[Senate Hearing 108-1018]
[From the U.S. Government Publishing Office]









                                                     S. Hrg. 108-1018

                      THE COAST GUARD'S READINESS,
                    MISSION BALANCE, AND FISCAL YEAR
                          2005 BUDGET REQUEST

=======================================================================

                                HEARING

                               before the

           SUBCOMMITTEE ON OCEANS, FISHERIES, AND COAST GUARD

                                 of the

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 7, 2004

                               __________

    Printed for the use of the Committee on Commerce, Science, and 
                             Transportation


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       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                     JOHN McCAIN, Arizona, Chairman
TED STEVENS, Alaska                  ERNEST F. HOLLINGS, South 
CONRAD BURNS, Montana                    Carolina, Ranking
TRENT LOTT, Mississippi              DANIEL K. INOUYE, Hawaii
KAY BAILEY HUTCHISON, Texas          JOHN D. ROCKEFELLER IV, West 
OLYMPIA J. SNOWE, Maine                  Virginia
SAM BROWNBACK, Kansas                JOHN F. KERRY, Massachusetts
GORDON H. SMITH, Oregon              JOHN B. BREAUX, Louisiana
PETER G. FITZGERALD, Illinois        BYRON L. DORGAN, North Dakota
JOHN ENSIGN, Nevada                  RON WYDEN, Oregon
GEORGE ALLEN, Virginia               BARBARA BOXER, California
JOHN E. SUNUNU, New Hampshire        BILL NELSON, Florida
                                     MARIA CANTWELL, Washington
                                     FRANK R. LAUTENBERG, New Jersey
      Jeanne Bumpus, Republican Staff Director and General Counsel
             Robert W. Chamberlin, Republican Chief Counsel
      Kevin D. Kayes, Democratic Staff Director and Chief Counsel
                Gregg Elias, Democratic General Counsel
                                 ------                                

           SUBCOMMITTEE ON OCEANS, FISHERIES, AND COAST GUARD

                   OLYMPIA J. SNOWE, Maine, Chairman
TED STEVENS, Alaska                  JOHN D. ROCKEFELLER IV, West 
TRENT LOTT, Mississippi                  Virginia, Ranking
KAY BAILEY HUTCHISON, Texas          ERNEST F. HOLLINGS, South Carolina
GORDON H. SMITH, Oregon              DANIEL K. INOUYE, Hawaii
JOHN E. SUNUNU, New Hampshire        JOHN B. BREAUX, Louisiana
                                     MARIA CANTWELL, Washington
                                     
                                     
                                     
                                     
                                     
                                     
                                     
                                     
                                     
                                     
                                     
                                     
                                     
                                     
                                     
                                     
                                     
                                     
                                     
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on April 7, 2004....................................     1
Statement of Senator Lautenberg..................................    33
Statement of Senator Lott........................................    36
Statement of Senator Snowe.......................................     1
    Prepared statement...........................................     3

                               Witnesses

Collins, Admiral Thomas H., Department of Homeland Security, 
  United States Coast Guard......................................     5
    Prepared statement...........................................     7
Margaret T. Wrightson, Director, Homeland Security and Justice 
  Issues, United States General Accounting Office................    12
    Prepared statement...........................................    15

                                Appendix

Response to written questions submitted to Admiral Thomas H. 
  Collins by:
    Hon. Ernest F. Hollings......................................    51
    Hon. Frank R. Lautenberg.....................................    61
Response to written questions submitted to Margaret T. Wrightson 
  by:
    Hon. Ernest F. Hollings......................................    64
    Hon. Frank R. Lautenberg.....................................    67
 
                      THE COAST GUARD'S READINESS,
                    MISSION BALANCE, AND FISCAL YEAR
                          2005 BUDGET REQUEST

                              ----------                              


                        WEDNESDAY, APRIL 7, 2004

                               U.S. Senate,
        Subcommittee on Oceans, Fisheries, and Coast Guard,
        Committee on Commerce, Science, and Transportation,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 2 p.m. in room 
SR-428(A), Russell Senate Office Building, Hon. Olympia Snowe, 
presiding.

          OPENING STATEMENT OF HON. OLYMPIA J. SNOWE, 
                    U.S. SENATOR FROM MAINE

    Senator Snowe. The hearing will come to order. I will begin 
this hearing, subject to recess for two votes that will begin 
somewhere around 2:15. They'll be back to back votes, so it is 
important to proceed with the hearing and then recess at the 
appropriate time.
    I thank you for accommodating the change in time for this 
hearing so that we can proceed more expeditiously this 
afternoon.
    I would like to thank both of you, Admiral Collins and Ms. 
Wrightson, for being here today to testify at this critical 
hearing on the Coast Guard's readiness, mission balance, and 
obviously the Fiscal Year 2005 budget request.
    I've called for this hearing today to further examine the 
readiness concerns, due to the overall degradation of the Coast 
Guard's assets, that were raised last month during the full 
Commerce Committee hearing reviewing the challenges that the 
Coast Guard faces in balancing its homeland security and 
traditional missions, and to ensure that we provide the Coast 
Guard with the 2005 budget it needs to meet all of its 
responsibilities and obligations under the law.
    As Chair of the Oceans, Fisheries, and Coast Guard 
Subcommittee, I strongly believe the Coast Guard serves as a 
cornerstone of our new Department of Homeland Security and is 
uniquely positioned to perform a wide variety of missions 
critical to our Nation's domestic safety and security. Last 
year alone, the Coast Guard responded to more than 31,500 calls 
for assistance and saved nearly 5,100 lives. These brave men 
and women risk their lives to defend our borders from drugs, 
illegal immigrants, acts of terror, and other national security 
threats.
    In 2003, the Coast Guard prevented 136,865 pounds of 
cocaine and 140,059 pounds of marijuana from crossing our 
borders. It also stopped more than 6,000 illegal migrants from 
reaching our shores, conducted more than 3,400 boardings to 
protect our vital fisheries stock, and responded to more than 
19,000 pollution incidents. Additionally, the Coast Guard 
deployed approximately 1,200 personnel and 11 cutters in 
support of Operation Iraqi Freedom.
    The Coast Guard also aggressively defended our homeland by 
conducting more than 36,000 port security patrols, boarding 
more than 8,000 vessels, escorting more than 7,000 vessels, and 
maintaining more than 115 security zones. The Coast Guard is 
currently reviewing approximately 9,500 vessel and 3,500 
facility security plans which must be in place by the 1st of 
July. I understand further the Coast Guard will finish the port 
security assessments for all of our Nation's 55 strategic ports 
by the end of the calendar year.
    And so I want to applaud the Coast Guard for this record of 
success. At the same time, I'm greatly concerned, and I know 
Admiral Collins has spoken to this issue as well, about the 
toll such a high operational tempo is taking on the Coast 
Guard's antiquated ships and aircraft, and ultimately on its 
personnel.
    And Admiral Collins, I must say, I was struck by your 
testimony on maritime security last month before the full 
committee, in which you laid out some of the issues and impacts 
stemming from the degradation and sustainment problems of your 
current equipment in terms of aircraft and cutters. That's 
obviously something we're going to have to address very 
carefully.
    Nearly one half of the Coast Guard's 110-foot patrol boats 
have suffered hull breaches and, during the last year, the 
Coast Guard lost the equivalent of 4 years of high and medium 
endurance cutter patrol time due to emergency maintenance, 
which was necessary to keep the cutters operational. And just 
recently, your service determined that the safety and 
reliability problems with the HH-65 helicopter are so severe 
that you must re-engine all of them within the next 2 years, 
several years ahead of the original Deepwater time table.
    This level of degradation is unacceptable and threatens the 
Coast Guard's ability to accomplish all of its many missions. 
The time to act on this is now, before we are further in 
crisis.
    Today, we are considering the Administration's Fiscal Year 
2005 budget request, which proposes approximately $7.3 billion 
in additional funding for the Coast Guard. That represents a 6 
percent increase over the previous year and it comes in 
addition to a 10 percent increase over Fiscal Year 2003. While 
these increases on the surface may appear to be sufficient, I 
am concerned that even this is not sufficient to address many 
of the issues that I--and certainly Admiral Collins--have 
raised.
    So as we delve into this budget request, we will find it 
does not significantly increase funding for the Coast Guard's 
Deepwater project, even though the Coast Guard is clearly in 
desperate need of upgrading its legacy assets. More 
importantly, the Administration's request would put this 
program on a 22 year time line, which is 2 years behind the 
original 20 year plan. This is not acceptable.
    The 20 year plan isn't acceptable, let alone a 22 year 
plan. So I'm going to continue to fight for Deepwater 
acceleration because it's the best and most cost effective way 
to remedy the Coast Guard's readiness problem and provide the 
Coast Guard with the tools it requires to carry out its 
responsibilities under the law.
    While these additional resources are desperately needed, 
our new reality requires the Coast Guard to operate more 
efficiently and smarter if it is also going to successfully 
carry out all of its traditional missions. Maintaining a proper 
mission balance is a significant challenge for the Coast Guard. 
As Ms. Wrightson will testify, we have to balance the available 
resource inputs with our expectations for mission requirements.
    While the Coast Guard is devoting approximately 44 percent 
fewer operational hours to its counterdrug mission than it did 
prior to September 11, I understand that by utilizing 
intelligence, new technology, and smarter tactics and 
partnering with other agencies, the Coast Guard has succeeded 
in bettering its drug seizure rates, which are now at some of 
the highest levels in history.
    It's also my understanding that half way through the 
current Fiscal Year, the Coast Guard is on pace to break its 
cocaine seizure record as well. This is very commendable, 
Admiral Collins, and I want to commend each and every man and 
woman in your force because that is really an exceptional 
accomplishment on the part of your team, given all that you 
have to deal with. I just want to learn from you how we can 
carry forward those lessons for other missions, particularly 
fisheries law enforcement.
    So I look forward, Admiral Collins, to hearing your 
testimony and discussing your agency's budget, as well as the 
other issues that I have raised. Our Nation depends on the 
Coast Guard today more than ever. I intend to ensure you, you 
will have the necessary resources to carry out your 
responsibilities, both in your homeland security and your non-
homeland security responsibilities.
    Ms. Wrightson, I understand that you now lead the GAO's new 
Homeland Security and Justice Team, and this is your first 
opportunity to testify before the Subcommittee. I want to 
welcome you and thank you for all the services that you have 
provided thus far in carrying out your responsibilities in your 
first year on the job. And I know there have been several GAO 
reports that you have completed on many of the issues that 
we're concerned about in this Subcommittee. So I welcome you as 
well and look forward to your testimony.
    We'll begin with the witnesses and, of course, our first 
witness is Admiral Collins, Commandant of the U.S. Coast Guard. 
I want to welcome you, Admiral Collins, and I appreciate your 
once again appearing before the Committee, and I'm looking 
forward to your testimony.
    And our second witness, of course, is Ms. Margaret 
Wrightson, who is the Director of the GAO's Homeland Justice 
and Security Team. I welcome you as well, Ms. Wrightson.
    So Admiral Collins, why don't you begin.
    [The prepared statement of Senator Snowe follows:]

  Prepared Statement of Hon. Olympia J. Snowe, U.S. Senator from Maine
    Admiral Collins and Ms. Wrightson, I'd like to thank both of you 
for testifying at this critical hearing on the Coast Guard's Readiness, 
Mission Balance, and Fiscal Year 2005 Budget Request.
    I called for this hearing today to further examine the readiness 
concerns due to the overall degradation of the Coast Guard's assets, 
that were raised during last month's Full Committee hearing; review the 
challenges the Coast Guard faces in balancing its homeland security and 
traditional missions; and ensure that we provide the Coast Guard with 
the Fiscal Year 2005 budget it needs to carry out all of its many 
responsibilities.
    As Chair of the Oceans, Fisheries, and Coast Guard subcommittee, I 
strongly believe the Coast Guard serves as a cornerstone of our new 
Department Homeland Security and is uniquely positioned to perform a 
wide variety of missions critical to our Nation's domestic safety and 
security. Last year alone, the Coast Guard responded to more than 
31,500 calls for assistance and saved nearly 5,100 lives. These brave 
men and women risk their lives to defend our borders from drugs, 
illegal immigrants, acts of terror, and other national security 
threats.
    In 2003, the Coast Guard prevented 136,865 pounds of cocaine and 
140,059 pounds of marijuana from crossing our borders. It also stopped 
more than 6,000 illegal migrants from reaching our shores, conducted 
more than 3,400 hoardings to protect our vital fisheries stocks, and 
responded to more than 19,000 pollution incidents. Additionally, the 
Coast Guard deployed approximately 1,200 personnel and 11 cutters 
(including the Maine-based WRANGELL) in support of Operation Iraqi 
Freedom.
    The Coast Guard also aggressively defended our homeland by 
conducting more than 36,000 port security patrols, boarding more than 
8,000 vessels, escorted more than 7,000 vessels, and maintaining more 
than 115 security zones. Under the MTSA, the Coast Guard is currently 
reviewing approximately 9,500 vessel and 3,500 facility security plans 
which must be in place by July 1. I understand further the Coast Guard 
will finish the Port Security Assessments for all of our Nation's 55 
strategic ports by the end of the calendar year.
    While I applaud the Coast Guard for this record of success,I am 
greatly concerned about the toll such a high operational tempo is 
taking on the Coast Guard's antiquated ships and aircraft and 
ultimately on its personnel. Admiral Collins, I was struck by your 
testimony during last month's Full Committee Hearing on Maritime 
Security in which you laid out the depths of the legacy asset 
sustainment problems faced by the Coast Guard.
    I know nearly one half of the Coast Guard's 110-foot patrol boats 
have suffered hull breeches and during the last year the Coast Guard 
lost the equivalent of four years of high and medium endurance cutter 
patrol time due to emergency maintenance, which was needed to keep the 
cutters operational. And just recently, your service determined that 
safety and reliability problems with the HH-65 helicopter are so severe 
that you must re engine all of them within the next two years, several 
years ahead ofthe original Deepwater time line. This level of 
degradation is unacceptable and threatens the Coast Guard's ability to 
accomplish all of its many missions.
    The time to act on this is now, before we are further in crisis. 
Today, we are considering the Administration's Fiscal Year 2005 budget 
request, which proposes approximately $7.3 billion in funding for the 
Coast Guard. This is approximately a 6 perc nt increase over last year 
and comes on the heels of a 10 percent increase over Fiscal Year 2003. 
While these increases on the surface may appear to be sufficient,I am 
concerned that even this is not enough.
    What's more, as we delve into this budget request, we find it does 
not significantly increase funding for the Coast Guard's Deepwater 
project, even though the Coast Guard is clearly in desperate need of 
upgrading its legacy assets. More importantly, the Administration's 
request would put this program on a 22 year time line, which is two 
years behind the original 20 year plan. This is not acceptable. I will 
continue to fight for Deepwater acceleration because it is the best and 
most cost effective way to remedy the Coast Guard's readiness problems 
and provide the Coast Guard with the tools it needs to carry out all of 
its missions.
    While these additional resources are desperately needed, our new 
reality requires the Coast Guard to operate more efficiently and 
smarter if it is going to also successfully carry out all its 
traditional missions. Maintaining a proper mission balance is a 
significant challenge for the Coast Guard. As Ms. Wrightson will 
testify, we have to balance the available resource inputs with our 
expectations for mission performance.
    While the Coast Guard is devoting approximately 44 percent fewer 
operational hours to its counterdrug mission than it did prior to 
September 11, I understand that by utilizing intelligence, new 
technology, smarter tactics, and partnering with other agencies the 
Coast Guard has succeeded in bettering its drug seizure rates at some 
of the highest levels in history. It is my understanding that half way 
through the current fiscal year the Coast Guard is on a pace to break 
its cocaine seizure record. This is very commendable andI look forward 
to hearing how we can use these lessons to improve the performance 
ofthe Coast Guard's other traditional missions such as fisheries law 
enforcement.
    Admiral Collins, I look forward to discussing your agency's budget 
request as well as the other issues I have raised. Our nation needs the 
Coast Guard today more than ever before. I intend to ensure you have 
the necessary resources to carry out the agencies homeland security and 
non-homeland security duties.
    Ms. Wrightson, I understand that you now lead the GAO's new 
Homeland Security and Justice Team and this is your first opportunity 
to testify before this subcommittee. I want to welcome and thank you 
for all the service you have provided us thus far in your first year on 
the job. I look forward to hearing your testimony and working with you 
in the future.

STATEMENT OF ADMIRAL THOMAS H. COLLINS, DEPARTMENT OF HOMELAND 
              SECURITY, UNITED STATES COAST GUARD

    Admiral Collins. Thank you very much for having me before 
the Subcommittee to discuss the important topic of our 2005 
budget and the services that we provide to the American people 
every day. I want to first thank the Subcommittee for the 
support in passing the Coast Guard Authorization Bill last 
week, which provides improvements.
    Senator Snowe. Finally.
    Admiral Collins. Sometimes you've got to be patient and 
great things happen, and it did in this case, and I think it 
provides for critical benefits for Coast Guard personnel. Very, 
very importantly, it raises the number of officers that the 
Coast Guard may have for the first time since 1993, and is a 
very, very important issue for us, something we have not been 
successful with in the House, but really appreciate the support 
of this committee because those additional officers are 
absolutely fundamental and critical to us in executing the 2005 
budget and particularly implementing the Maritime 
Transportation Security Act. It's just the type of folks that 
we need to oversee and implement that particular rule.
    I'm also very pleased to testify alongside Margaret 
Wrightson, of GAO. We value and we welcome GAO's assessment of 
our service and assessment of our processes. Simply put, they 
help us make ourselves better. And they're currently involved 
in, or recently have completed, 16 audits of the Coast Guard. 
For example, they have been productively involved in our 
Deepwater Modernization Program from the very inception and 
their wise counsel has helped us shape this program along the 
way, and keep improving it. It's sort of a continuous 
improvement approach to this very complex undertaking, and we 
appreciate their assistance.
    The latest Deepwater contract management audit makes a 
number of helpful recommendations which we are aggressively 
working on. We are committed to good stewardship of this 
critical project, and we will make periodic reports back to GAO 
on our progress on each and every recommendation.
    In all, GAO and this Committee and others have also 
examined whether we'll be able to sustain our pace of 
operations and support our full range of missions, all the 
while making homeland security the priority it should be. 
Clearly, we have been faced with increasing operational tempo 
since 9/11, but from an outcome or performance perspective, and 
as detailed in my written statement, we continue to hold our 
own across all our mission areas.
    In retrospect, we have been able to sustain this level of 
outcome due to several factors. First is our flexible 
allocation of limited assets to the greatest risk. Both within 
and across missions, we are a risk-based organization. We 
manage, we invest, we operate based on risk.
    Second, we are effectively improving our tactics and 
leveraging intelligence, technology, and partnerships that I 
have already alluded to.
    Third, we have invested in multi-mission platforms and 
multi-mission people, which gives our organization the 
flexibility to effectively and efficiently react to shifting 
mission priorities. I think that is a good story for the 
American people.
    Fourth, we are blessed with dedicated and hard-working 
professional Coast Guard men and women.
    And finally, the last factor, we're growing thanks to the 
support of Secretary Ridge, President Bush, and this committee. 
Between 2002 and 2004, our discretionary budget grew from $4.1 
billion to $5.8 billion, and we've added over 3,000 people 
during this timeframe.
    We are adding both capacity and capability. For example, 
total annual boat, cutter, and aircraft hours have increased 
from the pre-9/11 average of 534,000 to the Fiscal Year 2004 
level of 891,000, a 68 percent increase in the cutters, boats, 
and aircraft available to do our missions.
    The Coast Guard's 2005 budget continues this growth trend, 
with a proposed budget authority of $7.46 billion. Our 
operating expense budget will have grown over the period 2003 
to 2005 by 54 percent at this rate, and this growth supports 
the full range of our Coast Guard missions. It provides the 
necessary resources for us to continue to fulfill our 
responsibilities to the American public.
    And there are four basic priorities embedded in this 
budget. First is to recapitalize our aging and technologically 
obsolete aircraft, boats, and cutters, through our Deepwater 
Modernization Program. Our legacy systems are wearing out at a 
much faster rate than their current rate of replacement. And 
from my perspective, this is the single greatest threat to 
continued mission performance.
    Second, to ensure consistent operational performance across 
all missions and by ensuring the right force mix and right set 
of capabilities are in place, the 2005 budget, for example, 
includes operational funding for 11 additional coastal patrol 
boats and for five 179-foot ships transferred from the Navy, 
changing the gray painting to white, and overall adds 1,300 
people to our workforce in 2005.
    My third priority is aggressive implementation of the 
Maritime Transportation Security Act of 2002. Over $100 million 
and 791 new personnel support this very critical security 
initiative and we are on track to enforce compliance very 
aggressively effective 1 July of this year.
    The fourth priority is to expand maritime domain awareness. 
Critical to enhancing our performance across all missions, we 
must identify and understand threats. We must disseminate 
timely information to operational commanders and partners to 
best respond to terrorist attacks, drug smuggling, illegal 
migration, distressed boaters, or illegal fishing. A start of 
this effort is included in the 2005 budget request. And of 
course, Coast Guard people make our operational excellence 
possible and the 2005 budget provides the necessary funding, 
pay compensation, allowances and so forth to our people. And 
most importantly, the 2005 budget keeps us on track to making 
sure that our men and women are properly equipped, have the 
quality equipment to do their jobs.
    I look forward to working with you on this budget through 
this year. Thank you very, very much for your very, very 
aggressive support for our programs. And I'd be happy to answer 
any questions you might have.
    [The prepared statement of Admiral Collins follows:]

Prepared Statement of Admiral Thomas H. Collins, Department of Homeland 
                  Security, United States Coast Guard
Introduction
    Good afternoon, Madam Chairwoman and distinguished members of the 
Subcommittee. It is a pleasure to appear before you today to discuss 
the Coast Guard's Fiscal Year 2005 budget request, and its critical 
importance in your Coast Guard being able to deliver essential daily 
services to the American public.
    First, let me begin by saying I am extremely grateful for the 
Subcommittee's support in passing the Coast Guard Authorization Bill 
last week. It contains critical provisions to improve homeland 
security, fishery enforcement, marine safety, and environmental 
protection missions, and it helps provide critical benefits for Coast 
Guard personnel through expansion of housing authorities and use of 
military childcare facilities. It raises the ceiling on total number of 
officers the Coast Guard may have, the first time this limit has been 
raised since 1993, and which is desperately needed in order to execute 
the Fiscal Year 2005 budget request and such critical initiatives as 
implementing the Maritime Transportation Security Act of 2002.
    I am also pleased to testify alongside Margaret Wrightson of GAO. 
GAO is currently involved or recently completed 16 audits on the Coast 
Guard. While we don't always agree with the GAO, we do more often than 
not, and we always value and welcome their input as they are making the 
Coast Guard better. For example, GAO recently completed an Integrated 
Deepwater System contract management audit and made fourteen 
recommendations. I concur with their recommendations and we are 
diligently addressing every single recommendation. I'm committed to 
continuous improvement of the Deepwater program, and I'm incorporating 
GAO's recommendations as well as other best business practices, into 
its operating procedures. These changes are so important I intend to 
make periodic reports on our progress--the first is due April 20, 2004.
    The Coast Guard's Fiscal Year (FY) 2005 budget proposes budget 
authority of $7.46 billion, a nine percent increase over FY 2004, and 
continues our effort to enhance capability and competencies to perform 
both safety and security missions. It supports the goals of the 
President's National Strategy for Homeland Security to prevent 
terrorist attacks, reduce our vulnerabilities, and minimize damage from 
attacks that do occur.
    Before I discuss our FY 2005 budget, I would like to take a few 
moments to discuss some of our accomplishments during the past year. 
You deserve a quick report on how we have used the resources this 
Subcommittee has provided us in the past and I am proud of the results 
that Coast Guard men and women continue to deliver for the country. 
During FY 2003, the Coast Guard:

   Interdicted over 6,000 undocumented migrants attempting to 
        illegally enter the country by sea.

   Prevented more than 136,800 pounds of cocaine, over 14,000 
        pounds of marijuana and more than 800 pounds of hashish from 
        reaching U.S. shores.

   Aggressively conducted more than 36,000 port security 
        patrols, including 3,600 air patrols, 8,000 security boardings 
        and over 7,000 vessel escorts.

   Deployed the largest contingent of Coast Guard personnel 
        overseas since the Vietnam War to support Operation Iraqi 
        Freedom, including 11 cutters, two shoreside support units, and 
        over 1,200 personnel.

   Saved the lives of nearly 5,100 mariners in distress and 
        responded to more than 31,500 calls for assistance.

   Boarded more than 3,400 fishing vessels to enforce safety, 
        environmental and economic laws.

   Mobilized 64 percent of our reserve force to enhance 
        protection of our ports, waterways and critical infrastructure 
        during heightened states of alert, and to support the Combatant 
        Commanders.

   Kept critical shipping channels clear of ice in the Great 
        Lakes and New England ensuring the availability of critical 
        energy products.

   Maintained more than 50,000 Federal aids to navigation along 
        25,000 miles of maritime transportation highways.

   Responded to over 19,000 reports of water pollution or 
        hazardous material releases.

   Completed the most difficult re-supply of McMurdo Station 
        (Antarctica) during Operation Deep Freeze in 40 years. USCGC 
        Polar Sea and USCGC Healy smashed through 50 miles of ice more 
        than 13-feet thick to enable U.S. scientists to continue their 
        studies of the Earth's climate.

    In addition, we have become a proud member of the Department of 
Homeland Security that consolidated 22 agencies and nearly 180,000 
employees. We are committed to working with our partner agencies as one 
team engaged in one fight, and I truly believe having one Department 
responsible for homeland security has made America more secure today. 
An example of this one team-one fight motto is very evident in the 
developing events in Haiti. Under the direction of the Secretary of 
Homeland Security, the Homeland Security Task Force--Southeast was 
stood-up as part of OPERATION ABLE SENTRY. Led by Coast Guard Rear 
Admiral Harvey Johnson, the task force is comprised of many agencies 
chartered to plan, prepare, and conduct migrant interdiction operations 
in the vicinity of Haiti due to the escalation of violence in that 
country and the threat of a mass exodus of undocumented migrants. In 
the first week of interdiction operations, the task force demonstrated 
impressive agility and synergy:

   Coast Guard cutters, many with Citizenship and Immigration 
        Service (CIS) asylum pre-screening officers and interpreters 
        aboard, interdicted 17 Haitian vessels with 1,076 undocumented 
        migrants,

   Coast Guard and Immigration and Customs Enforcement (ICE) 
        aircraft patrolled the skies throughout the operating area,

   Coast Guard, ICE, and Customs and Border Protection (CBP) 
        boats conducted coordinated patrols off the Florida coast,

   Coast Guard and ICE conducted a coordinated boarding of a 
        boat suspected of being highjacked off the coast of Miami,

   Coast Guard, CBP, ICE, and the Transportation Security 
        Administration command center, public affairs, and intelligence 
        staffs fully engaged,

   Federal Emergency Management Agency (FEMA) deployed three 
        Information and Planning Specialists to the task force in 
        support of contingency planning.

