Coast Guard Cutter Procurement:
Background and Issues for Congress
Updated October 2, 2020
Congressional Research Service
https://crsreports.congress.gov
R42567

Coast Guard Cutter Procurement: Background and Issues for Congress

Summary
The Coast Guard’s program of record (POR) calls for procuring 8 National Security Cutters
(NSCs), 25 Offshore Patrol Cutters (OPCs), and 58 Fast Response Cutters (FRCs) as
replacements for 90 aging Coast Guard high-endurance cutters, medium-endurance cutters, and
patrol craft. The Coast Guard’s proposed FY2021 budget requests a total of $597 million in
procurement funding for the NSC, OPC, and FRC programs. It also proposes a rescission of $70
million in FY2020 procurement funding that Congress provided for the NSC program.
NSCs are the Coast Guard’s largest and most capable general-purpose cutters; they are replacing
the Coast Guard’s 12 Hamilton-class high-endurance cutters. NSCs have an estimated average
procurement cost of about $670 million per ship. Although the Coast Guard’s POR calls for
procuring 8 NSCs to replace the 12 Hamilton-class cutters, Congress through FY2020 has fully
funded 11 NSCs, including the 10th and 11th in FY2018. In FY2020, Congress provided $100.5
million for procurement of long lead time materials (LLTM) for a 12th NSC, so as to preserve the
option of procuring a 12th NSC while the Coast Guard evaluates its future needs. The funding can
be used for procuring LLTM for a 12th NSC if the Coast Guard determines it is needed. The Coast
Guard’s proposed FY2021 budget requests $31 million in procurement funding for activities
within the NSC program; this request does not include further funding for a 12th NSC. The Coast
Guard’s proposed FY2021 budget also proposes a rescission of $70 million of the $100.5 million
that Congress provided for a 12th NSC, with the intent of reprogramming that funding to the
Coast Guard’s Polar Security Cutter (PSC) program. Eight NSCs have entered service; the
seventh and eighth were commissioned into service on August 24, 2019. The 9th through 11th are
under construction; the 9th is scheduled for delivery in 2020.
OPCs are to be less expensive and in some respects less capable than NSCs; they are intended to
replace the Coast Guard’s 29 aged medium-endurance cutters. Coast Guard officials describe the
OPC and PSC programs as the service’s highest acquisition priorities. OPCs have an estimated
average procurement cost of about $411 million per ship. The first OPC was funded in FY2018.
The Coast Guard’s proposed FY2021 budget requests $546 million in procurement funding for
the third OPC, LLTM for the fourth, and other program costs. On October 11, 2019, the
Department of Homeland Security (DHS), of which the Coast Guard is a part, announced that
DHS had granted extraordinary contractual relief to Eastern Shipbuilding Group (ESG) of
Panama City, FL, the builder of the first four OPCs, under P.L. 85-804 as amended (50 U.S.C.
1431-1435), a law that authorizes certain federal agencies to provide certain types of
extraordinary relief to contractors who are encountering difficulties in the performance of federal
contracts or subcontracts relating to national defense. ESG reportedly submitted a request for
extraordinary relief on June 30, 2019, after ESG’s shipbuilding facilities were damaged by
Hurricane Michael, which passed through the Florida panhandle on October 10, 2018. The Coast
Guard intends to hold a competition for a contract to build OPCs 5 through 15.
FRCs are considerably smaller and less expensive than OPCs; they are intended to replace the
Coast Guard’s 49 aging Island-class patrol boats. FRCs have an estimated average procurement
cost of about $65 million per boat. A total of 60 have been funded through FY2020, including
four in FY2020. Six of the 60 are to be used by the Coast Guard in the Persian Gulf and are not
counted against the Coast Guard’s 58-ship POR for the program, which relates to domestic
operations. Excluding these six FRCs, 54 FRCs for domestic operations have been funded
through FY2020. The 38th FRC was commissioned into service on July 15, 2020. The Coast
Guard’s proposed FY2021 budget requests $20 million in procurement funding for the FRC
program; this request does not include funding for any additional FRCs.
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Coast Guard Cutter Procurement: Background and Issues for Congress

Introduction
This report provides background information and potential oversight issues for Congress on the
Coast Guard’s programs for procuring 8 National Security Cutters (NSCs), 25 Offshore Patrol
Cutters (OPCs), and 58 Fast Response Cutters (FRCs). The Coast Guard’s proposed FY2021
budget requests a total of $597 million in procurement funding for the NSC, OPC, and FRC
programs.
The issue for Congress is whether to approve, reject, or modify the Coast Guard’s funding
requests and acquisition strategies for the NSC, OPC, and FRC programs. Congress’s decisions
on these three programs could substantially affect Coast Guard capabilities and funding
requirements, and the U.S. shipbuilding industrial base.
The NSC, OPC, and FRC programs have been subjects of congressional oversight for several
years, and were previously covered in other CRS reports dating back to 1998 that are now
archived.1 CRS testified on the Coast Guard’s cutter acquisition programs most recently in
October and November of 2018.2 The Coast Guard’s plans for modernizing its fleet of polar
icebreakers are covered in a separate CRS report.3
Background
Older Ships to Be Replaced by NSCs, OPCs, and FRCs
The 91 planned NSCs, OPCs, and FRCs are intended to replace 90 older Coast Guard ships—12
high-endurance cutters (WHECs), 29 medium-endurance cutters (WMECs), and 49 110-foot
patrol craft (WPBs).4 The Coast Guard’s 12 Hamilton (WHEC-715) class high-endurance cutters
entered service between 1967 and 1972.5 The Coast Guard’s 29 medium-endurance cutters
included 13 Famous (WMEC-901) class ships that entered service between 1983 and 1991,6 14

1 This CRS report was first published on June 13, 2012. The earlier CRS reports were Coast Guard Deepwater
Acquisition Programs: Background, Oversight Issues, and Options for Congress, by Ronald O’Rourke (first version
December 18, 2006, final [i.e., archived] version January 20, 2012); CRS Report RS21019, Coast Guard Deepwater
Program: Background and Issues for Congress, by Ronald O’Rourke (first version September 25, 2001, final [i.e.,
archived] version December 8, 2006); and CRS Report 98-830 F, Coast Guard Integrated Deepwater System:
Background and Issues for Congress, by Ronald O’Rourke (first version October 5, 1998, final [i.e., archived] version
June 1, 2001). From the late 1990s until 2007, the Coast Guard’s efforts to acquire NSCs, OPCs, and FRCs were parts
of a larger, integrated Coast Guard acquisition effort aimed at acquiring several new types of cutters and aircraft that
was called the Integrated Deepwater System (IDS) program, or Deepwater for short. In 2007, the Coast Guard broke up
the Deepwater effort into a series of individual cutter and aircraft acquisition programs, but continued to use the term
Deepwater as a shorthand way of referring collectively to these now-separated programs. In its FY2012 budget
submission, the Coast Guard stopped using the term Deepwater as a way of referring to these programs.
2 See CRS Testimony TE10030, Icebreaker Acquisition and the Need for a National Maritime Strategy, by Ronald
O'Rourke, November 29, 2018, which includes discussions of the NSC, OPC, and FRC programs in Appendix E, and
CRS Testimony TE10029, Building the Fleets of the Future: Coast Guard and NOAA Fleet Recapitalization, by
Ronald O'Rourke, October 11, 2018.
3 CRS Report RL34391, Coast Guard Polar Security Cutter (Polar Icebreaker) Program: Background and Issues for
Congress, by Ronald O'Rourke.
4 In the designations WHEC, WMEC, and WPB, W means Coast Guard ship, HEC stands for high-endurance cutter,
MEC stands for medium-endurance cutter, and PB stands for patrol boat.
5 Hamilton-class cutters are 378 feet long and have a full load displacement of about 3,400 tons.
6 Famous-class cutters are 270 feet long and have a full load displacement of about 1,800 tons.
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Reliance (WMEC-615) class ships that entered service between 1964 and 1969,7 and 2 one-of-a-
kind cutters that originally entered service with the Navy in 1944 and 1971 and were later
transferred to the Coast Guard.8 The Coast Guard’s 49 110-foot Island (WPB-1301) class patrol
boats entered service between 1986 and 1992.9
Many of these 90 ships are manpower-intensive and increasingly expensive to maintain, and have
features that in some cases are not optimal for performing their assigned missions. Some of them
have already been removed from Coast Guard service: 8 of the Island-class patrol boats were
removed from service in 2007 following an unsuccessful effort to modernize and lengthen them
to 123 feet; additional Island-class patrol boats are being decommissioned as new FRCs enter
service; the one-of-a-kind medium-endurance cutter that originally entered service with the Navy
in 1944 was decommissioned in 2011; and Hamilton-class cutters are being decommissioned as
new NSCs enter service. A July 2012 Government Accountability Office (GAO) report discusses
the generally poor physical condition and declining operational capacity of the Coast Guard’s
older high-endurance cutters, medium-endurance cutters, and 110-foot patrol craft.10
Missions of NSCs, OPCs, and FRCs
NSCs, OPCs, and FRCs, like the ships they are intended to replace, are to be multimission ships
for routinely performing 7 of the Coast Guard’s 11 statutory missions, including
 search and rescue (SAR);
 drug interdiction;
 migrant interdiction;
 ports, waterways, and coastal security (PWCS);
 protection of living marine resources;
 other/general law enforcement; and
 defense readiness operations.11
Smaller Coast Guard patrol craft and boats contribute to the performance of some of these seven
missions close to shore. NSCs, OPCs, and FRCs perform them both close to shore and in the
deepwater environment, which generally refers to waters more than 50 miles from shore.

7 Reliance-class cutters are 210 feet long and have a full load displacement of about 1,100 tons.
8 These were the Acushnet (WMEC-167), which originally entered service with the Navy in 1944, and the Alex Haley
(WMEC-39), which originally entered service with the Navy in 1971. The Acushnet served in the Navy from until
1946, when it was transferred to the Coast Guard. The ship was about 214 feet long and had a displacement of about
1,700 tons. The Alex Haley served in the Navy until 1996. It was transferred to the Coast Guard in 1997, converted into
a cutter, and reentered service with the Coast Guard in 1999. It is 282 feet long and has a full load displacement of
about 2,900 tons.
9 Island-class boats are 110 feet long and have a full load displacement of about 135 to 170 tons.
10 Government Accountability Office, Coast Guard[:]Legacy Vessels’ Declining Conditions Reinforce Need for More
Realistic Operational Targets, GAO-12-741, July 2012, 71 pp.
11 The four statutory Coast Guard missions that are not to be routinely performed by NSCs, OPCs, and FRCs are
marine safety, aids to navigation, marine environmental protection, and ice operations. These missions are performed
primarily by other Coast Guard ships. The Coast Guard states, however, that “while [NSCs, OPCs, and FRCs] will not
routinely conduct [the] Aids to Navigation, Marine Safety, or Marine Environmental Protection missions, they may
periodically be called upon to support these missions (i.e., validate the position of an Aid to Navigation, transport
personnel or serve as a Command and Control platform for a Marine Safety or Marine Environmental Response
mission, etc.).” (Source: Coast Guard information paper provided to CRS on June 1, 2012.)
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NSC Program
National Security Cutters (Figure 1)—also known as Legend (WMSL-750)12 class cutters
because they are being named for legendary Coast Guard personnel13—are the Coast Guard’s
largest and most capable general-purpose cutters.14 They are larger and technologically more
advanced than Hamilton-class cutters, and are built by Huntington Ingalls Industries’ Ingalls
Shipbuilding of Pascagoula, MS (HII/Ingalls).
Figure 1. National Security Cutter

Source: U.S. Coast Guard photo accessed May 2, 2012, at http://www.flickr.com/photos/coast_guard/
5617034780/sizes/l/in/set-72157629650794895/.

12 In the designation WMSL, W means Coast Guard ship and MSL stands for maritime security cutter, large.
13 For a Coast Guard news release that mentions the naming rule for the class, see U.S. Coast Guard, “Acquisition
Update: Keel Authenticated for the Fifth National Security Cutter,” May 17, 2013.
14 The NSC design is 418 feet long and has a full load displacement of about 4,500 tons. The displacement of the NSC
design is about equal to that of Navy’s now-retired Oliver Hazard Perry (FFG-7) class frigates, which were 453 feet
long and had a full load displacement of about 4,200 tons. The Coast Guard’s three polar icebreakers are much larger
than NSCs, but are designed for a more specialized role of operations in polar waters. The Coast Guard states that
The largest and most technologically advanced of the Coast Guard’s newest classes of cutters, the
NSCs replace the aging 378-foot high endurance cutters, which have been in service since the
1960s. Compared to legacy cutters, the NSCs’ design provides better sea-keeping and higher
sustained transit speeds, greater endurance and range, and the ability to launch and recover small
boats from astern, as well as aviation support facilities and a flight deck for helicopters and
unmanned aerial vehicles.
(“National Security Cutter,” accessed April 19, 2018, at https://www.dcms.uscg.mil/Our-
Organization/Assistant-Commandant-for-Acquisitions-CG-9/Programs/Surface-Programs/National-
Security-Cutter/.)
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The Coast Guard’s acquisition program of record (POR)—the service’s list, established in 2004,
of planned procurement quantities for various new types of ships and aircraft—calls for procuring
8 NSCs as replacements for the service’s 12 Hamilton-class high-endurance cutters. The Coast
Guard’s FY2020 budget submission estimated the total acquisition cost of a nine-ship NSC
program at $6.030 billion, or an average of about $670 million per ship.15
Although the Coast Guard’s POR calls for procuring 8 NSCs to replace the 12 Hamilton-class
cutters, Congress through FY2020 has fully funded 11 NSCs, including the 10th and 11th in
FY2018. In FY2020, Congress provided $100.5 million for procurement of long lead time
materials (LLTM) for a 12th NSC, so as to preserve the option of procuring a 12th NSC while the
Coast Guard evaluates its future needs. The funding can be used for procuring LLTM for a 12th
NSC if the Coast Guard determines it is needed. The Coast Guard’s proposed FY2021 budget
requests $31 million in procurement funding for activities within the NSC program; this request
does not include further funding for a 12th NSC. The Coast Guard’s proposed FY2021 budget also
proposes a rescission of $70 million of the $100.5 million that Congress provided for a 12th NSC,
with the intent of reprogramming that funding to the Coast Guard’s Polar Security Cutter (PSC)
program. The remaining $30.5 million would be used for procuring mission equipment for the
10th and 11th NSCs.16
Eight NSCs have entered service; the seventh and eighth were commissioned into service on
August 24, 2019. The 9th through 11th are under construction; the 9th is scheduled for delivery in
2020. For additional information on the status and execution of the NSC program from a May
2018 GAO report, see Appendix C.
OPC Program
Overview
Coast Guard officials describe the Offshore Patrol Cutter program and the Coast Guard’s Polar
Security Cutter (PSC) program17 as the service’s two highest acquisition priorities. The Coast
Guard’s POR calls for procuring 25 OPCs as replacements for the service’s 29 medium-
endurance cutters. The first four ships in the OPC program are being built by Eastern
Shipbuilding Group (ESG) of Panama City, FL.
OPCs (Figure 2, Figure 3, Figure 4, Figure 5, and Figure 6)—also known as Heritage
(WMSM-915)18 class cutters because they are being named for past cutters that played a
significant role in the history of the Coast Guard and the Coast Guard’s predecessor
organizations19—are to be less expensive and in some respects less capable than NSCs.20 OPCs

15 Source: Coast Guard Five-Year (FY2020-FY2024) Capital Investment Plan (CIP) funding table for the Procurement,
Construction and Improvements (PC&I) account.
16 Source: Email from Coast Guard liaison office to CRS, February 26, 2020.
17 For more on the PSC proram, see CRS Report RL34391, Coast Guard Polar Security Cutter (Polar Icebreaker)
Program: Background and Issues for Congress, by Ronald O'Rourke.
18 In the designation WMSM, W means Coast Guard ship and MSM stands for maritime security cutter, medium.
19 For the naming rule for the class and a list of the names of the first 11 OPCs, see U.S. Coast Guard, “The Offshore
Patrol Cutter (OPC) Is The Coast Guard’s Highest Investment Priority and Will Play A Critical Role in the Service’s
Future,” undated, accessed August 15, 2017, at http://www.dcms.uscg.mil/Our-Organization/Assistant-Commandant-
for-Acquisitions-CG-9/Newsroom/OPC_Day/. See also Sam LaGrone, “Coast Guard Celebrates Birthday by Naming
11 Planned Offshore Patrol Cutters,” USNI News, August 4, 2017 (updated August 5, 2017).
20 The service states that OPCs
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are to have a length of 360 feet, which will make them about 86% as long as NSCs, which have a
length of 418 feet. OPCs were earlier estimated to have a full load displacement of 3,500 tons to
3,730 tons, which would have made them about 80% as large in terms of full load displacement
as NSCs, which have a full load displacement of about 4,500 tons21 As the OPC design has
matured, however, its estimated displacement has grown to about 4,500 tons, making it
essentially as large as the NSC in terms of full load displacement.22
Figure 2. Offshore Patrol Cutter
Artist’s rendering

Source: Photograph accompanying Kirk Moore, “Coast Guard’s Birthday Present: Naming the Next Cutters,”
WorkBoat, August 4, 2017. A caption to the rendering credits the rendering to Eastern Shipbuilding Group.

