Coast Guard Deepwater Program: Background and Issues for Congress

Coast Guard Deepwater Program: Background and Issues for Congress

Order Code RS21019
Updated September 6, 2006
CRS Report for Congress
Received through the CRS Web
Coast Guard Deepwater Program:
Background and Issues for Congress
Ronald O’Rourke
Specialist in National Defense
Foreign Affairs, Defense, and Trade Division
Summary
The Coast Guard’s FY2007 budget requests $934.431 million for the Deepwater
acquisition program. The House-reported version of H.R. 5441, the FY2007
Department of Homeland Security (DHS) appropriations bill, recommends $892.64
million for the Deepwater program; the Senate-reported version recommends $993.631
million. This report will be updated as events warrant.
Background1
Introduction. The Integrated Deepwater Systems (IDS) program, or Deepwater
program for short, is a project to replace and modernize the Coast Guard’s aging fleet of
deepwater-capable ships and aircraft. It is the largest and most complex acquisition effort
in Coast Guard history. The Coast Guard’s FY2007 budget requests $934.431 million for
the program. The issue for Congress is whether to approve, reject, or modify the
Administration’s funding requests and overall approach for the program.
Deepwater Missions. The Coast Guard performs a variety of missions in the
deepwater environment (which generally means waters more than 50 miles from shore),
including the following: drug interdiction, alien migrant interdiction, fisheries
enforcement, search and rescue, the International Ice Patrol in northern waters; overseas
maritime intercept (sanctions-enforcement) operations, overseas port security and defense,
overseas peacetime military engagement; general defense operations in conjunction with
the Navy; marine pollution law enforcement, enforcement of lightering (i.e., at-sea cargo-
transfer) zones, and overseas inspection of foreign vessels entering U.S. ports. Deepwater
assets are also used closer to shore for various operations.
Legacy Deepwater-Capable Assets. When the Deepwater program began in
the late 1990s, the Coast Guard’s existing (i.e., “legacy”) assets for performing deepwater
1 For additional background information on the Deepwater program, see the program’s Internet
page at [http://www.uscg.mil/deepwater/].
Congressional Research Service ˜ The Library of Congress

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missions included 93 aging cutters and patrol boats and 207 aging aircraft. Many of these
ships and aircraft are expensive to operate (in part because the cutters require large
crews), increasingly expensive to maintain, technologically obsolete, and in some cases
poorly suited for performing today’s deepwater missions.
Deepwater Program Contract. On June 25, 2002, the Coast Guard awarded
Integrated Coast Guard Systems (ICGS) — an industry team led by Lockheed Martin and
Northrop Grumman’s Ship Systems division — with an indefinite delivery, indefinite
quantity contract for the Deepwater program. The contract includes a five-year baseline
term ending in June 2007 and five potential additional award terms of up to five years (60
months) each. On May 19, 2006, the Coast Guard announced that it was awarding ICGS
a 43-month first additional award term, reflecting good but not excellent performance by
ICGS. With this additional award term, the contract will extend to January 2011.
Systems to Be Procured or Modernized. The revised Deepwater
implementation plan, submitted on March 25, 2005, includes the acquisition or
modernization over a 25-year period, at an estimated cost of $24 billion, of the following:
Ships, boats, and surface craft:
! 8 new National Security Cutters, or NSCs, displacing about 4,000 tons
each (i.e., ships analogous to today’s high-endurance cutters);
! 25 new Offshore Patrol Cutters, or OPCs, displacing about 3,200 tons
each (i.e., ships analogous to today’s medium-endurance cutters);
! 58 new Fast Response Cutters (FRCs) displacing 200 tons each;
! 33 new Long Range Interceptor (LRI) craft displacing 15 tons each; and
! 91 new Short Range Prosecutor (SRP) craft displacing 9 tons each.
Aircraft:
! 22 modernized HC-130H/J Long Range Search (LRS) aircraft;
! 36 new HC-235 Medium Range Search (MRS) aircraft, also known as
Maritime Patrol Aircraft (MPA), based on based on the European
Aeronautic Defence and Space Company (EADS) CASA HC-235
Persuader MPA aircraft design;
! 42 modernized HH-60J Medium Range Recovery (MRR) helicopters;
! 95 re-engined and modernized HH-65C Multi-Mission Cutter
Helicopters (MCHs);
! 45 new HV-911 Eagle Eye VTOL (vertical take-off or landing)
Unmanned Aerial Vehicles (VUAVs); and
! 4 leased RQ-4A Global Hawk High Altitude Endurance UAVs
(HAEUAVs).
Issues for Congress
Program Affordability. Some observers have expressed concern about the
affordability of the $24 billion Deepwater plan, particularly in light of constraints on
available funding and the funding needs of other Coast Guard and DHS programs.
Program Management. Some observers have strongly criticized the Coast
Guard’s management of the program, particularly regarding plans for maintaining legacy
assets (particularly 110-foot patrol boats and HH-65 helicopters) until they are replaced
or modernized. In earlier reports and testimony, the Government Accountability Office