    In addition, we have begun aggressively implementing the Maritime 
Transportation Security Act thanks in large part to a herculean inter-
agency effort. Final Rules were published in October 2003 and security 
plans from approximately 9,500 vessels and 3,500 facilities were due on 
December 31, 2003. To date, approximately 99 percent have been 
received. We will continue to aggressively pursue 100 percent 
compliance, and have instituted a phased implementation of penalties to 
ensure that all regulated facilities have implemented approved security 
plans by the 1 July 2004 deadline. In early February, we initiated 
civil enforcement action against those owners or operators who did not 
submit their plans, with nearly 160 Notice of Violations (Civil 
Penalties) of $10,000 issued for failing to file an assessment report. 
Many of these vessel and facility owners have subsequently submitted 
their security plans. As a result, as of today, the Coast Guard has 
only issued a second civil penalty (of $25,000 each) to four owners/
operators during the second phase of enforcement program. We completed 
eleven port security assessments, and have established 43 Area Maritime 
Security Committees to provide enhanced planning, communication and 
response for our Nation's ports. We have met with nearly sixty 
countries representing the vast majority of all shippers to the U.S., 
reinforcing a commitment to the International Ship and Port Facilities 
Security (ISPS) code. We have commissioned additional Maritime Safety 
and Security Teams (MSSTs) and plan to have 13 teams by the end of CY 
2004. We are installing an Automatic Identification System (AIS) 
network in nine coastal locations that have Vessel Traffic Services 
improving our awareness of the maritime domain, and are simultaneously 
designing a nationwide system.
The Need to Sustain Growth in FY 2005
    Despite these accomplishments, there is still much to do. The last 
few weeks paint a clear and vivid picture of the breadth, scope and 
national importance of all Coast Guard missions. Rescue personnel from 
our mid-Atlantic units responded to the distress call from the burning 
and sinking Singaporean tanker Bow Mariner, and six crewmen were saved 
from 44 degree water. A Coast Guard cutter seized the entire catch from 
a fishing vessel off the New England coast for having twice the legal 
limit of lobster on board and more importantly having female egg 
bearing lobsters that a biologist indicated had been scrubbed of eggs. 
Our search and rescue and living marine resource response capability 
was sustained even as 15 cutters, 6 aircraft, and approximately 1,550 
personnel deployed south positioning from the coast of Haiti to the 
approaches to South Florida as part of Homeland Security Task Force-
Southeast, and interdicted 1,076 Haitian migrants. Simultaneously, we 
have four Patrol Boats, two Port Security Units, and 377 personnel 
deployed in support of operations in Iraq. Just last week the Coast 
Guard Cutter MIDGETT returned home from a patrol in the Eastern Pacific 
after seizing 27,000 pounds of cocaine in three boardings, setting a 
record for the most cocaine seized by a cutter in a single patrol. As 
you can see, demand for Coast Guard resources continue to expand, while 
our ships and aircraft continue to age. The Coast Guard is the nation's 
lead Federal agency for maritime homeland security and marine safety. 
Critical new resources are required to establish a new level of 
maritime security while continuing to perform the full range of Coast 
Guard missions.
    The budget requests resources that are necessary for the Coast 
Guard to fulfill its responsibilities to the American public. For 
Fiscal Year 2005, my priorities are:

   Recapitalize operational assets;

   Enhance performance across all missions by leveraging Coast 
        Guard authorities, capabilities, competencies and partnerships;

   Aggressively implement the comprehensive requirements of 
        MTSA; and

   Expand awareness of activities occurring in the maritime 
        domain
Recapitalize Operational Assets
    The Coast Guard's greatest threat to mission performance continues 
to be that our aircraft, boats and cutters are aging, technologically 
obsolete, and require replacement and modernization. The majority of 
these assets will reach the end of their service life by 2008, and have 
increasing operating and maintenance costs, which results in lost 
mission performance, mission effectiveness, unnecessary risks, and wear 
and tear on people. These assets are failing at an alarming rate. 
Recent asset failures and their subsequent impact on operational 
readiness exemplify the downward readiness spiral created by 
increasingly aging capital assets coupled with a more demanding 
operational tempo. Frankly, the existing system is failing in numerous 
areas and I am concerned that we are reaching a ``declining readiness 
spiral'' phenomenon. Deferred modernization results in reduced patrols 
and readiness, corresponding increased maintenance needs and higher 
total ownership costs. Recapitalization funds are then needed to keep 
old assets operating, which only defers modernization starting this 
declining cycle over again. The Coast Guard is faced with trading asset 
modernization funding toward legacy asset maintenance and capability to 
address immediate safety and reliability concerns. Some examples of why 
I am so concerned:

   HH-65 Helicopter engine system casualties: in-flight engine 
        partial power losses occurred at a rate of 63 per 100,000 
        flight hours in FY 2003, and is significantly higher so far in 
        FY 2004. This rate far exceeds the FAA standard of one per 
        100,000 hours and the U.S. Navy Safety Center guidelines of no 
        more than 10 mishaps per 100,000 flight hours. HH-65 
        helicopters are critical to Coast Guard operations including 
        ongoing efforts off the coast of Haiti.

   110-foot Patrol Boats: to date, 20 hull breaches requiring 
        emergency dry docks. One cutter required emergency dry dock for 
        hull breach only 14 weeks after a 10-month hull renewal project 
        that had cost $2 million. The 110-foot fleet is the high-speed 
        workhorse during migrant interdiction operations such as the 
        ongoing events in the vicinity of Haiti, and has repatriated 
        927 Haitian migrants thus far.

   378-foot High Endurance Cutter: 3 out of total class of 12 
        ships have recently missed operations due to unscheduled 
        maintenance to failing subsystems. A 378-foot cutter is 
        currently serving as the on-scene command ship for Haitian 
        operations.

    All three of these asset classes (HH-65, 110, 378) are currently 
supporting the Coast Guard missions such as migrant and drug 
interdiction operations, ports waterways and coastal security, 
fisheries enforcement, and search and rescue, and the Coast Guard 
continues to be successful in spite of casualties and readiness levels. 
This success comes through the extraordinary efforts of Coast Guard 
personnel, and I'm concerned about our ability to continue this 
performance in the future. Cocaine seizures to date in FY 2004 total 
38.9 metric tons, nearly double last year's pace which yielded the 
second highest seizure total ever (62.1 metric tons). The threat of a 
mass migration from Haiti, coupled with the flow of illegal drugs and 
undocumented migrants from other countries towards the U.S., highlights 
the value that the U.S. Coast Guard provides our Nation.
    The Integrated Deepwater System (IDS) is the answer to these 
concerns and entails far more than the progressive replacement of our 
aging inventory. IDS is an integrated systems approach to upgrading 
existing legacy assets through a completely integrated and 
interoperable system. All of Deepwater's highly capable assets will be 
linked with modern command, control, communications, computers, 
intelligence, surveillance, and reconnaissance (C4ISR) architecture. 
The ability to link and network disparate platforms seamlessly over 
vast distances is an essential aspect to providing the Coast Guard the 
capability to detect and interdict potential threats prior to reaching 
our shores and ports. Deepwater assets are America's first line of 
defense to counter threats in the maritime domain, and thwart 
catastrophes to vulnerable infrastructure (oil rigs, deepwater 
channels, shipping). Funding for the Deepwater program is a critical 
investment in homeland safety and security and means a more secure 
United States of America.
    The Coast Guard's deepwater assets are not the only capital assets 
that desperately need replacement. The FY 2005 budget also requests 
resources for:

   Rescue 21 project, which will be the primary command and 
        control system to perform the functional tasks of detection, 
        classification, and command and control in the inland and 
        coastal zones for Search and Rescue. The existing National 
        Distress System is inadequate to meet the safety requirements 
        of growing marine traffic, and is not capable of meeting the 
        requirements of the International Convention for the Safety of 
        Life at Sea (SOLAS) treaty. Rescue 21 will expand existing 
        capability through greater area coverage, and improved 
        direction finding capability to enhance Coast Guard emergency 
        response;

   Great Lakes Icebreaker, which is scheduled to replace USCGC 
        MACKINAW in 2006 after 57 years of continuous service;

   Response Boat--Medium, which will replace the aging 41-foot 
        Utility Boat, and will meet mission requirements for search and 
        rescue, and emerging homeland security missions.
Enhance Mission Performance
    To enhance mission performance the Coast Guard must optimize its 
unique authorities, capability, competency, and partnerships; while 
gaining the capacity in each to complete our full range of missions. 
Due to the Coast Guard's multi-mission nature, resources provided will 
assist in the performance of all missions. New assets will be used to 
conduct fishery patrols and search and rescue cases as well as protect 
the Nation against terrorist attacks.
    FY 2005 budget initiatives that add capacity to enable mission 
performance include:

   Operational funding for eleven 87-foot Coastal Patrol boats 
        built in 2004;

   Operational funding for five 179-foot Patrol Coastals being 
        transferred to the Coast Guard from the Navy;

   Safety configuration changes to the 47-foot Motor Life Boat, 
        which will allow crews to safely conduct missions in 
        deteriorating weather conditions.
Aggressively Implement the Maritime Transportation Security Act of 2002
    During the past year, the Coast Guard led the international 
maritime community in adopting a new international security regime 
requiring vessels and port facilities to develop security plans. This 
effort paralleled the requirements this committee helped establish 
through enactment of the Maritime Transportation Security Act (MTSA) of 
2002. These regulations require that United States ports, vessels, and 
facilities each have a plan to protect against terrorist attacks. 
Aggressive implementation of MTSA is essential if we are to maintain 
the security of our ports and waterways at acceptable levels. To 
implement and enforce these regulations, the Coast Guard has a 
recurring requirement to develop, review, approve, and ensure vessels 
and facilities are sustaining their own security responsibilities for 
all aspects of maritime security. Approximately 97 percent of required 
vessel and facilities have turned in security plans to date. We are 
issuing notices of violation to the ten percent that missed the 
deadline, are starting the process of approving security plans, and 
have commenced training of Coast Guard personnel to complete on-site 
verification. Providing the Coast Guard with the resources necessary to 
undertake this implementation and enforcement effort is a key step 
toward enhanced port, vessel and facility security.
    We cannot have a safe and secure marine transportation system 
without the ability to properly safeguard merchant mariner documents 
and licenses. It was recently announced that the Coast Guard identified 
nine individuals holding merchant mariner credentials with possible 
associations to terrorism through Operation Drydock, a cooperative 
investigation with the FBI that has also led to approximately a dozen 
arrests for providing fraudulent information to the government on 
merchant mariner credential applications. Support of the FY 2005 budget 
will enable the Coast Guard to continue implementation of Mariner 
Licensing and Documentation (MLD) Program security improvements to 
safeguard the mariner credentialing system from criminals and 
terrorists. These security enhancements include sustained robust 
screening and evaluation of applicants, increased contact with the 
mariner, improved identification validation and record keeping 
technology and are intended to ensure a system with greater 
accountability of who is using Coast Guard credentials and enhance 
marine safety and national security.
Maritime Domain Awareness
    Expanding awareness of activities occurring in the maritime domain 
is critical to enhancing Coast Guard performance in all mission areas. 
The U.S maritime jurisdiction is enormous, covering some 3.5 million 
square miles of ocean and 95,000 miles of coastline. In addition, the 
Coast Guard projects a defense-in-depth presence in other areas such as 
the Caribbean and eastern Pacific to deter, detect, and interdict drug 
and migrant smugglers. The Coast Guard operates at times and in places 
no U.S. forces operate. The ongoing events off the coast of Haiti 
highlight the need for a robust maritime domain awareness capability. 
The Coast Guard has minimal capability to monitor the activities 
occurring within this maritime zone without the presence of a cutter or 
aircraft. We must identify and understand threats, and disseminate 
timely information to our operational commanders and our homeland 
security partners in order to respond to emerging threats such as 
terrorist attacks, drug smuggling, illegal migration, location of 
distressed boaters, or illegal fishing before they reach our borders. 
An intelligence and warning system that detects indicators of potential 
terrorist activity before an attack occurs is necessary to take 
preemptive and protective action. We are currently installing Automatic 
Identification System (AIS) in our Vessel Traffic Service (VTS) ports, 
and are formalizing the operational requirements to award a contract 
for installation of a nation-wide AIS network. $4 million is requested 
in FY 2005 to continue this important project. This budget submission 
also includes 35 people to integrate all of our projects that provide 
maritime domain awareness (MDA), including AIS, Deepwater and Rescue 
21, and these people will partner with the other Department of Homeland 
Security agencies, the Navy, and other entities to unite our joint 
efforts.
Conclusion
    Thank you for your support in the Fiscal Year 2004 Emergency 
Supplemental. Funding is ensuring Coast Guard forces remaining in Iraq 
are properly resourced for the rest of Fiscal Year 2004.
    None of what the Coast Guard has accomplished or is striving to 
achieve is possible without our people--the bedrock of our service. 
They routinely put their service above all else and I am convinced of 
their unwavering dedication to the security of this Nation and the 
safety of its citizens. They are our highest priority and most valuable 
resource.
    The Coast Guard's Fiscal Year 2005 budget request improves the 
quality of life for Coast Guard men and women and their families by 
providing a pay raise, and continuing improvements in Basic Allowance 
for Housing (BAH) reducing out-of-pocket expenses from 3.5 percent to 
zero, and gives them the equipment and assets that will allow them to 
best contribute their time and talents to the safety and security of 
our Nation.
    I have asked every member of the Coast Guard to continue to focus 
intently and act boldly on the three elements of my direction: improve 
Readiness; practice good Stewardship; and enhance the growth, 
development and well being of our People. With this diligence we will 
fulfill our operational commitment to America and maintain our high 
standards of excellence.
    I look forward to working with you to that end.
    Thank you for the opportunity to testify before you today. I will 
be happy to answer any questions you may have.

    Senator Snowe. Thank you, Admiral Collins. I appreciate 
your testimony and I will follow up with some question. I'd 
better suspend because I see the vote is on. So Ms. Wrightson, 
if you don't mind, I will go and vote, and we'll be right back. 
The hearing stands in recess.
    [Recess.]
    Senator Snowe. The hearing will reconvene. Ms. Wrightson, 
I'm sorry for the interruption. Please proceed.

         STATEMENT OF MARGARET T. WRIGHTSON, DIRECTOR,

             HOMELAND SECURITY AND JUSTICE ISSUES,

            UNITED STATES GENERAL ACCOUNTING OFFICE

    Ms. Wrightson. No problem at all. I wanted to depart from 
my statement just for a moment to return a compliment to the 
Commandant. We really--actually, we enjoyed the break, a chance 
to sit and chat. I can't remember in my various tours in GAO a 
time here where I've had a better relationship with the agency 
that we're auditing. So the Coast Guard calls it a good 
conversation and GAO, we call it a constructive engagement. So 
I just want to pass back the compliment. I didn't know we were 
doing 16 audits. I knew we were busy, but even that surprised 
me.
    Senator Snowe. Now you know why.
    Ms. Wrightson. So the Coast Guard has upped the bean 
counters here.
    Senator Snowe. I appreciate that, and I'm glad to hear it. 
I think that sets a great example.
    Ms. Wrightson. OK.
    Senator Snowe. I appreciate it.
    Mr. Wrightson. Even so, as you would expect GAO doing its 
job, my role here today is to discuss the management and budget 
challenges that the Coast Guard faces in this and future years, 
and my testimony is going to focus on three key concerns. 
First, on the issue of mission balance, asset usage has risen 
dramatically since the terrorist attacks of September 11, as 
you mentioned. All of this increase has been in homeland 
security. While non-homeland security program hours have been 
declining, their performance results have remained largely 
unchanged or even improved.
    While this should provide some comfort to those of us who 
worry about mission balance, there are reasons for continued 
concern. Currently, the Coast Guard has limited data and no 
systematic approach to explain why resource expenditures do not 
appear clearly linked to performance results.
    Second, to ensure Deepwater success, the Coast Guard should 
take immediate steps to improve its management and contractor 
oversight. Again, I was pleased to hear the Commandant's 
comments on this. Action on both would help justify any funding 
increases that may be provided to return the program to its 
original schedule.
    Third, an 8 percent increase in Coast Guard funding, 
excluding the 2003 supplemental, is a substantial sum, 
especially in light of past budget increases. However, much of 
this funding increase is in the operating budget to pay salary 
and benefit increases for current and retired employees. And 
looking at new initiatives, more than 90 percent of the 
increase is for the Coast Guard to implement key provisions of 
the Maritime Transportation Security Act, MTSA, which, as you 
know, is a new responsibility for the Coast Guard. And under 
this responsibility, the Coast Guard has the daunting task to 
review, approve and enforce port security planning requirements 
and all the improvements related thereto.
    Turning to some of the important details on mission 
balance. By the end of Fiscal Year 2003, the total number of 
resource hours spent by Coast Guard's boats, ships, and 
aircrafts was up nearly 40 percent over the pre-9/11 baseline. 
That is an astounding figure. As the chart to my left shows, 
ports, waterways, and coastal security--one of the prominent 
homeland security missions--was the principal beneficiary, with 
non-homeland security missions, most notably LMR, Living Marine 
Resources, and SAR, remaining well below their pre-9/11 levels.
    In contrast, and somewhat surprisingly, performance results 
remained unchanged for the most part or even improved. While 
the Coast Guard has reason to be pleased, there is also reason 
to be cautious. The service does not know with certainty why 
program results do not appear to be linked to resources 
expended. They do have ideas and I'm sure are going to discuss 
those today.
    Although the Coast Guard can point to examples of 
productivity improvements or external intervening factors, and 
while our own audit work supported some of that evidence, it 
still needs to collect and more systematically incorporate 
information on these relationships into its planning and 
budgeting processes.
    On Deepwater, the most significant challenge is keeping 
this ambitious, complex and important program on schedule and 
within planned budget projections. Added to this is the fact 
that key legacy assets are becoming increasingly unreliable and 
costly to maintain. If the situation worsens, the Coast Guard 
could be forced to reduce investments in critical planned 
acquisitions to fund repairs on the very assets it is seeking 
to replace. An examination of statistics on down time, 
unscheduled maintenance, and maintenance costs, some of which 
are shown in the line chart--could you flip that for me--
provides some support for this concern.
    We have always regarded Deepwater as a risk because of its 
acquisition strategy and the requirement for constant and large 
amounts of funding over many years. Our most recent review 
concluded that the risks we identified in 2001 remain risks 
today. To help mitigate them, we have recommended that the 
Coast Guard strengthen its Integrated Project Teams, IPTs, 
improve its metrics for and measurement of contractor 
performance, and beef up its oversight of contractor efforts to 
ensure competition. I was really pleased to hear today that the 
Coast Guard is embracing those, and we look forward to seeing 
those changes.
    Stable funding for the program would also help, while the 
Coast Guard has not yet provided us a satisfactory analysis of 
the reasons for why the program is currently behind schedule 
and projected costs have escalated to $2 billion more than 
estimated just a few years go. This trend must not be allowed 
to continue.
    With respect to the budget, the President's request 
represents an 8 percent increase in nominal terms, excluding 
that supplemental I mentioned. The largest share is for funds 
to fund current employee and retirement benefits. Most of the 
funds, as I said, for new initiatives are under MTSA, including 
new FTEs which will just be used to replace reservists, for the 
most part. These staff are responsible to approve vessel and 
facility security plans and ensure that the plans are being 
followed. Other funds will help to improve maritime domain 
awareness and intelligence capabilities.
    Last fall, we testified on port security planning efforts 
and we raised questions to the Coast Guard about vulnerability 
assessments and whether these assessments were going to prove 
useful to port stakeholders and captains of the port. I'm 
pleased that the Coast Guard made improvements in response to 
our requests, and we will issue a report in June on the 
progress they're making.
    In sum, it's a time of challenge for the Coast Guard. Thus 
far, they are meeting performance targets for most of their 
missions, notwithstanding a decrease in resources. But there 
are no guarantees. The steps we've outline to the agency will 
help give it greater certainty as to whether it's spending too 
much, too little, or about right on various programs. And 
improvements in Deepwater should also help.
    Thank you, Madam Chairman. And I really appreciate the 
time, and I would be happy to answer any questions you might 
have.
    [The prepared statement of Ms. Wrightson follows:]

                               Highlights
Coast Guard
Key Management and Budget Challenges for Fiscal Year 2005 and Beyond
Why GAO Did This Study
    As the lead Federal agency for maritime homeland security within 
the Department of Homeland Security, the Coast Guard is facing 
extraordinary, heightened responsibilities to protect America's ports, 
waterways, and waterside facilities from terrorist attacks. At the same 
time, the Coast Guard remains responsible for many other programs 
important to the Nation's interests, such as conducting search and 
rescue and protecting important fishing grounds. Its expanded 
responsibilities come at a time when budget resources are increasingly 
constrained, making prioritization among competing agencies and 
programs an even more critical factor in congressional decision-making. 
This testimony specifically addresses (1) the most recent trends in 
both resource usage and performance results for the Coast Guard's 
homeland security and non-homeland security programs; (2) challenges 
the agency faces as it proceeds with its Deepwater acquisition program 
to replace or modernize its key legacy cutters and aircraft; and (3) an 
overview of the President's Fiscal Year 2005 budget request for the 
Coast Guard, focusing on several areas of particular congressional 
interest.
What GAO Found
    Resource usage for Coast Guard assets--its cutters, boats, and 
aircraft--was up almost 40 percent from the pre-September 11th 
baseline. Homeland security programs, such as the ports, waterways, and 
coastal security program, have been more likely to see increases in 
usage, while non-homeland security programs, such as living marine 
resources, remain below pre-September 11th levels. Although resource 
usage changed substantially for many of these programs, performance 
results generally improved or remained largely the same. The stable or 
improved performance results were attributed mainly to operational 
efficiencies (e.g., improved technology, improved tactics, stronger 
partnerships, and improved intelligence). However, the Coast Guard has 
limited data and no systematic approach to explain or account for the 
effects of these factors. Without such an approach and supporting data 
to link its resources and performance results, the agency may be 
missing further opportunities to increase productivity and efficiency 
to ensure best use of its funds.
    Some of the Coast Guard's legacy Deepwater cutters, patrol boats, 
and aircraft are increasingly unreliable and costly to maintain, and 
timely and effective implementation of the agency's ongoing Deepwater 
acquisition program to modernize these assets is crucial in order to 
reverse this trend. However, the Coast Guard faces serious challenges 
to keep the Deepwater program on schedule and within planned budget 
estimates. We estimate that to return the program to its original 20-
year completion schedule will cost about $2.2 billion more than the 
Coast Guard estimated when the program was implemented in 2002. Also, 
available program funding, which has been less than the Coast Guard 
planned, may have to be used, in part, to address critical maintenance 
needs of the legacy assets, diverting funds otherwise intended for 
future Deepwater replacements and upgrades. Moreover, recent GAO work 
raised serious concerns about the management and oversight of the 
program, including the quality of the Coast Guard's assessment of the 
program contractor's performance and the uncertainty as to whether the 
Coast Guard would be able to effectively control costs.
    The President's Fiscal Year 2005 budget request of about $7.5 
billion for the Coast Guard represents about an 8 percent increase over 
last year. It includes $5.2 billion in operating expenses and $943 
million for its capital acquisition budget. Most of the new initiatives 
outlined in its operating expense budget are targeted for homeland 
security initiatives, including $102 million for implementation of the 
Maritime Transportation Security Act of 2002. Aside from the new 
initiatives, two other efforts in the budget request may require 
further attention. The Coast Guard's multi-mission stations are still 
experiencing a heavy workload for station personnel because of 
increased homeland security responsibilities. Also, the Coast Guard's 
Rescue 21 program, which will replace the Coast Guard's current 
antiquated communication system, faces possible delays because of 
software system development problems.
                                 ______
                                 
    Prepared Statement of Margaret T. Wrightson, Director, Homeland 
  Security and Justice Issues, United States General Accounting Office
    Madame Chair and Members of the Subcommittee:

    I am pleased to be here today to discuss the President's Fiscal 
Year 2005 budget request for the Coast Guard and key management and 
operational challenges the agency faces in this and future budgets. As 
the lead Federal agency for maritime homeland security within the 
Department of Homeland Security (DHS), the Coast Guard is facing 
extraordinary, heightened responsibilities to protect America's ports, 
waterways, and waterside facilities from terrorist attacks and from 
becoming an avenue for terrorists to bring weapons of mass destruction 
into the country. The Coast Guard also remains responsible for many 
other programs important to the Nation's interests, such as helping 
stem the flow of illegal drugs and illegal migration, protecting 
important fishing grounds, and responding to marine pollution. These 
expanded responsibilities come at a time when budget resources are 
increasingly constrained, making prioritization among competing 
agencies and programs an even more critical factor in congressional 
decision-making.
    To help meet its increased homeland security responsibilities and 
restore activity levels for its traditional programs, the Coast Guard 
received substantial budget increases from Fiscal Years 2001 to 2004. 
This trend continued with the President's Fiscal Year 2005 budget 
request for the Coast Guard of about $7.5 billion, an 8 percent 
increase over the previous year. Still, despite the large budget 
increases since September 11, there is much congressional concern about 
whether the Coast Guard can continue to meet all of its 
responsibilities, given both the increased emphasis on and additional 
resources required for homeland security, and the agency's heavy 
reliance on its fleet of larger ships and mainstay aircraft, many of 
which are now aged and technologically obsolete. In addition, our past 
work \1\ has shown that notwithstanding substantial increases in the 
Coast Guard's budget to accommodate its increased responsibilities, the 
Coast Guard's emphasis on homeland security reduced the level of 
resources devoted to non-homeland security programs.
---------------------------------------------------------------------------
    \1\ U.S. General Accounting Office, Coast Guard: Relationship 
between Resources Used and Results Achieved Needs to be Clearer, (GAO-
04-432, Washington, D.C.: Mar. 22, 2004); Coast Guard: Strategy Needed 
for Setting and Monitoring Levels of Effort for All Missions, (GAO-03-
155, Washington, D.C.: Nov. 12, 2002).
---------------------------------------------------------------------------
    My testimony today, which is based on recently completed work, 
addresses three topics: (1) the most recent trends in both resource 
usage and performance results for the Coast Guard's homeland security 
and non-homeland security programs; (2) challenges the agency faces as 
it proceeds with its Deepwater acquisition program to replace or 
modernize its key legacy cutters and aircraft; and (3) an overview of 
the President's Fiscal Year 2005 budget request for the Coast Guard, 
focusing on several areas of particular congressional interest. We 
conducted our work from March 2004 to April 2004 in accordance with 
generally accepted government auditing standards.
    In summary, our work shows the following:

   Resource usage--as measured by the number of hours the Coast 
        Guard's cutters, boats, and aircraft were used to perform its 
        missions--were up almost 40 percent from the pre-September 11 
        baseline. Resource hours for homeland security programs 
        benefited most, while hours for non-homeland security programs 
        generally declined. In contrast, performance results for both 
        homeland and non-homeland security programs generally improved 
        or remained largely unchanged. The Coast Guard believes that 
        the lack of a clear relationship between resource use and 
        performance results is attributable to both internally and 
        externally driven factors. According to the Coast Guard, the 
        use of new technologies, better operational tactics, improved 
        intelligence, and stronger partnering efforts have contributed 
        to stable or improving performance results despite declines in 
        resource hours used for some programs. The Coast Guard also 
        pointed to external factors beyond the agency's control, such 
        as a surge of undocumented migrants attempting to enter the 
        United States by maritime routes, as affecting the results. 
        Although our work lends some support to these explanations, the 
        Coast Guard has limited data and no systematic approach to 
        explain or account for the effects of these factors. Without 
        such an approach and supporting data to link its resources and 
        performance results, the agency may be missing further 
        opportunities to increase productivity and efficiency to ensure 
        the best use of its funds.