The OPCs will provide the majority of offshore presence for the Coast Guard’s cutter fleet,
bridging the capabilities of the 418-foot national security cutters, which patrol the open ocean, and
the 154-foot fast response cutters, which serve closer to shore. The OPCs will conduct missions
including law enforcement, drug and migrant interdiction, search and rescue, and other homeland
security and defense operations. Each OPC will be capable of deploying independently or as part of
task groups and serving as a mobile command and control platform for surge operations such as
hurricane response, mass migration incidents and other events. The cutters will also support Arctic
objectives by helping regulate and protect emerging commerce and energy exploration in Alaska.
(“Offshore Patrol Cutter,” accessed April 20, 2018, https://www.dcms.uscg.mil/Our-Organization/
Assistant-Commandant-for-Acquisitions-CG-9/Programs/Surface-Programs/Offshore-Patrol-
Cutter/Offshore-Patrol-Cutter-Program-Profile/.)
21 As of May 26, 2017, the OPC’s light ship displacement (i.e., its “empty” displacement, without fuel, water, ballast,
stores, and crew) was preliminarily estimated at about 2,640 to 2,800 tons, and its full load displacement was
preliminarily estimated at about 3,500 to 3,730 tons. (Source: Figures provided to CRS by Cost Guard liaison office,
May 26, 2017.) In terms of full load displacement, this would have made OPCs roughly 80% as large as NSCs.
22 Source: Email from Coast Guard liaison office to CRS, November 25, 2019. See also Figure 6.
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Figure 3. Offshore Patrol Cutter
Artist’s rendering

Source: “Offshore Patrol Cutter Notional Design Characteristics and Performance,” accessed September 16,
2016, at https://www.dcms.uscg.mil/Portals/10/CG-9/Surface/OPC/OPC%20Placemat%2036x24.pdf?ver=2018-10-
02-134225-297.
Figure 4. Offshore Patrol Cutter
Artist’s rendering

Source: Eastern Shipbuilding Group (http://www.easternshipbuilding.com/), accessed September 9, 2019.
The Coast Guard’s FY2020 budget submission estimated the total acquisition cost of the 25 ships
at $10.270 billion, or an average of about $411 million per ship.23 The first OPC was funded in
FY2018. The Coast Guard’s proposed FY2021 budget requests $546 million in procurement
funding for the third OPC, LLTM for the fourth, and other program costs.

23 Source: Coast Guard Five-Year (FY2020-FY2024) Capital Investment Plan (CIP) funding table for the Procurement,
Construction and Improvements (PC&I) account.
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Figure 5. Offshore Patrol Cutter
Artist’s rendering

Source: Image received from Coast Guard liaison office, May 25, 2017.
The Coast Guard’s Request for Proposal (RFP) for the OPC program, released on September 25,
2012, established an affordability requirement for the program of an average unit price of $310
million per ship, or less, in then-year dollars (i.e., dollars that are not adjusted for inflation) for
ships 4 through 9 in the program.24 This figure represents the shipbuilder’s portion of the total
cost of the ship; it does not include the cost of government-furnished equipment (GFE) on the
ship,25 or other program costs—such as those for program management, system integration, and
logistics—that contribute to the above-cited figure of $411 million per ship.26
Competition and September 2016 Contract Award
In response to the September 25, 2012, RFP, at least eight shipyards expressed interest in the OPC
program.27 On February 11, 2014, the Coast Guard announced that it had awarded Preliminary

24 Source: Section C.5 of the RFP, accessed October 31, 2012, at http://www.uscg.mil/ACQUISITION/newsroom/
updates/opc092512.asp.
25 GFE is equipment that the government procures and then delivers to the shipyard for installation on the ship.
26 Source: Coast Guard emails to CRS dated June 25, 2013.
27 The firms were the following: Bollinger Shipyards of Lockport, LA; Eastern Shipbuilding Group of Panama City,
FL; General Dynamics Bath Iron Works (GD/BIW) of Bath, ME; Huntington Ingalls Industries (HII) of Pascagoula,
MS; Marinette Marine Corporation of Marinette, WS; General Dynamics National Steel and Shipbuilding Company
(GD/NASSCO) of San Diego, CA; Vigor Shipyards of Seattle, WA; and VT Halter Marine of Pascagoula, MS.
(Source: U. S. Coast Guard Offshore Patrol Cutter (OPC) List of Interested Contractors Updated July 2012, accessed
online October 23, 2012, at http://www.uscg.mil/ACQUISITION/opc/pdf/companiesinterested.pdf; and Kevin
Brancato and Anne Laurent, Coast Guard’s $12 Billion Cutter Competition Spurs Eight Shipyards to Dive In,
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and Contract Design (P&CD) contracts to three of those eight firms—Bollinger Shipyards of
Lockport, LA; Eastern Shipbuilding Group (ESG) of Panama City, FL; and General Dynamics’
Bath Iron Works (GD/BIW) of Bath, ME.28
On September 15, 2016, the Coast Guard announced that it had awarded the detail design and
construction (DD&C) contract to ESG. The contract covered detail design and production of up
to 9 OPCs and had a potential value of $2.38 billion if all options were exercised.29
October 2019 Announcement of Contractual Relief and Follow-on Competition
On October 11, 2019, the Department of Homeland Security (DHS), of which the Coast Guard is
a part, announced that DHS had granted extraordinary contractual relief to ESG under P.L. 85-
804 as amended (50 U.S.C. 1431-1435), a law originally enacted in 1958 that authorizes certain
federal agencies to provide certain types of extraordinary relief to contractors who are
encountering difficulties in the performance of federal contracts or subcontracts relating to
national defense.30

Bloomberg Government Study, November 8, 2012, 6 pp. The Coast Guard document states that these firms “expressed
interest in the Offshore Patrol Cutter acquisition and have agreed to their names provided on the Coast Guard website.”
See also Stew Magnuson, “New Coast Guard Cutter Sparks Fierce Competition Among Shipbuilders,” National
Defense (www.nationaldefensemagazine.org), April 2013, accessed March 26, 2013, at
http://www.nationaldefensemagazine.org/articles/2013/4/1/2013april-new-coast-guard-cutter-sparks-fierce-
competition-among-shipbuilders.)
28 “Acquisition Update: U.S. Coast Guard Awards Three Contracts for Offshore Patrol Cutter Preliminary and Contract
Design,” February 11, 2014, accessed February 14, 2014, at https://www.dcms.uscg.mil/Portals/10/CG-9/Newsroom/
In%20The%20News%20Archives/2014/opc021114.pdf?ver=2017-05-23-145011-727. HII and VT Halter Marine
reportedly filed protests of the Coast Guard’s award decision on February 24 and 25, respectively. The Coast Guard
issued stop work orders to Bollinger, Eastern, and GD/BIW pending GAO’s rulings on the protests. (Calvin Biesecker,
“Coast Guard Issues Stop Work Orders On OPC Following Protests,” Defense Daily, February 28, 2014: 2-3. See also
Christopher P. Cavas, “Ingalls Protesting US Coast Guard Cutter Contract,” DefenseNews.com, February 26, 2014.) On
June 5, 2014, it was reported that GAO had rejected the protests, and that the Coast Guard had directed Bollinger,
Eastern, and GD/BIW to resume their work. (Calvin Biesecker, “Coast Guard Directs Design Work Continue On OPC
After GAO Denies Protests,” Defense Daily, June 5, 2014: 1; Christopher P. Cavas, “US Coast Guard Cutter Award
Upheld,” Defense News (http://www.defensenews.com), June 5, 2014. For the text of the decision, see Government
Accountability Office, Decision in the Matter of Huntington Ingalls Industries, Inc.; VT Halter Marine, Inc., June 2,
2014.)
29 “Acquisition Update: Coast Guard Selects Offshore Patrol Cutter Design,” September 15, 2016; “Acquisition
Update: Coast Guard Moves Forward To Next Phase Of OPC Acquisition,” October 5, 2016. See also “Coast Guard
Exercises Long Lead Time Materials Option For First Offshore Patrol Cutter,” September 7, 2017.
30 50 U.S.C. 1431 states in part
The President may authorize any department or agency of the Government which exercises
functions in connection with the national defense, acting in accordance with regulations prescribed
by the President for the protection of the Government, to enter into contracts or into amendments or
modifications of contracts heretofore or hereafter made and to make advance payments thereon,
without regard to other provisions of law relating to the making, performance, amendment, or
modification of contracts, whenever he deems that such action would facilitate the national defense.
The authority conferred by this section shall not be utilized to obligate the United States in an
amount in excess of $50,000 without approval by an official at or above the level of an Assistant
Secretary or his Deputy, or an assistant head or his deputy, of such department or agency, or by a
Contract Adjustment Board established therein.
For more on P.L. 85-804 as amended, see CRS Report 76-261, Extraordinary Contractual Relief Under Public Law 85-
804, April 28, 1976, by Andrew C. Mayer. The report was prepared at the request of the House Armed Services
Committee and converted by the committee into a committee print (70-905 O), dated May 10, 1976, that can be viewed
at https://ufdc.ufl.edu/AA00022546/00001/1j. See also David H. Peirez, “Public Law 85-804: Contractual Relief for the
Government Contractor,” Administrative Law Review, Vol. 16 (Summer 1964): 248-264, accessed October 11, 2019, at
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Figure 6. OPC Functional Design
“Placemat” summary from Coast Guard

Source: Slide 11 from Coast Guard presentation at OPC Industry Day, December 11, 2019, updated December
13, 2019, accessed December 17, 2019, at https://beta.sam.gov/opp/bf0b9b0a1fe2428e9a73043259641c13/view.
ESG reportedly submitted a request for extraordinary relief on June 30, 2019, after ESG’s
shipbuilding facilities were damaged by Hurricane Michael, which passed through the Florida
panhandle on October 10, 2018. The Coast Guard announced that the contractual relief is limited
to the first four hulls in the OPC program. DHS stated that the Coast Guard would immediately
transition to conducting a follow-on competition for subsequent ships in the OPC program,31
identified later as ships 5 through 15 in the program. Under P.L. 85-804 as amended, Congress
had 60 days of continuous session to review the announced contractual relief, with the 60-day
period in this case starting October 11.32

https://www.jstor.org/stable/40708469; and “Presidential Power: Public Law 85-804 (50 U.S.C. §§ 1431-35),” Brennan
Center for Justice, undated, accessed October 11, 2019, at https://www.brennancenter.org/sites/default/files/analysis/
50%20USC%201431-1435.pdf. (Although it is undated, it appears to have been written no earlier than 2014, as it
includes three references to the year 2014, including one that states, “As of 2014….”) The text of P.L. 85-804 as
originally enacted is posted at https://www.govinfo.gov/content/pkg/STATUTE-72/pdf/STATUTE-72-Pg972.pdf.
31 Department of Homeland Security, “DHS Extends Contract Relief for Offshore Patrol Cutter,” October 11, 2019;
U.S. Coast Guard, “Department of Homeland Security Approves Limited Extraordinary Relief for Offshore Patrol
Cutter Contract,” October 11, 2019; “DHS, Coast Guard Extend Limited Contract Relief for Offshore Patrol Cutter,”
Coast Guard News (coastguardnews.com), October 11, 2019.
32 50 U.S.C. 1431 states in part
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January 10, 2020, RFP for Industry Studies
On January 10, 2020, the Coast Guard released a request for proposals (RFP) for industry studies
in connection with its intended follow-on competition for ships 5 through 15 in the OPC program.
Responses to the RFP were due by January 31, 2020.
The RFP posting included an attached notional timeline for the follow-on effort. Under this
notional timeline, the contracts for industry studies were to be awarded in early March 2020 (they
were awarded on March 20—see next section), and the studies are to be completed by October
10, 2020. A draft RFP for the detail design and construction (DD&C) contract for ships 5 through
15 is to be released around July 31, 2020; the final RFP is to be released around October 10,
2020; and proposals under the RFP are to be submitted by a date late in the third quarter of
FY2021.
Under the Coast Guard’s notional timeline, the DD&C contract is to be awarded on January 30,
2022. Ships 1 through 7 in the 25-ship program are to be built at a rate of one per year, with
OPC-1 completing construction in FY2022 and OPC-7 completing construction in FY2028. The
remaining 18 ships are to be built at a rate of two per year, with OPC-8 completing construction
in FY2029 and OPC-25 completing construction in FY2038. These dates are generally 10 months
to about 2 years later than they would have been under the Coast Guard’s previous (i.e., pre-
October 11, 2019) timeline for the OPC program.33
Under the new notional timeline, the Coast Guard’s 14 Reliance-class 210-foot medium-
endurance cutters would be replaced when they would be (if still in service) about 54 to 67 years
old, and the Coast Guard’s 13 Famous-class 270-foot medium-endurance cutters would be
replaced when they would be (if still in service) about 42 to 52 years old.34

The authority conferred by this section may not be utilized to obligate the United States in any
amount in excess of $25,000,000 unless the Committees on Armed Services of the Senate and the
House of Representatives have been notified in writing of such proposed obligation and 60 days of
continuous session of Congress have expired following the date on which such notice was
transmitted to such Committees. For purposes of this section, the continuity of a session of
Congress is broken only by an adjournment of the Congress sine die at the end of a Congress, and
the days on which either House is not in session because of an adjournment of more than 3 days to
a day certain, or because of an adjournment sine die other than at the end of a Congress, are
excluded in the computation of such 60-day period
33 Source for ships 1-4: An October 15, 2019, press report states
Under the new plan, the Coast Guard intends for Eastern Shipbuilding Group (ESG) to build up to
four OPCs rather than the minimum of nine contracted for a year ago, with the first ship now
delayed 10 to 12 months and the three subsequent ships about nine to 10 months each from that
point, Shultz said at an event hosted by the Center for Strategic and International Studies. Delivery
of the first OPC, which began construction in January, has been pushed back to 2022.
(Cal Biesecker, “Decision To Reopen OPC Competition Will Stretch Out Acquisition,” Defense
Daily, October 15, 2019. See also Gina Harkins, “Despite Hurricane Damage, Coast Guard
Pressing On with Next-Gen Cutter Construction,” Military.com, October 15, 2019; Ben Werner,
“Coast Guard Seeks To Bring Bidders Onto Modified Offshore Patrol Cutter Contract,” USNI
News, October 15, 2019.)
Source for ships 5 through 25: CRS comparison of notional timeline’s completion dates with those shown in Figure 4
on page 17 of Government Accountability Office, Coast Guard Recapitalization[:] Matching Needs and Resources
Continue to Strain Acquisition Efforts, GAO-17-654 T, June 7, 2017. (Testimony Before the Subcommittee on Coast
Guard and Maritime Transportation, Committee on Transportation and Infrastructure, House of Representatives,
Statement of Marie A. Mak, Director, Acquisition and Sourcing Management.)
34 Source: CRS estimate based on replacement sequence shown in Government Accountability Office, Coast Guard
Recapitalization[:] Matching Needs and Resources Continue to Strain Acquisition Efforts, GAO-17-654 T, June 7,
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An October 18, 2019, Coast request for information (RFI) for the follow-on effort stated that “it is
assumed that Shipbuilders would utilize the mature parts of the existing OPC functional design—
to the maximum extent possible—and mature any incomplete aspects of the [OPC] detail design.”
This suggests that the Coast Guard envisioned that the fifth and subsequent OPCs would be built
to a design that is largely similar to that of ESG’s design for the first four OPCs.
March 20, 2020, Contract Awards for Industry Studies
On March 20, 2020, the Coast Guard announced that it had awarded nine industry study contracts
in support of the follow-on competition for the OPC program. The contracts were awarded to
 Austal USA of Mobile, AL;
 General Dynamics/Bath Iron Works (GD/BIW) of Bath, ME;
 Bollinger Shipyards Lockport of Lockport, LA;
 Eastern Shipbuilding Group (ESG) of Panama City, FL;
 Fincantieri Marinette Marine (F/MM) of Marinette, WS;
 General Dynamics/National Steel and Shipbuilding Company (GD/NASSCO) of
San Diego, CA;
 Huntington Ingalls Industries/Ingalls Shipbuilding (HII/Ingalls) of Pascagoula,
MS:
 Philly Shipyard of Philadelphia, PA;
 VT Halter Marine Inc. of Pascagoula, MS.
Most of the contracts have a base award value of $2.0 million and a total potential value of $3.0
million. The exceptions are the contract awarded to ESG, which has a base award value of $1.1
million and a total potential value of $1.2 million (a difference that appears to reflect ESG’s
status as the builder of the first OPCs), and the contract awarded to VT Halter, which has a total
potential value of $2.9 million.
The Coast Guard stated in its contract-award announcement that
Under their respective contracts, the awardees will assess OPC design and technical data,
provided by the Coast Guard, and the program’s construction approach. Based on their
analyses, the awardees will recommend to the Coast Guard potential strategies and
approaches for the follow-on detail design and construction (DD&C). The awardees will
also discuss how they would prepare the OPC functional design for production. The
awardees may also identify possible design or systems revisions that would be
advantageous to the program if implemented, with strategies to ensure those revisions are
properly managed.
The Coast Guard will use the industry studies results to further inform its follow-on
acquisition strategy and promote a robust competitive environment for the DD&C award.
Participation in industry studies is not a pre-requisite for submitting a DD&C proposal.35