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(GAO) expressed several concerns about the Coast Guard’s ability to manage the
program.2 In an April 2006 report, GAO stated:
Actions by the Coast Guard and the system integrator have fully implemented
three of the eight GAO [program-management] recommendations that were not fully
addressed during GAO’s review in 2005, and three more recommendations appear to
be nearly implemented. The remaining two have unresolved concerns, but the Coast
Guard is taking steps to resolve them. A program of this size, however, will likely
experience other challenges beyond those that have emerged so far, making continued
monitoring by the Coast Guard important.3
In a June 2006 report on the FRC, GAO stated that “The Coast Guard does not have
a formal, documented contingency plan should the FRC fail to meet performance
requirements. However, Coast Guard officials said it plans to pursue certain mitigation
strategies... to keep the current [110-foot] patrol boats operating longer.4 An August 2006
report by the DHS Inspector General strongly criticized the Coast Guard’s acquisition of
Deepwater information technology (IT) systems.5 Also in August 2006, a former
Lockheed engineer who says he worked on the part of the Deepwater program for
modernizing the 110-foot patrol boats posted on the Internet a video alleging significant
problems with the effort and resistance by Lockheed Martin and government officials to
seriously investigate his claims.6
Adequacy of Proposed Assets. The revised Deepwater implementation plan
reflects a new, post-9/11, analysis of Coast Guard mission demands. Some observers are
concerned that the revised plan did not substantially increase ship and aircraft numbers.
The Coast Guard says the ships and aircraft under the revised plan would be individually
more capable than under the 1998 plan. In a June 2006 report, GAO concluded that “The
Coast Guard’s analytical methods [in determining the revised plan] were appropriate for
2 See Government Accountability Office, COAST GUARD[:] Preliminary Observations on the
Condition of Deepwater Legacy Assets and Acquisition Management Challenges, GAO-05-307T,
Apr. 20, 2005; Government Accountability Office, Coast Guard[:] Observations on Agency
Priorities in Fiscal Year 2006 Budget Request, GAO-05-364T, Mar. 2005; General Accounting
Office, Contract Management: Coast Guard’s Deepwater Program Needs Increased Attention
to Management and Contractor Oversight, GAO-04-380, Mar. 2004; and General Accounting
Office, Coast Guard: Deepwater Program Acquisition Schedule Update Needed, GAO-04-695,
June 2004.
3 Government Accountability Office, Coast Guard[:] Changes to Deepwater Plan Appear Sound,
and Program Management Has Improved, but Continued Monitoring Is Warranted, GAO-06-
546, Apr. 2006.
4 Government Accountability Office: COAST GUARD[:] Status of Deepwater Fast Response
Cutter Design Efforts, GAO-06-764, Jun. 2006.
5 U.S. Department of Homeland Security, Office of Inspector General. Improvements Needed
in the U.S. Coast Guard’s Acquisition and Implementation of Deepwater Information Technology
Systems, August 2006. (Office of Information Technology, OIG-06-55) 45 pp.
6 Patricia Kime, “Video Alleges Security Problems With Converted U.S. Coast Guard Cutters,”
DefenseNews.com, August 7, 2006. See also Griff Witte, “On YouTube, Charges Of Security
Flaws,” Washington Post, August 29, 2006. The video is posted on the Internet at
[http://www.youtube.com/watch?v=qd3VV8Za04g].