   The most significant challenge the Coast Guard faces as it 
        moves forward with its Deepwater program is keeping the program 
        on schedule and within planned budget estimates through a well-
        managed and adequately funded effort. Adding to the challenge 
        is the fact that key legacy assets are becoming increasingly 
        unreliable and costly to maintain. This could put the Coast 
        Guard at risk of expending funds to repair deteriorating legacy 
        assets that otherwise had been planned for Deepwater 
        modernization initiatives. This action could potentially 
        further delay the program and increase total program costs. For 
        example, the Coast Guard is using Deepwater funds to address 
        recent engine system problems on mainstay helicopters used for 
        search and rescue, and law enforcement. More attention to 
        contract management and oversight, and stable funding will be 
        needed if the Coast Guard is to successfully manage these 
        risks. During the first 2 years of the Deepwater program, after 
        the contract was signed, the Coast Guard did not get the 
        funding originally planned, and now the program is behind 
        schedule. The Coast Guard estimates that a sustained funding 
        level of $795 million over the remaining years of the program 
        will be necessary to get the program back onto its original 20-
        year schedule. In nominal dollars, this amount represents about 
        a $2.2 billion escalation in costs over the earlier $15 billion 
        estimate. Aside from funding issues and problems with legacy 
        assets, our recent work has also raised concerns about the 
        Coast Guard's management of the program. Among the issues we 
        identified were problems with the quality of the Coast Guard's 
        assessment of the contractor's performance and the uncertainty 
        as to whether the Coast Guard would be able to effectively 
        control costs.

   The President's fiscal year budget request for the Coast 
        Guard represents an 8 percent increase over last year, and new 
        initiatives continue to focus on the Coast Guard's homeland 
        security programs. Of the new initiatives outlined in its 
        operating expense budget, for example, about 90 percent of the 
        funding was for homeland security initiatives. The largest, 
        totaling almost $102 million, is targeted for the cost of 
        implementing the Maritime Transportation Security Act of 2002. 
        This money would add about 500 new personnel (full-time-
        equivalent) to approve vessel and facility security plans, 
        ensure plans are being followed, and perform various other 
        inspection and intelligence activities. Aside from the new 
        initiatives, two other efforts may require special attention in 
        the budget request. One of these areas, the readiness of its 
        multi-mission stations, has been a congressional concern in 
        recent years. Since 2002, the Congress has earmarked additional 
        funding to provide more personnel, equipment, and training for 
        multi-mission stations. While personnel have increased by about 
        1,100 between Fiscal Years 2001 and 2003, the workload of these 
        stations is still a major concern. For example, station 
        personnel are currently averaging an 83-hour workweek, which is 
        virtually unchanged from 2001, and well beyond the Coast 
        Guard's standard of 68 hours per week. Rescue 21, the Coast 
        Guard's second largest procurement effort, will replace the 
        Coast Guard's current antiquated communication system that is 
        key to carrying out its search and rescue functions. This 
        program, which is estimated to cost $953 million, has 
        encountered delays related to software integration problems. 
        Currently, Coast Guard officials are unsure whether Rescue 21 
        will be completed on time at the end of Fiscal Year 2006, but 
        they do not anticipate any cost escalation in the program.
Background
    Now a part of DHS, the Coast Guard has experienced substantial 
budget growth since the terrorist attacks of September 11. The agency's 
operating budget in Fiscal Year 2004 was $4.7 billion--an increase of 
31 percent in nominal dollars over its Fiscal Year 2001 operating 
budget. The Coast Guard spends the bulk of this money on 11 programs--5 
related to its homeland security mission and 6 related to its non-
homeland security mission. (See table 1.)

 
 
------------------------------------------------------------------------
 


    Table 1.--Homeland Security and Non-Homeland Security Programs by
                     Mission Area (as of March 2004)
------------------------------------------------------------------------
Missions and programs
                            Activities and functions of each program
------------------------------------------------------------------------
Homeland security mission
------------------------------------------------------------------------
Ports, waterways, and  Conducting harbor patrols, vulnerability
 coastal security       assessments, intelligence gathering and
                        analysis, and other activities to prevent
                        terrorist attacks and minimize the damage from
                        attacks that occur.
------------------------------------------------------------------------
Illegal drug           Deploying cutters and aircraft in high drug
 interdiction           trafficking areas and gathering intelligence to
                        reduce the flow of illegal drugs through
                        maritime transit routes.
------------------------------------------------------------------------
Undocumented migrant   Deploying cutters and aircraft to reduce the flow
 interdiction           of undocumented migrants entering the United
                        States by maritime routes.
------------------------------------------------------------------------
Defense readiness      Participating with the Department of Defense
                        (DOD) in global military operations, deploying
                        cutters and other boats in and around harbors to
                        protect DOD force mobilization operations.
------------------------------------------------------------------------
Other law enforcement  Protecting U.S. fishing grounds by ensuring that
 (foreign fish          foreign fishermen do not illegally harvest
 enforcement) a         United States fish stocks.
------------------------------------------------------------------------
                      Non-homeland security mission
------------------------------------------------------------------------
Search and rescue      Operating multi-mission stations, and a national
                        distress and response communication system,
                        conducting search and rescue operations for
                        mariners in distress.
------------------------------------------------------------------------
Living marine          Enforcing domestic fishing laws and regulations
 resources              through inspections and fishery patrols.
------------------------------------------------------------------------
Aids to navigation     Managing U.S. waterways and providing a safe,
                        efficient, and navigable marine transportation
                        system; maintaining the extensive system of
                        navigation aids; monitoring marine traffic
                        through vessel traffic service centers.
------------------------------------------------------------------------
Ice operations         Conducting polar operations to facilitate the
                        movement of critical goods and personnel in
                        support of scientific and national security
                        activity and conducting domestic and
                        international icebreaking operations to
                        facilitate year-round commerce.
------------------------------------------------------------------------
Marine environmental   Preventing and responding to marine oil and
 protection             chemical spills; preventing the illegal dumping
                        of plastics and garbage in U.S. waters and
                        preventing biological invasions by aquatic
                        nuisance species.
------------------------------------------------------------------------
Marine safety          Setting standards and conducting vessel
                        inspections to better ensure the safety of
                        passengers and crew aboard commercial vessels,
                        cruise ships, ferries, and other passenger
                        vessels and partnering with states and boating
                        safety organizations to reduce recreational
                        boating deaths.
------------------------------------------------------------------------
Source: Coast Guard.
a Foreign fish enforcement is a key subset of the Coast Guard's other
  law enforcement program. For this report, we consider only the
  resource hours and performance results associated with the foreign
  fish aspect of the other law enforcement program. We subsequently
  refer to this program as foreign fish enforcement.

    To carry out these responsibilities,, the Coast Guard had almost 
44,500 full-time military and civilian positions at the end of Fiscal 
Year 2003--about 9 percent more than it had in Fiscal Year 2001.\2\ 
Also, the Coast Guard operates a fleet of more than 200 cutters and 
patrol boats, about 1,600 smaller boats, and almost 200 aircraft--
mainly helicopters. Several efforts are under way to replace, 
modernize, or add to these assets. The major one, the Deepwater 
program, was begun in 1996, to replace or modernize the Coast Guard's 
existing ships and aircraft, as well as make use of innovative 
technology such as satellites and improved detection capabilities to 
carry out its varied mission responsibilities. Deepwater involves the 
modernization and replacement of over 90 ships and 200 aircraft used 
for missions that generally occur beyond 50 miles from shore.
---------------------------------------------------------------------------
    \2\ These numbers include about 38,000 military and 6,200 civilian 
personnel. In addition, the Coast Guard has about 7,900 reservists, as 
well as about 36,000 volunteer auxiliary personnel who help with 
activities ranging from search and rescue to boating safety education.
---------------------------------------------------------------------------
    The Deepwater program has been in development for a number of 
years. Between 1998 and 2001, three industry teams competed to identify 
and provide Deepwater assets needed to transform the Coast Guard. In 
June 2002, the Coast Guard awarded a contract to Integrated Coast Guard 
Systems (ICGS) as the system integrator for the Deepwater program to 
develop and deliver an improved, integrated system of ships, aircraft, 
unmanned aerial vehicles, command, control, communications, computer, 
intelligence, surveillance, and reconnaissance, and supporting 
logistics. During the first 3 years of the program (Fiscal Years 2002-
2004), the Congress appropriated about $1.5 billion for the program.
Resource Hours Have Changed Substantially for Many Programs, While 
        Performance Results Have Largely Remained Stable
    Total Coast Guard resource hours devoted to its various programs 
have increased by 39 percent since the September 11 terrorist 
attacks.\3\ Among the various Coast Guard programs, however, there is a 
marked difference in the degree to which resource levels rose or 
declined. Of the various programs, the ports, waterways, and coastal 
security program saw by far the largest increase--more than 1,200 
percent. Before the September 11 attacks, this program was a small 
component of the Coast Guard, accounting for less than 4 percent of 
total resource hours. By the end of Fiscal Year 2003, the program 
accounted for 34 percent. As figure 1 shows, resource hours were up in 
4 programs and down in 5. Homeland security programs have been more 
likely to see increases in hours, while non-homeland security programs 
have been more likely to see decreases.
---------------------------------------------------------------------------
    \3\ Resource hours, which are the number of hours that Coast Guard 
ships, boats, and aircraft are used in each Coast Guard program, 
provide a basis for assessing levels of effort in 9 of the Coast 
Guard's 11 programs. We used resource hours for cutters, boats, and 
aircraft as an activity measure because the Coast Guard does not have a 
system that tracks how its personnel spend their time by program. The 
Coast Guard calculated a resource hour baseline from which the change 
in resource hours since the September 11 attacks can be estimated. This 
baseline is an average of the eight Fiscal Year quarters preceding 
September 11, 2001 multiplied by four to put it in terms of a full 
Fiscal Year. For the purposes of this report, we refer to this 
calculation as the pre-September 11 baseline or as pre-September 11 
levels. According to Coast Guard officials, there is no special 
significance to this baseline period, other than it represents the 
historical mission activity of the Coast Guard at that period in time. 
Although the Coast Guard tracks resource hours for all 11 of its 
programs, 2 of the 11 are carried out substantially without the use of 
cutters, boats, and aircraft. These two are marine safety (such as 
conducting ship inspections in port) and marine environmental 
protection (such as responding to oil or chemical spills).


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



---------------------------------------------------------------------------
    Source: GAO analysis of Coast Guard resource hour data.

    While resource hours changed substantially for many of these 
programs, their corresponding performance results did not necessarily 
reflect the direction of these changes. Most Coast Guard programs have 
key indicators--such as the percentage of distressed mariners' lives 
saved--that the Coast Guard uses to report program performance. Seven 
of the 9 programs we reviewed had information on these indicators over 
the 3-year period.\4\ Of these, only 1--defense readiness--showed a 
consistent relationship between resources and performance results. (See 
table 2.) For that program, resources increased and performance results 
improved. For the others, performance either remained stable despite 
changes in resources, or they actually improved even though resources 
decreased.\5\
---------------------------------------------------------------------------
    \4\ The Coast Guard had not yet established performance measures 
for the ports, waterways, and coastal security program, and Fiscal Year 
2003 measures for the illegal drug interdiction program were not yet 
available at the time of our review.
    \5\ For specific program indicators, as well as for results by 
Fiscal Year, see app. II.

 
 
------------------------------------------------------------------------
 


    Table 2.--Comparison of Trends in Resource Hours and Performance
                           Results, by Program
------------------------------------------------------------------------
                                  Increase or
                                  decrease in         General trend in
                              resource hours, pre- performance  results,
          Program a               September 11     comparing Fiscal Year
                               baseline to Fiscal  2001 with Fiscal Year
                                   Year 2003               2003 b
------------------------------------------------------------------------
Programs with an inconsistent relationship between resources and
 performance results
------------------------------------------------------------------------
Undocumented migrant          Increase             Stable
 interdiction
------------------------------------------------------------------------
Ice operations                Increase             Stable
------------------------------------------------------------------------
Search and rescue             Decrease             Stable
------------------------------------------------------------------------
Living marine resources       Decrease             Stable
------------------------------------------------------------------------
Foreign fish enforcement      Decrease             Improved
------------------------------------------------------------------------
Aids to navigation            Stable               Improved
------------------------------------------------------------------------
Program with a consistent relationship between resources and performance
 results
------------------------------------------------------------------------
Defense readiness             Increase             Improved
------------------------------------------------------------------------
Programs with incomplete information on trends
------------------------------------------------------------------------
Illegal drug interdiction     Decrease             Data not yet
                                                    available for 2003
------------------------------------------------------------------------
Source: GAO analysis of Coast Guard resource hour and performance data.
a Coast Guard has not yet established performance measures for the
  ports, waterways, and coastal security program. Consequently, it is
  not included in this table.
b For this report, we were most interested in comparing performance
  results for Fiscal Year 2001 with the most currently available
  results--from Fiscal Year 2003. As a result, we defined programs as
  ``stable'' or ``improved'' based on the known results for these 2
  years. All programs defined as ``stable'' showed a differential of
  less than 4 percentage points when comparing Fiscal Year 2001 and
  Fiscal Year 2003 results.

    Another way that the Coast Guard assesses its performance is by 
determining whether programs have achieved their performance targets 
each year. These targets--which represent the goals that the programs 
aim to achieve each year--were met in Fiscal Year 2003 by 5 of the 8 
programs we reviewed.\6\ (See app. III for a detailed summary of 
performance targets.)
---------------------------------------------------------------------------
    \6\ The ports, waterways, and coastal security program does not yet 
have established performance targets. In addition, the marine 
environmental protection program also met its performance target in 
Fiscal Year 2003 but was not included in our analysis. Since the marine 
safety program does not yet have performance results for Fiscal Year 
2003, discussing its target is not relevant here.
---------------------------------------------------------------------------
    Coast Guard officials acknowledged the apparent disconnect between 
resource hours expended and performance results achieved and offered 
two explanations for it. The first involved operational efficiencies--
Coast Guard-driven strategies that essentially allowed the agency to 
accomplish the same or greater results with fewer resources. These 
efficiencies were of four main types--improved technology, improved 
tactics, stronger partnerships, and improved intelligence. Table 3 
contains an example of each type.

 
 
------------------------------------------------------------------------
 


 Table 3.--Selected Examples of Operational Efficiencies Cited by Coast
                             Guard Officials
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Improved technology      New ships. The recapitalization of the buoy
                          tender fleet offers a number of improvements,
                          including greater transit speed, reducing
                          travel time, and allowing more work to be done
                          in a day; a larger buoy deck allowing the
                          completion of more work during a single
                          deployment and fewer trips back to base; and
                          improved navigation systems, enabling safer
                          navigation with fewer people.
------------------------------------------------------------------------
Improved tactics         Use of armed helicopters. The Coast Guard
                          reported that the Helicopter Interdiction
                          Tactical Squadron (HITRON) provides personnel,
                          training, and resources necessary to employ
                          armed helicopters in support of counter drug
                          operations. Prior to November 2002, the Coast
                          Guard used two armed helicopters
                          simultaneously with two cutters when
                          responding to drug interdiction operations.
                          The Coast Guard has since changed its tactics
                          to use one HITRON with one cutter per
                          operation and has seen no degradation in the
                          effectiveness of this drug interdiction
                          tactic.
------------------------------------------------------------------------
Stronger partnerships    Interagency flight schedules. In Miami, the
                          Coast Guard and another DHS agency, the
                          Immigration and Customs Enforcement Office,
                          have developed a combined flight schedule to
                          integrate patrol schedules and assets, which
                          has led to less overlap in response efforts,
                          saving time and resources for both agencies.
------------------------------------------------------------------------
Improved intelligence    Intelligence-sharing arrangements. In 2001, the
                          Coast Guard joined the U.S. Intelligence
                          Community (IC), a federation of Executive
                          Branch agencies and organizations that work
                          separately and together in intelligence-
                          gathering activities. According to Coast Guard
                          officials, this step greatly enhances the
                          agency's access to information.
------------------------------------------------------------------------
Source: Coast Guard.

    The Coast Guard's second explanation involved external events or 
developments that were largely beyond the Coast Guard's control but had 
an influence on the amount of work the Coast Guard had to confront. In 
Fiscal Year 2003, these events and developments included such things as 
``surge'' demands related to the Iraq War, a large increase in the 
number of undocumented migrants attempting to enter the United States 
by maritime routes, and poor weather conditions that, for example, 
increased icebreaking needs. According to Coast Guard officials, these 
externalities had a negative effect on performance results--that is, 
they made it more difficult for the Coast Guard to meet its goals, even 
when more resources were added. For example, according to Coast Guard 
officials, while the percentage of migrants interdicted showed an 
overall increase from Fiscal Years 2002 to 2003, a large increase in 
illegal immigrants seeking to enter the United States by sea during 
Fiscal Year 2003 reduced the performance results percentage from Fiscal 
Year 2002 levels.
    While the factors cited by the Coast Guard likely have an effect on 
mission performance, the extent of that effect is largely unknown. The 
Coast Guard does not have a mechanism in place to systematically 
determine the extent to which these factors affect performance. For 
instance, the Coast Guard does not have data on search and rescue cases 
handled by local responders; as a result, it cannot determine the 
extent to which this assistance has reduced the Coast Guard's own 
search and rescue workload.
    Coast Guard officials agree on the value of taking a more 
systematic approach to assessing performance, including better 
understanding of the effects of internal and external factors that 
affect their performance, and they have begun a number of steps 
directed at improving various aspects of performance assessment. For 
example, they are developing a procedure for capturing operating costs 
on a program-by-program basis, as well as a system for assessing the 
agency's ability to respond to mission requirements. These steps are 
still in their early stages, and while they represent a good beginning, 
it is not yet clear when they will be completed and whether they will 
tie together to address the weaknesses we have identified. Without a 
clear understanding of this linkage or a time-frame to ensure that it 
gets completed, the agency is at risk of misdirecting resources and 
missing further opportunities to increase productivity and efficiency 
to ensure the best use of its funds. A clear understanding is also 
needed to better allow the Congress to make informed budget decisions 
for the Coast Guard.
    In discussions with us, the Coast Guard has not clearly articulated 
a strategy for how these various efforts will weave together. However, 
Coast Guard officials told us that more information regarding these 
efforts will be included in the agency's strategic blueprint, which has 
yet to be finalized.
Reliability and Cost Issues Associated with Key Deepwater Assets 
        Heighten Program Funding and Management Challenges
    Under the Deepwater program, the Coast Guard's legacy assets are 
expected to remain in service until they are replaced or modernized 
through the Deepwater acquisition program. The maintenance costs to 
keep many of these assets operational have been more than the amounts 
the Coast Guard budgeted for these repairs, and the gap between these 
two is widening.
Coast Guard Reports Increasing Problems and Rising Costs with Assets
    As early as the mid-1990s, the Coast Guard identified problems with 
its aging fleet and cited the need to upgrade or replace many of its 
cutters and aircraft. The deteriorating condition of some of its 
deepwater assets has resulted in increasing operational problems and 
limitations, escalating maintenance needs and downtime of assets, and 
increasing maintenance costs over the past few years.
Increased Operational Problems and Limitations for Some Deepwater 
        Legacy Assets
    One key indicator of the deterioration of the Coast Guard's legacy 
assets is the increasing lost operational days--that is, days in which 
Coast Guard cutters could not conduct their normal mission activities. 
Although the Coast Guard was unable to provide complete historical data 
for this trend among all of its deepwater assets, it could provide data 
for some of its major deepwater cutters operating in the Atlantic 
region.\7\ As figure 2 shows, between Fiscal Year 2000 and Fiscal Year 
2003, there is an increase in lost operational days--from 60 to 165 
lost days--between Fiscal Year 2002 and Fiscal Year 2003 for these key 
deepwater assets.\8\
---------------------------------------------------------------------------
    \7\ Only limited data were available for Pacific region deepwater 
assets. The data that were provided indicated that there were 118 lost 
cutter days in Fiscal Year 2003 for the same deepwater assets as 
identified in the Atlantic region data. In Fiscal Year 2004, there have 
been 137 lost cutter days as of April 2004.
    \8\ It is important to note, however, that 46 of these days were 
the result of delays at the Coast Guard yard.


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Source: GAO analysis of Coast Guard data on Atlantic Area lost 
---------------------------------------------------------------------------
operational days.

    The Coast Guard provided the following examples of these problems 
and restrictions:

   An increasing number of in-flight safety-related incidents 
        for the HH-65 helicopter.\9\ These incidents have resulted in 
        the Coast Guard placing increased restrictions on the HH-65's 
        operations, including a reduced flight range and a reduced 
        passenger/crew level to help reduce safety risks for these 
        assets and the personnel flying them.
---------------------------------------------------------------------------
    \9\ A total of 32 incidents were reported in fiscal 2003; for the 
first 5 months of Fiscal Year 2004, almost 70 incidents have been 
reported.

   A large number of hull incidents on a class of key Coast 
        Guard patrol boats. To date, 20 of the Coast Guard's 110-foot 
        patrol boats have experienced significant levels of 
        deterioration that have resulted in hull breaches requiring 
        emergency repairs. To repair these hull breaches, each of these 
---------------------------------------------------------------------------
        vessels were removed from service for an average of 3 months.

   An increasing need to implement special safety response 
        measures aboard the fleet of 378-foot high endurance cutters. 
        These ships--the largest of the Coast Guard's offshore 
        cutters--have had to regularly implement fire team response 
        procedures when on patrol due to numerous fuel or lube oil 
        leaks. These procedures entail having the crew perform critical 
        safety and fire response actions, such as evacuating the 
        engineering space, donning firefighting gear, and investigating 
        the cause of the engineering casualty, while the ship's systems 
        are shut down and the cutter is ``dead in the water''--for a 
        period of time.
Concerns about Unscheduled Maintenance
    In addition to lost operational days, unscheduled maintenance days 
are also a concern. That is, when a cutter is undergoing unscheduled 
maintenance, it is also likely to be out of operation as well. However, 
Coast Guard officials noted that unscheduled maintenance days do not 
always result in lost operational days because they are sometimes able 
to schedule additional operational days for another cutter to make up 
for lost days from the cutter undergoing unscheduled maintenance. As 
figure 3 shows, the cumulative number of unscheduled maintenance days 
for the Coast Guard's mainstay cutters and a key patrol boat (the 210-
foot, 270-foot, and 378-foot cutters and the 110-foot patrol boat)--
have increased since Fiscal Year 2002.\10\
---------------------------------------------------------------------------
    \10\ The increase in overall unscheduled maintenance days is being 
driven by unscheduled maintenance days for the 110-foot patrol boats.


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Source: GAO analysis of Coast Guard data on unscheduled maintenance 
---------------------------------------------------------------------------
days.

    The Coast Guard provided us with examples of some of the more 
significant unscheduled maintenance events that its legacy cutters have 
experienced in recent years that resulted in lost operational days for 
the affected cutters. Because these cutters are typically scheduled to 
operate on average about 175 to185 days per year, a loss of 20 or more 
days in a year can be significant. These examples included:

   Twenty-eight lost operational days in Fiscal Year 2003 for 
        the 36-year old high endurance cutter, Chase, due to main 
        engine and boiler casualties; 84 lost operational days so far 
        in Fiscal Year 2004 due to additional mechanical problems.

   Twenty-four lost operational days in Fiscal Year 2003 for 
        the 36-year old high endurance cutter, Gallatin, due to a shaft 
        coupling failure.
Increasing Maintenance Costs for Cutters and Patrol Boats
    Unscheduled maintenance costs have also increased significantly 
over the past few years. According to our analysis of Coast Guard data 
on some of its major cutters and patrol boats, these maintenance 
expenditures have increased 79 percent--from about $522,000 to almost 
$934,000 per vessel--between Fiscal Year 2000 and Fiscal Year 2003. As 
a result, the Coast Guard is finding that in recent years it has spent 
much more on maintaining its aging assets, than it had planned. To 
determine how much to budget for asset maintenance, the Coast Guard 
determines what is known as the ``standard support level'' (SSL) for 
each of its vessels when they are commissioned. This budgetary estimate 
is equal to the amount of funding provided each year for vessel 
casualty support and maintenance needs, according to a Coast Guard 
official. The estimate is increased each year based on certain cost of 
living adjustments, and the support level can vary according to the 
estimated operating days for the class of the vessel. According to the 
Coast Guard, when maintenance expenditures exceed the SSL for a class 
of vessels, a budget deficit is created that must be filled with funds 
from other vessels, or from outside sources. In Fiscal Year 2003, the 
gap between the Coast Guard's planned and actual maintenance 
expenditures for key legacy assets was about almost $500,000 per 
vessel. (See fig. 4.)

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Source: Coast Guard.
    Note: This figure includes expenditures for four classes of 
cutters: the 378-foot high endurance cutters, the 270-foot medium 
endurance cutters; the 210-foot medium endurance cutters, and the 110-
foot patrol boats.

    Escalating maintenance costs and their effects are evident in the 
following examples:

   In Fiscal Year 2002, the Coast Guard removed from service 
        two of its 210-foot medium endurance cutters because, according 
        to Coast Guard officials, they had become too costly to 
        maintain. According to a knowledgeable Coast Guard official, 
        these two cutters were both over 35 years old, and the Coast 
        Guard estimated that it would have cost about $1 million per 
        year, per vessel to keep them in service, if they had not been 
        decommissioned.

   Returning from a 2-month patrol on a 20-year old 270-foot 
        medium endurance cutter, the ship's commander reported that 
        even after completing $1 million in repairs and maintenance in 
        the past year, the vessel still had a tremendous backlog of 
        critical maintenance that continued to grow exponentially. In 
        addition, the commander reported that during this particular 
        patrol, the cutter had experienced numerous debilitating vessel 
        maintenance problems--or casualties--resulting in 5 lost cutter 
        days. He also noted that the cutter would require 30 or more 
        days of repair upon its return. The commander further reported 
        that he believed the vessel casualties encountered on this 
        patrol foreshadowed the long-term impact that continued 
        deferral of major maintenance actions would have on overall 
        operational readiness.