2017. (Testimony Before the Subcommittee on Coast Guard and Maritime Transportation, Committee on
Transportation and Infrastructure, House of Representatives, Statement of Marie A. Mak, Director, Acquisition and
Sourcing Management.)
35 U.S. Coast Guard, “Coast Guard Awards Nine Contracts for Offshore Patrol Cutter Industry Studies,” March 20,
2020.
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Appendices with Additional Information
For additional general information on the status and execution of the OPC program from a May
2018 GAO report, see Appendix C. For additional background information on the impact of
Hurricane Michael on the OPC program at ESG, see Appendix E. For the text of a November 25,
2019, letter to the Acting Secretary of DHS from the Chair and Ranking Member of the House
Transportation and Infrastructure Committee and the Chair and Ranking Member of that
committee’s Coast Guard and Maritime Transportation subcommittee regarding the restructuring
of the OPC program under P.L. 85-804, see Appendix F.
FRC Program
Fast Response Cutters (Figure 7)—also called Sentinel (WPC-1101)36 class patrol boats because
they are being named for enlisted leaders, trailblazers, and heroes of the Coast Guard and its
predecessor services of the U.S. Revenue Cutter Service, U.S. Lifesaving Service, and U.S.
Lighthouse Service37—are considerably smaller and less expensive than OPCs, but are larger than
the Coast Guard’s older patrol boats.38 FRCs are built by Bollinger Shipyards of Lockport, LA.
The Coast Guard’s POR calls for procuring 58 FRCs as replacements for the service’s 49 Island-
class patrol boats.39 The POR figure of 58 FRCs is for domestic operations. The Coast Guard,
however, operates six Island-class patrol boats in the Persian Gulf area as elements of a Bahrain-
based Coast Guard unit, called Patrol Forces Southwest Asia (PATFORSWA), which is the Coast
Guard’s largest unit outside the United States.40 Providing FRCs as one-for-one replacements for
all six of the Island-class patrol boats in PATFORSWA would result in a combined
POR+PATFORSWA figure of 64 FRCs.
The Coast Guard’s FY2020 budget submission estimated the total acquisition cost of the 58
cutters at $3.748.1 billion, or an average of about $65 million per cutter.41 A total of 60 have been

36 In the designation WPC, W means Coast Guard ship and PC stands for patrol craft.
37 Source for class naming rule: U.S. Coast Guard bulletin, “ALCOAST 349/17 - Nov 2017 New Fast Response Cutters
Named for Coast Guard heroes,” November 22, 2017, accessed November 20, 2017, at
https://content.govdelivery.com/accounts/USDHSCG/bulletins/1c6c844.
38 FRCs are 154 feet long and have a full load displacement of 353 tons.
39 The Coast Guard states that
The planned fleet of FRCs will conduct primarily the same missions as the 110’ patrol boats being
replaced. In addition, the FRC will have several increased capabilities enhancing overall mission
execution. The FRC is designed for rapid response, with approximately a 28 knot speed capability,
and will typically operate in the coastal zones. Examples of missions that FRCs will complete
include SAR, Migrant Interdiction, Drug Interdiction and Ports Waterways and Coastal Security.
FRCs will provide enhanced capabilities over the 110’s including improved C4ISR capability and
interoperability; stern launch and recovery (up through sea state 4) of a 40 knot, Over-the-Horizon,
7m cutter boat; a remote operated, gyro stabilized MK38 Mod 2, 25mm main gun; improved sea
keeping; and enhanced crew habitability.
(Department of Homeland Security, United States Coast Guard, Fiscal Year 2013 Congressional
Justification, p. CG-AC&I-28 (pdf page 182 of 400).)
40 For additional information on PATFORSWA, see U.S. Coast Guard, “Patrol Forces Southwest Asia,
PATFORSWA,” accessed April 24, 2019, at https://www.atlanticarea.uscg.mil/Our-Organization/Area-Units/
PATFORSWA/, U.S. Coast Guard, “CG Patrol Forces SWA Org Chart,” accessed April 24, 2019, at
https://www.atlanticarea.uscg.mil/Our-Organization/Area-Units/PATFORSWA/Departments/; Edward H. Lundquist,
“PATFORSWA Serves Forward in the Arabian Gulf,” Defense Media Network, March 19, 2018; Eric D. Nielsen
(posted by Connie Terrell), “PATFORSWA: Guardians of the Arabian Gulf,” Coast Guard Compass, August 22, 2016.
41 Source: Coast Guard Five-Year (FY2020-FY2024) Capital Investment Plan (CIP) funding table for the Procurement,
Construction and Improvements (PC&I) account.
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funded through FY2020, including four in FY2020. Six of the 60 are to be used by the Coast
Guard in the Persian Gulf and are not counted against the Coast Guard’s 58-ship POR for the
program, which relates to domestic operations. Excluding these six FRCs, 54 FRCs for domestic
operations have been funded through FY2020. The 38th FRC was commissioned into service on
July 15, 2020.
Figure 7. Fast Response Cutter
With an older Island-class patrol boat behind

Source: U.S. Coast Guard photo accessed May 4, 2012, at http://www.flickr.com/photos/coast_guard/
6871815460/sizes/l/in/set-72157629286167596/.
The Coast Guard’s proposed FY2021 budget requests $20 million in procurement funding for the
FRC program; this request does not include funding for any additional FRCs.
For additional information on the status and execution of the FRC program from a May 2018
GAO report, see Appendix C.
Funding in FY2013-FY2021 Budget Submissions
Table 1 shows annual requested and programmed acquisition funding for the NSC, OPC, and
FRC programs in the Coast Guard’s FY2013-FY2021 budget submissions. Actual appropriated
figures differ from these requested and projected amounts.
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Table 1. NSC, OPC, and FRC Funding in FY2013-FY2021 Budget Submissions
Figures in millions of then-year dollars
Budget
FY13
FY14
FY15
FY16
FY17
FY18
FY19 FY20 FY21
FY22
FY23
FY24
FY25
NSC program

FY13
683
0
0
0
0

FY14

16
710
38
0
45

FY15

638
75
130
30
47

FY16

91.4
132
95
30
15

FY17

127
95
65
65
21

FY18

54
65
65
21
6.6

FY19

65
57.7
21
6.6
0

FY20

60
21
6.6
5
5

FY21

31
n/a
n/a
n/a
n/a
OPC program

FY13
30
50
40
200
530

FY14

25
65
200
530
430

FY15

20
90
100
530
430

FY16

18.5
100
530
430
430

FY17

100
530
430
530
770

FY18

500
400
457
716
700

FY19

400
457
716
700
689

FY20

457
716
700
689
715

FY21

546
n/a
n/a
n/a
n/a
FRC program

FY13
139
360
360
360
360

FY14

75
110
110
110
110

FY15

110
340
220
220
315

FY16

340
325
240
240
325

FY17

240
240
325
325
18

FY18

240
335
335
26
18

FY19

240
340
20
20
20

FY20

140
20
20
20
20

FY21

20
n/a
n/a
n/a
n/a
Total

FY13
852
410
400
560
890

FY14

716
885
348
640
585

FY15

768
505
450
780
792

FY16

449.9
557
865
700
370

FY17

467
865
820
920
809

FY18

794
800
857
763
724.6

FY19

705
854.7
757
726.6
709

FY20

657
757
726.6
714
740

FY21

597
n/a
n/a
n/a
n/a
Source: Table prepared by CRS based on FY2013-FY2021 budget submissions. n/a means not available.
Issues for Congress
Potential Impact of COVID-19 (Coronavirus) Situation
One issue for Congress concerns the potential impact of the COVID-19 (coronavirus) situation on
the execution of U.S. military shipbuilding programs, including the ones discussed in this report.
For additional discussion of this issue, see CRS Report RL32665, Navy Force Structure and
Shipbuilding Plans: Background and Issues for Congress, by Ronald O'Rourke.
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Procurement Funding for 12th NSC
Another issue for Congress concerns procurement funding for a 12th NSC—whether to approve,
reject, or modify the Coast Guard’s proposed rescission of $70 million of the $101.5 million in
FY2020 procurement funding that Congress provided for purchasing LLTM for a 12th NSC (with
the intent of reprogramming that $70 million to the PSC program), and whether to provide any
further procurement funding in FY2021 for a 12th NSC. Both of these questions relate to the issue
of whether to procure a 12th NSC.
Supporters of procuring a 12th NSC could argue that a total of 12 NSCs would provide one-for-
one replacements for the 12 retiring Hamilton-class cutters; that Coast Guard analyses showing a
need for no more than 9 NSCs assumed dual crewing of NSCs—something that has not worked
as well as expected; that the Coast Guard’s POR record includes only about 61% as many new
cutters as the Coast Guard has calculated would be required to fully perform the Coast Guard’s
anticipated missions in coming years;42 that the Coast Guard has recently begun to place more
emphasis on deploying cutters the Western Pacific—an action that could increase demands for
NSCs beyond what the Coast Guard anticipated when it established its program of record in
2004; and that the increase in the estimated displacement of the OPC to 4,500 tons—a figure
about equal to the displacement of NSCs—makes procuring additional NSCs more suitable as a
near-term measure for responding to potential delays in the restructured OPC program.
Skeptics or opponents of procuring a 12th NSC could argue that the Coast Guard’s POR includes
only 8 NSCs; that the Coast Guard’s fleet mix analyses (see Appendix A) have not shown a
potential need for more than 9 NSCs; that the Coast Guard intends to move expeditiously to
proceed with its restructured effort to procure OPCs; and that in a situation of finite Coast Guard
budgets, procuring a 12th NSC might reduce funding available for other Coast Guard programs,
including the PSC program.
Number of FRCs to Procure in FY2021
Another issue for Congress concerns whether to approve the Coast Guard’s proposal to procure
no FRCs in FY2021, or instead procure some number of FRCs, such as two (which would be
enough to either complete the program of record’s goal of 58 FRCs for domestic operations, or to
provide one-for-one replacements for all six of the Island-class patrol boats that the Coast Guard
operates in the Persian Gulf), or four (which would be enough to do both of these things).
Supporters of the Coast Guard’s proposal to procure no FRCs in FY2021 could argue that in a
situation of finite Coast Guard funding, procuring additional FRCS in FY2021 could reduce
funding for other Coast Guard programs, including the OPC and PSC programs, and that even if
no FRCs are procured in FY2021, additional FRCs could still be procured in FY2022 or
subsequent years.
Supporters of procuring two or four (or some other number of) FRCs in FY2021 could argue that
this could complete the FRC’s 58-shp program of record goal for domestic use, and/or replace all
six of the Coast Guard’s Island-class patrol boats in the Persian Gulf. They could argue that
waiting until FY2022 or a subsequent fiscal year to procure these FRCs would increase their cost
by creating a break in the shipyard’s production learning curve for building the boats and
incurring other program stop-and-restart costs.

42 See “Planned NSC, OPC, and FRC Procurement Quantities” below, as well as Appendix A.
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Procurement Cost Growth on OPCs 1 Through 4
Another potential oversight issue for Congress concerns an increase in the estimated procurement
cost of OPCs 1 through 4, and what implications, if any, this cost growth might have regarding
the cost-effectiveness of building each of these four cutters.
The Coast Guard states that as of mid-April 2020, the combined estimated procurement cost of
OPCs 1 through 4 had increased by a total of between $300 million and $400 million since the
Coast Guard’s 2017 Life Cycle Cost Estimate (LCCE) for the program, with the increase on the
cost OPC-1 being larger than the increases on the costs of OPCs 2 through 4, and that almost all
of the increase is attributable to relief provided under P.L. 85-804.43 A combined increase of $300
million to $400 million for OPCS 1 through 4 would represent an increase of 18% to 24% above
the $411 million average procurement cost for each of 25 OPCs as estimated under the Coast
Guard’s FY2020 budget submission. Potential oversight questions for Congress include the
following:
 Of the increase of $300 million to $400 million in the combined estimated
procurement cost of OPCs 1 through 4, how much was due to the effects of
Hurricane Michael?
 How cost-effective would it be to build each of these first four OPCs at their new
estimated procurement costs, relative to potential alternatives such as procuring
up to four additional NSCs, or up to four more of the OPCs that are to be built
under the follow-on OPC construction contract that the Coast Guard intends to
compete and award?
 What potential, if any, is there for further cost growth on OPCs 1 through 4?
 At what procurement cost would one or more of these first four OPCs no longer
be cost effective to procure, relative to the potential alternatives mentioned
above?
Contractual Relief and Follow-on Competition for OPC Program
More generally, the Coast Guard’s proposed course of action for the OPC program raises a
number of potential oversight questions for Congress, including those below.
Overall Course of Action
Potential oversight questions relating to the announced overall course of action include but are
not necessarily limited to the following:
 What potential overall courses of action did DHS and the Coast Guard examine
for responding to the situation at ESG created by Hurricane Michael? For
example, did DHS and the Coast Guard examine the option of immediately
terminating the OPC contract, paying ESG any resulting contract-termination
costs, and conducting a new competition to build OPCs starting with the first ship
in the program? Alternatively, for example, did DHS and the Coast Guard
examine the option of providing contractual relief to ESG under P.L. 85-804 as
amended while maintaining the plan to build up to nine OPCs at ESG? What
other potential overall courses of action were examined?

43 Source: Coast Guard email to CRS, April 15, 2020.
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 What were the potential advantages and disadvantages of these and other
potential overall courses of action?
 Why does DHS believe that the best overall course of action is to provide
extraordinary contractual relief for a limited number of OPCs under P.L. 85-804
as amended and then conduct a follow-on competition for the remaining ships in
the OPC program?
 What impact, if any, does the announced overall course of action for the OPC
program have on the issue discussed in the next section regarding funding for a
12th National Security Cutter (NSC)?
Contractual Relief
Potential oversight questions relating to specifically the contractual relief include but are not
necessarily limited to the following:
 Why is ESG being granted financial and other contractual relief as a consequence
of hurricane damage, when hurricanes are a known risk for communities on the
Gulf Coast? Did ESG have insurance covering hurricane damage? If so, how
much coverage did ESG have, and what payments did the insurance firm make to
ESG? If ESG did not have insurance covering hurricane damage, why not?
 Following Hurricane Katrina in 2005, Congress provided $1.7 billion in
reallocated emergency supplemental appropriations to pay estimated higher
shipbuilding costs for 11 Navy ships under construction at the Ingalls shipyard in
Pascagoula, MS, and the Avondale shipyard upriver from New Orleans, LA.44 In
what ways is that relief similar to or different from the relief being provided to
ESG under P.L. 85-804 following Hurricane Michael? If financial relief for
hurricane damage was provided to the Ingalls and Avondale shipyards, why
should it not also be provided to ESG? By providing relief to Gulf Coast
shipyards for hurricane damage, is the government creating a moral hazard that
encourages Gulf Coast shipyards to reduce the amount of insurance coverage
they purchase for hurricane damage, and if so, how if at all does that affect the
prices they are able bid in competitions against shipyards located in other parts of
the country?
 Why does the contractual relief extend to four OPCs, as opposed to a smaller or
greater number of OPCs?