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determining if the revised asset mix would provide greater mission performance and
whether the mix is appropriate for meeting Deepwater missions.”7
Program Acceleration. Some Members are interested in accelerating
procurement of Deepwater assets and thereby compressing the Deepwater acquisition
period to 15 or 10 years, so as to reduce total Deepwater acquisition costs and more
quickly replace legacy assets. GAO has cautioned that accelerating the Deepwater
program could increase program-management risks, but has also acknowledged that
accelerating selected parts of the program might be more feasible.8
Legislative Activity in 2006
H.R. 5681 (FY2007 Coast Guard Authorization Act). In its report (H.Rept.
109-614 of July 28, 2006) on H.R. 5681, the House Transportation and Infrastructure
Committee recommends authorizing a total of $1,735.9 million for the Deepwater
program for FY2007. Section 407 would require the Coast Guard to use a competitive
contracting procedure among U.S. shipyards for acquiring the FRC. Section 408 requires
DHS to submit a report on Coast Guard plans for managing “the annual readiness gap of
lost time for 110-foot patrol boats” from FY2007 through FY2013. The report expresses
strong concerns regarding the increase of the Deepwater time line to 25 years and Coast
Guard efforts to maintain and replace its 110-foot patrol boats, and support for acquiring
Deepwater assets as soon as possible. The report recommends that the Coast Guard
examine ways to reduce costs for maintaining legacy assets, particularly 110-foot patrol
boats and HH-65 helicopters, and expresses support for acquiring new assets in an
expedited manner.
H.R. 889/P.L. 109-241 of July 12, 2006 (Coast Guard and Maritime
Transportation Act of 2006). This act can be viewed in part as the FY2006 Coast
Guard authorization act. Section 408(a) of the conference report (H.Rept. 109-413 of
April 6, 2006) requires the Coast Guard to provide a detailed annual report on the
implementation of the Deepwater program. Section 408(b) requires a separate report on
accelerating the Deepwater acquisition period to 15 or 10 years. Section 408(c) requires
the Coast Guard, in consultation with GAO, to provide a third report on the Coast Guard’s
implementation of the recommendations made in GAO report GAO-04-380. Section
408(d) permits the Coast Guard to conduct an analysis of all or part of the Deepwater
program and assess whether (1) the choice of assets and capabilities selected as part of the
program meets the Coast Guard’s goals for performance and minimizing total ownership
costs; or (2) additional or different assets should be considered. Section 409 requires a
study on the impact of requiring that helicopters, or major parts thereof, acquired by the
Coast Guard, be U.S.-made, including the contractual impact on the Deepwater program.
The conference report expresses strong concerns for the Coast Guard’s legacy deepwater
vessels and aircraft, particularly 110-foot patrol boats and HH-65 helicopters, and support
7 GAO-06-546, op cit.
8 For additional discussion of some of these issues, 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.

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for accelerating the Deepwater program. The conference report also provides additional
discussion of what the conferees expect to see in the reports required by Section 408.
FY2007 DHS Appropriations Bill (H.R. 5441).
House. The House-reported version of H.R. 5441 recommends $892.64 million for
the Deepwater program, provided, among other things,
That the Secretary of Homeland Security shall submit to the Committees on
Appropriations of the Senate and the House of Representatives, in conjunction with
the President’s fiscal year 2008 budget, a review of the Revised Deepwater
Implementation Plan that identifies any changes to the plan for the fiscal year; an
annual performance comparison of Deepwater assets to pre-Deepwater legacy assets;
a status report of legacy assets; a description of the competitive process conducted in
all contracts and subcontracts exceeding $5,000,000 within the Deepwater program;
and the earned value management system gold card data for each Deepwater asset:
Provided further, That the Secretary shall submit to the Committees on
Appropriations of the Senate and the House of Representatives a comprehensive
review of the Revised Deepwater Implementation Plan every five years, beginning in
fiscal year 2011, that includes a complete projection of the acquisition costs and
schedule for the duration of the plan through fiscal year 2027....
The House Appropriations Committee, in its report (H.Rept. 109-476 of May 22,
2006) on H.R. 5441, states:
The Committee directs the Government Accountability Office (GAO) to
continue its oversight of the Deepwater program. GAO should focus on (1) the status
of development and delivery of the major aviation and maritime assets; (2)
maintenance, logistics and training; and (3) the Coast Guard’s management of the
ICGS contract. GAO should provide the Committee the results of its work annually
and the first report should be delivered no later than April 2007....
The Committee denies $41,580,000 for the production of the Fast Response
Cutter (FRC) requested by the President. This program is experiencing substantial
difficulties and the estimated delivery date of the first FRC has been pushed back at
least three fiscal years (2010). Until ongoing problems are resolved, the Committee
cannot continue to support a program that has so much risk of failure that it may be
terminated or substantially revised....
The Coast Guard has $79,347,002 in unobligated balances available to the FRC
and for service life extensions of the 110-foot patrol boat. Bill language (Sec. 521)
has been included that reprograms these unobligated balances to the acquisition of
traditional patrol boats (what the Coast Guard is referring to as the ‘parent craft’ in
their recent request for information) so that the Coast Guard may continue to maintain
patrol boat hours and meet operational requirements in the near-term. Also, funding
may continue to be used for service life extensions of the 110-foot patrol boat.
Procuring new patrol boats and completing service life extensions is even more
critical now that the Navy has informed the Coast Guard that they are not willing to
extend the current Memorandum of Agreement to permit the Coast Guard to continue
operating the Navy’s five 179-foot patrol boats past 2008. Without these assets, the
Coast Guard will have to reduce patrol hours by 12,500 (7 percent) per year, further
exacerbating a mission hour deficit.