    The Coast Guard was unable to attribute specific mission 
performance deterioration to these types of incidents; however, reduced 
operating availability time and increasing maintenance downtime for 
these assets would likely adversely affect mission performance results 
in the future. Given these maintenance costs and reliability problems, 
it is unclear what the actual service life might be for some of these 
assets, particularly the cutters and the HU-25 fixed wing aircraft, 
according to Coast Guard officials. And certainly, decisions to 
overhaul or upgrade assets would affect their longevity as well. 
However, Coast Guard officials said that it is unclear at this time as 
to when these Deepwater assets will become so costly to maintain that 
the Coast Guard would have no other logical choice but to retire them. 
This type of analysis would be valuable to the Coast Guard and the 
Congress in determining the priority order for future asset 
replacements and upgrades.
Coast Guard Is Facing Serious Challenges to Keep the Program on 
        Schedule and within Budget Projections
    The Coast Guard's Deepwater program--which uses a unique 
contracting approach requiring steady funding over 20 years--is facing 
serious challenges to keep the program on schedule and within budget 
estimates. Now, almost 2 years after the contract for the Deepwater 
program was awarded, cost estimates to complete the program have 
increased by about $2.2 billion in nominal terms, and key components 
necessary to manage the program effectively have not been rigorously 
implemented. In addition, new homeland security requirements, which 
have not yet been defined or approved, and necessary major 
modifications to key legacy assets make keeping the program on track 
that much harder.
    Under current funding plans, the Coast Guard continues to face 
potential cost increases in its $17 billion Deepwater program. The 
Coast Guard chose a unique contracting approach that requires steady 
funding for the program over its 20-year life. Under this approach, the 
Coast Guard has started on a course potentially expensive to alter and 
one that carries some risks. In a 2001 report,\11\ we expressed concern 
that the Coast Guard risked schedule slippages and cost escalation if 
project funding fell short of planned funding levels.\12\ Now, very 
early in the program our concerns are being realized. Program funding 
in the first 2 years was less than the agency planned by about $125 
million. This resulted in delays in the scheduled delivery of key 
deepwater assets, such as the maritime patrol aircraft. The Congress 
appropriated more than the requested funding in Fiscal Year 2004, and 
if the agency receives the $678 million funding level requested in the 
fiscal 2005 budget proposal, the Deepwater program will have 
cumulatively received $46 million more than planned levels for the 
first 4 years. However, according to the Coast Guard, the program's 
acquisition schedule has been lengthened and higher funding levels, 
($795 million per year over the remaining years of the program), will 
be needed to restore this schedule to its original 20-year completion 
pace.
---------------------------------------------------------------------------
    \11\ U.S. General Accounting Office, Coast Guard: Progress Being 
Made on Deepwater Project, but Risks Remain (GAO-01-564, May 2, 2001).
    \12\ This $2.2 billion estimate assumes completion of the Deepwater 
contract in a total of 20 years.
---------------------------------------------------------------------------
    Currently, Coast Guard officials believe that a continuing stream 
of funding at $795 million (adjusted for inflation) would put the 
project back onto its original 20-year time schedule. However, on this 
funding schedule, total costs for the Deepwater program, assuming no 
additional changes, would reach $17 billion--in nominal terms--about 
$2.2 billion more than the Coast Guard's earlier estimate.\13\ Because 
of time constraints for completing work for this statement, we could 
not assess the reasons for the cost escalation. Coast Guard officials 
attributed the increased costs, so early in the program, to the 
following factors.
---------------------------------------------------------------------------
    \13\ The earlier estimate called for completing the Deepwater 
program in 22 years with a continuing stream of funding at $530 million 
(adjusted for inflation).

   Under-funding in the first 2 years put the program behind 
        schedule and resulted in lost efficiency and flexibility that 
        they believe would have been realized by acquiring multiple 
        assets in a more coordinated way. They believe that this 
        coordinated approach would have offered efficiencies. For 
        example, they said that acquiring multiple assets 
        simultaneously or in their planned sequence would allow for 
        more efficient logistical support with respect to training, and 
        infrastructure planning for such things as facility and pier 
        space for personnel and assets. However, they believe that 
        these efficiencies were lost when these assets could not be 
---------------------------------------------------------------------------
        purchased simultaneously.

   The maintenance costs associated with sustaining legacy 
        assets have increased more than anticipated as these assets 
        deteriorated faster than expected. As a result, available 
        future funding may have to be used, in part, to address 
        critical maintenance needs of the legacy Deepwater assets, 
        diverting funds otherwise intended for future Deepwater 
        replacements and upgrades. In addition, Coast Guard officials 
        indicated that maintenance schedules for some vessels were 
        perhaps not kept according to plan in anticipation of these 
        assets being replaced or overhauled through the Deepwater 
        program.

   Delays have resulted in increased costs due to normal price 
        inflation. Because the contract for acquiring Deepwater assets 
        has a price adjustment factor that allows asset prices to be 
        adjusted for inflation, costs for these assets have increased 
        over time.

   Due to revised homeland security requirements, some redesign 
        of the national security cutter has occurred. These 
        modifications, made to ensure the vessel would accommodate DHS 
        needs included such things as lengthening the vessel to 
        accommodate DHS aircraft, installing an onboard intelligence 
        center, and making modifications to allow sustainability in an 
        environment tainted by chemical, biological and radiological 
        agents. According to Coast Guard officials, these modifications 
        resulted in additional costs for the Deepwater program.

    In recent discussions with Coast Guard officials about the 
Deepwater program, they were not able to explain in more detail the 
reasons for the escalation in the program costs and did not provide 
additional information to us before we completed our work. However, 
officials indicated that they would provide additional information in 
the future.
Increased Management and Oversight Attention Needed to Successfully 
        Complete the Deepwater Program
    While expeditiously completing the Deepwater program is important 
to the ability of the Coast Guard to effectively fulfill its 
responsibilities in the future, the agency must also be diligent in 
managing the contract, and ensuring necessary competition among 
contractors to prevent additional cost increases in the program. As we 
have recently reported we have concerns regarding the management and 
oversight of the project to date.\14\ Almost 2 years after the contract 
was awarded for implementation of the Deepwater program, the key 
components needed to manage the program and oversee the system 
integrator's performance\15\ have not been effectively implemented in 
the following areas:
---------------------------------------------------------------------------
    \14\ U.S. General Accounting Office, Contract Management: Coast 
Guard's Deepwater Program Needs Increased Attention to Management and 
Contractor Oversight (GAO-04-380, Mar. 9, 2004).
    \15\ The prime contractor, known as the ``system integrator,'' is 
responsible for overall program planning and management, asset 
integration, and overseeing the delivery of specific Deepwater assets.

   The effectiveness of the Integrated Project Teams--
        established as the main tool for managing the program and 
        overseeing the contractor--has been weakened due to changing 
        membership, understaffing, insufficient training, lack of 
        authority for decision making, and inadequate communication 
---------------------------------------------------------------------------
        among members.

   Although delivery of some of the first assets is imminent, 
        the Coast Guard has not effectively communicated to its 
        operational personnel decisions on how new and old assets will 
        be integrated and how maintenance responsibilities will be 
        divided between government and contractor personnel.

   The Coast Guard has not developed quantifiable metrics or 
        adhered to effective procedures for holding the system 
        integrator accountable for its ongoing performance, resulting 
        in a process for assessing performance that lacked rigor.

   The Coast Guard has not yet begun to measure the system 
        integrator's performance on the three overarching goals of the 
        Deepwater program--operational effectiveness, minimizing total 
        ownership cost, and customer satisfaction. This information 
        will be essential to the Coast Guard's decision about whether 
        to extend the system integrator's contract after the first 5 
        years.

   We have concerns about the Coast Guard's efforts to measure 
        the extent of competition among the suppliers of Deepwater 
        assets, or hold the system integrator accountable for doing so 
        to achieve this competition. The Coast Guard's ``hands-off'' 
        approach in this area raises questions about whether the 
        government will be able to control costs in the Deepwater 
        program. Concerns about the Coast Guard's ability to rely on 
        competition as a means to control future costs contributed to 
        our description of the Deepwater program in 2001 as ``risky.'' 
        Three years later, these concerns remain.
Unplanned Legacy Asset Modifications and Updated Deepwater Requirements 
        Pose Potential Additional Challenges
    In addition to funding and contract management concerns, there are 
other, as yet relatively unknown, but potentially significant factors 
that could affect the Coast Guard's Deepwater program. Recent 
discoveries about the condition of some legacy assets, and 
corresponding actions taken, combined with anticipated updates in the 
Coast Guard's mission requirements, may give the Coast Guard additional 
reasons to re-think its prioritization for obtaining or upgrading 
certain Deepwater assets.
    In recent years, the Coast Guard has had to make major unplanned 
upgrades on some of its Deepwater assets. Most recently, the Coast 
Guard decided to replace its HH-65 helicopter engines because of 
serious safety and reliability issues with that aircraft. Modernization 
of this helicopter is planned as part of the Deepwater program 
beginning in 2007, but for safety and reliability reasons, the existing 
engine on this helicopter needed to be replaced much sooner.\16\ The 
HH-65 is the Coast Guard's mainstay helicopter, serving such missions 
as search and rescue, drug and migrant interdiction, and homeland 
security. Problems with the current engine and related components have 
been occurring for a number of years, affecting the amount of power 
available for hovering, lifting, and other operations.
---------------------------------------------------------------------------
    \16\ U.S. General Accounting Office, Coast Guard: Replacement of 
HH-65 Helicopter Engine (GAO-04-595, Mar. 24, 2004).
---------------------------------------------------------------------------
    To address these problems, the Coast Guard plans to take action 
along two tracks. First, until the replacement engines are installed, 
they plan to upgrade the existing engines. Second, they plan to install 
new engines in the entire HH-65 fleet within 24 months. However, there 
are potential consequences for the Deepwater acquisition process 
associated with this early replacement decision. Funds to pay for the 
replacement engine are to be diverted from other Deepwater projects--a 
factor that could exacerbate further schedule delays. Also, the 
alignment between deepwater requirements--which have not yet been 
finalized--and those for the replacement engine cannot be determined. 
If the requirements are not in alignment, the Coast Guard faces 
significant cost and schedule risks because another engine replacement 
could be required to meet new mission requirements. Irrespective of 
these concerns, the Coast Guard's decision to re-engine these 
helicopters, in and of itself, provides reason for the agency to 
reassess its planned schedule for upgrading this asset under the 
Deepwater program.
    Coast Guard officials also anticipate that updated agency 
requirements--engendered by homeland security needs that were not known 
and, therefore, not factored into the original mission requirements 
developed prior to the September 11 attacks--also need to be 
considered. According to Coast Guard officials, they are currently in 
the process of re-examining the agency's Deepwater mission requirements 
to ensure that they align with DHS' strategic goals, and that the 
agency is able to meet increased mission demands and higher performance 
targets in a post September 11 environment. The Coast Guard's review of 
its Deepwater mission needs statement is expected to be completed by 
April or May 2004 and submitted to DHS for approval at that time.
    This continually evolving information flow challenges the Coast 
Guard even further to ensure that funds are wisely spent. As a result, 
as interim asset decisions, discoveries, and evolving mission 
priorities are identified, it becomes even more imperative that the 
Coast Guard continually updates its acquisition schedule and decision 
making to ensure that choices are made based on timely and accurate 
information.
Overview of Fiscal Year 2005 Budget and Funding for Several Areas of 
        Particular Congressional Interest
    The President's Fiscal Year budget request for the Coast Guard of 
nearly $7.5 billion represents an increase of about $534 million, or 
about 8 percent in nominal dollars over the enacted budget for Fiscal 
Year 2004.\17\
---------------------------------------------------------------------------
    \17\ This calculation does not include supplemental appropriations 
but does include the Fiscal Year 2004 rescissions.
---------------------------------------------------------------------------
    It includes almost $5.2 billion in operating expenses and $943 
million for its capital acquisition budget. The majority of the 
increase covers pay increases for current and retired employees or 
continues certain programs already underway, such as follow-on funding 
for construction projects at Coast Guard shore-side facilities, the 
Great Lakes Icebreaker construction, and information technology 
projects. About $115 million of the increase would fund new 
initiatives, about 90 percent of which relate to homeland security. The 
most significant new initiative at $102 million would be used to 
implement the Maritime Transportation Security Act (MTSA) of 2002.\18\
---------------------------------------------------------------------------
    \18\ The Maritime Transportation Security Act is comprehensive 
legislation that implements security standards that would apply to all 
foreign vessels seeking to enter the United States.
---------------------------------------------------------------------------
    This funding would be used to add about 500 new personnel (full-
time-equivalent) who will perform various security-related and other 
functions.\19\ An additional $2.2 million is being requested to fund a 
new initiative for increasing maritime domain awareness--another 
homeland security function.\20\
---------------------------------------------------------------------------
    \19\ Prior to Fiscal Year 2005, 480 Coast Guard reservists were 
handling MTSA implementation. The Coast Guard reported that authority 
to call up reservists will expire in Fiscal Year 2005; therefore it has 
requested almost 500 active duty personnel (full-time-equivalent) to 
take over these activities. Rather than approving implementation plans 
as was done by the reservists in Fiscal Year 2004, the new personnel in 
Fiscal Year 2005 will, for example, approve vessel and facility 
security plans, ensure operators are in compliance with their plans, 
and perform inspection activities on foreign vessels.
    \20\ According to the Coast Guard, Maritime Domain Awareness is an 
initiative that will provide visibility into events, conditions, and 
trends in the maritime domain to give national leaders, operational 
commanders, and maritime stakeholders the information and knowledge 
they need for both operational and policy decisions. Coast Guard 
information explains that this will help offset the physical 
impossibility of patrolling the entire U.S. maritime domain 
simultaneously or inspecting, certifying, and validating all travelers 
and cargoes.
---------------------------------------------------------------------------
    One area of particular interest to the Congress over the last 
several years is the readiness of its multi-mission stations. In 
September 2001, the Department of Transportation, Office of Inspector 
General, reported that readiness at multi-mission stations was 
deteriorating.\21\ For example, staff shortages at most stations 
required crews to work an average of 84 hours per week, well above the 
standard (68 hours maximum) established to limit fatigue and stress 
among personnel. Subsequently, the Congress appropriated funding 
totaling about $50 million for Fiscal Years 2002-2004 specifically to 
pay for increased staff, training, and equipment at stations and 
command centers. However, the degree that readiness has improved, if 
any, is unclear. For example, according to the Coast Guard, the average 
workweek at the multi-mission stations is still about 83 hours per 
week, even though about 1,100 personnel were added between Fiscal Years 
2001 and 2003. According to a Coast Guard official, one main reason for 
this high work week, is that these stations have taken on a major 
homeland security role since September 11, resulting in a heavier 
workload for station personnel carrying out functions, such as vessel 
escorts and port security patrols.
---------------------------------------------------------------------------
    \21\ Audit of the Small Boat Station Search and Rescue Program. MH-
2001-94 (Washington, D.C., Sept. 14, 2001).
---------------------------------------------------------------------------
    Of the $943 million requested for capital projects, $839 million, 
or 89 percent, would be dedicated to two projects--the Deepwater 
program ($678 million) and Rescue 21 ($161 million). Rescue 21, the 
Coast Guard's second largest acquisition program, provides for the 
modernization of the command, control, and communication infrastructure 
of the National Distress and Response System. The current system 
suffers from aging equipment, limited spare parts, and limited 
interoperability with other agencies. Of particular concern to the 
Coast Guard and the maritime community are the current system's 
coverage gaps, which can result in missed maritime distress calls. The 
Congress mandated the completion of the new system by the end of Fiscal 
Year 2006. The Fiscal Year 2005 request for $161 million is aimed to 
keep the project progressing; however, technical problems with software 
development have delayed implementation of the first elements of the 
system that were scheduled for last summer, and it is unclear to agency 
officials whether these issues will prevent the agency from completing 
implementation of the program on time. In recent discussions with Coast 
Guard officials, they said that they do not yet know whether Rescue 21 
will be completed on time at the end of Fiscal Year 2006, but they 
currently do not anticipate any cost escalation in the program, which 
is presently estimated to cost $953 million.
    Madame Chair and Members of the Subcommittee, this completes my 
prepared statement. I would be happy to respond to any questions that 
you or other Members of the Subcommittee may have at this time.
                   Appendix I: Scope and Methodology
    To determine the most recent trends in both resource usage and 
performance results for the Coast Guard's homeland security and non-
homeland security programs and the implication of these trends for 
Coast Guard management and accountability, we summarized findings from 
a recent GAO report.\1\
---------------------------------------------------------------------------
    \1\ U.S General Accounting Office, Coast Guard: Relationship 
between Resources Used and Results Achieved Needs to Be Clearer (GAO-
04-432, Mar. 22, 2004).
---------------------------------------------------------------------------
    To determine the challenges the agency faces as it proceeds with 
its program to modernize its Deepwater cutters and aircraft, we 
summarized briefings prepared in 2004 by the Coast Guard for the 
Congress and for internal use on the Deepwater program and the HH-65 
helicopters. We also interviewed Coast Guard staff at headquarters to 
determine the potential impacts of deteriorating Deepwater assets. In 
addition, we used current maintenance expenditure data provided by the 
Coast Guard to perform an historical analysis of maintenance costs. To 
assess the reliability of these data, we interviewed knowledgeable 
Coast Guard officials and reviewed existing documentation about the 
data and the systems that produced them. We determined that the data 
were sufficiently reliable for the purposes of this report.
    To give an overview of the President's Fiscal Year 2005 budget 
request for the Coast Guard, focusing on several areas of particular 
congressional interest, we obtained information on the average workweek 
of personnel at the Coast Guard's multi-mission stations and 
interviewed Coast Guard headquarters staff to determine how the Fiscal 
Year 2005 budget will address MTSA implementation, Rescue 21, and 
multi-mission stations. We also reviewed the Coast Guard's C-stage 
budget and other financial documentation provided by the Coast Guard.
    This testimony is based on published reports and briefings as well 
as additional audit work that were conducted in accordance with 
generally accepted government auditing standards.
  Appendix II: Coast Guard Performance Results, Fiscal Years 2001-2003
    Table 4 shows a detailed list of performance results for the 8 
programs for which we obtained data. In a recent report, we compared 
performance results for our baseline year--Fiscal Year 2001--with the 
most currently available results--Fiscal Year 2003.\1\ As a result, we 
defined programs as ``stable'' or ``improved'' based on the known 
results for these 2 years. All programs defined as stable showed a 
differential of less than 4 percentage points when comparing Fiscal 
Year 2001 and Fiscal Year 2003 results.
---------------------------------------------------------------------------
    \1\ For complete information, see U.S. General Accounting Office, 
Coast Guard: Relationship between Resources Used and Results Achieved 
Needs to Be Clearer (GAO-04-432, Mar. 22, 2004).

 
 
----------------------------------------------------------------------------------------------------------------
 


    Table 4.--Performance Results, by Program, from Fiscal Years 2001
                              through 2003
------------------------------------------------------------------------
                                                  Performance results by
                                                        fiscal year
     Program            Performance measure      -----------------------
                                                   2001    2002    2003
------------------------------------------------------------------------
Stable results
------------------------------------------------------------------------
Undocumented      Percentage of interdicted        82.5%   88.3%   85.3%
 migrant           illegal migrants entering the
 interdiction      United States through
                   maritime means.
------------------------------------------------------------------------
Ice operations    Number of waterway closure           7       7       7
                   days
------------------------------------------------------------------------
Living marine     Percentage of fishermen found    98.6%   97.3%   97.1%
 resources         in compliance with
                   regulations.
------------------------------------------------------------------------
Search and        Percentage of mariners' lives    84.2%   84.4%   87.7%
 rescue            saved.
------------------------------------------------------------------------
Improving results
------------------------------------------------------------------------
Foreign fish      Number of detected Exclusive       219     250     153
 enforcement       Economic Zone (EEZ) a
                   incursions by foreign fishing
                   vessels.
------------------------------------------------------------------------
Aids to           Number of collisions,            1,677   1,936   1,523
 navigation        allisions,b and groundings.
------------------------------------------------------------------------
Defense           Percentage of time units meet      67%     70%     78%
 readiness         combat readiness status at C-
                   2 level.c
------------------------------------------------------------------------
Pending results
------------------------------------------------------------------------
Illegal drug      Percentage of cocaine seized     11.7%   10.6%    N/Ae
 interdiction      out of total estimated
                   cocaine entering the United
                   States through maritime
                   means.d
------------------------------------------------------------------------
Source: GAO analysis of Coast Guard performance data.
a The EEZ is defined by the 1976 Magnuson-Stevens Fishery Conservation
  and Management Act as an area within 200 miles of U.S. shores in which
  U.S. citizens have primary harvesting rights to fish stocks.
b The Coast Guard defines an ``allision'' as a vessel collision with a
  fixed object.
c According to Coast Guard information, the C-2 level is defined as the
  level at which each unit possesses the resources and is trained to
  undertake most of the wartime missions for which it is organized or
  designed.
d The illegal drug interdiction performance measure only includes
  cocaine as cocaine has an analyzed flow rate, and it constitutes the
  preponderance of illegal drugs entering the United States through
  maritime means (i.e., cocaine shipments are measured in tons while
  heroin, marijuana, and other illegal drugs are measured in pounds).
e The illegal drug interdiction performance result for Fiscal Year 2003
  will not be calculated until the Interagency Assessment of Cocaine
  Movement (IACM) publishes its flow rate in spring of 2004.

         Appendix III: Performance Targets for Fiscal Year 2003
    In a recent report, we showed that another way that the Coast Guard 
assesses its performance is by determining whether programs have 
achieved their performance targets each year.\1\ These targets--which 
represent the goals that the programs aim to achieve each year--were 
met in Fiscal Year 2003 by 5 of the 8 programs we reviewed.\2\ (See 
table 5.) Two of the programs that did not meet their performance 
targets were defense readiness and undocumented migrant interdiction. 
Coast Guard officials reported that the defense readiness program did 
not meet its target, in part, because of equipment problems associated 
with operating aging ships and unit training deficiencies, such as 
cutters not having sufficient training time to perform gunnery 
exercises.\3\ As for the undocumented migrant interdiction program, 
Coast Guard officials reported that they consider their results to be a 
minimal decline, given the substantial increase in the number of 
migrants they successfully interdicted during the year.\4\ For example, 
of the key migrant populations tracked by the Coast Guard, about 5,300 
illegal migrants were interdicted in Fiscal Year 2003 compared with 
about 2,400 in Fiscal Year 2002, an increase of 120 percent.\5\ We 
could not determine whether the remaining program, illegal drug 
interdiction, met its performance target because the performance 
results for Fiscal Year 2003 were not yet available at the time we 
conducted our work.
---------------------------------------------------------------------------
    \1\ For complete information, see U.S. General Accounting Office, 
Coast Guard: Relationship between Resources Used and Results Achieved 
Needs to Be Clearer (GAO-04-432, Mar. 22, 2004).
    \2\ The marine environmental protection program also met its 
performance target in Fiscal Year 2003 but was not included in our 
analysis. Also, since the marine safety program does not yet have 
performance results for Fiscal Year 2003, discussing its target is not 
relevant here.
    \3\ According to Coast Guard information, the C-2 level is defined 
as the level at which each unit possesses the resources and is trained 
to undertake most of the wartime missions for which it is organized or 
designed.
    \4\ The undocumented migrant interdiction performance measure 
indicates the percentage of migrants interdicted or deterred from 
entering the United States via maritime routes. Specifically, it is the 
number of interdicted migrants divided by the estimated flow of 
undocumented migrants (which includes the number of law enforcement 
interdictions, known successful migrant arrivals, and the estimated 
number of migrants deterred from leaving their countries of origin). 
This estimate is prepared annually by the Coast Guard's Intelligence 
Coordination Center.
    \5\ According to the Coast Guard, the 2002 and 2003 illegal migrant 
numbers stated here include only those counted in the undocumented 
migrant performance measure, which uses the following four migrant 
populations: Haiti, Cuba, the Dominican Republic, and the People's 
Republic of China. The total number of all migrants interdicted in 
Fiscal Years 2002 and 2003 were 4,104 and 6,054, respectively.

 
 
------------------------------------------------------------------------
 


      Table 5.--Performance Targets by Program for Fiscal Year 2003
------------------------------------------------------------------------
                                                           Target met in
    Program          Fiscal Year 2003        Fiscal year    Fiscal Year
                   performance targets       2003 result       2003?
------------------------------------------------------------------------
Undocumented    Interdict or deter at      85.3%           No
 migrant         least 87 percent of
 interdiction    illegal migrants
                 entering the United
                 States through maritime
                 means.
------------------------------------------------------------------------
Illegal drug    Seize 20.7 percent or      To be           To be
 interdiction    more of cocaine entering   determined a    determined a
                 the United States
                 through maritime means.
------------------------------------------------------------------------
Ice operations  Limit waterway closures    7 days          Yes
                 to 8 days during severe
                 winters.
------------------------------------------------------------------------
Living marine   Raise percent of           97.1%           Yes
 resources       fishermen found in
                 compliance with
                 regulations to 97
                 percent or above.
------------------------------------------------------------------------
Search and      Save at least 85 percent   87.7%           Yes
 rescue          of all mariners in
                 distress.
------------------------------------------------------------------------
Foreign fish    Reduce number of detected  153 incursions  Yes
 enforcement     EEZ incursions by
                 foreign fishing vessels
                 to 202 or less.
------------------------------------------------------------------------
Aids to         Reduce 5-year average of   1,523 CAGs      Yes
 navigation      collisions, allisions,
                 and groundings (CAGs) to
                 2,010 or less.
------------------------------------------------------------------------
Defense         Maintain an overall        78%             No
 readiness       combat readiness status
                 at C-2 level or better
                 for 100 percent of
                 assets.
------------------------------------------------------------------------
Source: GAO analysis of Coast Guard performance data.
a The illegal drug interdiction performance result for Fiscal Year 2003
  will not be available until spring of 2004.