44 See CRS Report RS22239, Emergency Supplemental Appropriations for Hurricane Katrina Relief, by Keith Bea,
August 22, 2006, p. 6. The report states
Citing the need for “special oversight” of these shipbuilding funds dedicated to cover property
damage, cleanup, idle payroll, and business disruption (that may also be covered by shipbuilders’
insurance), the appropriators added report language requiring that the Navy or Army, as applicable,
submit a report to the Appropriations Committees “certifying” that the costs were related to the
hurricanes and would not be paid for by FEMA or the shipbuilders’ insurers.
(U.S. House, Conference Committees 2005, Making Appropriations for the Department of Defense
for the Fiscal Year Ending September 30, 2006, and for Other Purposes, conference report to
accompany H.R. 2863, H.Rept. 109-359, 109th Cong., 1st sess. (Washington: GPO, 2005), p. 496.)
See also CRS Report RL33298, FY2006 Supplemental Appropriations: Iraq and Other International Activities;
Additional Hurricane Katrina Relief, Paul M. Irwin, Coordinator, Larry Nowels, Coordinator, June 15, 2006, pp. 59-
66; and CRS Report RL33197, Reallocation of Hurricane Katrina Emergency Appropriations: Defense and Other
Issues, Coordinated by Amy Belasco, December 15, 2005, pp. 9-14. (These CRS reports are out of print and available
for congressional clients from the author of this report.)
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 What is the dollar value of the contractual relief? As mentioned earlier, letter to
the Acting Secretary of DHS from the Chair and Ranking Member of the House
Transportation and Infrastructure Committee and the Chair and Ranking Member
of that committee’s Coast Guard and Maritime Transportation subcommittee
regarding the OPC program (see Appendix F) states that under the Coast
Guard’s plan for providing contractual relief under P.L. 85-804, DHS and the
Coast Guard plan to “spend up to an additional $659 million to complete those
[four] cutters….” Is this figure is correct? How was it calculated?
Follow-On Competition
Potential oversight questions relating specifically to the follow-on competition for OPCs 5
through 15 include but are not necessarily limited to the following:
 If a follow-on competition is conducted for building ships 5 through 15 in the
OPC program, how much of a production learning curve advantage would ESG
have as a result of having some amount of production learning curve experience
in building its OPC design?
 As mentioned earlier, the Coast Guard envisions that OPCs 5 through 15 would
be built to a design that is largely similar to that of ESG’s design for the first four
OPCs.45 What are the potential advantages and disadvantages of this approach
compared to an approach under which bidders would be permitted to submit bids
for building their own OPC designs? What actions, if any, are needed for the
government to secure from ESG any design data rights that might be needed to
conduct a competition limited to ESG’s OPC design?
 If OPCs 5 through 15 would be built to a design that is largely similar to that of
ESG’s design for the first four OPCs, how much of a design-related advantage
(as opposed to a production learning curve advantage), if any, would that provide
to ESG in the competition? To what degree, if any, does ESG’s design for the
OPC include features that are optimized for ESG’s construction facilities?
 If a follow-on competition were to permit bidders to submit bids for building
their own designs for the OPC, and the winner of the competition is a builder that
has submitted a design different from ESG’s design, what might be the longer-
term implications of operating and supporting a class of perhaps no more than
four OPCs built to ESG’s design?
 If a follow-on competition is conducted for building ships 5 through 15 in the
OPC program, will the bidders be required to submit bids for only a contract with
options, or for both a contract with options and, alternatively, a block buy
contract? (See the section below on the issue of annual or multiyear [block buy]
contracting for OPCs.)
Regarding the second question above, pertaining to design data rights, the Coast Guard stated the
following to CRS in September 2017:
Eastern Shipyard Group, Inc. (ESG) (or its subcontractors) owns the data rights to specific
vessel design elements (e.g., hull form, etc.) that were developed wholly with contractor
funds; however, the Coast Guard (in the OPC contract) has the ability to purchase rights

45 As of October 11, 2019, the Coast Guard had obligated $11.3 million and expended $90.5 million on ESG’s detailed
design for the OPC. By February 3, 2020, these figures had grown to $122.7 million and $98.1 million, respectively.
(Source: Email from Coast Guard liaison office to CRS, February 13, 2020.)
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regarding the hull form for re-procurement purposes. The data rights options for hulls 10-
25 are contained within the contract under Section B [of ESG’s OPC contract, called the
Phase II contract]. A part of the Phase II contract’s data and software rights clauses, the
Coast Guard obtained either unlimited or government purpose data rights to vessel
components and systems that were designed and/or developed using government funds or
a mixture of contractor and government funds. As a result, the Coast Guard has data rights
licenses for parts of the vessel design but not the complete vessel design.
To construct the OPC with a yard other than ESG (i.e., potentially for hulls 10-25) the
Coast Guard would need to complete its data library by purchasing the data rights owned
by ESG (or its subcontractors); pricing for the Coast Guard to procure the additional data
rights specifically needed for re-procurement was provided as part of the Phase II
contract.46
Regarding the fifth question above, as shown earlier in the excerpts from the Coast Guard’s
October 18, 2019, RFI, the Coast Guard is requesting that firms responding to the RFI “provide
input on the potential use of a block buy contracting approach during the course of the program
and recommendations for incorporation of such an approach if your company deems that block
buy contracting is feasible. Also, if your company deems that block buy contracting is not
feasible, explain the rationale against using this approach.”
Notional Schedule
Potential oversight questions relating specifically to the Coast Guard’s notional schedule for
acquiring OPCs 5 through 25 include but are not necessarily limited to the following:
 Does the schedule for soliciting and awarding industry studies for OPCs the fifth
and subsequent OPCs provide proper amounts of time for firms to prepare bids
for these contracts and to conduct the studies?
 Does the schedule provide a proper amount of time for the Coast Guard to
evaluate the results of the industry studies and use the studies to inform the RFP
for the DD&C contract?
 Would the envisioned procurement rate for the OPCs complete the OPC program
too slowly, too quickly, or in about the right amount of time?
Regarding the final question above, as mentioned earlier, under the Coast Guard’s new notional
timeline, the Coast Guard’s 14 Reliance-class 210-foot medium-endurance cutters would be
replaced when they would be (if still in service) about 54 to 67 years old, and the Coast Guard’s
13 Famous-class 270-foot medium-endurance cutters would be replaced when they would be (if
still in service) about 42 to 52 years old.
November 25, 2019, House Committee Letter Regarding OPC Program
A November 25, 2019, letter to the Acting Secretary of DHS from the Chair and Ranking
Member of the House Transportation and Infrastructure Committee and the Chair and Ranking
Member of that committee’s Coast Guard and Maritime Transportation subcommittee regarding
the OPC program poses a number of questions regarding the Coast Guard’s proposed course of
action for the OPC program. The text of this letter, including these questions, is presented in
Appendix F.

46 Source: Email from Coast Guard liaison office to CRS, September 6, 2017. The Coast Guard’s email was in response
to a question from CRS about whether the Coast Guard owned the data rights for ESG’s OPC design.
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Risk of Procurement Cost Growth on OPCs 5-25
Another issue for Congress is the risk of procurement cost growth on OPCs 5 through 25,
particularly given the increase in the OPC’s estimated full load displacement from 3,500 to 3,730
tons as of May 2017 to 4,500 tons as of November 2019—an increase of more than 20%—and
how this risk might affect the probability that OPCs can be built within the Coast Guard’s
affordability requirement for the OPC program of an average unit price of $310 million per ship,
or less, in then-year dollars for ships 4 through 9 in the program for the shipbuilder’s portion of
the ship’s total cost. Since, as a general matter, the cost of a ship of a given type is roughly
proportional to its displacement, the increase of more than 20% in the OPC’s estimated full load
displacement raises a possibility that the cost to build OPCs may have increased, perhaps
substantially, from earlier estimates. The draft statement of work (SOW) for the Coast Guard’s
intended follow-on competition for the OPC program that the Coast Guard posted on November
22, 2019, requires contractors responding to the RFI to provide, among other things, “a risk
assessment of achieving the OPC Program’s previously established affordability target for
production OPCs.”
Annual OPC Procurement Rate
The current procurement profile for the OPC, which reaches a maximum projected annual rate of
two ships per year, would deliver OPCs many years after the end of the originally planned service
lives of the medium-endurance cutters that they are to replace. As mentioned earlier, under the
Coast Guard’s new notional timeline, the Coast Guard’s 14 Reliance-class 210-foot medium-
endurance cutters would be replaced when they would be (if still in service) about 54 to 67 years
old, and the Coast Guard’s 13 Famous-class 270-foot medium-endurance cutters would be
replaced when they would be (if still in service) about 42 to 52 years old. These ages, particularly
for the Reliance-class cutters, would be very high, raising questions as to whether the ships could
be made to last that long, and whether they would be able to cost effectively perform their
missions at such ages.
Coast Guard officials have testified that the service plans to extend the service lives of the
medium-endurance cutters until they are replaced by OPCs. There will be maintenance and repair
expenses associated with operating aged medium-endurance cutters, particularly during their final
years of intended service, and if the Coast Guard does not also make investments to increase the
capabilities of these ships, the ships may have less capability in certain regards than OPCs.47
One possible option for addressing this situation would be to increase the maximum annual OPC
procurement rate from the currently planned two ships per year to three or four ships per year.
Doing this could result in the 25th OPC being delivered a few to several years sooner than under
the currently planned maximum rate. Increasing the OPC procurement rate to three or four ships
per year would require a substantial increase to the Coast Guard’s Procurement, Construction,
and Improvements (PC&I) account,48 an issue discussed in Appendix B, and/or providing
additional funding for the procurement of OPCs through the Navy’s budget.
Increasing the maximum procurement rate for the OPC program could, depending on the exact
approach taken, reduce OPC unit acquisition costs due to improved production economies of
scale. It could also create new opportunities for using competition in the program. Notional

47 For further discussion, see Government Accountability Office, Coast Guard Acquisitions[:] Actions Needed to
Address Longstanding Portfolio Management Challenges, GAO 18-454, July 2018, pp. 32-36.
48 Prior to FY2019, the PC&I account was called the Acquisition, Construction, and Improvements (AC&I) account.
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alternative approaches for increasing the OPC procurement rate to three or four ships per year
include but are not necessarily limited to the following:
 increasing the production rate to three or four ships per year at a single
shipyard—an option that would depend on that shipyard’s production capacity;
 using two shipyards for building OPCs to a single OPC design;
 using two shipyards for building OPCs to two designs, with each shipyard
building OPCs to its own design—an option that would result in two OPC classes
(similar to how the Coast Guard currently operates two primary classes of
medium-endurance cutters); or
 building additional NSCs in the place of some of the planned OPCs—an option
that might include de-scoping equipment on those NSCs where possible to
reduce their acquisition cost and make their capabilities more like that of the
OPC.
The fourth alternative above—which could be viewed as broadly similar to how the Navy is using
a de-scoped version of the San Antonio (LPD-17) class amphibious ship as the basis for its LPD-
17 Flight II (LPD-30) class amphibious ships49—could be pursued in combination with one of the
first three alternatives.
Annual or Multiyear (Block Buy) Contracting for OPCs
Another issue for Congress is whether to acquire OPCs 5 through 25 using annual contracting or
multiyear contracting. The Coast Guard typically uses contracts with options for its shipbuilding
programs. Although a contract with options may look like a form of multiyear contracting, it
operates more like a series of annual contracts. Contracts with options do not achieve the
reductions in acquisition costs that are possible with multiyear contracting. Using multiyear
contracting involves accepting certain trade-offs.50
One form of multiyear contracting, called block buy contracting, can be used at the start of a
shipbuilding program, beginning with the first ship. (Indeed, this was a principal reason why
block buy contracting was in effect invented in FY1998, as the contracting method for procuring
the Navy’s first four Virginia-class attack submarines.51) Section 311 of the Frank LoBiondo
Coast Guard Authorization Act of 2018 (S. 140/P.L. 115-282 of December 4, 2018) provides

49 For additional discussion, see CRS Report R43543, Navy LPD-17 Flight II and LHA Amphibious Ship Programs:
Background and Issues for Congress, by Ronald O'Rourke.
50 These trade-offs include the following:
- reduced congressional control over year-to-year spending, and tying the hands of future Congresses;
- reduced flexibility for making changes in Coast Guard acquisition programs in response to unforeseen changes in
strategic or budgetary circumstances (which can cause any needed funding reductions to fall more heavily on
acquisition programs not covered by multiyear contracts);
- a potential need to shift funding from later fiscal years to earlier fiscal years to fund economic order quantity
(EOQ) purchases (i.e., up-front batch purchases) of components;
- the risk of having to make penalty payments to shipbuilders if multiyear contracts need to be terminated due to
unavailability of funds needed for the continuation of the contracts; and
- the risk that materials and components purchased for ships to be procured in future years might go to waste if
those ships are not eventually procured.
51 For additional discussion, see CRS Report R41909, Multiyear Procurement (MYP) and Block Buy Contracting in
Defense Acquisition: Background and Issues for Congress, by Ronald O'Rourke.
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permanent authority for the Coast Guard to use block buy contracting with economic order
quantity (EOQ) purchases (i.e., up-front batch purchases) of components in its major acquisition
programs. The authority is now codified at 14 U.S.C. 1137.
CRS estimates that if the Coast Guard were to use block buy contracting with EOQ purchases of
components for acquiring the first several OPCs beginning with OPC 5, and either block buy
contracting with EOQ purchases or another form of multiyear contracting known as multiyear
procurement (MYP)52 with EOQ purchases for acquiring the remaining ships in the program, the
savings on the total acquisition cost of the 25 OPCs (compared to costs under contracts with
options) could amount to hundreds of millions of dollars.
Planned NSC, OPC, and FRC Procurement Quantities
Another issue for Congress concerns the Coast Guard’s planned NSC, OPC, and FRC
procurement quantities. The POR’s planned force of 91 NSCs, OPCs, and FRCs is about equal in
number to the Coast Guard’s legacy force of 90 high-endurance cutters, medium-endurance
cutters, and 110-foot patrol craft. NSCs, OPCs, and FRCs, moreover, are to be individually more
capable than the older ships they are to replace. Even so, a Coast Guard analysis conducted in
2011 (the most recent such analysis that the Coast Guard has released) concluded that the planned
total of 91 NSCs, OPCs, and FRCs would provide 61% of the cutters that would be needed to
fully perform the service’s statutory missions in coming years, in part because Coast Guard
mission demands are expected to be greater in coming years than they were in the past. For
further discussion of this issue, about which CRS has testified and reported on since 2005,53 see
Appendix A.
Legislative Activity for FY2021
Summary of Appropriations Action on FY2021 Procurement
Funding Request
Table 2 summarizes appropriations action on the Coast Guard’s request for FY2021 procurement
funding for the NSC, OPC, and FRC programs.
Table 2. Summary of Appropriations Action on FY2021 Procurement Funding
Request
Figures in millions of dollars, rounded to nearest tenth
Request
Request
HAC
SAC
Final
NSC program
31
31

