[Senate Hearing 109-1096]
[From the U.S. Government Publishing Office]



                                                       S. Hrg. 109-1096
 
        THE COAST GUARD'S REVISED DEEPWATER IMPLEMENTATION PLAN

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

                                HEARING

                               before the

             SUBCOMMITTEE ON FISHERIES AND THE COAST GUARD

                                 OF THE

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 21, 2005

                               __________

    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 NINTH CONGRESS

                             FIRST SESSION

                     TED STEVENS, Alaska, Chairman
JOHN McCAIN, Arizona                 DANIEL K. INOUYE, Hawaii, Co-
CONRAD BURNS, Montana                    Chairman
TRENT LOTT, Mississippi              JOHN D. ROCKEFELLER IV, West 
KAY BAILEY HUTCHISON, Texas              Virginia
OLYMPIA J. SNOWE, Maine              JOHN F. KERRY, Massachusetts
GORDON H. SMITH, Oregon              BYRON L. DORGAN, North Dakota
JOHN ENSIGN, Nevada                  BARBARA BOXER, California
GEORGE ALLEN, Virginia               BILL NELSON, Florida
JOHN E. SUNUNU, New Hampshire        MARIA CANTWELL, Washington
JIM DeMINT, South Carolina           FRANK R. LAUTENBERG, New Jersey
DAVID VITTER, Louisiana              E. BENJAMIN NELSON, Nebraska
                                     MARK PRYOR, Arkansas
             Lisa J. Sutherland, Republican Staff Director
        Christine Drager Kurth, Republican Deputy Staff Director
                David Russell, Republican Chief Counsel
   Margaret L. Cummisky, Democratic Staff Director and Chief Counsel
   Samuel E. Whitehorn, Democratic Deputy Staff Director and General 
                                Counsel
             Lila Harper Helms, Democratic Policy Director
                                 ------                                

             SUBCOMMITTEE ON FISHERIES AND THE COAST GUARD

                   OLYMPIA J. SNOWE, Maine, Chairman
TED STEVENS, Alaska                  MARIA CANTWELL, Washington, 
TRENT LOTT, Mississippi                  Ranking
GORDON H. SMITH, Oregon              DANIEL K. INOUYE, Hawaii
JOHN E. SUNUNU, New Hampshire        JOHN F. KERRY, Massachusetts
DAVID VITTER, Louisiana              FRANK R. LAUTENBERG, New Jersey


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on June 21, 2005....................................     1
Statement of Senator Cantwell....................................     7
    Prepared statement...........................................     7
Statement of Senator Inouye......................................     6
    Prepared statement...........................................     6
Statement of Senator Snowe.......................................     1
    Prepared statement...........................................     3
Statement of Senator Stevens.....................................     6

                               Witnesses

Collins, Admiral Thomas H., Commandant, U.S. Coast Guard; 
  Accompanied by Rear Admiral Pat Stillman.......................     8
    Prepared statement...........................................    10
O'Rourke, Ronald, Specialist in National Defense, Congressional 
  Research Service...............................................    38
    Prepared statement...........................................    40
Wrightson, Margaret T., Director, Homeland Security and Justice, 
  U.S. Government Accountability Office..........................    19
    Prepared statement...........................................    22

                                Appendix

Response to written questions submitted to Admiral Thomas H. 
  Collins by:....................................................
    Hon. Maria Cantwell..........................................    68
    Hon. Daniel K. Inouye........................................    66
    Hon. Olympia J. Snowe........................................    63
Response to written questions submitted to Ronald O'Rourke by:...
    Hon. Maria Cantwell..........................................    88
    Hon. Daniel K. Inouye........................................    86
    Hon. Olympia J. Snowe........................................    83
Response to written questions submitted to Margaret T. Wrightson 
  by:............................................................
    Hon. Maria Cantwell..........................................    80
    Hon. Daniel K. Inouye........................................    78
    Hon. Olympia J. Snowe........................................    74


        THE COAST GUARD'S REVISED DEEPWATER IMPLEMENTATION PLAN

                              ----------                              


                         TUESDAY, JUNE 21, 2005

                               U.S. Senate,
     Subcommittee on Fisheries and the Coast Guard,
        Committee on Commerce, Science, and Transportation,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:15 a.m. in 
room SR-253, Russell Senate Office Building, Hon. Olympia J. 
Snowe, Chairman of the Subcommittee, presiding.