    Senator Snowe. Thank you, Ms. Wrightson, for that report, 
and I appreciate those charts that underscore some of the 
challenges. And actually, considering the change of resource 
hours by program, it is remarkable, under the circumstances, 
how the Coast Guard performed. Admiral Collins, let's begin 
with that.
    Exactly what contributed to your ability to meet all the 
requirements under the law, and in many ways with fewer 
resources? For all your non-homeland security missions and 
responsibilities, you were able to meet a level of performance 
even though your hours were down.
    Admiral Collins. Clearly, our focus since 9/11 has been 
building up our readiness and capability for homeland security. 
A good deal of the budget increment that we have seen in the 
last several years is to provide those kind of resources. But 
the fact of the matter is, they all equal increased presence on 
our ports, waterways, and coastal approaches. We have a limited 
accounting scheme that accounts for activity levels that will 
put our resources into one little bin because that's the sortie 
it starts out on. But in fact, that same vessel or aircraft 
that started out on that sortie could very easily do a SAR 
mission or en route do an environmental scan of the waterway.
    So you have embedded in our assets multi-mission assets, 
multi-mission people that can apply to a wide range of our 
missions at any given time, and I think that is a tremendous 
strength for us. It gives us the adaptability, it gives us the 
flexibility to respond to a wide range of issues even though 
the program patrol, the program sortie that it is on, is for 
one single mission.
    Senator Snowe. Are you saying that you may do several 
missions on the way to doing a final mission?
    Admiral Collins. Yes. And accounting for those hours, they 
don't necessarily get neatly put--reflect that multi-mission 
character or that effort. So we've got a limitation of our 
accounting scheme, number one, I think. And also, I think GAO 
is right on target about us getting more sophisticated in terms 
of accounting for resources across the board, people resources, 
how we account for people.
    For instance, the current activity spread shows boats, 
aircraft, and cutters, but it doesn't account for the law 
enforcement detachments or the HITRON helicopter or whatever, 
that may go on a Navy platform. For example, the law 
enforcement detachments that go on Navy platforms, and Navy 
platforms and the counter-drug missions make up almost 50 
percent of the total ship days devoted to that mission.
    So there's a lot of lack of sophistication, I think, in the 
way we account for this and attribute resource allocation to 
performance. And that's something we're working hard on. We 
found out this is really hard stuff to get a regime in place 
that allows you to evaluate and account this, and we're working 
hard to try to do that.
    To get back to how we're able to cover the bases in 
performance, I think it is because the character of our 
organization in terms of multi-mission. It's because we have 
very effectively partnered and because we have used good intel 
and technology and tactics to leverage our performance. A 
couple of examples, and I've used these before, but in the 
counter-drug mission, we almost broke our record last year in 
cocaine seizures. You've already alluded to the fact that we're 
on the glide slope this year to break or exceed any previous 
years' cocaine seizures and removals, and number of arrests at 
sea, and we're actually doing it with less resources.
    We had to allocate, for instance, on the Haiti crisis here 
recently, we had to pull back our ships from the counter-drug 
mission to provide increased presence in the Windward Pass. It 
was exactly the right thing to do. It was a risk-based approach 
to our mission, but it was less resources in counter-drugs. And 
yet, we're surpassing every cocaine seizure. We already have 
seized 117,000 pounds of cocaine this year. We're only half way 
through the year. And it's because of great use of intel, great 
interagency partnering, and including building international 
coalitions on this effort. And we're trying to do that in every 
mission.
    Fisheries is the same thing. We've been very effective in 
the Maritime Boundary Line. I wish Senator Stevens was here to 
hear this. I know he's very interested in the Boundary Line in 
the Bering Sea. But we've been very, very effective over the 
last year in the Bering Sea, and we've maintained our presence 
there despite orange conditions and the like. We've partnered 
effectively with the Russians to do it jointly, and we've 
changed some of our tactics.
    So just a couple of examples. Yes, we're still under 
pressure to maintain our levels of performance across the 
board. We're trying to do it smartly. We're trying to do it 
risk-based. And we're trying to grow at the same time. But I 
said in my testimony, the biggest challenge, apart from all 
these considerations, is that material condition of our fleet. 
To me, if you want to identify the biggest issue for us and 
ability to continue our mission performance, that's it.
    Senator Snowe. A couple of things on that point, and I 
understand exactly what you're saying on trying to match your 
resource hours with your assets and performance results. Is 
there a way of developing a mechanism--and I know GAO has 
recommended developing a time frame--for proceeding with issues 
to account more completely for resources expended and ensuring 
through its planning process the agency develops a strategy of 
identifying intervening factors that affect performance 
results, and systematically assessing the relationship between 
these factors, resources used, and results achieved?
    Is there a way of setting up this process so that you can 
better identify those factors that contribute to your success?
    Admiral Collins. We're working very hard to do that. I 
think there are a couple of--and we're not, quite frankly, 
we're not there yet. The problem is to have very good validated 
activity standards, because I think it really starts there, 
standards that you can validate and connect to performance. 
They're leading indicators. What we have now in our performance 
are laggard indicators. It's tough to manage on laggard 
indicators.
    So you've got to have, I think, activity standards that are 
leading indicators of performance, and to have a system to 
validate the connectivity or the cause-and-effect relationship 
between the activity and the performance. We're not there yet, 
and it's going to require a lot more use of our brain cells to 
get a predictable system in place. But I think that's the 
answer.
    A predictor, for example, of our search and rescue 
performance is clearly not how many sorties we do. It is not 
how many boat hours we sailed. The predictor of good search and 
rescue performance is your readiness standard, to have you 
maintain your readiness standard in terms of responding in such 
and such a timeframe, being on scene in such and such a 
timeframe, and ensuring the resources are in place--well-
trained people, well equipped resources that maintain a 
readiness standard. That is really the predictor of good SAR 
performance, as an example.
    But we have to go through--this is hard work. We have to go 
through every mission, identify those activity standards, and 
roll in the people dimension, which is a great recommendation 
from GAO to account for the people allocation as well, and fold 
this in. And we've got some work ahead of us to get there.
    Senator Snowe. I appreciate that forthrightness. Ms. 
Wrightson.
    Ms. Wrightson. There is--I think what we would say is, GAO 
generally doesn't tell agencies which particular performance 
measures they should have because it's really a matter of facts 
and circumstances. But what we do know is that the Commandant 
is absolutely right. There are some problems both on the input 
and the output side of their measures.
    On the input side, as he mentioned and we have, missing the 
human assets is a critical problem and one of the reasons is 
because the Coast Guard is using those assets more and more for 
new missions such as inspections and so forth. All of that is 
lost, as well as traditional missions where it has used people, 
like in MEP.
    The other thing that we would say there is that not only do 
they need to improve both input and output, but also the 
account--when you have data that are going in a direction that 
is counter-intuitive, as these are, it's really incumbent upon 
the agency to do what we call environmental scanning, where 
they keep track of operational improvements, changes in 
tactics, partnerships and technologies, and they're able to 
catalog those in a systematic way and use information about 
those to determine whether they should expand, reduce, or 
change efforts that they're making to do better with less.
    So that is something that we can help the Coast Guard with 
and we expect to do that going forward.
    Admiral Collins. One thing, I just had a very interesting 
brief yesterday from our operations staff on--it happened to be 
on my favorite topic, Deepwater, and some of the planning 
associated with that, and it was on modeling. It was an 
operations research brief and some of the modeling skills--
simulation and modeling skills--they're developing to look at 
performance of Deepwater as a system. And it's terribly 
exciting, and I think we're making a lot of progress there, and 
I really can't wait to give GAO----
    Ms. Wrightson. I think I've seen it. Is it DMOS?
    Admiral Collins. Yes.
    Ms. Wrightson. I've seen it.
    Admiral Collins. And I think it's going down the right 
path. The cake is in the oven. It's not fully cooked, but I 
think it's going in the right direction. It has great 
potential. One thing I think as a service we have under-
invested in is operational research capability and tools, and 
that's one of the things that I would like to pay attention to 
over the next year and buildup our operational research 
capability so we can develop some of these techniques and 
capabilities that allow us to make better decisions about 
resources.
    Having said that, I think the results are pretty darned 
good. If you look at the lives that we've saved, if you look at 
the cocaine we've seized, if you look at the environmental 
protection we have rendered, I think that's a good return on 
our investment from every perspective I can think of. But the 
fact of the matter is, we can't be satisfied with that. And how 
do we invest the next increment, how do we ensure when we have 
a decaying asset that we adjust the game plan appropriately. So 
we're committed to making the investment to get smarter and 
have the tools in place to make good decisions.
    Senator Snowe. Senator Lautenberg.

            STATEMENT OF HON. FRANK R. LAUTENBERG, 
                  U.S. SENATOR FROM NEW JERSEY

    Senator Lautenberg. Thank you very much, Madam Chairman. 
I'm always happy to see a Coast Guard representative and we're 
delighted that Ms. Wrightson is here, and hope that she will 
agree more with me than with he.
    I don't mean to get poetic, but I kind of see it that way. 
And I wonder, Madam Chairman, do we have time for me to make 
about a 5-minute opening statement?
    Senator Snowe. Please proceed.
    Senator Lautenberg. Thanks very much. And once again, I'm 
pleased to have you convening this hearing. We--Maine and New 
Jersey--go perfectly together when we're talking about the 
Coast Guard. Each of us is very dependent on the Coast Guard 
for all kinds of services and our reliance on the Coast Guard 
reflects our interest in our maritime industry, the safety of 
those out at sea, and the protection of our environment. It 
makes sure that pollution doesn't start in the first place, and 
reach our shores in the second.
    So I appreciate the fact that, although I'm not a member of 
this Subcommittee, Senator Snowe invited me here today. I think 
she invited me without me begging, too.
    Senator Snowe. We're bipartisan.
    Senator Lautenberg. The Coast Guard plays such a critical 
role in protecting our Nation's economic security interests, 
and it's so critically important that these folks have the 
resources that they need to do their job.
    Last year, my staff received a call from a constituent who 
is also a member of the Coast Guard. He said that he was being 
forced to share personal equipment like special suits, items 
intended to be worn by one individual. He said that things were 
tough, but they were making do. Nonetheless, I found this 
disturbing.
    What are the priorities of this Administration? Maritime 
safety, illegal drug interdiction, environmental protection, 
other crucial Coast Guard missions. Are they worthy of being 
funded adequately? And we have our witness from General 
Accounting Office who I think perhaps has already testified to 
the Coast Guard's ability to perform its tasks from search and 
rescue, and all of the other things it does. We forget at times 
the navigational markers. And having been a sailor, I know what 
it's like not to be able to see the next one, which was often 
the case with me, and being able to holler ``help'' in a more 
dignified way than that and get it.
    So all of these things, I think, are being compromised by 
budget cuts. Now, while our good friend and outstanding 
Commandant, Admiral Collins, is here to tell us that certain 
performance measures don't show that these areas are taking a 
hit, I'm not convinced. We all know ``OMB-speak'' when we hear 
it, and it is unfortunate that the Commandant is being 
requested, let me say, to make due with a budget that we all 
believe is inadequate.
    On another note, and Admiral Collins mentioned it, I'm 
concerned about the Deepwater program. A $17 billion long-term 
contract award is a risky prospect when we consider what the 
record has been on overseeing contracts. In every agency where 
the Administration has promoted significant increases in 
contracting out, we have seen some problems--Defense, NASA, the 
FAA. And yet, there is a continuous push to government 
contracting, like it's the answer to all of the budget 
problems. For me, it's shocking that there's even an interest 
in privatizing the FAA's air traffic control functions.
    Along these lines, GAO has identified some very serious 
problems with Deepwater, and I'm interested to hear Ms. 
Wrightson's comments on this.
    I'm also concerned about the status of the Oil Spill 
Liability Trust Fund and our ability to respond to coastal 
disasters like the Exxon Valdez. I had a chance to be up there 
to view the site within a couple of days after it happened. 
That spill prompted Congress to enact the Oil Pollution Act of 
1990, and it established a comprehensive statutory mechanism 
for preventing and cleaning up oil spills. I was an original 
co-sponsor of the Senate version of the OPA, and I was a 
conferee on the bill.
    The Oil Spill Liability Trust Fund was actually established 
prior to the enactment of OPA. The Trust Fund has been used to 
pay for cleaning up a number of oil spills since its inception, 
including the spill off the coast of my home state, New Jersey, 
this past February. The revenue source for this fund was a 5-
cent per barrel tax on domestic and imported oil. 
Unfortunately, the authority to collect this tax expired nearly 
10 years ago, in December 1994.
    Although the Oil Spill Liability Trust Fund is in better 
shape, let's say, than the SuperFund Trust Fund, I'm concerned 
that with no new tax revenues, it will go broke. At the 
beginning of Fiscal Year 2003, the fund contained over a 
billion dollars. By the end of Fiscal Year 2005, the Fund 
balance is going to drop by over $200 million. And I'm 
considering introducing a bill to reinstate the tax that funds 
the Oil Spill Liability Trust Fund so that it doesn't end up 
like the SuperFund Trust Fund, which is out of money.
    And again, I'm interested, Madam Chairman, in what the 
witnesses have to say in more detail about those things that 
we're so concerned about. So with that, I will turn it back to 
you.
    Senator Snowe. Well, I thank you, Senator Lautenberg, and I 
thank you for being here today. I appreciate your comments on 
some of the issues that are important to the Coast Guard and to 
our mutual constituencies. Would you care to ask any questions 
or----
    Senator Lautenberg. I would like to ask Admiral Collins 
this question. And that is, would you like to have more money?
    Admiral Collins. Senator, our 2005 budget is just right. It 
will support our operations in 2005. I think as we go forward 
and particularly on the capital end of our budget, we're going 
to have to think through the out years to ensure that we have--
- we can address this, what I refer to as a downward spiral, 
maintenance spiral of our assets and the readiness posture of 
our assets, which is my primary concern.
    Senator Lautenberg. Admiral, I would say you were a good 
soldier, but I know that you're technically not a soldier. But 
the character is the same. You're a loyal, steadfast and able 
Commandant of the Coast Guard, a branch of service that, 
frankly, I really think is always a little bit under-funded, 
under-served, because even if the funding stays static, 
including an inflation adjustment, the new assignments never 
stop coming. And I think in some ways, the Coast Guard is the 
most dynamic of our branches of service because of this 
increasing number of duties to perform.
    Years ago, no one thought about pollution control or about 
inspecting ship manifests or setting safety standards for 
passenger boats, things that seem so routine. Our navigation 
system is so good that it has guided the entire maritime 
industry, that is so important to our economy and our society, 
including a serious recreational boating element as well as 
commercial enterprise.
    And so when I look at all those tasks and I hear you say 
that the funding is just right, I would ask you, Admiral 
Collins, did you have too many people and too much equipment in 
performing these tasks before. Was that the case?
    Admiral Collins. No, sir.
    Senator Lautenberg. I just wanted to be sure.
    Admiral Collins. There are obviously some challenges and 
we're trying to juggle parts of our budget to ensure we cover 
all the bases, recognizing that the budget world is not an 
unconstrained world, and we're trying to live within the 
constraints we are dealt with.
    Senator Lautenberg. I know you don't want more but if you 
did want more, how much more would you have wanted?
    [Laughter.]
    Admiral Collins. Let me put it this way. I can refer to a 
report that is already on the table submitted to the Senate and 
the House that addresses our capital options to deal with our 
capital modernization issues, and that was submitted last year. 
That addressed, again, some different approach and time line to 
our modernization efforts and suggested some advantages that 
might accrue and the ability for the capacity of the industry 
to adapt to that change.
    So if you're asking me, Senator, if I'm an advocate, a 
believer in that report, I would probably have to say yes.
    Senator Lautenberg. All right. We're beginning to tie the 
things together here, Admiral, because I remember seeing a 
report that had us in a relative state of disrepair in terms of 
our service versus other similar services around the world. And 
it shouldn't be that way, especially since 9/11 and the 
responsibilities the Coast Guard has since taken on. I look out 
my window at my home in New Jersey and I face the Hudson River, 
and I see the Coast Guard craft out there all hours of the day 
and night. 9/11 added to the burden the Coast Guard has, and it 
doesn't come free.
    So just for a moment, I'd like to ask you a question about 
the Oil Spill Liability Trust Fund which I mentioned earlier in 
my remarks. What's projected as the balance at the end of the 
Fund five and 10 years from now, the end of Fiscal Years 2009 
and 2014, respectively? Do you know when the Fund is projected 
to run out of money?
    Admiral Collins. I think in 2009, we're going to start, by 
that time, start realizing some problems with sufficient 
funding in the pot. I think you described the situation--you 
hit the nail right on the head, Senator. I couldn't agree with 
you more about the current state of play with that fund. The 
sources of the funding, of course, no longer exists. We're 
using that fund more aggressively. Spills are costing more 
money to clean up. And I think we've got good at controlling 
the number of spills. We reduced--we have pretty good 
performance dimensions on the number of spills, gallons of oil 
spilled per gallon ship.
    But having said that, one has to question whether in the 
2009 and post-2009 period, whether the Fund will be sufficient 
to do the things that the Congress and the American people need 
it to do.
    Senator Lautenberg. I was an original co-sponsor of the Oil 
Pollution Act of 1990, and I am also a strong advocate of the 
polluter paying for its deeds. You know, we had the 5-cent a 
barrel tax that funded the Trust Fund, but the tax, again, 
expired nearly a decade ago. I take it from the comments you 
just made that you wouldn't mind seeing this tax reinstated. Is 
that a fair observation?
    Admiral Collins. I would like--what I would like to see is 
a source of funding for the fund, whatever the proper funding 
mechanism would be, and I would leave that to the experts to 
figure that out.
    Senator Lautenberg. I won't press you any further. I 
understand how delicately you're phrasing your remarks, but we 
get to the same conclusion. I'll do the interpreting, Admiral 
Collins.
    Ms. Wrightson. Could I just add a point there? That 
generally speaking, when GAO has done work on trust funds, our 
position has generally been that when there are negative 
externalities that are created such as in this case, that those 
externalities are paid for by society at large. That is, a 
self-financing mechanism makes the most sense.
    So that would be my last word on that subject as well.
    Senator Lautenberg. Thank you. Thanks very much, Chairman 
Snowe.
    Senator Snowe. Thank you very much, Senator Lautenberg. We 
appreciate it. Thank you for being here. Senator Lott.