OPC program
546
546

FRC program
20
260

TOTAL
597
837

52 For more on MYP, see CRS Report R41909, Multiyear Procurement (MYP) and Block Buy Contracting in Defense
Acquisition: Background and Issues for Congress, by Ronald O'Rourke.
53 See Statement of Ronald O’Rourke, Specialist in National Defense, Congressional Research Service, Before the
Senate Commerce, Science, and Transportation Committee, Subcommittee on Fisheries and the Coast Guard, Hearing
on The Coast Guard’s Revised Deepwater Implementation Plan, June 21, 2005, pp. 1-5.
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Source: Table prepared by CRS based on Coast Guard’s FY2021 budget submission, HAC committee report,
and SAC chairman’s mark and explanatory statement on FY2021 DHS Appropriations Act. HAC is House
Appropriations Committee; SAC is Senate Appropriations Committee.
FY2021 DHS Appropriations Act (H.R. 7669)
House
The House Appropriations Committee, in its report (H.Rept. 116-458 of July 20, 2020) on H.R.
7669, recommended the funding levels shown in the HAC column of Table 2. H.Rept. 116-458
states:
Fast Response Cutter (FRC).—The recommendation provides $260,000,000 for four
FRCs, $240,000,000 above the request to finish the program of record for this asset.
National Security Cutter (NSC).—The bill does not include the proposed rescission of
$70,000,000 of the $100,500,000 provided in fiscal year 2020 for the acquisition of long
lead time materials for the construction of a twelfth National Security Cutter.
Offshore Patrol Cutter (OPC).—The recommendation provides the requested
$546,000,000 to continue the program of record for these critical assets. The Committee
directs the Coast Guard to continue briefings, as described in Public Law 116–93, on the
metrics used to evaluate adherence to production timelines and costs, as well as progress
towards or challenges experienced in meeting these metrics. (Page 48)
FY2021 National Defense Authorization Act (H.R. 6395)
House
Division H of H.R. 6395 is the Elijah E. Cummings Coast Guard Authorization Act of 2020,
which includes the provisions discussed below.
Section 8004 states:
SEC. 8004. Availability of amounts for acquisition of additional National Security Cutter.
(a) In general.—Of the amounts authorized to be appropriated by—
(1) section 4902(2)(A)(i) of title 14, United States Code, as amended by section 8001 of
this division, $100,000,000 for fiscal year 2020; and
(2) section 4902(2)(A)(ii) of title 14, United States Code, as amended by section 8001 of
this division, $550,000,000 for fiscal year 2021,is authorized for the acquisition of a
National Security Cutter.
(b) Treatment of acquired Cutter.—Any cutter acquired using amounts available pursuant
to subsection (a) shall be in addition to the National Security Cutters approved under the
existing acquisition baseline in the program of record for the National Security Cutter.
Section 8012 states:
SEC. 8012. Acquisition of fast response cutter.
(a) In general.—Of the amounts authorized to be appropriated under section 4902(2)(A)(ii)
of title 14, United States Code, as amended by section 8001 of this division, $265,000,000
for fiscal year 2021 shall be made available for the acquisition of four Fast Responses
Cutters.
(b) Treatment of acquired cutters.—Any cutter acquired pursuant to subsection (a) shall be
in addition to the 58 cutters approved under the existing acquisition baseline.
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Section 9211 states:
SEC. 9211. Modification of acquisition process and procedures.
(a) Extraordinary relief.—
(1) IN GENERAL.—Subchapter III of chapter 11 of title 14, United States Code, is
amended by adding at the end the following:
“§ 1157. Extraordinary relief
“(a) In general.—With respect to any prime contracting entity receiving extraordinary
relief pursuant to the Act entitled ‘An Act to authorize the making, amendment, and
modification of contracts to facilitate the national defense’, approved August 28, 1958
(Public Law 85–804; 50 U.S.C. 1432 et seq.) for a major acquisition, the Secretary shall
not consider any further request by the prime contracting entity for extraordinary relief
under such Act for such major acquisition.
“(b) Inapplicability to subcontractors.—The limitation under subsection (a) shall not apply
to subcontractors of a prime contracting entity.
“(c) Quarterly report.—Not less frequently than quarterly during each fiscal year in which
extraordinary relief is approved or provided to an entity under the Act referred to in
subsection (a) for the acquisition of Offshore Patrol Cutters, the Commandant shall provide
to the Committee on Commerce, Science, and Transportation of the Senate and the
Committee on Transportation and Infrastructure of the House of Representatives a report
that describes in detail such relief and the compliance of the entity with the oversight
measures required as a condition of receiving such relief.”.
(3) ANALYSIS FOR CHAPTER 11.—The analysis for chapter 11 of title 14, United States
Code, is amended by inserting after the item relating to section 1156 the following:
“1157. Extraordinary relief.”.
(b) Notice to Congress with respect to breach of contract.—Section 1135 of title 14, United
States Code, is amended by adding at the end the following:
“(d) Notice to Congress with respect to breach of contract.—Not later than 48 hours after
the Commandant becomes aware that a major acquisition contract cannot be carried out
under the terms specified in the contract, the Commandant shall provide a written
notification to the Committee on Commerce, Science, and Transportation of the Senate and
the Committee on Transportation and Infrastructure of the House of Representatives that
includes—
“(1) a description of the terms of the contract that cannot be met; and
“(2) an assessment of whether the applicable contract officer has issued a cease and desist
order to the contractor based on the breach of such terms of the contract.”.
Section 9422 states:
SEC. 9422. Report on fast response cutters, offshore patrol cutters, and national security
cutters.
(a) In general.—Not later than 90 days after the date of the enactment of this Act, the
Commandant shall submit to the Committee on Commerce, Science, and Transportation of
the Senate and the Committee on Transportation and Infrastructure of the House of
Representatives a report on the combination of Fast Response Cutters, Offshore Patrol
Cutters, and National Security Cutters necessary to carry out Coast Guard missions.
(b) Elements.—The report required by subsection (a) shall include—
(1) an updated cost estimate for each type of cutter described in such subsection; and
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(2) a cost estimate for a Sensitive Compartmented Information Facility outfitted to manage
data in a manner equivalent to the National Security Cutter Sensitive Compartmented
Information Facilities.
Section 11301 states:
SEC. 11301. Coast Guard Arctic prioritization.
(a) Findings.—Congress makes the following findings:
(1) The strategic importance of the Arctic continues to increase as the United States and
other countries recognize the military significance of the sea lanes and choke points within
the region and understand the potential for power projection from the Arctic into multiple
regions.
(2) Russia and China have conducted military exercises together in the Arctic, have agreed
to connect the Northern Sea Route, claimed by Russia, with China's Maritime Silk Road,
and are working together in developing natural gas resources in the Arctic.
(3) The economic significance of the Arctic continues to grow as countries around the
globe begin to understand the potential for maritime transportation through, and economic
and trade development in, the region.
(4) Increases in human, maritime, and resource development activity in the Arctic region
may create additional mission requirements for the Department of Defense and the
Department of Homeland Security.
(5) The increasing role of the United States in the Arctic has been highlighted in each of
the last four national defense authorization acts.
(6) The United States Coast Guard Arctic Strategic Outlook released in April 2019 states,
“Demonstrating commitment to operational presence, Canada, Denmark, and Norway have
made strategic investments in ice-capable patrol ships charged with national or homeland
security missions. The United States is the only Arctic State that has not made similar
investments in ice-capable surface maritime security assets. This limits the ability of the
Coast Guard, and the Nation, to credibly uphold sovereignty or respond to contingencies
in the Arctic.”.
(b) Sense of Congress.—It is the sense of Congress that—
(1) the Arctic is a region of strategic importance to the national security interests of the
United States, and the Coast Guard must better align its mission prioritization and
development of capabilities to meet the growing array of challenges in the region;
(2) the increasing freedom of navigation and expansion of activity in the Arctic must be
met with an increasing show of Coast Guard forces capable of exerting influence through
persistent presence;
(3) Congress fully supports the needed and important re-capitalization of the fleet of cutters
and aircraft of the Coast Guard, but, the Coast Guard must avoid overextending operational
assets for remote international missions at the cost of dedicated focus on this domestic area
of responsibility with significant international interest and activity; and
(4) although some progress has been made to increase awareness of Arctic issues and to
promote increased presence in the region, additional measures are needed to protect vital
economic, environmental, and national security interests of the United States, and to show
the commitment of the United States to this emerging strategic choke point of increasing
great power competition.
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(c) Arctic defined.—In this section, the term “Arctic” has the meaning given that term in
section 112 of the Arctic Research and Policy Act of 1984 (15 U.S.C. 4111).54

54 For more on the Arctic, including the definition of the Arctic under Section 112 of the Arctic Research and Policy
Act of 1984, see CRS Report R41153, Changes in the Arctic: Background and Issues for Congress, coordinated by
Ronald O'Rourke.
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Appendix A. Planned NSC, OPC, and FRC
Procurement Quantities
This appendix provides further discussion on the issue of the Coast Guard’s planned NSC, OPC,
and FRC procurement quantities.
Overview
The Coast Guard’s program of record for NSCs, OPCs, and FRCs includes only about 61% as
many cutters as the Coast Guard calculated in 2011 would be needed to fully perform its
projected future missions. (The Coast Guard’s 2011 analysis is the most recent such analysis that
the Coast Guard has released.) The Coast Guard’s planned force levels for NSCs, OPCs, and
FRCs have remained unchanged since 2004. In contrast, the Navy since 2004 has adjusted its ship
force-level goals multiple times in response to changing strategic and budgetary circumstances.55
Although the Coast Guard’s strategic situation and resulting mission demands may not have
changed as much as the Navy’s have since 2004, the Coast Guard’s budgetary circumstances may
have changed since 2004. The 2004 program of record was heavily conditioned by Coast Guard
expectations in 2004 about future funding levels in the PC&I account. Those expectations may
now be different, as suggested by the willingness of Coast Guard officials in 2017 to begin
regularly mentioning the need for a PC&I funding level of $2 billion per year (see Appendix B).
It can also be noted that continuing to, in effect, use the Coast Guard’s 2004 expectations of
future funding levels for the PC&I account as an implicit constraint on planned force levels for
NSCs, OPCs, and FRCs can encourage an artificially narrow view of Congress’s options
regarding future Coast Guard force levels and associated funding levels, depriving Congress of
agency in the exercise of its constitutional power to provide for the common defense and general
welfare of the United States, and to set funding levels and determine the composition of federal
spending.
2009 Coast Guard Fleet Mix Analysis
The Coast Guard estimated in 2009 that with the POR’s planned force of 91 NSCs, OPCs, and
FRCs, the service would have capability or capacity gaps56 in 6 of its 11 statutory missions—
search and rescue (SAR); defense readiness; counterdrug operations; ports, waterways, and
coastal security (PWCS); protection of living marine resources (LMR); and alien migrant
interdiction operations (AMIO). The Coast Guard judges that some of these gaps would be “high
risk” or “very high risk.”
Public discussions of the POR frequently mention the substantial improvement that the POR
force would represent over the legacy force. Only rarely, however, have these discussions
explicitly acknowledged the extent to which the POR force would nevertheless be smaller in
number than the force that would be required, by Coast Guard estimate, to fully perform the
Coast Guard’s statutory missions in coming years. Discussions that focus on the POR’s

55 See Table 1 and Table B-1 of CRS Report RL32665, Navy Force Structure and Shipbuilding Plans: Background and
Issues for Congress, by Ronald O'Rourke. As shown in those tables, the Navy’s force-level goal of 2002-2004 was
followed by new force- level goals in early 2005, February 2006, mid-2011, September 2011, March 2012, January
2013, March 2015, and December 2016.
56 The Coast Guard uses capability as a qualitative term, to refer to the kinds of missions that can be performed, and
capacity as a quantitative term, to refer to how much (i.e., to what scale or volume) a mission can be performed.
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improvement over the legacy force while omitting mention of the considerably larger number of
cutters that would be required, by Coast Guard estimate, to fully perform the Coast Guard’s
statutory missions in coming years could encourage audiences to conclude, contrary to Coast
Guard estimates, that the POR’s planned force of 91 cutters would be capable of fully performing
the Coast Guard’s statutory missions in coming years.
In a study completed in December 2009 called the Fleet Mix Analysis (FMA) Phase 1, the Coast
Guard calculated the size of the force that in its view would be needed to fully perform the
service’s statutory missions in coming years. The study refers to this larger force as the objective
fleet mix. Table A-1 compares planned numbers of NSCs, OPCs, and FRCs in the POR to those
in the objective fleet mix.
Table A-1. Program of Record Compared to Objective Fleet Mix
From Fleet Mix Analysis Phase 1 (2009)
Objective
Objective Fleet Mix
Fleet Mix
compared to POR
Program of
From FMA
Ship type
Record (POR)
Phase 1
Number
%
NSC
8
9
+1
+13%
OPC
25
57
+32
+128%
FRC
58
91
+33
+57%
Total
91
157
+66
+73%
Source: Fleet Mix Analysis Phase 1, Executive Summary, Table ES-8 on page ES-13.
As can be seen in Table A-1, the objective fleet mix includes 66 additional cutters, or about 73%
more cutters than in the POR. Stated the other way around, the POR includes about 58% as many
cutters as the 2009 FMA Phase I objective fleet mix.
As intermediate steps between the POR force and the objective fleet mix, FMA Phase 1
calculated three additional forces, called FMA-1, FMA-2, and FMA-3. (The objective fleet mix
was then relabeled FMA-4.) Table A-2 compares the POR to FMAs 1 through 4.
Table A-2. POR Compared to FMAs 1 Through 4
From Fleet Mix Analysis Phase 1 (2009)
Program
FMA-4
of Record
(Objective
Ship type
(POR)
FMA-1
FMA-2
FMA-3
Fleet Mix)
NSC
8
9
9
9
9
OPC
25
32
43
50
57
FRC
58
63
75
80
91
Total
91
104
127
139
157
Source: Fleet Mix Analysis Phase 1, Executive Summary, Table ES-8 on page ES-13.
FMA-1 was calculated to address the mission gaps that the Coast Guard judged to be “very high
risk.” FMA-2 was calculated to address both those gaps and additional gaps that the Coast Guard
judged to be “high risk.” FMA-3 was calculated to address all those gaps, plus gaps that the Coast
Guard judged to be “medium risk.” FMA-4—the objective fleet mix—was calculated to address
all the foregoing gaps, plus the remaining gaps, which the Coast Guard judge to be “low risk” or
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“very low risk.” Table A-3 shows the POR and FMAs 1 through 4 in terms of their mission
performance gaps.
Table A-3. Force Mixes and Mission Performance Gaps
From Fleet Mix Analysis Phase 1 (2009)—an X mark indicates a mission performance gap
Risk levels of Program
these
of
FMA-4
Missions with performance
performance
Record
FMA-
(Objective
gaps
gaps
(POR)
1
FMA-2
FMA-3
Fleet Mix)
Search and Rescue (SAR)
Very high
X

capability
Defense Readiness capacity
Very high
X

Counter Drug capacity
Very high
X

Ports, Waterways, and Coastal
High
X
X

Security (PWCS) capacitya
Living Marine Resources (LMR)
High
X
X

[all gaps
capability and capacitya
addressed]
PWCS capacityb
Medium
X
X
X

LMR capacityc
Medium
X
X
X

Alien Migrant Interdiction
Low/very low
X
X
X
X

Operations (AMIO) capacityd
PWCS capacitye
Low/very low
X
X
X
X

Source: Fleet Mix Analysis Phase 1, Executive Summary, page ES-11 through ES-13.
Notes: In the first column, The Coast Guard uses capability as a qualitative term, to refer to the kinds of
missions that can be performed, and capacity as a quantitative term, to refer to how much (i.e., to what scale or
volume) a mission can be performed.
a. This gap occurs in the Southeast operating area (Coast Guard Districts 7 and 8) and the Western operating
area (Districts 11, 13, and 14).
b. This gap occurs in Alaska.
c. This gap occurs in Alaska and in the Northeast operating area (Districts 1 and 5).
d. This gap occurs in the Southeast and Western operating areas.
e. This gap occurs in the Northeast operating area.
Figure A-1, taken from FMA Phase 1, depicts the overall mission capability/performance gap
situation in graphic form. It appears to be conceptual rather than drawn to precise scale. The black
line descending toward 0 by the year 2027 shows the declining capability and performance of the
Coast Guard’s legacy assets as they gradually age out of the force. The purple line branching up
from the black line shows the added capability from ships and aircraft to be procured under the
POR, including the 91 planned NSCs, OPCs, and FRCs. The level of capability to be provided
when the POR force is fully in place is the green line, labeled “2005 Mission Needs Statement.”
As can be seen in the graph, this level of capability is substantially below a projection of Coast
Guard mission demands made after the terrorist attacks of September 11, 2001 (the red line,
labeled “Post-9/11 CG Mission Demands”), and even further below a Coast Guard projection of
future mission demands (the top dashed line, labeled “Future Mission Demands”). The dashed
blue lines show future capability levels that would result from reducing planned procurement
quantities in the POR or executing the POR over a longer time period than originally planned.
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Figure A-1. Projected Mission Demands vs. Projected Capability/Performance
From Fleet Mix Analysis Phase 1, Executive Summary

Source: Fleet Mix Analysis Phase 1, Executive Summary, Figure ES-1 on p. ES-2.
FMA Phase 1 was a fiscally unconstrained study, meaning that the larger force mixes shown in
Table A-2 were calculated primarily on the basis of their capability for performing missions,
rather than their potential acquisition or life-cycle operation and support (O&S) costs.
Although the FMA Phase 1 was completed in December 2009, the figures shown in Table A-2
were generally not included in public discussions of the Coast Guard’s future force structure
needs until April 2011, when GAO presented them in testimony.57 GAO again presented them in a
July 2011 report.58
The Coast Guard completed a follow-on study, called Fleet Mix Analysis (FMA) Phase 2, in May
2011. Among other things, FMA Phase 2 includes a revised and updated objective fleet mix called
the refined objective mix. Table A-4 compares the POR to the objective fleet mix from FMA
Phase 1 and the refined objective mix from FMA Phase 2.
As can be seen in Table A-4, compared to the objective fleet mix from FMA Phase 1, the refined
objective mix from FMA Phase 2 includes 49 OPCs rather than 57. The refined objective mix
includes 58 additional cutters, or about 64% more cutters than in the POR. Stated the other way
around, the POR includes about 61% as many cutters as the refined objective mix.

57 Government Accountability Office, Coast Guard[:]Observations on Acquisition Management and Efforts to
Reassess the Deepwater Program, Testimony Before the Subcommittee on Coast Guard and Maritime Transportation,
Committee on Transportation and Infrastructure, House of Representatives, Statement of John P. Hutton, Director
Acquisition and Sourcing Management, GAO-11-535T, April 13, 2011, p. 10.
58 Government Accountability Office, Coast Guard[:]Action Needed As Approved Deepwater Program Remains
Unachievable, GAO-11-743, July 2011, p. 46.
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Table A-4. POR Compared to Objective Mixes in FMA Phases 1 and 2
From Fleet Mix Analysis Phase 1 (2009) and Phase 2 (2011)
Refined
Objective
Objective
Program of
Fleet Mix
Mix from
Record
from FMA
FMA Phase
Ship type
(POR)
Phase 1
2
NSC
8
9
9
OPC
25
57
49
FRC
58
91
91
Total
91
157
149
Source: Fleet Mix Analysis Phase 1, Executive Summary, Table ES-8 on page ES-13, and Fleet Mix Analysis Phase
2, Table ES-2 on p. iv.
Compared to the POR, the larger force mixes shown in Table A-2 and Table A-4 would be more
expensive to procure, operate, and support than the POR force. Using the average NSC, OPC, and
FRC procurement cost figures presented earlier (see “Background”), procuring the 58 additional
cutters in the Refined Objective Mix from FMA Phase 2 might cost an additional $10.7 billion, of
which most (about $7.8 billion) would be for the 24 additional FRCs. (The actual cost would
depend on numerous factors, such as annual procurement rates.) O&S costs for these 58
additional cutters over their life cycles (including crew costs and periodic ship maintenance costs)
would require billions of additional dollars.59
The larger force mixes in the FMA Phase 1 and 2 studies, moreover, include not only increased
numbers of cutters, but also increased numbers of Coast Guard aircraft. In the FMA Phase 1
study, for example, the objective fleet mix included 479 aircraft—93% more than the 248 aircraft
in the POR mix. Stated the other way around, the POR includes about 52% as many aircraft as the
objective fleet mix. A decision to procure larger numbers of cutters like those shown in Table A-2
and Table A-4 might thus also imply a decision to procure, operate, and support larger numbers
of Coast Guard aircraft, which would require billions of additional dollars. The FMA Phase 1
study estimated the procurement cost of the objective fleet mix of 157 cutters and 479 aircraft at
$61 billion to $67 billion in constant FY2009 dollars, or about 66% more than the procurement
cost of $37 billion to $40 billion in constant FY2009 dollars estimated for the POR mix of 91
cutters and 248 aircraft. The study estimated the total ownership cost (i.e., procurement plus life-
cycle O&S cost) of the objective fleet mix of cutters and aircraft at $201 billion to $208 billion in
constant FY2009 dollars, or about 53% more than the total ownership cost of $132 billion to $136
billion in constant FY2009 dollars estimated for POR mix of cutters and aircraft.60
A December 7, 2015, press report states the following:
The Coast Guard’s No. 2 officer said the small size and advanced age of its fleet is limiting
the service’s ability to carry out crucial missions in the Arctic and drug transit zones or to
meet rising calls for presence in the volatile South China Sea.