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

    Senator Snowe. This hearing will come to order.
    Admiral Collins and Ms. Wrightson, and Mr. O'Rourke, I want 
to thank each of you for testifying at this critical hearing on 
the Coast Guard's revised Deepwater Implementation Plan.
    I called for this hearing today to further examine the plan 
recently released by the Coast Guard revising how it will 
implement its Fleet Recapitalization Modernization Project, 
known as Deepwater. Congress outlined the actual requirements 
for this report in the Department of Homeland Security 
Appropriations Act for Fiscal Year 2005. I applaud the Coast 
Guard for this--for an enormous record of success across the 
board, whether it's in its homeland- or non-homeland-security 
missions.
    And my hearing today is going to focus, essentially, on the 
question of whether or not the service is going to be able to 
carry out the enormous achievements and successes, long into 
the future, that has been experienced by the Coast Guard. And 
Deepwater is the future of the Coast Guard. Without the 
advanced assets and capabilities that this program will 
provide, our mariners and coastal communities will watch the 
benefits this service provides slowly erode. The Nation cannot 
afford to lose or reduce the on-water presence of this vital 
agency, so now is the time for Congress and the Administration 
to renew its commitment to properly fund and ensure the Coast 
Guard--that it's capable of doing all that we ask it to do.
    When the Congress called for this report, we intended to 
have the Coast Guard evaluate its needs and requirements in a 
post-9/11 environment. The original Deepwater proposal was 
developed prior to the 9/11 catastrophic events. As we delved 
into this revised plan, however, it becomes glaringly obvious 
that it does not meet the needs of a post-9/11 threat 
environment.
    I am deeply disturbed by this stunning reversal of the 
Coast Guard when I study the figures, and compare the number of 
ships and planes that the service originally desired to what 
this revised plan recommends. For example, despite a massive 
increase in the Coast Guard's homeland-security mission, this 
report does not propose increasing the number of ships 
patrolling our shores. Even more disturbing, is the total 
number of cutters could be less than what was originally 
planned, as displayed in this chart here that, I believe, gives 
a strong indication of what this revised plan would do, 
compared to the request and the recommendations pre-9/11. These 
figures, in my opinion, are not capable of meeting the 
significant increases in mission responsibilities that the 
Congress has assigned to this service. There is no logical 
methodology that would reach these same conclusions, that I am 
aware of. All of the studies, both the RAND Center and the 
Center for Naval Analysis, indicate much higher numbers for 
surface and aviation assets are needed. Simply put, the role of 
the Coast Guard in defending our Nation has increased 
exponentially, and its available resources should reflect this 
reality. And even though the numbers in the same categories 
show an increase in its numbers being procured, it must be 
pointed out that these numbers are much higher due to the use 
of refitted legacy assets, most of which are being refitted, 
and not new assets.
    The Coast Guard will tell us today that the assets they are 
planning on purchasing will have greater capabilities than the 
original Deepwater ones; therefore, the argument is that the 
Coast Guard does not require as many vessels and aircraft 
because of the new capabilities. While the new capabilities and 
technologies are essential to accomplishing the service's 
mission, they're a poor substitute for actual on-water 
presence. Capacity is the most important capability of all. 
Capability is not the limiting factor for success. The number 
of ships is what's limiting the performance. There is no 
substitute for having these assets on the water. No question. 
It helps to establish an increased enforcement presence for the 
mariner.
    Another aspect of this report I find equally disturbing is 
the absence of the word acceleration. I, frankly, find it 
shocking that the Coast Guard did not evaluate ways to shorten 
and expedite the timeframe for acquiring Deepwater assets. 
Again, the acceleration of this project, in my opinion and the 
opinion of so many others in Congress, is desperately required, 
as the service legacy assets are breaking at a significantly 
higher rate than anticipated. Operational mishaps have 
increased, along with unanticipated maintenance days. This 
equates to ships being tied to the pier for extensive periods 
of time, not being underway in the water patrolling our coasts. 
The Coast Guard is losing the equivalent of two major cutters 
each year in lost patrols.
    I emphasize security, as well, because, again, accelerating 
the timetable would give American taxpayers a Coast Guard 
capable of meeting its vital security missions. We're not 
talking about theoretical threats in a distant future. We're 
talking about dangers that have become a reality in this new 
threat environment, this new normalcy. And this Nation requires 
a Coast Guard that can respond to current and emerging threats.
    I refer you to the second chart, on the performance-gap 
analysis. It demonstrates the actual--in the gray line, the 
actual legacy degradation; the purple line is the proposed 
solution in this revised implementation plan of the Coast 
Guard; and then you see the post-9/11 Coast Guard mission 
demands, at the higher line, and what it's going to require, 
showing the red line, to close that gap. And it continues to be 
a growing and significant gap. We are talking about a post-9/11 
environment, and yet that gap is growing wider and wider, even 
under the Coast Guard's revised plan.
    The Coast Guard should no longer have to say, ``We can do 
more with less.'' We have heard that consistently before this 
Committee, time and again. Frankly, I think it's a phrase that 
we ought to remove from the vocabulary. I well recall a past 
Commandant saying that, ``Doing more with less will evolve into 
doing everything with nothing.'' Obviously, we all refuse to 
accept that philosophy and that rationale.
    But, Admiral Collins, it clearly does rely on the Congress 
and the Administration--and, obviously, you--in providing the 
necessary resources to the men and women who deserve quality 
assets, because they perform life-saving missions each and 
every day, both in the non-homeland- and homeland-security 
responsibilities and obligations, as you well know. So, we need 
to get to a common understanding and consensus of how we are 
going to bridge this gap under the new proposed plan that you 
are submitting to the Congress. Frankly, I have some serious 
concerns about that, and we need to explore some of those 
issues here today, because I see us just extending this 
recapitalization program further and further out into the 
future. We are talking 20-25 years. And we are going to have to 
put more investments into the legacy assets that are aging. I 
think we are going to compound some very serious problems. So, 
we are obviously looking forward to your testimony here this 
morning.
    Ms. Wrightson, thank you, as well, for being here. You 
certainly contribute enormously to this discussion in helping 
the Coast Guard to meet its responsibilities and 
recommendations based on your invaluable insights.
    And, Mr. O'Rourke, thank you, because you have also 
contributed measurably in shaping and debating national 
policies affecting our national defense, our homeland security, 
and shipbuilding programs, as well.
    And I want to thank each and every one of you for being 
here--and Admiral Stillman, as well--thank you for being here 
to provide support on a number of issues.
    [The prepared statement of Senator Snowe follows:]