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Senate. The Senate-reported version of H.R. 5441 recommends $993.631 million
for the program, provided, among other things,
That the Secretary of Homeland Security shall submit to the Committees on
Appropriations of the Senate and the House of Representatives, in conjunction with
the President’s fiscal year 2008 budget, a review of the Revised Deepwater
Implementation Plan that identifies any changes to the plan for the fiscal year; an
annual performance comparison of Deepwater assets to pre-Deepwater legacy assets;
a status report of legacy assets; a detailed explanation of how the costs of legacy
assets are being accounted for within the Deepwater program; an explanation of why
many assets that are elements of the Integrated Deepwater System are not accounted
for within the Deepwater appropriation under this heading; a description of the
competitive process conducted in all contracts and subcontracts exceeding $5,000,000
within the Deepwater program; a description of how the Coast Guard is planning for
the human resource needs of Deepwater assets; and the earned value management
system gold card data for each Deepwater asset: Provided further, That the Secretary
shall submit to the Committees on Appropriations of the Senate and the House of
Representatives a comprehensive review of the Revised Deepwater Implementation
Plan every 5 years, beginning in fiscal year 2011, that includes a complete projection
of the acquisition costs and schedule for the duration of the plan through fiscal year
2027.... In addition, of the funds appropriated under this heading in title II of the
Department of Homeland Security Appropriations Act, 2006 (Public Law 109-90; 119
Stat. 2087), $79,200,000 are rescinded from the unexpended balances specifically
identified in the Joint Explanatory Statement (House Report 109-241) accompanying
that Act for the Fast Response Cutter, the service life extension program of the current
110-foot Island Class patrol boat fleet, and accelerated design and production of the
Fast Response Cutter.
Section 533 of the bill rescinds $20 million in unexpended balances for development
of the Offshore Patrol Cutter. The Senate Appropriations Committee, in its report
(S.Rept. 109-273 of June 29, 2006) on H.R. 5441, “notes that $101,610,954 in carryover
balances from prior-year appropriations continue to be available for the design and
development of the Offshore Patrol Cutter.” The report also states:
The Committee notes a Government Accountability Office report (GAO-06-546)
states ‘changes to Deepwater plan appear sound, and program management has
improved, but continued monitoring is warranted.’ The Committee agrees with these
conclusions. The Deepwater program is critical to the Coast Guard’s ability to
address its homeland and maritime border security mission, and therefore should be
accelerated toward completion in 2016 rather than 2026. The Committee encourages
the Coast Guard to request sufficient funding in the fiscal year 2008 budget request
to accelerate the Deepwater program accordingly.... The Committee recommendation
includes $41,580,000, as proposed in the budget, for the Fast Response Cutter
program. This amount shall be used to conduct a business case analysis on the cutter,
develop a proposal, and fund the preliminary design and contract design. The
Committee commends the Coast Guard for suspending the program to re-evaluate the
design to more accurately reflect the Coast Guard’s critical mission needs. However,
the Committee notes significant value in pursuing the Fast Response Cutter program
to address the Coast Guard’s long-term needs. In the short term, the Committee is
concerned with the current gap in patrol boat hours. To address this gap, the
recommendation rescinds $79,200,000 from balances in the Fast Response Cutter
program and reappropriates these funds for the purchase of off-the-shelf replacement
patrol boats to address the patrol boat gap as soon as possible.