59 The FMA Phase 1 and Phase 2 studies present acquisition and life-cycle ownership cost calculations for force mixes
that include not only larger numbers of NSC, OPCs, and FRCs, but corresponding larger numbers of Coast Guard
aircraft.
60 Fleet Mix Analysis Phase 1, Executive Summary, Table ES-11 on page ES-19, and Table ES-10 on page ES-18. The
life-cycle O&S cost was calculated through 2050.
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“The lack of surface vessels every day just breaks my heart,” VADM Charles Michel, the
Coast Guard’s vice commandant, said Dec. 7.
Addressing a forum on American Sea Power sponsored by the U.S. Naval Institute at the
Newseum, Michel detailed the problems the Coast Guard faces in trying to carry out its
missions of national security, law enforcement and maritime safety because of a lack of
resources.
“That’s why you hear me clamoring for recapitalization,” he said.
Michel noted that China’s coast guard has a lot more ships than the U.S. Coast Guard has,
including many that are larger than the biggest U.S. cutter, the 1,800-ton [sic:4,800-ton]
National Security Cutter. China is using those white-painted vessels rather than “gray-hull
navy” ships to enforce its claims to vast areas of the South China Sea, including reefs and
shoals claimed by other nations, he said.
That is a statement that the disputed areas are “so much our territory, we don’t need the
navy. That’s an absolutely masterful use of the coast guard,” he said.
The superior numbers of Chinese coast guard vessels and its plans to build more is
something, “we have to consider when looking at what we can do in the South China Sea,”
Michel said.
Although they have received requests from the U.S. commanders in the region for U.S.
Coast Guard cutters in the South China Sea, “the commandant had to say ‘no’. There’s not
enough to go around,” he said.61
Potential oversight questions for Congress include the following:
 Under the POR force mix, how large a performance gap, precisely, would there
be in each of the missions shown in Table A-3? What impact would these
performance gaps have on public safety, national security, and protection of
living marine resources?
 How sensitive are these performance gaps to the way in which the Coast Guard
translates its statutory missions into more precise statements of required mission
performance?
 Given the performance gaps shown in Table A-3, should planned numbers of
Coast Guard cutters and aircraft be increased, or should the Coast Guard’s
statutory missions be reduced, or both?
 How much larger would the performance gaps in Table A-3 be if planned
numbers of Coast Guard cutters and aircraft are reduced below the POR figures?
 Has the executive branch made sufficiently clear to Congress the difference
between the number of ships and aircraft in the POR force and the number that
would be needed to fully perform the Coast Guard’s statutory missions in coming
years? Why has public discussion of the POR focused mostly on the capability
improvement it would produce over the legacy force and rarely on the
performance gaps it would have in the missions shown in Table A-3?

61 Otto Kreisher, “’Not Enough’ USCG Vessels to Meet Demand for Presence in South China Sea, Arctic,” Seapower,
December 7, 2015.
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 What projected mission demands or other factors may have changed since the
Coast Guard’s 2011 Fleet Mix Analysis, and how might these changes affect
future required numbers of Coast Guard cutters and other Coast Guard assets?62

62 For a blog post discussing this issue, see Chuck Hill, “Is Our Fleet Recapitalization on Course? Do We Need to
Change the Destination?” Chuck Hill’s CG Blog, September 8, 2019.
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Appendix B. Funding Levels in PC&I Account
This appendix provides background information on funding levels in the Coast Guard’s
Procurement, Construction, and Improvements (PC&I) account.63
Overview
Table B-1 shows funding programmed in the PC&I account under the Coast Guard’s FY2013-
FY2021 budget submissions.

63 Prior to FY2019, the PC&I account was called the Acquisition, Construction, and Improvements (AC&I) account.
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Table B-1. Funding in PC&I Account in FY2013-FY2020 Budgets
Figures in millions of dollars, rounded to nearest tenth
Budget
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY23
FY24
FY25
Avg.
FY13
1,217.3
1,429.5
1,619.9
1,643.8
1,722.0

1,526.5
FY14

951.1
1,195.7
901.0
1,024.8
1,030.3

1,020.6
FY15

1,084.2
1,103.0
1,128.9
1,180.4
1,228.7

1,145.0
FY16

1,017.3
1,125.3
1,255.7
1,201.0
1,294.6

1,178.8
FY17

1,136.8
1,259.6
1,339.9
1,560.5
1,840.8

1,427.5
FY18

1,203.7
1,360.9
1,602.7
1,810.6
1,687.5

1,533.1
FY19

1,886.8
1,473.0
1,679.8
1,555.5
1,698.5

1,658.7
FY20

1,234.7
1,679.8
1,555.5
1,698.5
1,737.0

1,581.1

1,637.1
n/a
n/a
n/a
n/a
n/a
Source: Table prepared by CRS based on Coast Guard FY2013-FY2020 budget submissions. n/a means not available.

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The Coast Guard has testified that funding the PC&I account at a level of about $1 billion to $1.2
billion per year (the average levels under the FY2014-FY2016 budget submissions) would make
it difficult to fund various Coast Guard acquisition projects, including the PSC program and
improvements to Coast Guard shore installations. Coast Guard plans call for procuring OPCs at
an eventual rate of two per year. If each OPC costs roughly $400 million, procuring two OPCs
per year in a PC&I account of about $1 billion to $1.2 billion per year, as programmed under the
FY2014-FY2016 budget submissions, would leave about $200 million to $400 million per year
for all other PC&I-funded programs.
Since 2017, Coast Guard officials have been stating more regularly what they stated only
infrequently in earlier years—that executing the Coast Guard’s various acquisition programs fully
and on a timely basis would require the PC&I account to be funded at a level of about $2 billion
per year. Statements from Coast Guard officials on this issue in past years have sometimes put
this figure as high as about $2.5 billion per year.
Using Past PC&I Funding Levels as a Guide for Future PC&I
Funding Levels
In assessing future funding levels for executive branch agencies, a common practice is to assume
or predict that the figure in coming years will likely be close to where it has been in previous
years. While this method can be of analytical and planning value, for an agency like the Coast
Guard, which goes through periods with less acquisition of major platforms and periods with
more acquisition of major platforms, this approach might not always be the best approach, at least
for the PC&I account.
More important, in relation to maintaining Congress’s status as a co-equal branch of government,
including the preservation and use of congressional powers and prerogatives, an analysis that
assumes or predicts that future funding levels will resemble past funding levels can encourage an
artificially narrow view of congressional options regarding future funding levels, depriving
Congress of agency in the exercise of its constitutional power to set funding levels and determine
the composition of federal spending.
Past Coast Guard Statements About Required PC&I Funding Level
At an October 4, 2011, hearing on the Coast Guard’s major acquisition programs before the Coast
Guard and Maritime Transportation subcommittee of the House Transportation and Infrastructure
Committee, the following exchange occurred:
REPRESENATIVE FRANK LOBIONDO:
Can you give us your take on what percentage of value must be invested each year to
maintain current levels of effort and to allow the Coast Guard to fully carry out its
missions?
ADMIRAL ROBERT J. PAPP, COMMANDANT OF THE COAST GUARD:
I think I can, Mr. Chairman. Actually, in discussions and looking at our budget—and I’ll
give you rough numbers here, what we do now is we have to live within the constraints
that we’ve been averaging about $1.4 billion in acquisition money each year.
If you look at our complete portfolio, the things that we’d like to do, when you look at the
shore infrastructure that needs to be taken care of, when you look at renovating our smaller
icebreakers and other ships and aircraft that we have, we’ve done some rough estimates
that it would really take close to about $2.5 billion a year, if we were to do all the things
that we would like to do to sustain our capital plant.
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So I’m just like any other head of any other agency here, as that the end of the day, we’re
given a top line and we have to make choices and tradeoffs and basically, my tradeoffs boil
down to sustaining frontline operations balancing that, we’re trying to recapitalize the
Coast Guard and there’s where the break is and where we have to define our spending.64
An April 18, 2012, blog entry stated the following:
If the Coast Guard capital expenditure budget remains unchanged at less than $1.5 billion
annually in the coming years, it will result in a service in possession of only 70 percent of
the assets it possesses today, said Coast Guard Rear Adm. Mark Butt.
Butt, who spoke April 17 [2012] at [a] panel [discussion] during the Navy League Sea Air
Space conference in National Harbor, Md., echoed Coast Guard Commandant Robert Papp
in stating that the service really needs around $2.5 billion annually for procurement.65
At a May 9, 2012, hearing on the Coast Guard’s proposed FY2013 budget before the Homeland
Security subcommittee of the Senate Appropriations Committee, Admiral Papp testified, “I’ve
gone on record saying that I think the Coast Guard needs closer to $2 billion dollars a year [in
acquisition funding] to recapitalize—[to] do proper recapitalization.”66
At a May 14, 2013, hearing on the Coast Guard’s proposed FY2014 budget before the Homeland
Security Subcommittee of the Senate Appropriations Committee, Admiral Papp stated the
following regarding the difference between having about $1.0 billion per year rather than about
$1.5 billion per year in the PC&I account:
Well, Madam Chairman, $500 million—a half a billion dollars—is real money for the
Coast Guard. So, clearly, we had $1.5 billion in the [FY]13 budget. It doesn't get everything
I would like, but it—it gave us a good start, and it sustained a number of projects that are
very important to us.
When we go down to the $1 billion level this year, it gets my highest priorities in there, but
we have to either terminate or reduce to minimum order quantities for all the other projects
that we have going.
If we're going to stay with our program of record, things that have been documented that
we need for our service, we're going to have to just stretch everything out to the right. And
when we do that, you cannot order in economic order quantities. It defers the purchase.
Ship builders, aircraft companies—they have to figure in their costs, and it inevitably raises
the cost when you're ordering them in smaller quantities and pushing it off to the right.

64 Source: Transcript of hearing.
65 David Perera, “The Coast Guard Is Shrinking,” FierceHomelandSecurity.com, April 18, 2012, accessed July 20,
2012, at http://www.fiercehomelandsecurity.com/story/coast-guard-shrinking/2012-04-18.
66 Source: transcript of hearing. Papp may have been referring to remarks he made to the press before giving his annual
state of the Coast Guard speech on February 23, 2012, in which reportedly stated that the Coast Guard would require
about $2 billion per year in acquisition funding to fully replace its current assets. (See Adam Benson, “Coast Guard
Cutbacks Will Cost 1,000 Jobs,” Norwich Bulletin, February 23, 2012, accessed May 31, 2012, at
http://www.norwichbulletin.com/x1138492141/Coast-Guard-cutbacks-will-cost-1-000-jobs. See also “Coast Guard
Leader Calls For More Ships,” MilitaryFeed.com, February 24, 2012, accessed May 31, 2012, at
http://militaryfeed.com/coast-guard-leader-calls-for-more-ships-5/; Associated Press, “Coast Guard Commandant Calls
for New Ships,” TheLog.com, March 10, 2012, accessed May 31, 2012, at http://www.thelog.com/SNW/Article/Coast-
Guard-Commandant-Calls-for-New-Ships-to-Replace-Aging-Fleet; Mickey McCarter, “Congress Poised to Give Coast
Guard More Money Than Requested for FY 2013,” HSToday.us, May 10, 2012, accessed May 31, 2012, at
http://www.hstoday.us/focused-topics/customs-immigration/single-article-page/congress-poised-to-give-coast-guard-
more-money-than-requested-for-fy-2013.html.) See also “Interview, Adm. Robert Papp, US Coast Guard
Commandant,” Defense News, November 11, 2013: 30.
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Plus, it almost creates a death spiral for the Coast Guard because we are forced to sustain
older assets—older ships and older aircraft—which ultimately cost us more money, so it
eats into our operating funds, as well, as we try to sustain these older things.
So, we'll do the best we can within the budget. And the president and the secretary have
addressed my highest priorities, and we'll just continue to go on the—on an annual basis
seeing what we can wedge into the budget to keep the other projects going.67
At a March 12, 2014, hearing on the Coast Guard’s proposed FY2015 budget before the
Homeland Security subcommittee of the House Appropriations Committee, Admiral Papp stated
the following:
Well, that’s what we've been struggling with, as we deal with the five-year plan, the capital
investment plan, is showing how we are able to do that. And it will be a challenge,
particularly if it sticks at around $1 billion [per year]. As I've said publicly, and actually, I
said we could probably—I've stated publicly before that we could probably construct
comfortably at about 1.5 billion [dollars] a year. But if we were to take care of all the Coast
Guard’s projects that are out there, including shore infrastructure that that fleet that takes
care of the Yemen [sic: inland] waters is approaching 50 years of age, as well, but I have
no replacement plan in sight for them because we simply can't afford it. Plus, we need at
some point to build a polar icebreaker. Darn tough to do all that stuff when you're pushing
down closer to 1 billion [dollars per year], instead of 2 billion [dollars per year].
As I said, we could fit most of that in at about the 1.5 billion [dollars per year] level, but
the projections don't call for that. So we are scrubbing the numbers as best we can.68
At a March 24, 2015, hearing on the Coast Guard’s proposed FY2016 budget before the
Homeland Security subcommittee of the House Appropriations Committee, Admiral Paul
Zukunft, Admiral Papp’s successor as Commandant of the Coast Guard, stated the following:
I look back to better years in our acquisition budget when we had a—an acquisition budget
of—of $1.5 billion. That allows me to move these programs along at a much more rapid
pace and, the quicker I can build these at full-rate production, the less cost it is in the long
run as well. But there’s an urgent need for me to be able to deliver these platforms in a
timely and also in an affordable manner. But to at least have a reliable and a predictable
acquisition budget would make our work in the Coast Guard much easier. But when we
see variances of—of 30, 40% over a period of three or four years, and not knowing what
the Budget Control Act may have in store for us going on, yes, we are treading water now
but any further reductions, and now I am—I am beyond asking for help. We are taking on
water.69
An April 13, 2017, press report states the following (emphasis added):
Coast Guard Commandant Adm. Paul Zukunft on Wednesday [April 12] said that for the
Coast Guard to sustain its recapitalization plans and operations the service needs a $2
billion annual acquisition budget that grows modestly overtime to keep pace with inflation.
The Coast Guard needs a “predictable, reliable” acquisition budget “and within that we
need 5 percent annual growth to our operations and maintenance (O&M) accounts,”
Zukunft told reporters at a Defense Writers Group breakfast. Inflation will clip 2 to 3

67 Transcript of hearing. The remarks were made in response to a question from Sen. Mary Landrieu.
68 Transcript of hearing.
69 Transcript of hearing. The remarks were made in response to a question from Rep. John Culberson.
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percent from that, but “at 5 percent or so it puts you on a moderate but positive glide slope
so you can execute, so you can build the force,” he said.70
In an interview published on June 1, 2017, Zukunft said the following (emphasis added):
We cannot be more relevant than we are now. But what we need is predictable funding.
We have been in over 16 continuing resolutions since 2010. I need stable and repeatable
funding. An acquisition budget with a floor of $2 billion. Our operating expenses as I
said, they’ve been funded below the Budget Control Act floor for the past five years. I need
5 percent annualized growth over the next five years and beyond to start growing some of
this capability back.
But more importantly, we [need] more predictable, more reliable funding so we can execute
what we need to do to carry out the business of the world’s best Coast Guard.71