  Prepared Statement of Hon. Olympia J. Snowe, U.S. Senator from Maine

    We have an urgent Coast Guard matter at hand that now demands our 
attention. Admiral Collins, Ms. Wrightson, and Mr. O'Rourke, I'd like 
to thank each of you for testifying at this critical hearing on the 
Coast Guard's Revised Deepwater Implementation Plan.
    I also want to thank my fellow Committee Members for attending this 
morning and demonstrating their commitment to the future of the United 
States Coast Guard. For years and years, this Committee has watched 
this military service attempt to do more with less, and this 
unsustainable pattern has caught up with us.
    We are here today because this Committee, and this Nation, must 
understand the dire situation in which the Coast Guard now finds 
itself, regarding its ``Deepwater'' recapitalization plan. Eight years 
ago, Deepwater was conceived in the knowledge that the Coast Guard's 
aging vessels and aircraft needed to be modernized, and they proposed 
to do this over a 20-year timeline. At the time, we thought this would 
be sufficient.
    But then on September 11, 2001, everything changed. Everything, 
that is, except for the Coast Guard's assessment of how Deepwater would 
help them meet the new terrorist threats facing our nation. The Coast 
Guard recently issued a report that, shockingly, says it actually needs 
fewer ships, planes, and helicopters than before 9/11.
    That violation of common sense is at the crux of today's hearing. 
This committee must expose the heart of the contradictions before us, 
and help the Coast Guard immediately correct its course. If we let the 
Administration continue with this way of thinking, the foundations of 
Deepwater will continue to crumble before our eyes.
    I am sure that Admiral Collins will testify that--as always--his 
men and women can ``get by'' with what the Administration has 
requested. As admirable as that stance is, however, the cold hard truth 
remains that the Coast Guard is experiencing a record number of 
casualties and mishaps like never seen before, and it is simply 
becoming unsafe for our young men and women to serve aboard these aging 
assets. Catastrophic engine failures and main space casualties have 
risen at an alarming rate in the fleet.
    Because my colleagues and I were alarmed to see this chronic 
downward spiral of asset failures, we directed the Coast Guard to 
report on how it can reverse this trend. In the Department of Homeland 
Security Appropriations Act for FY 2005, as part of our oversight for 
the largest Coast Guard acquisition in history, we called for this 
report. We knew that the original Deepwater plan was outdated, since it 
was developed before September 11, 2001. We intended to have the Coast 
Guard evaluate its operational and asset requirements in a post-9/11 
environment--in which we have significantly greater knowledge of 
terrorist attacks and other threats.
    As we delve into this new plan for revising Deepwater, however, it 
becomes glaringly obvious that it does not meet the demands of a post-
9/11 world. I am stunned and disheartened to learn that the 
Administration tells us that this service may not require as many ships 
in the water and airframes in the sky. They try to justify this by 
saying that the Deepwater assets will have ``greater capabilities'' 
than those in the original Deepwater plan. Therefore, the Coast Guard 
says it does not need as many assets. While I agree that new 
technologies are essential to accomplishing the service's missions, 
such capabilities simply do not substitute for actual on-the-water 
presence. Capacity is the most important capability of all.
    When I study the figures in this report, and compare the number of 
assets that the service originally called for to what this revised plan 
says, I am overtaken by total disbelief to see the Coast Guard wants 
fewer ships and aircraft. And that is relying more and more on simply 
upgrading its legacy assets, at a time when these old assets are 
failing more frequently. Phrase it however you would like . . . or 
cushion the numbers to create the illusion of having more . . . but 
nothing will substitute for the fact that our Nation requires more new 
assets--along with more capabilities--in the water and in the air. And 
we must utilize those assets now.
    Allow me to elaborate. Despite a massive increase in the Coast 