                 STATEMENT OF HON. TRENT LOTT, 
                 U.S. SENATOR FROM MISSISSIPPI

    Senator Lott. Thank you very much, Madam Chairman, and 
thank you for having this hearing in your jurisdiction as 
Chairman of this Subcommittee. And Admiral Collins, thank you 
for being here. And Ms. Wrightson, I appreciate your report, 
too. I'm sorry I didn't get to hear your opening statements. 
But as I've said many times before, Admiral Collins, we 
appreciate the work that you do and that the Coast Guard does. 
Since I live right on the Gulf of Mexico, I pay attention to 
the Coast Guard and all the benefits that they give, the good 
work that the men and women in the Coast Guard provide along 
the Gulf Coast and up the river, too, the Mississippi.
    How are we dealing with the Deepwater program? I know it's 
always a question of funding and there's no question you need 
more funding, and I'm going to be an advocate for an increase 
of funding for the Deepwater program above what was asked for 
in the budget. But just, unless it's already been done, give us 
sort of an overview. How are we doing with that project?
    Admiral Collins. I think it is, from a management 
perspective, it's a complex project to manage this system of 
systems approach. We're working very, very hard at it. We're 
having wise counsel from GAO to help us with process 
improvements along the way and we're tending to those very 
aggressively. So from a management perspective, we've worked 
hard. We have additional work to do and we're attending that. 
We have a plan of action and milestone for every 
recommendation, for example, that GAO has rendered on the 
project.
    In terms of the funding stream, there are two issues 
impacting Deepwater--well, several. One is funding stream, past 
funding stream and future funding stream that dictate how you 
put that project together, that is, those systems of systems 
together. That's one issue.
    The second issue is, externalities that influence the 
requirement. That requirement was a pre-9/11 requirement that 
evolved and defined the contract and the solution that was 
proposed for that contract. These things that have happened 
obviously since 9/11 that changed--9/11 and beyond--that have 
changed our world of work, and we need to make requirement 
adjustments because of those. That's factor number two.
    Factor number three is the current state of the legacy 
system, Senator, which are much worse than we projected back in 
1998. And that is, the decay curve, if you will, of those 
legacy assets. And they impart for me personally, and I know 
throughout our service there's a sense of urgency about getting 
on with this modernization because of those three factors, and 
the last one in particular.
    Senator Lott. Well, let me be specific for those who may 
not follow what you're saying that closely. But I understand 
your finding that your fast response cutter, that's your 110-
foot patrol boats, as they're being converted to 123-foot 
boats, you're finding that they're in worse shape than you 
thought they were. The same thing is true with the offshore 
patrol cutter, which is I guess the 210 1960s vintage vessel. 
You're finding that it also is having more problems, or has 
more problems than you realized.
    And so now there is a need to deal with those additional 
costs aside from, of course, the need to do some catch-up on 
the overall funding for Deepwater. Is that correct?
    Admiral Collins. Yes, sir. You're referring to the 
current--some of the systems failures we experienced on some of 
our platforms. The 110-foot vessel, we've had 20 hull breaches. 
That's water coming in, emergency drydocking.
    Senator Lott. That's a little problem.
    Admiral Collins. That gets your attention. It gets the 
adrenaline flowing. We've had that problem. When we sent the 
Matagorda, which is the first ship to stretch a 110 into a 123, 
we had forecast about 10 to 15 percent of the hull plating 
would have to be changed as a part of that renovation. We ended 
up over 35 percent because of the current state of that, and 
that's symptomatic of the overall fleet.
    We've had--last year, we lost 671 days of cutter time--
that's medium endurance cutter and high endurance cutter--to 
unscheduled maintenance. And that's another reflection of the 
current state of the fleet. So you're losing operational 
capacity because of the current state of the fleet and it's 
costing you more. You saw the curve here. We will have to 
continue to invest in our legacy assets.
    So those are alarming data points, Senator, in terms of the 
imperative of this modernization program.
    Senator Lott. Well, I guess you've done pretty well 
comparatively speaking to other parts of the budget, with a 6 
percent increase in 2005 over 2004, with these additional 
problems, and with what we're going to have to do to make up 
for Deepwater. We're going to have to come up with some more 
funding for you to be able to do the job, from Maine through 
New Jersey to the Gulf of Mexico and the West Coast. And so 
we'll try to be helpful in that area.
    Let me be parochial on one issue, if I might. When you pull 
into my home town to the Port of Pascagoula--of course, we have 
regular dredging maintenance by the Corps of Engineers. But 
when you pull in, if you look to the right you'll see my house. 
If you look dead ahead, you look at one of the country's 
largest and most important ship yards. I'm sure that Senator 
Snowe would have some idea about what it looks like.
    Senator Snowe. That's with the exception of Bath.
    [Laughter.]
    Senator Lott. You look to the left and you see the Naval 
Station at Pascagoula where a Coast Guard cutter is also 
moored. And if you look behind you as you come in the channel, 
you're looking at a Chevron oil refinery, chemical plant. The 
point is, in a very small space, there's a lot of critical 
stuff--refineries, chemical plant, naval station, shipyard, 
weapon caches, the works. And I'm worried that we're not 
getting the attention paid to the central part of the Gulf of 
Mexico in terms of security for our ports that they need.
    Now, it's understandable you'd go with the bigger, more 
identifiable ports first, and we have done a little bit better 
this year with some of the security allowances. But I want to 
encourage you to look--well, let me just be specific--at that 
particular port, because I think it is a lot more vulnerable 
than other ports along the Gulf, in the central Gulf. Most of 
them don't have a naval station, a shipyard, and an oil 
refinery within spitting distance of each other. So I would 
hope you would take a look at that.
    One other thing is, there's a company identified as MariTEL 
that obtained spectrum through the FCC auction to develop a 
commercial coastal telecommunication service with the 
requirement to provide the Coast Guard with limited access to 
portions of that spectrum. The Coast Guard now wants to expand 
its spectrum requirements for the automated identification 
system in a way that would imperil MariTEL's commercial plans. 
Obviously, you have to be sensitive to that, and I would just 
like--I know you may need the additional spectrum. They have 
made an investment. I would like to ask you to at least work 
with MariTEL and try to work this out in a way that you can get 
the spectrum you need, but without putting legitimate private 
enterprise out of business.
    Would you like to respond to either of those two issues?
    Admiral Collins. The spectrum issue is a complicated issue. 
It kind of makes your head hurt a little bit. It's a technical 
issue, but it boils down to having access to a particular 
spectrum that is the international standard for automatic 
identification system. The vessels coming into our country have 
used international across the board and will have to use it in 
our country for both safety and security purposes. It's a very, 
very important system, and we need that access to that 
frequency.
    We have not been able to develop a consensus between 
MariTEL and us. The issue is in front of the FCC to take a look 
and come to some conclusions on the best use of that spectrum. 
And I think we've agreed to disagree, Senator.
    Senator Lott. Well, that sounds like the Congress, ``we 
agree to disagree'' across party lines, across philosophical 
lines, regional lines, all that kind of stuff. And my attitude 
is always, ``OK. Now we agree on what we disagree on. Now let's 
find a solution.'' It's not good enough to just say, ``We've 
come to the conclusion we'll disagree on the spectrum.'' When 
you've got a private sector investment, a legitimate 
investment, you've got to find an alternative. And so I hope 
the Coast Guard will work with the FCC and the private sector 
to see if there's not some other option there.
    There is a solution. Somebody just has to be innovative in 
coming up with it. And I'm not advocating anything as to what 
the solution may be, but there must be some solution so that 
you can have the spectrum you need and so that they have some 
protection of their rights and their investment. And I hope you 
will work on it.
    Admiral Collins. I'll be happy to continue the discussion 
and explore all options. My door is totally open to the 
leadership.
    Senator Lott. Maybe we can bring in GAO and they can come 
up with a solution here.
    Admiral Collins. I would love to be able to talk to the 
leadership of the corporation. Come in, let's chat, and let's 
talk.
    Senator Lott. I assume you're doing that, aren't you?
    Admiral Collins. We are at the lawyer-to-lawyer basis.
    Senator Lott. That's the problem then. There it is. Now we 
know.
    [Laughter.]
    Admiral Collins. We would like to----
    Senator Lott. Let's get some Coast Guard officers involved 
in this, not a bunch of lawyers from the FCC, the Coast Guard, 
and the company.
    Ms. Wrightson. I hate to add you've already brought 
accountants into it, but you already have. We're doing ongoing 
work on AIS for Senators McCain and Hollings, and we expect to 
report out on that in the next few months.
    Admiral Collins. It's a difficult issue, Senator. We'll 
continue the dialogue and look for every option possible to 
have a reasonable solution to this thing.
    Senator Lott. OK. I believe the Coast Guard can do it. If 
they can't, the Seabees will. Thank you very much, Madam 
Chairman.
    Senator Snowe. Thank you, Senator Lott. I would like to 
return to the issue that Senator Lott just raised concerning 
the status of the Deepwater program, because this is a 
fundamental issue. I would say we're almost at the point of 
crisis with respect to the declining readiness of your aircraft 
and your cutters. And as you indicated in your testimony, it's 
declining faster than your ability to repair your current 
assets and sustain them.
    So the issue is, and I recall you mentioning this in your 
testimony before the full Commerce Committee recently, that you 
have aircraft and cutters that are old enough to qualify for 
Social Security, and that the funding that you had hoped and 
anticipated to use to buy new cutters and aircraft is now being 
used to sustain the current fleet. This is a serious situation 
we're in.
    Are you contemplating or have you recommended a new time 
line for Deepwater? I ask that question because, as you know, I 
have certainly been a strong proponent of advancing that time 
line for the Deepwater program. I know the same has been true 
for Senator Lott. And currently, Senator Lott and Senator 
Breaux and I have been circulating a letter to our colleagues 
to submit to the Homeland Security Subcommittee on 
Appropriations, requesting that they advance that time line to 
at least a 15-year time line. To do this, we're requesting $1.1 
billion for Deepwater in fiscal year 2005. If we can't meet the 
10-year standard, we should at least meet the 15-year standard.
    But at some point, we've got to change direction. It's 
going to take some time, but I think we've got to do something 
clearly different from what we are doing right now. The status 
quo is unacceptable.
    Admiral Collins. I think there are a couple of--Madam 
Chairman, there are a couple of adjustments that need to be 
made. One is to adjust the sequencing of the current profile. 
And the piece parts remain the same in terms of the overall 
system, it's when you introduce which part because of the 
current condition of the legacy system. That's one adjustment 
that's going to have to be done, for example.
    Right now, the fast response cutter is slated to come on 
board on 2018, to replace the 110/123-foot patrol boats. Given 
the current state of the existing legacy assets, that's too far 
down the pike and so the schedule has to be moved to the left.
    We've already made the adjustment for the helicopters 
because of the entire power train--the gear box, the fuel 
control system, and all that combination--is not producing the 
reliability and safety that our men and women deserve. I didn't 
have any choice. That's a decision that had to be made. That's 
moving to the left. And obviously we get the first engines in 
in the June timeframe.
    So those are adjustments within the envelope, if you will, 
that have to be made given the current state of the legacy 
system and we're moving expeditiously on that.
    The other adjustment is, and it's a subject of continued 
discussion as an out-year budget within the Administration, on 
exactly what the sequence, the next flow will be, and based 
upon what requirement. And we're actively recasting that next 
five-year plan for Deepwater, and hopefully we'll have that 
redefined by the summer timeframe.
    Senator Snowe. So in what Fiscal Year would you have to 
begin accelerating this program? I assume it would have to be 
started in this next fiscal year.
    Admiral Collins. Well, again, within the budget envelope 
that I currently have dealt, the hand that I have dealt to me--
----
    Senator Snowe: Can you do that?
    Admiral Collins. Well, I have to make trade-offs. For 
example----
    Senator Snowe. What would be the trade-offs?
    Admiral Collins. For the engines, the final dollar amount 
is not yet defined, but between 200 and 250 million dollars. To 
move that to the left, I have to take from other parts of 
Deepwater. So the money that is going to be taken will be the 
aviation legacy sustainment line item of Deepwater. That was 
slated to buy enhanced capability, FLIR, which is a very 
important capability for helicopters, extremely important 
capability. That was slated to do that and other avionic 
upgrades.
    I can't buy that modernization because I'm tending to this 
legacy system. But it's the right choice within the dollar 
envelope, or the budget envelope, I had. It's the right choice 
to make because it's a safety and reliability issue of great 
import to our men and women. So that's the right decision and 
we'll do that, but that's the trade-off I had to make there.
    For the fast response cutter, we will have to slow down the 
110 to 123 portion of the patrol boat segment of Deepwater and 
then try to accelerate the design work for the fast response 
cutter to the left, the schedule to the left, so we can get 
that in the queue, get that going faster so they'll start 
spitting out much before 2018.
    Again, that's a trade-off I have to make within that one. 
But it means less 123s. So those--if I stay within the current 
budget envelope--those are the trade-offs that you have to 
make.
    Senator Snowe. So you're making the assumption that there 
will not be any increases in the budget? You're saying that you 
can do that without requiring any increases?
    Admiral Collins. I will have to push all the modernization 
to the right and I won't realize that capability, and I will be 
probably faced with more maintenance. So it is not a very 
attractive thing to me, quite frankly.
    Senator Snowe. Could it end up being more costly? That's 
the other concern, because then you don't have any room for 
error.
    Admiral Collins. We don't realize the performance 
enhancements of the new system. We're buying a system of 
systems with Deepwater. It means realtime data connectivity 
between our aircraft, between our platforms. It gives us much 
greater surveillance. It allows us to put metal on target, if 
you will. It allows us to put the right ship at the right place 
at the right time, to get the outcome. It enhances performance. 
It is just--it is kind of frustrating because it's just over 
the horizon, that capability that we need so desperately.
    But it's not only for the homeland security mission but for 
fisheries enforcement, effectiveness on the MBL, effectiveness 
off the coast of Maine and George's Bank. It's effectiveness 
across our missions to use our resources very, very 
productively. So that's what's so exciting about Deepwater. So 
the faster we can get on with it, the better we'll be in terms 
of productivity. And what we're trying to do is manage it. 
We're dealt a certain budget hand and we're trying to manage it 
as effectively as we can going forward and addressing the first 
things first within the constraints that we have.
    Senator Snowe. Well, do you think it's going to compromise, 
even under that scenario, your ability to carry out your 
missions, particularly on homeland security, and on the other 
missions as well?
    Ms. Wrightson, I would like your comments on that, too, 
from your analysis.
    Admiral Collins. Well, the fact is, already we've lost 4 
ship years last year, which is 600 and--roughly 671 ship days 
equals about--unscheduled maintenance--equals about 4 years 
worth of ships in the HEC and MEC that we lost. So that's an 
opportunity cost. Those are four ships that could be seizing 
the next ton of cocaine or enforcing the next fisheries or 
interdiction of the next batch of migrants. So it's that 
capability foregone. There's a value to that.
    Senator Snowe. Ms. Wrightson, would you care to comment?
    Ms. Wrightson. Yes. A couple of points. It's a really 
complex question that involves tradeoffs between legacy assets 
sustainment and what we know about what that's going to look 
like in the future, performance and capability, which I don't 
think there's anyone in this room who wouldn't agree that 
trading a Deepwater asset for a legacy asset wouldn't be a good 
idea in terms of enhancing the Coast Guard's efficiency and 
effectiveness in all of its missions 50 miles out.
    And then the other issue is, how much do we know in terms 
of data analysis that has been done that could be used to 
justify any increases, and will the Coast Guard be able to 
manage the new funds as well or better than it's currently 
managing the program now. So those are all the things that are 
in play when GAO thinks about this.
    As to the issues with legacy assets, we just--for this 
testimony, we did a preliminary look at some of the data the 
Coast Guard has. There is no question that those data raise 
obvious concerns about the direction and acceleration of the 
assets' deterioration. We did an in-depth analysis of the HH-65 
and it was pretty clear to us that the issues involved were 
serious, real, and that the decision that the Coast Guard made 
was overall a sound decision. If that should worsen or 
translate into other assets, as it is already with the 110s and 
so forth, then it's a really serious question for the Coast 
Guard.
    The second part of it is, if you were to accelerate the 
funding, you would want to know not only that you would get 
performance and improved capability in an untenable situation, 
but that the Coast Guard would be able to use those funds in a 
manner that would maximize the promise of that program, which 
was to have total ownership costs be minimized, value to the 
government maximized, and client service--meaning the people 
who were going to use the assets--satisfaction achieved.
    I don't think it's quite clear yet from GAO's perspective 
that the management that we want to see is in place either with 
respect to cost containment, with all due respect, also with 
respect to how they're handling the IPTs, which are those 
product teams that are so important, holding the contractor 
accountable. I mean, this is a unique and risky approach. 
Putting more money into it until we see that those things are 
in place heightens the risk.
    And finally, on one closing note, it's really not up to us 
to determine whether or not there would be cost savings, but if 
we were requested, we could take a look at that because the 
Coast Guard is already $2 billion acceleration over what we saw 
before, given all the changing parameters in the program. It 
would probably be worth taking a look at those legacy assets 
and the cost speculation to know what's really true in this 
case because it would basically put more information on the 
table from which Congress could make a judgment.
    Senator Snowe. How long would that take?
    Ms. Wrightson. You know, it's really hard to speculate 
because we don't know what the Coast Guard's data systems look 
like. But I would think that in 6 months or so, we could do an 
analysis on legacy assets with good cooperation from the Coast 
Guard. The cost estimate work is mostly economic work, and I'm 
guessing that if we did it, we would probably come back and 
tell you that the parameter estimates that we would give you 
would be so broad given the assumptions that it probably could 
be in the billions on either side in terms of cost savings. But 
6 months to 8 months would probably get you preliminary work 
that you could use.
    Senator Snowe. Based on the analysis that you did on the 
Integrated Product Teams and the integrator that the Coast 
Guard would have put in place, how long----and I know Admiral 
Collins has addressed some of these issues that you recommended 
today--would it take to make adjustments to make sure it 
becomes cost-competitive, reducing the cost overruns, and it's 
working in the right direction in terms of efficiencies? How 
much time do you think that that would require in order to do 
that? Obviously, accelerating and sequencing the acquisitions 
is a way of doing it. I mean, it's leaving you no choice, given 
the circumstances of the budget.
    But the issue is, that would require shifting funds. It 
could cost more money in the final analysis. And should all 
these other adjustments be made before you do that, and how 
long would that take? Do you see a need to measure the cost 
effectiveness of the competitive model that is in place now 
which has the systems integrator and the teams that you 
referred to that are absolutely essential to ensuring that we 
don't have cost overruns?
    Ms. Wrightson. Well, I really think that's the Commandant's 
question to answer. But I definitely believe if it's worth 
doing, it's worth doing right.
    Admiral Collins. Again, I think we have our first session 
with GAO at the end of this month to say, ``This is our plan of 
attack. This is how we're doing it and acting on your 
recommendations.'' And we're going to obviously--we're 
committed in following through and doing that on a periodic 
basis. So we're moving out in earnest. I think our measurement 
scheme, holding the contractor accountable to costs.
    But I might comment, that $2 billion, a good bit of that is 
driven by externalities. The fact of the matter is, a good 
portion of that is the legacy maintenance costs. Another 
portion of it was for requirements changes in the National 
Security Cutter. We did that, not the contractor. The fact of 
the matter was, in the post 9/11 era, we had to make some 
adjustments to the National Security Cutter requirement. For 
example, we needed to have a chemical, biological, radiological 
protection system. In today's world, to build a cutter that's 
going to last for 25, 30, 40 years, and not have that 
capability in the current threat environment, is just not 
prudent. So that--we had to make adjustment to the requirement. 
That drives up costs a little bit.
    So I think the $2 billion was not mismanagement or lack of 
performance on the part of the contractor, it was these 
externalities and other considerations that drove those costs. 
And they were all very, very legitimate. And we have multiple 
systems spread over a long period of time, and there's going to 
have to be modifications to the requirement over that time. 
There are changes in budget, the budget flow of this project 
that changes things. There are technology changes. Over a 20-
year program, it changes things. There are mission demands that 
changes things. There are political changes in our government 
that changes levels of support.
    There are all these parameters, and we have to have a 
system that can adjust to these things. I think we have it in 
this contract. The contract vehicle, the acquisition strategy, 
and the contract vehicle allows for these adjustments. You've 
got to have it if you're going to run a 22-year program, 20-
year program or 15-year program, whatever the case, how it 
eventually comes out. You're going to have to have some kind of 
contractual flexibility to deal with these externalities.
    The fact that we had 9/11, we had 9/11, and our new threat 
environment, new security environment we have dictates some 
adjustments to the project. Another example, I mentioned the 
National Security Cutter, but we now have a greater strategic 
lift requirement from Deepwater that we did not have. We have 
these Maritime Safety Security Teams that are deployable teams 
that go to the risks. They have to be airlifted. Well, that 
changes a little bit of the requirement mix.
    Our helicopters need to have airborne use of force and 
vertical insertion capability in today's security environment. 
That did not exist in 1998 when the initial requirement--so 
these are requirements adjustments that have been well thought 
out, I think extraordinarily well justified, that have got to 
be codified in a mission need statement to our department. And 
they're doing that with a great sense of urgency. We'll codify 
these requirements change, get a new mission statement, get it 
approved by our department, run it by OMB, and get it in detail 
to the contractor to make the requirement change. But that's 
all part of the issues we have to attend to.
    Senator Snowe. Ms. Wrightson, would you care to make a 
final comment on this?
    Ms. Wrightson. Final comment. I would endorse their doing 
that. Getting a new mission statement and new requirements for 
the program in the post-9/11 environment would go a long way, 
along with the other things, to putting the program on the kind 
of management track it needs to be on.
    Senator Snowe. Well, then we agree on that. And moving 
forward, I think there is no disagreement, but we need a 
process by which we can do that new mission statement to make 
sure needs will be met. And obviously on the other issues, on 
the time line for Deepwater and the budgetary constraints, it's 
going to be a major issue for this Congress. I don't think we 
can ignore it. We're living on borrowed time.
    It's purely illusionary on the part of Congress to think 
that we can ask the Coast Guard to do so much in so many ways, 
particularly in the sphere of homeland security, and expect it 
to do so with this degradation of current assets. It's just not 
going to be able to fulfill the mandates under law. You're 
doing an incredible job as it is and we certainly can help you, 
but I think we have to recognize some realities here and help 
you in that process.
    One final issue, on port security. Senator Lott was raising 
the whole issue of the potential susceptibility and 
vulnerability of our ports. And I know the port security 
process and assessment plans are underway. I was concerned 
about the Administration's request, as I mentioned in my 
opening statement, for these port security grants--they're down 
63 percent from the previous year.
    Admiral Collins. There's $46 million that are sort of 
defined as port security funds. And then there's also the 
ability for states and localities to go forward and above and 
beyond that amount to the larger pot of money, which is $3.4 
billion or $5 billion in an overarching pot within the 
Department of Homeland Security. And they have--although 
they're not dedicated to port security--they do have access to 
that.
    Senator Snowe. They have access to this other pot of money? 
Is that what you're saying, that this other pot of money is 
available?
    Admiral Collins. There's a total grant program within the 
department. It totals approximately $3.4 billion, and $46 
million of that is earmarked for port security, but states and 
localities can apply for the larger pot of money under other 
categories. So they can make an application, although it is not 
dedicated to port security.
    Senator Snowe. Are the communities aware of that?
    Admiral Collins. I believe so. And of course, the other 
thing is, the program is being organized. The grant program 
will be centralized in ODP.
    Senator Snowe. Does that make sense? That's another 
question I have.
    Admiral Collins. If it's managed right, it does.
    Senator Snowe. I thought the TSA was going to be 
overarching in all modes of transportation.
    Admiral Collins. It allows us to have a common grant system 
and allows it to be managed from one focal point. And it allows 
us, the way it's unfolding, still to sort of be the expert 
witness on maritime issues. So the local captain of the port, 
who has the best visibility into what's needed in Portland or 
Boston or wherever, can have input into review of the grant 
applications. And that is still part of the process. So 
although we don't run the grants program itself, we do have 
meaningful input as sort of the expert witness. We're a 
stakeholder.
    Senator Snowe. How many port security assessments have been 
completed at this point?
    Admiral Collins. We have 16 completed. We have about----
    Senator Snowe. Out of the top 50 ports?
    Admiral Collins. About 55. We have about four or five that 
have started, another four or five started just this month, and 
we're on track. We did a little hiatus--we treaded water a 
little bit while we reevaluated the methodology. We had some 
very wise counsel from GAO and others that said, ``Wait a 
minute. You need to take a pause here. You need to rethink this 
methodology. There are a lot of security assessments that have 
already been done out there. There could be some duplication. 
Why don't you have a system where you can pull or draw from 
those already there and look at wider issues and not 
duplicate.''
    And we've also used a better data base, a geographic 
information display type system that we want to develop. So 
there's a great tool for the port committee, because that's 
really the customer. The port committees could have a great 
interactive, vibrant, dynamic tool to draw from, to make good 
decisions when they do apply for that grant. Or what's the next 
grant you apply for? Where's the next gap you address?
    So we've spent some time, based upon wise counsel, spent 
some time improving that, and I think we're rocking and rolling 
now, Madame Chairman, to get on with it. We have every 
expectation of meeting the time line.
    Senator Snowe. You mean by the first of July?
    Admiral Collins. No, by the end of this calendar year we'll 
have all these done.
    Senator Snowe. The question is, when is all of this 
mitigation going take place once they've identified security 
vulnerabilities and so on? I know that the Coast Guard has 
identified $5.4 billion worth of needed security measures. Is 
it more than that?
    Admiral Collins. It's actually higher than that. The 
estimate in the rule was $1.5 billion the first year and $7.3 
billion over 10 years.
    Senator Snowe. It's much higher. So now the question is 
about the pace of this change--that's a concern. What is going 
to be the pace for this change? Let's just look at the top 55 
ports. When would you expect those assessments to occur? Over 
what period of time? There are some major vulnerabilities out 
there. I know you're aware of that, and obviously you're 
meeting your obligations.
    What do we need to do to fulfill those obligations at a 
certain pace? We can't allow this to sort of just drift over 
time. And that is my major concern. I think that vulnerability 
with respect to our ports is a serious issue that we must 
address in meeting and fulfilling our homeland security 
mandates, and I think the assessments have got to move faster 
than they are. And it's not due to your lack of oversight. It 
is a question of what we're doing to create a sense of urgency 
about it.
    I would appreciate any input you have with respect to this 
issue. What can we be doing to ensure that we're driving this 
issue?
    Admiral Collins. As we review the security facility plan 
that comes in, or the vessel plan that comes in, they, in their 
plan, have to address certain dimensions of the security 
issue--the access control, parameter security and the like. And 
they can say, ``This is the state of play. Here's where we are 
and here's the actions we're taking. And oh, by the way, here's 
our investments we're taking to mitigate this over time and 
here's the time line.'' And that's all part of the review 
process of each one of these plans.
    And we can't expect every problem to disappear on 1 July. 
We can expect, though, to have--we can expect to have a plan 
that is well developed, that addresses the gaps and has a plan 
to remediate them.
    Senator Snowe. OK. So let's just take, for example, the 
issue that Senator Lott raised. In some of the more vulnerable 
ports, the bigger ports in America, how quickly will these 
vulnerabilities be mitigated? How quickly will they be 
addressed?
    Admiral Collins. I think I have to--one size doesn't fit 
all. One answer won't fit all. And the saying that we have, 
``When you've seen one port, you've seen one port.'' Every port 
has very different characteristics, and they're going to have 
to have a port plan, port-by-port plan. That's the reason for 
the area committees. That's the reason for a collaborative 
approach with all the major stakeholders sitting around the 
table.
    Senator Snowe. Well, what about, as he suggested, chemical 
facilities at ports, for example. What kind of protection is 
afforded those in that type of situation right now?
    Admiral Collins. When we go to an orange alert, for 
example, it's all threat-based. When we go to an orange alert, 
we will have certain types of intel and we'll mobilize assets 
into certain key critical areas. So the last orange alert--I 
think we would have to give you a classified brief on this. But 
there were a number of different issues that were on our scope 
that we worry about every day, and we mobilized assets into 
those areas because they stood out in terms of their risk, in 
terms of their vulnerability, and the consequences of something 
happening to them. They were very critical assets.
    And we mobilized--incidentally, local, state, and federal-
mobilized assets in and around those particular areas to 
provide the security. It's dependent on the threat condition 
you're in.
    Senator Snowe. But it's threat-based. Does it necessarily 
need to be threat-based to have a major vulnerability and a 
problem? In other words, we may not get a sufficient or advance 
notice or indication.
    Admiral Collins. We have various levels of security, 
maritime security level 1, 2 and 3. There are various levels of 
security. You have to practice at each one of those and when we 
go to a certain condition, those are set and they require a 
certain additional level of security action by the facility, by 
the vessel, by the captain of the port.
    Senator Snowe. But they aren't always accurate about it.
    Ms. Wrightson. Madame Chairman, it's also true that there 
have to be capital investments, and the vast majority of those 
capital investments are going to have to be funded by the 
stakeholders themselves. On the visits--we're doing work now 
for the House Transportation on the implementation of the port 
security provisions. And to date, it is really interesting. 
Visiting Valero as I did in Corpus Christi, or others, you get 
a sense that they are making investments because they have a 
hefty need to do so.
    On the other hand, a stakeholder would turn to us and say, 
``I don't want to be the most safe business out of business.'' 
So there's a certain balance that they're going to have to 
achieve. And I think based on the work we've done so far, while 
we've seen implementation to date looks good, nobody really 
knows the answer to your question, when will the security 
improvements be put in place. No one really knows.
    Admiral Collins. I think the real important part of MTSA is 
that there's a level--the standard attempts to develop a level 
playing field so you won't have the discontinuity from one 
businessman to the other businessman. If we enforce it right, 
there's a basic standard from port to port, facility to 
facility, yet flexible. It's not descriptive. It's not telling 
them the answer. It's setting the standard down and there's 
equivalent--there are alternative security measures and 
equivalent security measures. We've tried to make this as a 
common sense practical approach as we possibly can.
    And I think that level playing field, whether you're 
talking to the international participant in this international 
system or the domestic, that is what they want. They want a 
level playing field.
    Senator Snowe. OK. Well, I appreciate that. And finally, 
Admiral Collins, I just want to thank you for the quick 
response by the Coast Guard to filling in the gap at Brunswick 
Naval Air Station when the Navy removed those Naval 
helicopters, and for how you responded by placing three 25-foot 
fast boats there. And under the memorandum of understanding, 
the Coast Guard has with the Canadian government, they will 
have a formal exercise in search and rescue. I really 
appreciate you filling the gap and restaging HH-60 helicopters 
at Brunswick from the airport. I really appreciate that and the 
commitment you have made.
    I just was wondering, could you tell me, were you informed 
by the Navy that these helicopters would be removed, the ones 
that helped us in search and rescue?
    Admiral Collins. I don't know the time line, Madame 
Chairman, when that news broke. I can get that information back 
to you. But we're comfortable that the past adjustments we've 
made for the coast of Maine, the current ones that are in play, 
and the future enhancements that we've got going, including 
Rescue-21 and others, faster boats, I think we're very 
comfortable with the coverage we have there.
    The Naval Air Station, in the last number of years, only 
had a handful of cases. You can count them on one hand, and 
none of which were emergent type cases. So I think we're very 
comfortable between the assets we have, the capability of the 
Cape Cod Air Station, the agreement we have with Canada and the 
new capability. As a kid that summered on the coast of Maine, 
I've got a soft spot in my heart.
    Senator Snowe. We appreciate that soft spot.
    Admiral Collins. We're going to make sure that we attend to 
that.
    Senator Snowe. I appreciate that, Admiral Collins. I know 
it was a very quick response. Obviously we were concerned, 
especially with the gap that does exist and would continue to 
exist with the loss of those helicopters. Your response was 
quick and prompt. And you feel comfortable that this would be 
filling in that gap on search and rescue for those 44 nautical 
miles? You do feel comfortable with that coverage?
    Admiral Collins. I think we will meet or exceed our search 
and rescue standards for that area.
    Senator Snowe. OK. Well, I thank you very much. I 
appreciate it. Ms. Wrightson, thank you as well, and I 
appreciate your cooperation, assistance, and guidance with your 
recommendations. And I thank you, Admiral Collins, for your 
leadership at the Coast Guard and for doing a superb job under 
some very difficult circumstances. And we, the Subcommittee and 
the full Committee, want to work with you to make sure that you 
can meet your obligations and mandates under the law. We'd like 
to make it easier for you, so we're going to try to do that in 
the meantime. Thank you. This hearing is adjourned.
    [Hearing adjourned at 4:10 p.m.]

                            A P P E N D I X

 Response to Written Questions Submitted by Hon. Ernest F. Hollings to 
                       Admiral Thomas H. Collins
Cost of Vessel Tracking
    Question 1. Admiral Collins, the MTSA requires all vessels arriving 
in U.S. waters to be equipped with transponders to allow the Coast 
Guard to track their movements by the end of this year (currently oil 
tankers and cruise ships are carrying them). Last year your budget only 
requested $1 million dollars for the installation of towers and 
equipment to monitor shipping. I was able to get you an additional $23 
million, but the FY05 budget request is for only $4 million. Is $4 
million enough to cover all of the costs for this program? What is the 
total amount needed for the program?
    Answer. The funding requested and provided to date for the 
installation of Automatic Identification System (AIS) equipment is 
adequate for the current stage of AIS installation efforts. The Coast 
Guard is using the funding provided in FY04 to accelerate deployment of 
interim AIS capability while concurrently moving forward on a major 
acquisition to achieve nationwide capability beginning in late FY05. 
The funds requested to date are not the total required for the complete 
program. The Coast Guard has estimated 15-year lifecycle costs (which 
include purchase of equipment, installation, maintenance and operation) 
range between $155 million to $675 million. To date, the Coast Guard 
has spent approximately $25 million on AIS projects. The large ranges 
are reflective of the uncertainties in system requirements and 
uncertainty over whether the nationwide AIS system will be able to 
reuse existing or planned Coast Guard infrastructure. The low end of 
the cost ranges assumes available infrastructure will be used with 
incremental increases in support costs and no use of satellite systems. 
The high end assumes some new towers and sites will be required with 
associated new support costs and the use of some satellite systems 
(moving AIS from a national/short range to a more international/long 
range operating picture). In addition, the highest life cycle cost is 
based on a commercially built and owned system that provides AIS 
information to the Coast Guard as a service.
Comprehensive System to Track Vessels in U.S. Territorial Seas
    Question 2. Admiral Collins, you recently gave a speech in which 
you said that the U.S. needs a ``maritime NORAD'' to comprehensively 
track vessels either engaged in innocent passage through the U.S. 
territorial sea or simply navigating through the EEZ. This type of 
traffic is not captured since it does not enter a U.S. port. Yet our 
territorial sea goes all the way to our coastline. What are you doing 
to create this capability? What is the amount of the request for this 
program?
    Answer. The Coast Guard has several on-going initiatives to provide 
vessel tracking.
    The ``Nationwide AIS'' project will provide the capability to track 
vessels that are required to carry this equipment, and those that are 
carrying it voluntarily. We are currently developing this project, and 
expect that, by including receivers on offshore platforms and buoys, we 
will be able to cover almost the entire EEZ. To obtain some longer-
range capability in the short run, we have contracted with a commercial 
vendor to test and evaluate the feasibility of receiving offshore AIS 
signals by satellite. The first satellite launch is scheduled for late 
2005. The Nationwide AIS project has been funded for Fiscal Year 2004 
and is delivering preliminary capability in a number of areas even as 
the overall system and national architecture are being developed.
    Our Sector Command Center initiative will provide port and coastal 
sensors that will track all vessels in major ports and out to about 24 
nm, and allow the tactical level command centers to receive, process 
and respond to this information. We have developed standards and 
equipment suites with the Department of Homeland Security Science and 
Technology Directorate at our test bed in Miami, and have begun 
providing preliminary capabilities to several port areas. Developmental 
work for this project to date has been done using agency operating 
funds and long-term funding needs are being examined.
    Our long-range tracking and identification initiatives seek to 
provide long range tracking of all vessels 65 feet in length or greater 
in the zone from 24 to 2,000 miles off shore, to evaluate with 
intelligence, and other data bases. We are working with a number of 
entities to explore/test various technologies and develop requirements. 
These include the Department of Homeland Security Science and 
Technology Wide Area Surveillance Panel; the Coast Guard Research and 
Development Center; the Naval Research Lab; the national intelligence 
community; and the Johns Hopkins Applied Physics Lab. We are also 
working with the International Maritime Organization to develop 
international requirements for long-range vessel identification and 
tracking. This project is in development and funding requirements and 
alternatives are being examined.
    We are also working closely with several entities (U.S. Navy, 
NORTHCOM, Assistant Secretary of Defense for Homeland Defense) to look 
at alternatives for an interagency organization to collect, analyze and 
disseminate this kind of vessel tracking information to appropriate 
agencies with a role in maritime security.
Law Enforcement in U.S. Waters
    Question 3. There are quite a number of laws, including fisheries 
and marine safety laws, that apply to ships that enter our waters 
without coming to our ports. How exactly is the Coast Guard enforcing 
these laws against such ships, if it does not even know what ships are 
entering these waters, nor when and where they are doing so?
    Answer. All vessels that are in U.S. waters, legally or otherwise, 
are subject to boarding by the U.S. Coast Guard or other law 
enforcement agencies to determine their compliance with U.S. law. With 
3.36 million square miles of Exclusive Economic Zone (EEZ) and 95,000 
miles of shoreline to patrol, the Coast Guard cannot be everywhere at 
once. To provide effective enforcement the Coast Guard uses a 
combination of enforcement presence, partnerships with other agencies, 
timely and actionable intelligence, surveillance and tracking 
technologies.
    Coast Guard presence in maritime regions is provided by Coast Guard 
boats, cutters, helicopters and airplanes. To bolster the enforcement 
presence, Coast Guard units routinely participate in joint operations 
with state and local enforcement partners. Coast Guard and other 
government agencies' intelligence and surveillance activities are 
critical force multipliers, enabling the Coast Guard to position assets 
to best protect the Nation's maritime borders through deterrence, 
detection and interception.
    Coast Guard law enforcement and homeland security is also greatly 
aided by law abiding, patriotic mariners--many of whom hold Coast Guard 
licenses, operate Coast Guard inspected vessels, or have benefited from 
Coast Guard services such as search and rescue or aids to navigation.
    Methods of tracking vessels entering U.S. waters include shore-
based radars, such as Vessel Traffic Service or Sector Command Centers-
Joint installations and electronic signals from automated tracking 
devices such as the Vessel Monitoring System (VMS) and the Automatic 
Identification System (AIS).
    The Integrated Deepwater System (IDS) will deliver new, modern 
surface and air assets tied together by a state-of-the-art Common 
Operating Picture and interoperable C4ISR technology. These new assets 
will put the right people together with the right capabilities to 
enforce laws and regulations in U.S. waters.
Cost of Maritime Security Capability
    Question 4. At the security hearing we held in this Committee on 
March 24, 2004, I asked you to give me figures for how much the 4 areas 
of the Coast Guard's security program would cost. Do you have those 
numbers yet?
    Answer. As discussed during the hearing, the Coast Guard is 
continuing to work on building the necessary authorities, capabilities, 
competencies and partnerships in order to enhance national maritime 
security. However, we believe strongly that this is not a finite 
journey with a defined price tag. To view this effort with defined 
finish line underestimates the challenges and threats we face now and 
will face in the future. Rather, the more prudent approach is one that 
applies resources against a set of strategic imperatives that will help 
enhance maritime security, no matter the changing nature of the threat.
    With the support of the administration and Congress, the Coast 
Guard has been able to invest resources and make substantial 
improvements to maritime security since 9/11. Obviously, there remains 
much to do. It requires an unwavering vigilance and adaptability. As 
the threat changes, capabilities are developed and technologies become 
available, the resource need will also need to adapt. Nonetheless, 
continuing investments in our collective maritime security will 
continue to be required if we are to maintain the momentum of the last 
several years and achieve the imperatives of our national strategies. 
The below graphics summarize some of the key investments made to date 
as well as some of those planned for the future. The dynamic nature of 
the threat and of the maritime domain as a whole cannot be overstated. 
It is critical that we continue to evaluate risks and vulnerabilities 
and pursue those capabilities that will most effectively counter our 
vulnerabilities.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