70 Calvin Biesecker, “Zukunft Wants $2 Billion Baseline Acquisition Budget; Sustained Growth In O&M Funding,”
Defense Daily, April 13, 2017: 1.
71 Jill Aitoro, “Interview: Adm. Paul Zukunft Demands Coast Guard Respect,” Defense News, June 1, 2017.
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Appendix C. Information on NSC, OPC, and FRC
Programs from GAO Report
This appendix presents additional information on the status and execution of the NSC, OPC, and
FRC programs from a May 2018 GAO report reviewing DHS acquisition programs.72
NSC Program
Regarding the NSC program, the May 2018 GAO report states the following:
DHS’s Under Secretary for Management (USM) directed the USCG to complete follow-
on operational test and evaluation (OT&E) by March 2019. According to USCG officials,
the program’s OTA began follow-on OT&E in October 2017, which will test unmet key
performance parameters (KPP) and address deficiencies found during prior testing. The
NSC completed initial operational testing in 2014, but did not fully demonstrate 7 of its 19
KPPs, including those related to unmanned aircraft and cutter-boat deployment in rough
seas. According to USCG officials, operators have since demonstrated these KPPs during
USCG operations. For example, USCG officials stated that they successfully demonstrated
operations of a prototype unmanned aircraft on an NSC. However, the USCG will not
evaluate the NSC’s unmanned aircraft KPP until the unmanned aircraft undergoes initial
OT&E, currently planned for June 2019. In addition, the NSC will be the first USCG asset
to undergo cybersecurity testing. However, this test has been delayed over a year with the
final cyber test event scheduled for August 2018 because of a change in NSC operational
schedules, among other things.
The DHS USM also directed the USCG to complete a study to determine the root cause of
the NSC’s propulsion system issues by December 2017; however, as of January 2018, the
study was not yet complete. GAO previously reported on these issues—including high
engine temperatures, cracked cylinder heads, and overheating generator bearings that were
impacting missions—in January 2016....
The USCG initially planned to implement a crew rotational concept in which crews would
rotate while NSCs were underway to achieve a goal of 230 days away from the cutter’s
homeport. In February 2018, USCG officials told GAO they abandoned the crew rotational
concept because the concept did not provide the USCG with the expected return on
investment. Instead, USCG officials said a new plan has been implemented that does not
rotate crew and is anticipated to increase the days away from home port from the current
capability of 185 days to 200 days.73
OPC Program
Regarding the OPC program, the May 2018 GAO report states the following:
DHS approved six key performance parameters (KPP) for the OPC related to the ship’s
operating range and duration, crew size, interoperability and maneuverability, and ability
to support operations in moderate to rough seas. The first OPC has not yet been constructed,
so the USCG has not yet demonstrated whether it can meet these KPPs. The USCG plans

72 Government Accountability Office, Home Security Acquisitions[:] Leveraging Programs’ results Could Further
DHS’s Progress to Improve Portfolio Management, May 2018, GAO-18-339SP, 109 pp., and Government
Accountability Office, Homeland Security Acquisitions[:]DHS Has Strengthened Management, but Execution and
Affordability Concerns Endure, GAO-16-338SP, March 2016, 110 pp. Hereinafter GAO-18-339SP and GAO-16-
338SP, respectively.
73 GAO-18-339SP, p. 92.
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to use engineering reviews, and developmental and operational tests throughout the
acquisition to measure the OPC’s performance.
USCG officials told GAO that the program completed an early operational assessment on
the basic ship design in August 2017, which entailed a review of the current design plans.
The program plans to refine the ship’s design as needed based on preliminary test results.
However, as of December 2017, USCG officials had not received the results of this
assessment.
The USCG plans to conduct initial operational test and evaluation (OT&E) on the first
OPC in fiscal year 2023. However, the test results from initial OT&E will not be available
to inform key decisions. For example, the results will not be available to inform the
decision to build 2 OPCs per year—which USCG officials said is scheduled to begin in
fiscal year 2021. Without test results to inform these key decisions, the USCG must make
substantial commitments prior to knowing how well the ship will meet its requirements....
The USCG is in the process of completing the design of the OPC before starting
construction, which is in-line with GAO shipbuilding best practices. In addition, USCG
officials stated that the program is using state-of-the-market technology that has been
proven on other ships as opposed to state-of-the-art technology, which lowers the risk of
the program.74
FRC Program
Regarding the FRC program, the May 2018 GAO report states the following:
In February 2017, DHS’s Director, Office of Test and Evaluation (DOT&E) assessed the
results from the program’s July 2016 follow-on operational test and evaluation (OT&E)
and determined that
• the program met its six key performance parameters, and
• the FRC was operationally effective and suitable.
During follow-on OT&E, the OTA found that several deficiencies from the program’s
initial OT&E had been corrected. For example, the OTA closed a severe deficiency related
to the engines based on modifications to the FRC’s main diesel engines. However, five
major deficiencies remain. According to USCG officials, the remaining deficiencies are
related to ergonomics (e.g., improving the working environment for operators) and issues
with stowage space. USCG officials stated that they plan to resolve the remaining
deficiencies by fiscal year 2020.
DOT&E noted that these deficiencies do not prevent mission completion or present a
danger to personnel, but recommended that they be resolved as soon as possible. USCG
officials indicated that they plan to resolve the remaining deficiencies through engineering
or other changes....
The USCG continues to work with the contractor—Bollinger Shipyards, LLC—to address
issues covered by the warranty and acceptance clauses for each ship. For example, 18
engines—9 operational engines and 9 spare engines—have been replaced under the
program’s warranty. According to USCG documentation, 65 percent of the current issues
with the engines have been resolved through retrofits; however, additional problems with
the engines have been identified since our April 2017 review. For example, issues with
water pump shafts are currently being examined through a root cause analysis and will be
redesigned and are scheduled to undergo retrofits starting in December 2018. We
previously found that the FRC’s warranty resulted in improved cost and quality by
requiring the shipbuilder to pay for the repair of defects. As of September 2017, USCG

74 GAO-18-339SP, p. 94.
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officials said the replacements and retrofits completed under the program’s warranty
allowed the USCG to avoid an estimated $104 million in potential unplanned costs—of
which $63 million is related to the engines.75
For a discussion of some considerations relating to warranties in shipbuilding and other
acquisition programs, see Appendix D.

75 GAO-18-339SP, p. 82. For additional discussions of warranties in acquisition programs, see Appendix D.
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Appendix D. Some Considerations Relating to
Warranties in Shipbuilding
This appendix presents some considerations relating to warranties in shipbuilding and other
defense acquisition.76
In discussions of Navy and Coast Guard shipbuilding, one question that sometimes arises is
whether including a warranty in a shipbuilding contract is preferable to not including one.
Including a warranty in a shipbuilding contract (or a contract for building some other kind of
military end item), while potentially valuable, might not always be preferable to not including
one—it depends on the circumstances of the acquisition, and it is not necessarily a valid criticism
of an acquisition program to state that it is using a contract that does not include a warranty (or a
weaker form of a warranty rather than a stronger one).
Including a warranty generally shifts to the contractor the risk of having to pay for fixing
problems with earlier work. Although that in itself could be deemed desirable from the
government’s standpoint, a contractor negotiating a contract that will have a warranty will
incorporate that risk into its price, and depending on how much the contractor might charge for
doing that, it is possible that the government could wind up paying more in total for acquiring the
item (including fixing problems with earlier work on that item) than it would have under a
contract without a warranty.
When a warranty is not included in the contract and the government pays later on to fix problems
with earlier work, those payments can be very visible, which can invite critical comments from
observers. But that does not mean that including a warranty in the contract somehow frees the
government from paying to fix problems with earlier work. In a contract that includes a warranty,
the government will indeed pay something to fix problems with earlier work—but it will make
the payment in the less-visible (but still very real) form of the up-front charge for including the
warranty, and that charge might be more than what it would have cost the government, under a
contract without a warranty, to pay later on for fixing those problems.
From a cost standpoint, including a warranty in the contract might or might not be preferable,
depending on the risk that there will be problems with earlier work that need fixing, the potential
cost of fixing such problems, and the cost of including the warranty in the contract. The point is
that the goal of avoiding highly visible payments for fixing problems with earlier work and the
goal of minimizing the cost to the government of fixing problems with earlier work are separate
and different goals, and that pursuing the first goal can sometimes work against achieving the
second goal.77

76 This appendix is adapted from Appendix C of CRS Testimony TE10019, Options and Considerations for Achieving
a 355-Ship Navy, by Ronald O'Rourke.
77 It can also be noted that the country’s two largest builders of Navy ships—General Dynamics (GD) and Huntington
Ingalls Industries (HII)—derive about 60% and 96%, respectively, of their revenues from U.S. government work. (See
General Dynamics, 2016 Annual Report, page 9 of Form 10-K [PDF page 15 of 88]) and Huntington Ingalls Industries,
2016 Annual Report, page 5 of Form 10-K [PDF page 19 of 134]). These two shipbuilders operate the only U.S.
shipyards currently capable of building several major types of Navy ships, including submarines, aircraft carriers, large
surface combatants, and amphibious ships. Thus, even if a warranty in a shipbuilding contract with one of these firms
were to somehow mean that the government did not have pay under the terms of that contract—either up front or later
on—for fixing problems with earlier work done under that contract, there would still be a question as to whether the
government would nevertheless wind up eventually paying much of that cost as part of the price of one or more future
contracts the government may have that firm.
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The Department of Defense’s guide on the use of warranties states the following:
Federal Acquisition Regulation (FAR) 46.7 states that “the use of warranties is not
mandatory.” However, if the benefits to be derived from the warranty are commensurate
with the cost of the warranty, the CO [contracting officer] should consider placing it in the
contract. In determining whether a warranty is appropriate for a specific acquisition, FAR
Subpart 46.703 requires the CO to consider the nature and use of the supplies and services,
the cost, the administration and enforcement, trade practices, and reduced requirements.
The rationale for using a warranty should be documented in the contract file....
In determining the value of a warranty, a CBA [cost-benefit analysis] is used to measure
the life cycle costs of the system with and without the warranty. A CBA is required to
determine if the warranty will be cost beneficial. CBA is an economic analysis, which
basically compares the Life Cycle Costs (LCC) of the system with and without the warranty
to determine if warranty coverage will improve the LCCs. In general, five key factors will
drive the results of the CBA: cost of the warranty + cost of warranty administration +
compatibility with total program efforts + cost of overlap with Contractor support +
intangible
savings.
Effective
warranties
integrate
reliability,
maintainability,
supportability, availability, and life-cycle costs. Decision factors that must be evaluated
include the state of the weapon system technology, the size of the warranted population,
the likelihood that field performance requirements can be achieved, and the warranty
period of performance.78

78 Department of Defense, Department of Defense Warranty Guide, Version 1.0, September 2009, accessed July 13,
2017, at https://www.acq.osd.mil/dpap/pdi/uid/docs/departmentofdefensewarrantyguide[1].doc.
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Appendix E. Impact of Hurricane Michael on OPC
Program at Eastern Shipbuilding
This appendix provides additional background information of the impact of Hurricane Michael on
the OPC program at Eastern Shipbuilding Group (ESG).
An August 22, 2019, press released from Eastern Shipbuilding states
On August 16th, 2019 Eastern Shipbuilding Group, a Panama City, Florida shipyard
building both government and commercial vessels, successfully delivered the tug Capt. Jim
McAllister. This is the fifth vessel to be delivered by the shipyard since Hurricane Michael,
a category 5 storm—which devastated the region. This delivery marks another milestone
in Eastern’s accelerated return to normal operations, as well as its commitment to long term
sustained recovery and economic stability for the industrial base of the Florida Panhandle.
Other shipbuilding projects include three Staten Island Ferries, the Coast Guard Offshore
Patrol Cutters, a large commercial fishing trawler, two harbor tugs, and two river
pushboats. Eastern is actively bidding other projects and is poised to maintain its position
as the go to shipyard on the US Gulf. All of these projects support skilled manufacturing
jobs for Northwest Florida and over twenty five other states where Eastern buys material,
equipment, and specialized services.
Since the hurricane, Eastern has repaired or replaced all of its impacted equipment,
buildings, and shipbuilding infrastructure as part of a major company-funded
recapitalization effort. Additionally, Eastern has invested in new technology aimed at
increasing shipbuilding efficiency. Eastern has also partnered with State and local
Governmental agencies to plan additional investments of over $45 Million towards
enhancing shipbuilding efficiency and capacity in both Bay and Gulf Counties in order to
ensure long term stability and growth of the shipbuilding industry in Northwest Florida.
As part of its recovery and growth from a once-in-a-generation storm, Eastern is actively
recruiting and hiring additional personnel to join its team and support its long term
commitment to building the best vessels for its government and commercial customers.
Eastern remains grateful for the unwavering Federal, State, and local support during this
recovery—empowering a devastated area by providing manufacturing and industrial
employment opportunities.79
A July 31, 2019, press report states
A bill needed to continue a long-awaited multi-billion-dollar Coast Guard shipbuilding
project in Panama City sailed through a U.S. Senate committee on Wednesday [July 31].
The bill, which received bipartisan support in the Senate Committee on Commerce,
Science and Transportation, would let the Coast Guard renegotiate its $10.5 billion contract
with Eastern Shipbuilding Group to account for higher labor costs and shortages caused by
Hurricane Michael. The bill should help the project get back on track after the hurricane to
create hundreds of new jobs that are needed more than ever as the area still recovers from
the Category 5 storm, some officials say.
According to a Wednesday news release, the committee approved U.S. Sen. Marco Rubio’s
Restore Coast Guard Capabilities Act [S. 2319] as part of the Coast Guard Reauthorization
Act of 2019. Rubio’s bill would give the Coast Guard the authority to renegotiate the
contract with Eastern Shipbuilding to construct the first series of up to 25 offshore patrol

79 Eastern Shipbuilding, “Eastern Shipbuilding Group, Inc. Successfully Delivers Fifth Vessel Since Hurricane
Michael,” August 22, 2019.
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cutters. Without a way to renegotiate the contract, the project could be delayed by years,
Rubio’s office warned.
The Coast Guard requested the authority to renegotiate, while not exceeding the original
affordability requirement set forth by the government in the existing contract, because of
skyrocketing labor costs caused by the hurricane.
The historic storm, which hit the Panhandle on Oct. 10, significantly damaged Tyndall Air
Force Base. The press release states that the labor needed to rebuild the base is competing
directly with the labor required to fulfill Eastern Shipbuilding’s contract.80
A May 22, 2019, press report states
A Category 5 hurricane that battered Florida’s panhandle region last fall, including
shipbuilder Eastern Shipbuilding Group, will impact the new medium-endurance cutter
ship the company is building for the Coast Guard but at the moment it’s unclear what the

80 Patrick McCreless, “Bill Passes Committee to Renogotiate Panama City Coast Guard Shipbuilding Contract,”
Panama City News Herald, July 31, 2019. The press release mentioned in the article, dated July 31, 2019, states
Today, U.S. Senator Marco Rubio (R-FL) applauded the Senate Committee on Commerce, Science,
and Transportation’s approval of his Restore Coast Guard Capabilities Act (S.2319) as part of the
Coast Guard Reauthorization Act of 2019 (S. 2297). Rubio’s bill would give the U.S. Coast Guard
the authority to take into account the impacts of Hurricane Michael to modify its Offshore Patrol
Cutter (OPC) contract with Panama City-based Eastern Shipbuilding.
On October 10, 2018, Hurricane Michael wreaked havoc in Northwest Florida, and made history as
one of only four category 5 hurricanes to make landfall on the U.S. mainland. The Coast Guard has
requested this authority that would provide much needed flexibility to modify the OPC contract,
while not exceeding the original affordability requirement set forth by the government in the
existing contract, as a result of skyrocketing labor costs due to Hurricane Michael. The Coast
Guard maintains that acquisition of the OPC is its highest investment priority.
“Continuing authorizations for the Coast Guard to protect Florida’s waterways and our nation’s
homeland security is imperative,” Rubio said. “I applaud the Senate Commerce Committee on
approving this larger reauthorization, which includes several of my joint priorities that are critical
to the Coast Guard’s mission readiness. As a result of my partnership with Senator Scott, the bill
now includes our Restore Coast Guard Capabilities Act, which will ensure the Coast Guard has the
tools necessary to safeguard the Offshore Patrol Cutter even after the devastation caused by
Hurricane Michael.”
Today, the Senate Committee on Commerce, Science and Transportation approved the Coast Guard
Reauthorization Act of 2019 (S. 2297), which included several Rubio priorities:
 The Restore Coast Guard Capabilities Act (S. 2319), adopted as an amendment offered by
Senator Scott
 Section 426: Coast Guard Shore Infrastructure Improvement Act
 Section 221: Continuation of Coast Guard pay during lapse in appropriations. Senator Rubio is
a cosponsor of the Pay Our Coast Guard Act (S. 21)
Background:
Eastern Shipbuilding is under contract with the Coast Guard to deliver up to 25 OPCs, the Coast
Guard’s highest priority investment program. However, Hurricane Michael significantly damaged
Tyndall Air Force Base and the labor needed to rebuild the base is competing directly with the
labor to fulfill the OPC contract. As a result, the Coast Guard has requested authorization from
Congress to potentially revisit the contract to take into account the increased labor costs associated
with the category 5 hurricane.
(“Rubio Applauds Commerce Committee Passage of the Restore Coast Guard Capabilities Act to
Build Offshore Patrol Cutters,” July 31, 2019, accessed September 10, 2019, at
https://www.rubio.senate.gov/public/index.cfm/press-releases?ID=52E5D8E4-2559-4F67-AFBD-
D70EE38FC7A5.)
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effects will be on cost and schedule, Coast Guard Commandant Adm. Karl Schultz said on
Tuesday [May 21].
Eastern Shipbuilding’s analysis of Hurricane Michael’s impact on the Offshore Patrol
Cutter (OPC) is due to the Coast Guard by May 31, and from there the service expects to
have an understanding on the way forward with the program before the end of June, Schultz
said in response to questions from Rep. Garret Graves (R-La.), during a hearing hosted by
the House Transportation and Infrastructure Coast Guard and Maritime Transportation
Subcommittee. He said Eastern Shipbuilding will provide “perspectives” on the cost and
schedule and any other impacts.
“It’s safe to say that we understand the impacts of a Category 5 hurricane on Eastern
Shipbuilding Group will have an impact on the OPC program,” Shultz said. He expects
there to be some “puts and takes” after Eastern Shipbuilding submits its analysis.
Rep. Peter DeFazio (D-Ore.), citing a press report earlier in the hearing, said that Sen.
Marco Rubio (R-Fla.) has inserted language in a draft disaster assistance bill allowing the
Coast Guard and Eastern Shipbuilding to renegotiate the firm fixed-price contract the
shipbuilder is working under for the OPC to account for damage to shore side facilities
from Hurricane Michael and increased labor costs.
DeFazio said he is skeptical of the company’s claim, noting, “I’m pretty sure they had
insurance,” and adding that “I question whether or not this has something to do with their
original bid, which some thought was low.” He also said he has concerns that a former
Coast Guard Commandant that works for Eastern Shipbuilding has said he’ll have authority
to negotiate with his former service.
Retired Adm. Robert Papp, the 24th commandant of the Coast Guard, runs Eastern
Shipbuilding’s Washington, D.C., operations.
Eastern Shipbuilding did not respond to a query from Defense Daily about impacts to the
OPC program from Hurricane Michael and any relief it may need from the current contract.
Schultz said that the OPC contract can’t be renegotiated without legislative authorities from
Congress. He said the Coast Guard, in response to an “ask” from Congress, provided
language to help with drafting the proposed legislation related to the OPC in the disaster
bill.
Schultz also said that the Coast Guard is not involved in Eastern Shipbuilding’s lobbying
efforts with Congress.81
A May 17, 2019, press report stated
As the Senate continues to negotiate the particulars of the supplemental disaster relief bill
that seems poised to go to a vote next week, a new provision to save something many likely
didn’t know was at risk has been added.
A new line in the draft bill will let Eastern Shipbuilding Group renegotiate its contract with
the U.S. Coast Guard to build up to 25 new off-shore patrol cutters.
“Under the old contract we were prohibited from negotiating for additional money for
increased costs,” said Admiral Bob Papp, President of Washington Operations for Eastern.
That meant that after Hurricane Michael, they would be unable to negotiate with the Coast
Guard to help cover a slew of new costs associated with both the project and the hurricane,
such as the damage from the Category 5 storm that needed repairs, the prolonged schedule