Congressional Report Status
    Question 5. Admiral Collins, in conference on the MTSA, the Senate 
conferees took the position that port security costs had to be paid 
for, and in the absence of a commitment of funding by the 
Administration, and proposed a fee on users of the system. Ultimately, 
the Senate relented in the face of opposition by the House, however, we 
required the Administration to file a report within 6 months to explain 
what they proposed to pay in the way of port security costs, both for 
ports and for a variety of Federal port security programs. That report 
is 9 months overdue--when can we expect that report?
    Answer. The report, Resources to Address Key Issues in Port 
Security, was signed by the Secretary of the Department of Homeland 
Security on 27 August 2004 and delivered to Congress on 30 August 2004.
Performance of Non-Homeland Security Missions
    Question 6. You have testified in the past that the Coast Guard 
would rebuild its non-security missions within 3 years to pre-9/11 
levels. Our Homeland Security Act made it clear that maintaining the 
strength of those missions is extremely important, and could not be 
changed without Congressional action. Yet isn't it the case that the 
hours of resources that the CG dedicated for many non-security 
missions, such as search and rescue operations and foreign fish 
enforcement, are still below pre-9/11 levels. Doesn't this conflict 
with the Homeland Security Act?
    Answer. Consistent with section 888 of the Homeland Security Act: 
Preserving Coast Guard Mission Performance, the Coast Guard is 
dedicated to maintaining the strength of its non-security missions. 
Rather than focusing strictly on activity resource levels (hours spent 
on each mission), the Coast Guard has, since September 11, 2001, 
continued to concern itself with achieving all performance targets and 
mitigating risk in the maritime domain.
    Both presence and response-based standards ensure that non-homeland 
security missions do not fall below acceptable levels during periods of 
increased terrorist threats. In Fiscal Year 2003, for example, the 
Coast Guard met its performance target for the search and rescue (SAR) 
mission program. General Accounting Office report GAO-04-432 (March 
2004) examined Coast Guard performance results for Fiscal Years 2001-
2003, and found that all of the assessed programs ``had stable or 
improved performance results.'' The two non-security programs that were 
not assessed, Marine Environmental Protection and Marine Safety, have 
reported three years of increasing performance since Fiscal Year 2001. 
In short, the Coast Guard met or exceeded performance targets for all 
non-security missions in FY 2003.
Performance Measures and Partnerships
    Question 7. Is it not true that some of Coast Guard's performance 
measures are being met because you are getting help from other 
agencies, including local and state governments that also are strapped 
for resources?
    Answer. The Coast Guard increases its mission capacity and thus 
performance by addressing improvement across four discrete elements: 
Authorities, Capability, Competencies, and Partnerships (ACCP). Under 
this construct, partnering with various federal, state, local, and 
private entities is--and always has been--a key contributing factor to 
Coast Guard performance. The Coast Guard uses authorities--such as the 
Maritime Transportation Safety Act (MTSA)--to regulate operations and 
activities of the marine industry to increase the safety and security 
of the United States. The Integrated Deepwater System program is an 
example of how the Coast Guard is improving the capability to 
accomplish its missions. Training and education of the workforce raises 
competency levels so that Coast Guard personnel can deliver more 
performance, more efficiently. And finally, the Coast Guard uses 
partnerships to act as a force multiplier to accomplish our important 
missions. By optimizing the four elements of mission capacity the Coast 
Guard enhances mission performance.
    In FY 2003, the Coast Guard met or exceeded its performance targets 
in seven of its eleven mission-programs. Many of these success stories 
involve partnerships with other agencies at all levels of government. 
For instance, state agencies contribute to saving lives at risk on 
rivers and lakes that are also patrolled by the Coast Guard, while 
Coast Guard law enforcement presence assists in enforcing state 
fisheries law and achieving state resource protection objectives.
    These partnerships also benefit other agencies. The Coast Guard's 
activities at sea help interdict illegal drug traffic entering the 
United States, which benefits the Drug Enforcement Administration's 
performance. The National Science Foundation benefits from Coast Guard 
ice breaking services in accessing the world's polar regions. And the 
Environmental Protection Agency benefits from the Coast Guard's 
activities as part of its environmental protection mission.
Foreign Fishing Vessel Enforcement Measure
    Question 8. It also is not clear to me how meaningful some of the 
Coast Guard's performance measures are. For example, couldn't the 
performance measure for foreign fishing enforcement in the Pacific--the 
number of times foreign fishing vessels are identified as illegally 
entering the EEZ--be met due to a decreased detection rate (due to lack 
of resources) rather than to improved enforcement?
    Answer. Program performance is the most important element of the 
Coast Guard Performance Management System. Program managers establish 
measures to accurately portray organizational performance. The measures 
are data-driven, fully documented, and focus on outcomes. Using the 
performance measures, and with an emphasis toward improving 
effectiveness, the Commandant of the Coast Guard establishes long-term 
performance outcome targets that are linked to the strategic intent of 
the organization, including maintaining the balance between homeland 
security and non-homeland security missions. The Coast Guard has been 
lauded in the past for its performance measurement efforts, but 
recognizes and acknowledges that limitations in these measures exist. 
The Coast Guard has been working with the Government Accountability 
Office (GAO) through a recent audit (04-432), examining the 
relationship between resources and results, and the Office of 
Management and Budget (OMB) through the Performance Assessment Rating 
Tool (PART) reviews, and other independent evaluation efforts to 
continually review and improve program measures' clarity and 
objectivity.
    With regards to the foreign fishing vessel incursions performance 
measure, although it is possible that lower detection rates could cause 
the Coast Guard to meet its performance measure, it does not reflect 
the reality of the situation in the Pacific. Encroachments by foreign 
fishing vessels over the U.S.-Russian Maritime Boundary Line (MBL) have 
been reduced drastically over the last several years due to policy and 
strategy changes and increased partnering with Russian enforcement 
counterparts. In Fiscal Year 2003, the Coast Guard detected the lowest 
number of EEZ incursions over the U.S.-Russian MBL in more than five 
years, more likely as a result of recording the highest number of 
cutter hours for the last three years and the highest number of 
aircraft hours for the last seven years dedicated to this mission. Due 
to the vast distances surrounding our noncontiguous EEZs of the central 
and western Pacific (e.g., American Samoa, Wake Island), the primary 
means of surveillance of those areas are by national technical means, 
which are not affected by Coast Guard resource efforts.
Domestic Fisheries Regulation Measure
    Question 9. In another example, the performance measure for 
compliance with domestic fisheries regulations is how many fishermen--
of those reviewed--were found to be in compliance. Does that really 
tell us anything? What if the Coast Guard interviewed one fisherman and 
he was in compliance--wouldn't that give the Coast Guard a 100 percent 
performance for this measure?
    Answer. The Office of Management and Budget (OMB) assessed the 
domestic fisheries enforcement performance measure and observed 
compliance rate, through the Performance Assessment Rating Tool (PART) 
review process. OMB rated this to be a sound measure that appropriately 
focused on outcomes and reflected the purpose of the Coast Guard's 
fisheries law enforcement program.
    The observed compliance rate measure is determined by calculating 
the total number of Coast Guard domestic fishing vessel boardings minus 
the boardings that had significant violations, divided by the total 
number of Coast Guard fishing vessel boardings. Only boardings that 
have a significant violation (a living marine resource violation that 
results in significant damage or impact to the fisheries resource, 
significant monetary advantage to the violator, or has high regional or 
national interest) are counted.
    Historically, domestic compliance rates, which are based on more 
than 3,000 boardings (post 9/11 statistic) annually, have been between 
95-98 percent. Movement within this range is expected and mostly beyond 
Coast Guard control as economic and social factors other than 
enforcement presence motivates individuals to violate the law. As a 
result, a floor has been established at 97 percent observed compliance 
to evaluate if Coast Guard levels of enforcement are sufficient to 
ensure wide-scale compliance with regulations.
    Historical data illustrates Coast Guard enforcement presence does 
affect observed compliance rates, and that there is a delay between 
enforcement presence/absence and fisheries compliance rates. Although 
observed compliance rate will not perfectly indicate the actual 
industry-wide compliance rate, it serves as a reasonable indicator of 
the actual compliance when enforcement resource effort is sufficient to 
make performance-tracking possible.
Rescue 21 Schedule
    Question 10. Is it true that the Rescue 21 recapitalization--which 
is critically important for saving mariners' lives and also for 
security--is going to be behind schedule?
    Answer. The planned Initial Operating Capability (IOC) scheduled 
for September 2003 is approximately one year behind schedule due to 
software development issues. The delay to Full Operating Capability 
(FOC) has been determined to be approximately one year, with expected 
completion in Fiscal Year 2007. Some restoration of the original 
completion schedule, once IOC is achieved, may be possible by 
simultaneous roll-out of Rescue 21 regions.
    The Coast Guard and General Dynamics Decision Systems (GDDS) have 
formed a joint deployment team to streamline the regional deployment 
process and identify tasks that can be performed concurrently or more 
efficiently to complete the maximum number of regions by the end of 
2006. The deployment team is using the experience of the first 6 
regions to redefine processes and align activities to accelerate 
deployment. Future deployment dates of Rescue 21 will depend upon 
GDDS's ability to accelerate their work, deploy innovations, and do 
parallel deployments as the system is built out.
Target Hours At Multi-Mission Stations
    Question 11. GAO's testimony indicates that the Coast Guard is 
still having problems meeting Congressional targets for maximum hours 
at multi-mission stations, where the search and rescue work is 
coordinated. What is going on here?
    Answer. Although the Coast Guard has not fully attained the 68-hour 
workweek goal at Stations, we have improved training, management and 
oversight, operational readiness, and the average workweek over the 
past three years.
    Recently, the Administration approved the Coast Guard's multi-year, 
multi-phased Boat Forces Strategic Plan. This plan provides the 
foundation for improving Station operations and reducing the average 
workweek through four major components: 1) Leadership and Management; 
2) Personnel and Staffing; 3) Training and Expertise; and 4) Equipment, 
Support and Technology. Within each component are several measures that 
the Coast Guard is monitoring to improve various aspects of Station 
operations, including incremental improvements to the average workweek.
    Additionally, in the past two years, the Congress funded over 900 
new and/or upgraded billets at Stations and the training and support 
facilities that serve them. As required by Congress, these billets were 
created to support station-level staffing, training, and operational 
readiness. We have witnessed progress in the average workweek from 
these increased billets, and we expect favorable results towards 
meeting the goal as the Station community matures and gains experience.
    Additional billets alone will not ensure that Stations reach the 
68-hour workweek goal. It is an evolving process that includes building 
experience and increased oversight within the Station community. For 
instance, further reductions in the average workweek are anticipated 
when the new billets are filled, and most importantly, they are fully 
trained and qualified. Similarly, the improved leadership and 
management provided by upgraded command cadre positions will also 
improve the overall results.
Competition
    Question 12. What do you plan to do to address the lack of 
competition for subcontracts? According to GAO, the first-tier 
subcontractors of the Deepwater program--Lockheed Martin and Northrop 
Grumman--have sole responsibility for determining whether to ``make or 
buy'' Deepwater assets. Since over 40 percent of the funds obligated to 
Lockheed Martin and Northrop Grumman have either remained with those 
companies or been awarded to their subsidiaries, it seems their 
philosophy is, ``If we make it, we don't have to buy it''.
    Answer. The Coast Guard considers all of the subcontracts to 
Lockheed Martin and Northrop Grumman Ship Systems in the first 5 years 
of the contract, which is the first award term, to have been made under 
competition.
    The Government Accountability Office (GAO) concurred with this 
assessment in their March 2004 report, Contract Management: Coast 
Guard's Deepwater Program Needs Increased Attention to Management and 
Contractor Oversight, stating:

        ``The benefits of competition may be viewed as sufficient in 
        the contract's early years because, for the initial 5-year 
        contract period, prices proposed by ICGS for equipment and 
        software were based on competitions held among various 
        subcontractors.'' (21)

    All of the IDS nominated items in the first five years of the 
contract were fully competed as part of the competition between the 
three industry consortiums led by Litton/Avondale Industries, Science 
Applications International Corporation, and Lockheed Martin Naval 
Electronics and Surveillance Systems. The Coast Guard, the DOT, and the 
Office of Federal Procurement Policy, through review and approval of 
the Request for Proposal, acknowledges that the first award term 
appropriately included competition. Part of the competitive proposal 
process required the industry consortiums to nominate which 
subcontractors would provide supplies and services for the entire life 
of the program. Therefore, the basic competition requirement has been 
met.
    To ensure the continued observance of competitive subcontracting 
the Coast Guard has instituted several policies for the Deepwater 
Program. For subcontracts over $10M, notification to the Coast Guard 
Agency Acquisition Executive is required, to include an evaluation of 
the alternatives considered, if ICGS subcontracts out to Lockheed 
Martin and/or Northrop Grumman. The Coast Guard and ICGS, based on 
GAO's recommendations, are also working to include competition as a 
factor for determining if the contract should be approved for another 
term and the amount of years of that term. The measures for competition 
under consideration for adoption include:

   Percentage of awards competed;

   Minimizing the number of teaming agreements;

   Number of advertisements publicizing supplier registration;

   Number of vendor outreach programs; and

   Percentage of first tier subcontracts that incorporate the 
        intent of the Federal Acquisition Regulation clause 52-244.5 
        ``Competition in Subcontracting.''
Cost Control
    Question 13. How do you expect to keep costs down if there is not 
more predictable, and more frequent, competition?
    Answer. The Coast Guard facilitates cost control through 
competition with system integrator accountability for competition among 
second tier suppliers. To achieve this result the Coast has instituted 
several subcontractor competition policies for the Deepwater 
acquisition.

   For subcontracts over $10M, notification to the Coast Guard 
        is required, to include an evaluation of the alternatives 
        considered, if ICGS subcontracts out to Lockheed Martin and/or 
        Northrop Grumman.

   The Open Business Model, initially a Lockheed Martin 
        philosophy, is now official ICGS policy and is applicable to 
        all Deepwater transactions. To ensure compliance, ICGS has 
        appointed a Competition Advocate and Ombudsman, who is drafting 
        implementation procedures for regular reporting to ICGS and 
        will examine Make/Buy and competition practices.

   A review of ICGS' application of their Open Business Model 
        vis a vis accountability for ensuring competition will be 
        included in the Award Term Evaluation and measured diligently 
        as discussed earlier.

   The program is considering processes to ensure competitive 
        forces are being used to manage costs such as: annual 
        independent third party review of transactions and the Agency 
        Acquisition Executive will review any subcontract over $10M 
        awarded to Lockheed Martin or Northrop Grumman.

    The Deepwater Program is working to include competition as a factor 
for determining if the contract should be approved for another term and 
how long that term should be. The measures for competition under 
consideration for adoption include:

   Percentage of awards competed;

   Minimizing the number of teaming agreements;

   Number of advertisements publicizing supplier registration;

   Number of vendor outreach programs; and

   Percentage of first tier subcontracts that incorporate the 
        intent of the Federal Acquisition Regulation clause 52-244.5 
        ``Competition in Subcontracting.''
Program Oversight
    Question 14. GAO also found that Coast Guard's weak oversight of 
the Deepwater program is part of the reason little competition is being 
held. What are you going to do to fix these oversight and management 
problems?
    Answer. In their March 2004 report, Contract Management: Coast 
Guard's Deepwater Program Needs Increased Attention to Management and 
Contractor Oversight, GAO-04-380, GAO characterized the Deepwater 
program's management of competition concerns as follows:

        ``The benefits of competition may be viewed as sufficient in 
        the contract's early years because, for the initial 5-year 
        contract period, prices proposed by ICGS for equipment and 
        software were based on competitions held among various 
        subcontractors.'' (21)

    However, GAO also concluded that additional attention must be 
provided beyond the first five years. To do this, the Coast Guard is 
diligently incorporating GAO's recommendations, as well as other best-
business practices, into IDS operating procedures. The Coast Guard 
responded to initial GAO suggestions by incorporating changes into the 
program management structure to address the areas identified for 
improvement.
    The Coast Guard and ICGS, based on GAO's recommendations, are 
working to include competition as a factor for determining if the 
contract should be approved for another term and the amount of years of 
that term. The measures for competition being considered for adoption 
include:

   Percentage of awards competed;

   Minimizing the number of teaming agreements;

   Number of advertisements publicizing supplier registration;

   Number of vendor outreach programs; and

   Percentage of first tier subcontracts that incorporate the 
        intent of the Federal Acquisition Regulation clause 52-244.5 
        ``Competition in Subcontracting.''

    The Coast Guard is actively addressing those management practices 
not in place, and is improving and maturing processes for those that 
are already in existence. The Coast Guard has continued to work with 
GAO to keep them informed of the program's on-going improvement 
efforts. The Coast Guard fully anticipates that adequate competition 
will be present in the second award term.
Basis of Award Fee
    Question 15. Why did the Coast Guard give Lockheed and Northrop a 
rating of 87 percent or ``very good,'' resulting in an award fee of 
$4.0 million of the maximum $4.6 million annual award fee in the first 
year of the contract, even though GAO found there were documented 
problems in schedule, performance, cost control and contract 
administration?
    Answer. The Coast Guard is confident that the Award Fee level was 
fair and represented an accurate assessment of contractor performance. 
Evaluation Factors for the Award Fee determination include overall 
program management, cost control efforts, quality, performance 
improvements and/or total ownership cost reductions. The contractor 
award fee score is much lower than typical. The average Industry Award 
Fee Score for the Lockheed Martin Defense Sector is 97 percent. 
Additionally, the award fee determination recommended ICGS improvement 
in the following areas: Program Management; Cost Control; Quality, 
Completeness, Accuracy of Work; and Flexibility and Ability to Adapt to 
Changes.
    While the Coast Guard believes that the award fee was appropriate 
given the level of performance, the Coast Guard and ICGS, based on 
GAO's recommendations, are working to refine the program's performance 
metrics. The Coast Guard has continued to work with GAO to keep them 
informed of the program's on-going improvement efforts.
Switching to A New Contractor
    Question 16. Do you agree with your experts in the Coast Guard's 
Deepwater program who spoke with GAO that it is ``unrealistic to think 
that the Coast Guard would switch to a new contractor'' when the first 
five years of this contract are up? If that is true, then what 
incentive does the contractor have to keep costs down?
    Answer. It is premature to discuss if the Coast Guard would make a 
change to either a different system integrator or to a revised 
acquisition strategy. The reason to make such a change would be as a 
result of the system integrator's overall performance. If the System 
Integrator's performance warranted a change, prudence indicates that an 
exit plan or transition plan be developed.
    The incentive of the current contractor to maintain competition and 
keep costs down is twofold. First, to maximize the annual award fees 
requires that competition be maintained. Second, it is in the current 
contractor's best interest to be awarded another term award of up to 
five years. Competition will be required to earn the next award term. 
If competition is not maintained and costs kept at competitive levels, 
annual award fees and award terms will not be provided to the current 
System Integrator. In addition, once the Coast Guard has issued a 
Delivery Task Order, we use the Earned Value Management System to 
ensure we receive the performance indicated for the cost. In summary, 
if there is a reason to change contractors or acquisition strategy, the 
Coast Guard will act decisively to do so. It is anticipated that the 
contractor will maintain competition leading to reasonable costs or the 
contractor will be changed.
HH-65 Re-Engining Update
    Question 17. With respect to the recent decision to accelerate the 
engine replacement for the HH-65 helicopter, please provide (1) a 
schedule for replacing the engines on the fleet; (2) the projected 
costs; (3) what process was used/is planned for selecting the 
replacement engine?
    Answer. The re-engining contract, formally referred to as the 
definitized Delivery Task Order (DTO), was signed on 17 September 2004.
    The project will re-engine approximately 24 aircraft per year at 
the Coast Guard Aircraft Repair and Supply Center (AR&SC) in Elizabeth 
City, NC.
    The first engine has been installed, flight tested, and delivered. 
Several more conversion kits and engines have been received and are 
being inspected in a joint ICGS/Eurocopter/Turbomeca/Coast Guard 
effort.
    The current projected cost of the HH-65 re-engining is 
approximately $290M.
    The selection of Turbomeca by Integrated Coast Guard System (ICGS) 
was based on the best value for the Coast Guard in terms of cost, 
schedule and performance, and with full consideration of the critical 
and urgent nature of this project. ICGS conducted a market survey of 
industry via a Request For Information (RFI). As a result of this 
action, ICGS selected Turbomeca as the supplier for the HH-65 engine 
and engine control systems replacement project. The engine model is the 
Turbomeca Arriel 2C2. It will undergo minor modifications as it is 
installed on the HH-65, and be redesignated the Turbomeca Arriel 2C2-
CG.
9/11 Changes to Deepwater Program
    Question 18. Admiral Collins, you testified recently at the 
Homeland Security appropriations hearing that the Coast Guard is 
reevaluating whether the mix of assets included in the original 
Deepwater program will need to be changed to address security issues. I 
seem to recall that after 9/11, you and your predecessor, Admiral Loy, 
testified that the Deepwater program as originally conceived would 
address security concerns. What has changed? Will such changes likely 
lead to cost increases? What are the projected increases?
    Answer. While the Integrated Deepwater Systems acquisition strategy 
and solution remain sound, Homeland Security mission requirements have 
continued to evolve and mature to greater definition. The Coast Guard 
and the Department of Homeland Security, have always indicated that 
there would be changes as threats continued to evolve. We must make 
incremental changes to address these threats. In addition to these 
mission changes, legacy asset capability obsolescence and deterioration 
in legacy asset materiel condition since 1998 have created a 
performance gap in both capability and capacity, which has been studied 
and addressed in the proposed revised Deepwater Mission Need Statement 
(MNS).
    The draft MNS is under review by DHS procurement councils (Joint 
Requirements Council, Investment Review Board). Costs associated with 
the MNS recommendations will be addressed in future Administration 
budget proposals.
Cost Escalation
    Question 19. Admiral Collins, the GAO's testimony indicates that 
the Coast Guard was not able to explain the reasons for escalation in 
the program costs. Do you have any new information on this?
    Answer. The changes in program cost were due to:

  1.  Not receiving program funding as planned in the implementation 
        plan;

  2.  Accelerating the delivery of the Offshore Patrol Cuter (OPC) due 
        to the deteriorating condition of the Medium Endurance Cutters;

  3.  Accelerating the delivery of the Fast Response Cutter (FRC);

  4.  Increased current and projected funding to address the ``downward 
        spiral'' in legacy asset sustainment; and

  5.  Changes in asset requirements to better align with the homeland 
        security mission and DHS responsibilities to make America 
        secure from terrorism.

    To address the deterioration of the Medium Endurance Cutters, the 
conceptual development of the OPC has been advanced approximately 5 
years at a cost of $20M in FY 2004. Advancing the OPC is critical to 
Coast Guard alignment with DHS strategic goals and objectives, but was 
not in the original implementation plan for this time.
    Several factors have contributed to advancing the FRC: increased 
demands on the existing patrol boat fleet, accelerated deterioration of 
the 110-foot class cutters due to a higher operating tempo, and 
requirements associated with a heightened homeland security posture. 
The FRC will provide more capability to the Coast Guard than the 123-
foot WPB conversion program and acceleration will provide that 
increased capability sooner.
    Due to rapid deterioration of legacy assets, funds have been 
diverted from the current asset replacement schedule to support legacy 
asset maintenance and sustainment needs. This, coupled with increased 
Homeland Security OPTEMPO, has hastened a ``downward spiral'' in 
reliability and capability. From FY 2002 through FY 2004, $65 million 
over planned funding levels was requested and subsequently appropriated 
to address the effects of the ``downward spiral.''
    The graph below highlights the planned vs. actual legacy asset 
funding.
    Another element that has increased program costs is due to changes 
in requirements to align with DHS responsibilities to make America 
secure from terrorism. These changes include providing secure 
communication capability on legacy cutters, adding an Integrated 
Navigation System to the 123 WPB, including Collision Avoidance on the 
Vertical Takeoff and Landing Unmanned Aerial Vehicle, and additional 
capabilities on the National Security Cutter (NSC).

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    The graphic provides, by Fiscal Year, the planned funding for 
legacy asset sustainment included in the original proposed IDS 
implementation plan compared to the actual funding used for legacy 
asset sustainment. Fiscal year 2005 funding shows the level of the 
President's request.
                                 ______
                                 
Response to Written Questions Submitted by Hon. Frank R. Lautenberg to 
                       Admiral Thomas H. Collins
Award Fee and Performance Measures
    Question 1. In regard to the Deepwater contract--on what basis did 
the Coast Guard reward the prime contractor its `award fee' of $4 
million out of a possible $4.6 million? If the Coast Guard wishes to be 
measured in terms of performance, are there any objective, quantifiable 
measures to assess the performance of its contractors on which to base 
bonuses?
    Answer. The Deepwater contract employs a Cost Plus Award Fee 
incentive for System Integration and Management Requirements. Award 
fees are evaluated based on a combination of subjective and objective 
assessment of performance. Evaluation Factors for the Award Fee 
determination include overall program management, cost control efforts, 
quality, performance improvements and/or TOC reductions.
    The first annual award fee determination overall rating for ICGS 
was 87 percent (Very Good) for CLIN 0001 and 79 percent (Good) for CLIN 
0061AA. Although, objective measures are being introduced into the 
award fee process. We are confident that the Award Fee level was fair 
and represented an accurate assessment of contractor performance in 
accordance with the Evaluation Factors for the Award Fee.
    Since the contract award to the IDS acquisition program's systems 
integrator, Integrated Coast Guard Systems (ICGS), the Coast Guard has 
placed particular emphasis on the ability to measure performance. The 
program is currently tracking over 150 performance measures at the 
program, domain, and team level. This effort continues to evolve as the 
program identifies measures and data sources and as the system 
components mature from design to production, fielding, and disposal.
    To implement the performance management requirements for the 
acquisition, design, and fielding of the IDS, the Coast Guard chartered 
a Performance Measurement Integrated Product Team (IPT) and established 
systems to evaluate the contractor, including the determination of the 
Award Fee and other incentive programs. Progress has been steady. The 
framework for all measurement will be the Deepwater Balanced Scorecard, 
which is updated monthly. The Balanced Scorecard (BSC) Strategy Map 
explains how the objectives of the program's BSC identify input, 
process, and output measures that provide leading indicators of 
Operational Effectiveness, TOC, and Customer Satisfaction. BSC metrics 
measure the status of the program and allow for early course 
corrections if required.
Balance in the Oil Spill Liability Trust Fund
    Question 2. I understand that the Oil Spill Liability Trust Fund 
had a balance of over one billion dollars at the beginning of Fiscal 
Year 2003, but that this amount is projected to decline to only $780 
million by the end of Fiscal Year 2005. What is the current balance of 
the Oil Spill Liability Trust Fund? What is the projected balance of 
the Fund five and ten years from now (at the end of Fiscal Years 2009 
and 2014, respectively)? When is the Fund projected to run out of 
money?
    Answer. The balance of the Oil Spill Liability Trust Fund as of 
June 2004 was $841M. The projected balance of the Fund at the end of FY 
2009 is $125M. At current spending rates, the Fund balance is projected 
to reach zero during FY 2010.
$1B Cap on Applicability of 5 Cent/Barrel Tax
    Question 3. 26 U.S.C. section 4611(f)(2) provides that the expired 
5 cents per barrel petroleum tax will not apply during any calendar 
quarter if the balance in the Fund at the end of the previous quarter 
is estimated to exceed one billion dollars. Is a one billion dollar 
Fund adequate for current and future oil spill prevention and 
remediation needs? Should the one billion dollar cap on applicability 
of the tax be increased (for example, to two billion or five billion 
dollars) to prevent the Fund from being depleted again in the future?
    Answer. The current $1 Billion Cap on the OSLTF appears to be 
adequate provided there is sufficient income to the Fund for it to be 
self-sustaining.
Oil Spill Tax Provisions in 26 U.S.C. Section 4611
    Question 4. What technical modifications, if any, does the Coast 
Guard recommend to the oil spill tax provisions in 26 U.S.C. section 
4611 if this tax is reinstated?
    Answer. The Coast Guard has no recommendations for modifications 
other than to note that any decision to reinstate the tax will probably 
require modification to 26 U.S.C. section 4611(f)(1) to provide a 
revised period of time during which the OSLTF financing rate is to 
apply.
Impact Of Raising Liability Limits
    Question 5. What impact do the liability limits in section 1004(a) 
of the Oil Pollution Act of 1990 (33 U.S.C. section 2704(a)) have on 
the Oil Spill Liability Trust Fund? Does the Coast Guard recommend that 
these liability limits be increased to reflect changes in the cost of 
living since 1990 and/or to prevent depletion of the Fund? Does the 
Coast Guard recommend that these liability limits be increased to 
reflect changes in the cost of living since 1990 and/or to prevent 
depletion of the Fund?
    Answer. The Fund is available to pay a Responsible Party (RP) claim 
for oil removal costs and damages paid or incurred in excess of the 
RP's applicable OPA liability limit. To date, the NPFC has paid RP 
claims for a total of $36.3M arising from seven incidents. Other RP 
claims from these seven incidents, for a total of $52.4M, pend 
adjudication and the amounts to be paid have not been determined. The 
seven incidents can be further broken down by vessel type. One tank 
vessel incident resulted in payments totaling $18.5M with an additional 
$11M in claims pending. Four tank barge incidents resulted in payments 
of $17.7M with an additional $2M in claims pending. Two non-tank vessel 
incidents have resulted in pending claims of $39.3M. Additionally, 
there have been nine other OPA incidents in which we have confirmed 
RP's have exceeded their limits, but have not submitted Limits of 
Liability claims. Of these nine incidents, none involved tank vessels, 
five involved tank barges, and four involved non-tank vessels. Had the 
RP's pursued reimbursement for exceeding limits of liability in these 
incidents, $206M and $90.5M in claims could have been submitted for 
tank barges and non-tank vessels respectively.
    The Coast Guard has not studied the economic impacts of increasing 
liability limits, and must respectfully demur in making a 
recommendation. In looking at the OSLTF balance, increased liability 
limits might mitigate, but are not likely to prevent, Fund depletion. 
For example, the Fund uses include substantial annual appropriations 
that are not removal costs or damages for which an RP would be liable. 
Another income source would be needed to balance pressures on the Fund 
from appropriations. In the 1990s the Fund benefited from income 
sources, including the tax on oil, higher interest rates on Fund 
investments and transfers from legacy funds such as the Trans-Alaska 
Pipeline Liability Fund, that are no longer available.
Recovery of Oil Spill Cleanup Costs
    Question 6. What percentage of oil spill clean-up costs and damages 
paid by the Fund are recovered from responsible parties? Please provide 
this information for the last five years for which information is 
available.
    Answer. The OSLTF is used to clean up spills and pay damages 
whether or not a responsible party is known or able to pay. The OSLTF 
is also used to pay claims to responsible parties who have exceeded 
their limit of liability, which are costs that will not be recovered. 
Cost recovery for a given year normally reflects spending during 
previous years. The data for the past five Fiscal Years follows: (in 
millions of dollars)

----------------------------------------------------------------------------------------------------------------
                                        Removal Costs/Damages
             Fiscal Year                         Paid               Amount Recovered             Percent
----------------------------------------------------------------------------------------------------------------
1999                                                     $34.4                     $7.3                      21%
----------------------------------------------------------------------------------------------------------------
2000                                                      45.4                      6.6                      15%
----------------------------------------------------------------------------------------------------------------
2001*                                                     89.7                     59.9                      67%
----------------------------------------------------------------------------------------------------------------
2002                                                      74.5                     12.8                      17%
----------------------------------------------------------------------------------------------------------------
2003                                                      73.9                      6.7                       9%
----------------------------------------------------------------------------------------------------------------
Total                                                   $317.9                    $93.4                      29%
----------------------------------------------------------------------------------------------------------------

    *The 2001 amount recovered includes $53.6 million of funds received 
for the Berman oil spill in Puerto Rico in 1994. This is an unusual but 
illustrative example of the time delays that can ensue between spending 
for cleanup and successful cost recovery.

    When a responsible party is identified and has a Certificate of 
Financial Responsibility (COFR), cost recovery is significantly 
improved. The following table provides the dollar amount billed by 
Fiscal Year (FY) for COFR'd vessels, amount recovered from the date of 
billing through FY 2003, in millions of dollars, and the percentage 
recovered from the responsible party.

----------------------------------------------------------------------------------------------------------------
                                                                   Amount  Recovered
             Fiscal  Year                   Amount  Billed           FY1999-FY2003               Percent
----------------------------------------------------------------------------------------------------------------
1999                                                      $0.9                     $0.5                      58%
----------------------------------------------------------------------------------------------------------------
2000                                                       2.3                      2.2                      97%
----------------------------------------------------------------------------------------------------------------
2001                                                       1.2                      0.9                      75%
----------------------------------------------------------------------------------------------------------------
2002                                                       0.5                      0.3                      65%
----------------------------------------------------------------------------------------------------------------
2003                                                       1.9                      0.4                      22%
----------------------------------------------------------------------------------------------------------------
Total                                                     $6.9                     $4.4                      64%
----------------------------------------------------------------------------------------------------------------

    When a responsible party is identified but does not have a 
Certificate of Financial Responsibility, cost recovery is less 
successful. The following table provides the dollar amount billed by 
Fiscal Year (FY) for non-COFR'd vessels and facilities, the amount 
recovered from the date of billing through FY 2003, in millions of 
dollars, and the percentage recovered from the responsible party.

----------------------------------------------------------------------------------------------------------------
                                                                   Amount  Recovered
             Fiscal  Year                   Amount  Billed           FY1999-FY2003               Percent
----------------------------------------------------------------------------------------------------------------
1999                                                      $7.5                     $2.4                      32%
----------------------------------------------------------------------------------------------------------------
2000                                                       8.7                      1.7                      19%
----------------------------------------------------------------------------------------------------------------
2001                                                       9.0                      2.9                      32%
----------------------------------------------------------------------------------------------------------------
2002                                                       8.0                      2.5                      31%
----------------------------------------------------------------------------------------------------------------
2003                                                       5.1                      1.6                      32%
----------------------------------------------------------------------------------------------------------------
Total                                                    $38.4                    $11.1                      29%
----------------------------------------------------------------------------------------------------------------

Interest Rate on Funds in Oil Spill Liability Trust Fund
    Question 7. What interest rate is currently earned by funds in the 
Oil Spill Liability Trust Fund? How does this compare to interest rates 
earned by these funds in the past?
    Answer. Below is a table of the average interest rates earned by 
the OSLTF over the past ten years. The Fiscal Year 2004 interest rate 
is as of July 2004.

----------------------------------------------------------------------------------------------------------------
              1995                 1996     1997     1998     1999     2000     2001     2002     2003     2004
----------------------------------------------------------------------------------------------------------------
6.5%                                5.9%     5.6%     5.7%     4.6%     6.0%     5.8%     2.9%     1.6%     1.1%
----------------------------------------------------------------------------------------------------------------

Have the Costs of Oil Spill Clean-Ups Increased Over Time?
    Question 8. Have the costs of oil spill clean-ups increased over 
time? If so, by how much?
    Answer. The National Pollution Funds Center does not have the data 
to answer this question. The OSLTF is accessed for only a small 
percentage of the total number of spills in the U.S., and for the 
spills for which the OSLTF is accessed, expenditures from the OSLTF are 
only a small subset of the total costs of responding to those oil 
spills. The NPFC's data does not reflect the amounts responsible 
parties pay for oil spills or the amount of oil spilled for all spills 
in the U.S. Without this data, we are not in a position to adequately 
respond to the question.
                                 ______
                                 
 Response to Written Questions Submitted by Hon. Ernest F. Hollings to 
                         Margaret T. Wrightson
    Question 1. It not clear to me how meaningful some of the Coast 
Guard's performance measures are. For example, couldn't the performance 
measure for foreign fishing enforcement in the Pacific--the number of 
times foreign fishing vessels are identified as illegally entering the 
EEZ--be met due to a decreased detection rate (due to lack of 
resources) rather than to improved enforcement?
    Answer. We agree that there are limitations to some of the Coast 
Guard's performance measures. It is also true that fluctuations in some 
of the results could be associated with decreases or increases in 
resources hours dedicated to the mission/program area. Recognizing this 
valid concern, we discussed these performance measure limitations with 
the Coast Guard and noted several examples of the various limitations, 
along with the Coast Guard's efforts to improve them, in our March 2004 
report (GA0-04-432). One such example is how performance measures can 
be affected by how certain factors are weighted within the measure. For 
example, the foreign fish enforcement performance measure--which counts 
the number of times that foreign fishing vessels are identified as 
illegally entering the United States Exclusive Economic Zone (EEZ)--
does not distinguish the severity of each entry. As a result, a single 
fisherman in a small boat catching a few fish is weighted equally with 
a large foreign trawler that is harvesting fish by the tons. Another 
limitation that can affect the strength of performance measures is the 
accuracy of estimated information. For example, the undocumented 
migrant interdiction performance measure contains estimated 
information, such as the number of illegal migrants entering the U.S. 
As a result, the Coast Guard reported that the estimated number of 
potential migrants-a key part of this performance measure--might 
contain significant error. More specific information about performance 
measure limitations is discussed on pages 16-18. Also, the foreign fish 
measure can be affected by fluctuations in demand and thus the results 
may not directly reflect agency efforts. For example, the foreign fish 
enforcement performance measure can be affected by the migratory 
patterns of fish. As a result, EEZ encroachment could increase or 
decrease depending on where the fish are located as fishermen may or 
may not cross EEZ boundaries to catch them. In addition, Appendix III 
of the report provides further explanation of each performance measure, 
and potential factors that could have influenced the performance 
results. Information regarding foreign fish enforcement, in particular, 
can be found on pages 49-50 of the March 2004 report.

    Question 2. In another example, the performance measure for 
compliance with domestic fisheries regulations is how many fishermen--
of those reviewed--were found to be in compliance. Does that really 
tell us anything? What if the Coast Guard interview 1 fisherman and he 
was in compliance--wouldn't that give the Coast Guard a 100 percent 
performance for this measure?
    Answer. Yes, similar to the foreign fish enforcement measure, the 
living marine resources performance measure (measuring domestic fish 
enforcement compliance) is also potentially affected by the level of 
activity or resource hours dedicated to that program. In this case, the 
total number of resource hours dedicated to the living marine resource 
program was 38 percent lower than the pre-9/11 baseline in FY 2002 and 
26 percent lower in FY 2003, and the number of vessel hoardings also 
declined. However, the compliance percentage remained stable. We noted 
this limitation--the performance measure's reliance on the Coast 
Guard's presence or direct observation of events in our report as well. 
The Coast Guard acknowledged that some of its performance measures are 
subject to these weaknesses and directed its field personnel to be 
mindful of these issues in its planning guidance.
    It is because of the performance measures that the Coast Guard's 
performance is best measured with multiple measures-such as resource 
hours, performance measures, and activity levels.

    Question 3. Is it true that the Rescue 21 recapitalization--which 
is critically important for saving mariners' lives and also for 
security--is going to be behind schedule?
    Answer. When we discussed the status of Rescue 21 with Coast Guard 
officials in April 2004, they informed us that they did not know as yet 
whether Rescue 21 would be completed on time at the end of Fiscal Year 
2006, or not. They indicated that their Fiscal Year 2005 budget request 
was aimed at keeping the project progressing; however, technical 
problems with software development had delayed implementation of the 
first elements of the system that were scheduled for Summer 2003. In 
September 2003, we reported that the Coast Guard had postponed schedule 
for key tests and achieving initial operating capability. Originally 
scheduled for September 2003, the Coast Guard is now scheduled to 
achieve initial operating capability by December 2004. This 
postponement was due in part to the development of the system taking 
longer than planned. The Coast Guard did indicate at that time that it 
did not anticipate any cost escalation in the program, which was 
estimated at $953 million.

    Question 4. GAO's testimony indicates that the Coast Guard is still 
having problems meeting Congressional targets for maximum hours at 
multi-mission stations, where the search and rescue work is 
coordinated. What is going on here?
    Answer. In Fiscal Year 2003 the Coast Guard reported that as a 
result of increases in staffing at multimission stations over the past 
few years, including the addition of 224 full-time positions in Fiscal 
Year 2002, the average workweek at stations declined by 3.18 percent 
between 1998 and 2002. In our May 2004 report, Coast Guard: Station 
Spending Requirement Met, but Better Processes Needed to Track 
Designated Funds (GA0-04-704), we reported that the Coast Guard had 
increased its staffing at multi-mission stations by 466 personnel in 
Fiscal Year 2003. The Coast Guard expects to add an additional 500 
personnel to stations and command centers in Fiscal Year 2004 in a 
further effort to bring down station work week hours. As directed by 
the House and Senate Appropriations Committees (P.L. 108-7), GAO is 
currently reviewing the impact these staffing increases have had on 
station work week hours and plans to issue a report on this and other 
issues related to multimission stations in November 2004. A copy of the 
report will be provided to you and we will be available to answer any 
questions you may have at that time.

    Question 5. The Coast Guard has estimated that the budget request 
for Deepwater--$678 million--would put the Deepwater project on a 22 
year track. Is that your view?
    Answer. There is no way to know whether the $678 million request 
could keep the Deepwater on 22-year track. In fact, the likelihood is 
that the Coast Guard will not be able to acquire the currently planned 
assets at the currently planned cost estimates, even with the requested 
$678 million. There are several reasons for my view: First, as we found 
in our June 2004 report (Coast Guard: Deepwater Acquisition Program 
Schedule Update Needed, GA0-04-695), the Coast Guard does not know the 
degree to which Deepwater is on track with its original 2002 22-year 
acquisition schedule because the Coast Guard has not kept the schedule 
updated. Second, Deepwater is only in its third year of acquisition and 
has already received unstable funding. As the Coast Guard has contended 
since the program's inception, Deepwater's 22-year program requirements 
are dependent on a stable and constant stream of funding. In addition, 
as noted in my testimony, we have found that the Coast Guard has 
underestimated total program costs. Finally, Deepwater is as major and 
complicated an acquisition as many of those in DOD and DOD acquisitions 
are often over schedule and over budget projections. Deepwater is the 
Coast Guard's largest acquisition in its history and we have reported 
that Coast Guard management has thus far lacked capabilities to 
adequately handle such an acquisition.

    Question 6. Your written testimony suggests that the Deepwater 
project will cost a total of $2.2 billion more than the Coast Guard 
estimated originally. What is this attributable to?
    Answer. The Coast Guard chose a unique contracting approach for 
Deepwater that requires steady funding over 20 years. In a 2001 report 
(GA0-01-564), we expressed concern that the Coast Guard risked schedule 
slippages and cost escalation if the project's funding fell short of 
planned funding levels. Now, very early in this program our concerns 
are being realized. When we discussed the increased estimated costs 
with Coast Guard's officials in April2004, they attributed the 
increased costs to several factors. First, they indicated that under-
funding for Deepwater in the first two years put the program behind 
schedule and resulted in lost efficiency and flexibility that they 
believe would have been realized by acquiring multiple assets in a more 
coordinated way. Second, they believed that maintenance costs 
associated with sustaining legacy assets have increased faster than 
anticipated as these assets deteriorated faster than expected. As a 
result, they stated that available future funding may have to be used, 
in part, to address critical maintenance needs for legacy assets, 
diverting funds otherwise intended for future Deepwater replacements 
and upgrades. Third, delays have resulted in increased costs due to 
normal price inflation. Because the contract has a price adjustment 
factor that allows asset prices to be adjusted for inflation, costs for 
these assets have increased over time. And lastly, due to revised 
homeland security requirements, some redesign of the homeland security 
cutter has occurred to ensure that the vessel would accommodate DHS 
needs. According to Coast Guard officials, these modifications resulted 
in additional costs for the Deepwater program.

    Question 7. The Coast Guard has suggested that they could 
accelerate the Deepwater program to 10 years. Yet the GAO has recently 
issued a report citing management problems with the program. Do you 
think it would be feasible, or advisable, to accelerate the program to 
this shorter time frame? How quickly could GAO produce an analysis of 
the Coast Guard's report on acceleration?
    Answer. Until the Coast Guard demonstrates that it can effectively 
manage the Deepwater program, it would not be prudent, in our view, to 
accelerate the schedule. As we stated in our March 2004 report [GA0-04-
380], the Coast Guard had not put in place adequate mechanisms for 
overseeing the contractor or for assessing the contractor's 
performance. Schedule, performance, cost control, and contract 
administration problems have already surfaced in the Deepwater program. 
Perhaps most significantly, the Coast Guard does not yet have the 
process, procedures, or metrics in place to determine whether the 
contractor is meeting the goals of the Deepwater program: increased 
operational effectiveness, reduced total ownership costs, and customer 
satisfaction.
    We have not done an assessment of the Coast Guard's acceleration 
plan, and it would mostly likely take us between four and six months to 
complete an analysis. The report contains a number of assumptions that 
merit a thorough evaluation, including those related to contractor 
performance, cost projections, economic forecasts, industrial base 
capability, personnel, and training requirements.
                                 ______
                                 
Response to Written Questions Submitted by Hon. Frank R. Lautenberg to 
                         Margaret T. Wrightson
    Question 1. Admiral Collins testified a couple of weeks ago that 
resource hours are not the best indicator of the Coast Guard's ability 
to carry out its missions adequately, but rather performance results. 
Do you agree?
    Answer. We believe that the best way to measure the Coast Guard's 
mission performance is through a combination of measures that would 
include resource hours, performance results, and activity measures. 
Previous reliance on resource hours to measure the Coast Guard's 
performance was driven by a lack of sufficient and quality data by 
which to measure the Coast Guard's performance through other means--
such as performance measures or activity data. (Activity data is still 
rather limited, and resource hour data is still unavailable for certain 
marine safety and envirorunental protection program areas.) In general, 
resource hour data is the most consistent data available by which to 
measure levels of effort, but we recognize that effort does not always 
equate to performance success. The Coast Guard has made progress in 
developing performance measures, however, there are still limitations 
to these measures. For example, as noted above, some of these measures 
have limitations in what they can measure with respect to performance. 
Moreover, performance measures for the Coast Guard's Ports, Waterways, 
and Coastal Security program area have yet to be developed.

    Question 2. In an ideal world where data is freely available and 
easily tabulated, what would be the best indication of the Coast 
Guard's effectiveness in carrying out its missions? Why are relative 
comparisons so important here?
    Answer. In an ideal world, the best indicator of the Coast Guard's 
mission effectiveness would be performance measures that assessed 
``outcomes'' or the ``results'' associated with the Coast Guard's 
efforts that are ``leading indicators.'' That is, results that are 
``forward looking'' measures of results. However, to achieve this 
goal--the agency needs quality and consistent data to develop strong 
performance measures, and a clear understanding of the relationship 
between resources expended and results achieved. As a result, and given 
the limitations in the Coast Guard's current data, as well as the lead 
time needed to develop data trends, we have suggested that the Coast 
Guard develop a more systematic understanding of the linkages between 
their resource usage and the performance results they achieve. 
Moreover, given some of the inconsistent relationships that we 
identified in resource usage and performance achieved by the Coast 
Guard, we made two recommendations to the Coast Guard in our March 2004 
report (GA0-04-432). First, we recommended that the Coast Guard develop 
a time-frame for expeditiously proceeding with its plans for 
implementing a system that will accurately account for resources 
expended for all of its program areas, and second, we recommended that 
the agency ensures that its strategic planning process identifies the 
intervening factors that may affect program performance and 
systematically assesses the relationship between the intervening 
factors, resources used and results achieved.

    Question 3. If the Coast Guard wishes to be measured in terms of 
performance, are there any objective, quantifiable measures to assess 
the performance of its contractors on which to base bonuses, like the 
``award fee'' in the Deepwater contract?
    Answer. Performance-based contracts such as Deepwater should 
include measurable performance standards and incentives to motivate 
contractor performance. In evaluating the contractor's performance, the 
Coast Guard needs to have in place quantifiable metrics against which 
to make decisions about award fees or other performance incentives. Our 
recent report found that the Coast Guard was still in the process of 
developing quantifiable award fee metrics. Further, the Coast Guard had 
not determined how to hold the contractor accountable for achieving the 
overarching goals of Deepwater: increased operational effectiveness, 
lower total ownership costs, and customer satisfaction.
    Objective, quantifiable measures for monitoring the contractor's 
performance in areas such as program management and quality must be 
defined. Our report noted that the Coast Guard had not established a 
solid baseline against which to measure progress in lowering total 
ownership costs. In addition, the Coast Guard lacked a method of 
determining whether the contractor was making progress toward increased 
operational effectiveness. Without measurements for these key goals of 
the Deepwater program, the Coast Guard lacks a meaningful way to hold 
the contractor accountable for results.

    Question 4. 26 U.S.C. section 4611(f)(2) provides that the expired 
5 cents per barrel petroleum tax will not apply during any calendar 
quarter if the balance in the Fund at the end of the previous quarter 
is estimated to exceed one billion dollars. Is a one billion dollar 
Fund adequate for current and future oil spill prevention and 
remediation needs? Should the one billion dollar cap on applicability 
of the tax be increased (for example, to two billion or five billion 
dollars) to prevent the Fund from being depleted again in the future?
    Answer. While GAO recently completed work reviewing (certain 
aspects of) the Oil Spill Liability Trust Fund (GA0-04-114R and GA0-04-
340R), these reports do not directly address your question. To 
determine whether a $1 billion balance for the fund is adequate for 
current and further oil spill prevention and remediation needs, it 
would be prudent to assess a number of factors related to the fund. For 
example, assessing the current and anticipated fund balance would be 
key to determining appropriate action related to the fund. Part of this 
effort would include determining past charges against the fund, and 
developing an estimate of the anticipated number of future spills that 
the fund would be subject to paying for, and estimating the costs 
associated with this effort. Without such assessments, along with 
analyses of any other factors that could affect the fund, such as the 
interest rate earned by the fund, and any potential changes to the law 
that could affect liability limits, it would be difficult to accurately 
state the optimum balance for this fund.

    Question 5. What technical modifications, if any, does the GAO 
recommend to the oil spill tax provisions if this tax is reinstated?
    Answer. Unfortunately, we have not done work on this provision and 
therefore have no basis for comment. However, generally GAO believes 
that tax provisions should be judged based on economic efficiency, 
effectiveness and equity criteria as well as on their impact on tax 
system complexity and the resources devoted to assuring compliance.

                                  [all]

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