81 Calvin Biesecker, “Coast Guard Expects Impact To OPC Program From Hurricane Michael, Commandant Says,”
Defense Daily, May 22, 2019.
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and the “skyrocketing” costs of labor, Papp said. The contract—the largest in the Coast
Guard’s history at more than $10 billion—didn’t account for a natural disaster.
It was going to be hard, Papp said, for Eastern to complete the project and to “stay healthy”
without some negotiations. At stake in the community are 900 planned jobs and up to 5,000
indirect jobs officials believe will help jump-start the region’s manufacturing economy.
But an official in Sen. Marco Rubio’s office said the latest version of the supplemental
disaster relief bill now includes a provision that will allow negotiations.
Rubio, according to the official, spoke with the President Donald Trump on Air Force One
following the president’s rally in Panama City Beach last week, helping to secure the
language that made it into the bill.
“We’ve waited far too long (for disaster relief), and we’re also involved in some Florida-
specific issues,” Rubio said in a recent video. “For example, the Hurricane had an impact
on a very important Coast Guard project that’s in Northwest Florida and we want to make
sure that project stays on target and continues to feed jobs because Northwest Florida
desperately needs those jobs to recover. We’re very hopeful. Cautiously optimistic, that
next week can be a very good week.”
Papp thanked the area’s congressional delegation for stepping up to advocate for this
project, saying the company is “honored and delighted” to receive help.82
A January 28, 2019, press release from Eastern Shipbuilding stated
Panama City, FL, Eastern Shipbuilding Group [ESG] reports that steel cutting for the first
offshore patrol cutter (OPC), Coast Guard Cutter ARGUS (WMSM-915), commenced on
January 7, 2019 at Eastern’s facilities. ESG successfully achieved this milestone even with
sustaining damage and work interruption due to Hurricane Michael. The cutting of steel
will start the fabrication and assembly of the cutter’s hull, and ESG is to complete keel
laying of ARGUS later this year. Additionally, ESG completed the placement of orders for
all long lead time materials for OPC #2, Coast Guard Cutter CHASE (WMSM-916).
Eastern’s President Mr. Joey D’Isernia noted the following: “Today represents a
monumental day and reflects the dedication of our workforce - the ability to overcome and
perform even under the most strenuous circumstances and impacts of Hurricane Michael.
ESG families have been dramatically impacted by the storm, and we continue to recover
and help rebuild our shipyard and community. I cannot overstate enough how appreciative
we are of all of our subcontractors and vendors contributions to our families during the
recovery as well as the support we have received from our community partners. Hurricane
Michael may have left its marks but it only strengthened our resolve to build the most
sophisticated, highly capable national assets for the Coast Guard. Today’s success is just
the beginning of the construction of the OPCs at ESG by our dedicated team of shipbuilders
and subcontractors for our customer and partner, the United States Coast Guard. We are
excited for what will be a great 2019 for Eastern Shipbuilding Group and Bay County,
Florida.”83
A November 1, 2018, statement from Eastern Shipbuilding states that the firm
resumed operations at both of its two main shipbuilding facilities just two weeks after
Hurricane Michael devastated Panama City Florida and the surrounding communities….
… the majority of ESG’s [Eastern Shipbuilding Group’s] workforce has returned to work
very quickly despite the damage caused by the storm. “Our employees are a resourceful

82 Katie Landeck, “Provision Added to Disaster Relief Bill to Help Eastern Shipbuilding,” Panama City News Herald,
May 17, 2019.
83 Eastern Shipbuilding press release entitled “Eastern Shipbuilding Group Announces Commencement of Steel Cutting
for USCGC ARGUS (WMSM-915),” January 28, 2019, p. 1.
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and resilient group of individuals with the drive to succeed in the face of adversity. This
has certainly been proven by their ability to bounce back over the two weeks following the
storm. Our employees have returned to work much faster than anticipated and brought with
them an unbreakable spirit, that I believe sets this shipyard and our community apart” said
[Eastern Shipbuilding] President Joey D’Isernia. “Today, our staffing levels exceed 80%
of our pre-Hurricane Michael levels and is rising daily.”
Immediately following the storm, ESG set out on an aggressive initiative to locate all of its
employees and help get them back on the job as soon as practical after they took necessary
time to secure the safety and security of their family and home. Together with its network
of friends, partners, and customers in the maritime community, ESG organized daily
distribution of meals and goods to employees in need. Additionally, ESG created an interest
free deferred payback loan program for those employees in need and has organized Go
Fund Me account to help those employees hardest hit by the storm. ESG also knew
temporary housing was going to be a necessity in the short term and immediately built a
small community located on greenfield space near its facilities for those employees with
temporary housing needs.
ESG has worked closely with its federal, state and commercial partners over the past two
weeks to provide updates on the shipyard as well as on projects currently under
construction. Power was restored to ESG’s Nelson Facility on 10-21-18 and at ESG’s
Allanton Facility on 10-24-18 and production of vessels under contract is ramping back
up. Additionally, all of the ESG personnel currently working on the US Coast Guard’s
Offshore Patrol Cutter contract have returned to work….
“We are grateful to our partners and the maritime business community as a whole for their
support and confidence during the aftermath of this historic storm. Seeing our incredible
employees get back to building ships last week was an inspiration,” said D’Isernia. “While
there is no doubt that the effects of Hurricane Michael will linger with our community for
years to come, I can say without reservation that we are open for business and excited about
delivering quality vessels to our loyal customers.”84
An October 22, 2018, press report states the following:
U.S. Coast Guard officials and Eastern Shipbuilding Group are still assessing the damage
caused by deadly category 4 Hurricane Michael to the Panama City, Fla.-based yard
contracted to build the new class of Offshore Patrol Cutters.
On September 28, the Coast Guard awarded Eastern Shipbuilding a contract to build the
future USCGC Argus (WMSM-915), the first offshore patrol cutter (OPC). The yard was
also set to build a second OPC, the future USCGC Chase (WMSM-916). Eastern
Shipbuilding’s contract is for nine OPCs, with options for two additional cutters.
Ultimately, the Coast Guard plans to buy 25 OPCs.
However, just as the yard was preparing to build Argus, Hurricane Michael struck the
Florida Panhandle near Panama City on October 10. Workers from the shipyard and Coast
Guard project managers evacuated and are just now returning to assess damage to the yard
facilities, Brian Olexy, communications manager for the Coast Guard’s Acquisitions
Directorate, told USNI News.
“Right now we haven’t made any decisions yet on shifts in schedule,” Olexy said….
Since the yard was just the beginning stages of building Argus, Olexy said the hull wasn’t
damaged. “No steel had been cut,” he said.

84 Eastern Shipbuilding news release, November 1, 2018, entitled “Eastern Shipbuilding Group, Inc. Resumes
Operations.”
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Eastern Shipbuilding is still in the process of assessing damage to the yard and trying to
reach its workforce. Many employees evacuated the area and have not returned, or are in
the area but lost their homes, Eastern Shipbuilding spokesman Justin Smith told USNI
News.
At first, about 200 workers returned to work, but by week’s end about 500 were at the yard,
Smith said. The company is providing meals, water, and ice for its workforce.
“Although we were significantly impacted by this catastrophic weather event, we are
making great strides each day thanks to the strength and resiliency of our employees,” Joey
D’Isernia, president of Eastern Shipbuilding, said in a statement.85

85 Ben Werner, “Coast Guard, Shipbuilder Assessing Hurricane Damage to Yard Building Offshore Patrol Cutter,”
USNI News, October 22, 2018. See also Paul McLeary, “Hurricane Michael Hits Coast Guard’s Largest Program,
Leaving Devastation,” Breaking Defense, October 18, 2018; Marex, “Despite Hurricane Michael, Eastern Shipbuilding
Keeps Working,” Maritime Executive, October 16, 2018; Samuel Hill, “Eastern Shipbuilding Hit Hard by Hurricane
Michael,” Workboat, October 16, 2018.
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Appendix F. November 25, 2019, House Committee
Letter Regarding OPC Program
This appendix presents text from a November 25, 2019, letter to the Acting Secretary of DHS
from the Chair and Ranking Member of the House Transportation and Infrastructure Committee
and the Chair and Ranking Member of that committee’s Coast Guard and Maritime
Transportation subcommittee regarding the OPC program. The letter states in part
The Committee on Transportation and Infrastructure has reviewed your proposal to provide
extraordinary relief under Public Law 85-804 as requested by Eastern Shipbuilding Group
(ESG) for the construction of the Offshore Patrol Cutter (OPC). We are skeptical that such
truly extraordinary relief is justified given that this “crisis” was foreseeable and mostly
avoidable. Further, we are concerned that this relief sets a damaging precedent that any
current or future contract with the United States Coast Guard (Coast Guard or Service)
could be renegotiated outside the Federal Acquisition Regulations.
As you know, the Coast Guard is in the middle of a rnulti-decade, multi-billion-dollar
recapitalization of its cutter fleets. Last fall, the Service entered into a fixed price contract
with ESG for the largest single acquisition in its history for the OPC. Shortly after entering
into that contract, on October 10, 2018, Hurricane Michael hit the ESG shipyard and
devastated the surrounding Panama City, Florida area where much of the shipyard
workforce lived. The shipyard claims the impacts of the disaster rendered its facilities and
workforce incapable of meeting the terms of the contract. The Department of Homeland
Security (DHS) and the Service now propose to expand the timeframes for the delivery of
each of the first four OPCs, spend up to an additional $659 million to complete those
cutters, and then re-compete the contract earlier than previously planned. The decision to
proceed with the current contractor raises a number of concerns for the Committee.
Foremost among those concerns being the delay in delivering the cutters as well as the use
of the Public Law No. 85-804 authority, which ultimately eliminates the Coast Guard’s
claim of getting the best value through a firm, fixed-price contract. If that were a priority
for the Service, it would make more sense to pivot to a contractor who had competed for
the original contract and is positioned to execute on it rather than create continued
uncertainty around the OPC.
For more than a decade, the Committee has tracked the widening capability gap between
the existing legacy fleet of Medium Endurance Cutters (MECs)—several built during the
Vietnam War—and the commissioning of new OPCs. During that time, the Committee has
repeatedly urged the Coast Guard to undertake a ship life extension program (SLEP) for
the MECs and advocated for the Service to look at alternative methods to acquire new
mission capabilities. Due to limited funding provided for the Coast Guard’s Procurement,
Construction and Improvements account, the Service made the decision to defer initiating
an MEC SLEP to partially offset the loss of MEC capability as those cutters aged out.
Rather than heeding the Committee’s caution, the Service decided to prioritize construction
of the OPCs at the earliest possible time to allow the Coast Guard to continue to effectively
carry out its law enforcement, drug and migrant interdiction, and search and rescue
missions.
The Service then compounded the risks of this “all-or-nothing” strategy by entering into a
contract with ESG; a company that has never built a ship for the Federal government and
whose bid came in at a per-vessel price far below that of other qualified bidders. This action
led many observers to question whether the Coast Guard was taking too great a risk, but
the Service believed, nonetheless, that the risk was acceptable.
Regrettably, ESG began lobbying lawmakers for “relief” from the contract barely six
months after agreeing to its terms. Within nine months, ESG formally notified the Coast
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Guard that they could no longer meet the contractual schedule or deliver the OPC at the
contract price.
In all, it appears the Coast Guard’s initial failure to adequately examine the risks of using
a shipyard with no government shipbuilding experience could be perpetuated by DHS
granting this extraordinary relief under Public Law No, 85-804. The Committee is
concerned that the Coast Guard, along with DHS, embarked on exploring options to
resuscitate ESG and prevent it from defaulting on the OPC contract without first
completing a transparent and objective alternatives analysis. Additionally, the veil of
secrecy regarding its analysis and the absence of any meaningful consultation by the Coast
Guard and DHS with the Committee, provides us scant confidence that any revised OPC
contract will not encounter a similar fate as the original contract.
Accordingly, the Committee would like to know:
 Why did the Coast Guard fail to stop construction on hull #1 as soon as they learned
the contractor was informing lawmakers that it would be unable to meet the terms of
the contract?
 What interim measures are available to mitigate the lost mission capabilities while the
OPC contract is being delayed and recompeted?
 Is the Coast Guard considering the use of leased barges to support helicopter
operations, the acquisition of additional National Security Cutters or Fast Response
Cutters, or other available options?
 What national security missions will be carried out by each of the four OPCs for which
relief is sought?
 What is the status of the ship life extension program for the 270B MECs?
Regarding a revised OPC contract, the Committee would like to know?
 Has the Department requested authority from Congress to expedite the re-compete of
the OPC contract?
 How will the Coast Guard ensure that no additional extraordinary relief will be needed
beyond the potential upward limit of $659 million and the proposed schedule
extensions?
 Are the federal/non-federal share lines for each of the first four OPCs set in the DHS
decision granting limited Public Law No. 85-804 extraordinary relief, and if not, what
are these share lines and what is their justification request?
 In which fiscal years will it be necessary to request funds above the amounts projected
for the OPCs in the Coast Guard’s latest Capital Improvement Plan? In what amounts?
 On what ship design will the re-compete be based?
 Can you confirm that the Coast Guard owns the OPC design?
 How many additional construction hours above the amount on which the initial bid
was based are now anticipated for each of hulls #1-4?
 What controls will be instituted to ensure that there is no excessive overage in
production hours?
 What conditions do the Coast Guard intend to include in a revised contract to ensure
transparency in all financial transactions; accountability with all performance metrics
and timetables for deliverables; certification and notification standards and protocols
before the Coast Guard or DHS exercises an option on hulls #2-4?
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 Given the fact that the contractor is unable to perform under the terms of the original
contract, will any effort be made to receive the performance bond associated with the
contract?
The Committee will continue to investigate these issues and closely monitor this situation.
We are concerned about the impacts any further delays of this contract will have on the
Service’s ability to carry out its critical mission responsibilities and the overall impact the
escalated cost of producing these assets will have on the Coast Guard’s Procurement,
Construction and Improvements account for the foreseeable future. As we begin
negotiations with the Senate on the Coast Guard Authorization Act of 2019, we will
examine if further legislation is necessary to protect U.S. taxpayers from profligate, unwise
spending, notwithstanding the urgent need to provide the Coast Guard with the modern
assets it needs to remain the world’s preeminent Coast Guard.86

Author Information

Ronald O'Rourke

Specialist in Naval Affairs

Disclaimer
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86 The letter was accessed November 27, 2019, at https://transportation.house.gov/imo/media/doc/2019-11-25 DHS 85-
804 Big 4 Letter.pdf.
Congressional Research Service
R42567 · VERSION 121 · UPDATED
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