Guard's homeland security mission, this report does not propose 
increasing the number of ships patrolling our shores. Even more 
disturbing--the total number of cutters could be less than what was 
originally planned. The National Security Cutter went from 6 to a range 
of 6-8, the Offshore Patrol Cutter remained the same (this is the 
workhorse of the fleet), and the Fast Response Cutter went from 58 to a 
range of 43-58. These figures are not capable of meeting the expanded 
mission responsibilities that Congress has assigned to the service. 
Simply put, the role of the Coast Guard in defending our Nation has 
increased exponentially, and its available resources should reflect 
this reality.
    Another aspect of this report I find equally disturbing is the 
total absence of the word acceleration. I find it shocking that the 
Coast Guard did not evaluate ways to shorten the time frame for 
acquiring Deepwater assets. Completing Deepwater on a 10 or 15-year 
timeline, would not only offer a cost savings of up to $4 billion over 
the life the program, it also gives the American taxpayers a Coast 
Guard capable of meeting its vital security missions, sooner rather 
than later. The Coast even conducted its own acceleration feasibility 
study and stated that acceleration was possible, it saved billions of 
dollars, and it provided thousands of more operational mission hours.
    I emphasize security, because we are not talking about theoretical 
threats in some far-off land . . . the dangers are a reality that we 
risk facing every day. Therefore, as the GAO rightly noted, we need to 
focus on how well this service is actually performing in its multiple 
missions. This graph, which the Coast Guard provided, illustrates the 
gaps in performance that the service is experiencing. This clearly 
shows the inadequacy of the proposed Deepwater solution in closing the 
performance gap as a result of the severe degradation of legacy assets. 
Simply put, the ships and planes that have served the Coast Guard well 
for so long can no longer absorb the pace of operations required to 
secure this Nation in today's world.
    Admiral Collins, having served as Chairman of this Fisheries and 
Coast Guard Subcommittee for more than 8 years, I refuse to believe 
this report reflects what you want for the young men and women serving 
under you. I strongly believe the Coast Guard serves as a cornerstone 
of our Department of Homeland Security . . . and cornerstones of our 
national security should not be in the dilemma the Coast Guard now 
finds itself.
    But we would be mistaken to frame this hearing totally around 
questions of national security, because the Coast Guard has been 
uniquely positioned to perform a wide variety of missions critical to 
our Nation's maritime needs. Last year alone, the Coast Guard responded 
to more than 32,000 calls for assistance and saved nearly 5,500 lives. 
These brave men and women prevented 376,000 pounds of marijuana and 
cocaine from crossing our borders, stopped more than 11,000 illegal 
migrants, conducted more than 4,500 fisheries boardings, and responded 
to more than 24,000 pollution incidents.
    The Coast Guard also aggressively defended our homeland as it 
undertook more than 36,000 port security patrols, conducted 19,000 
boardings, escorted more than 7,200 vessels, and maintained more than 
115 security zones. The Coast Guard has reviewed and approved domestic 
security plans for 9,580 vessel and 3,119 facilities, and they verified 
security plan implementation on 8,100 foreign vessels.
    We must all take note of these figures, because with the current 
condition of its assets and the continued degradation of its ships and 
planes, the Coast Guard will lose its ability to maintain this 
impressive track record. For now, we can still applaud the Coast Guard 
for its success, but my concern at this hearing focuses on the 
service's ability to carry out these achievements and successes long 
into the future.
    And Deepwater is the future of the Coast Guard. Without the 
advanced assets and capabilities that this program will provide, our 
mariners and coastal communities will watch these benefits erode. The 
Nation cannot afford to lose or reduce the on-the-water presence of 
this vital agency . . . because if we do, more lives will be lost at 
sea, that is the hard truth. Now is the time for Congress to renew our 
commitment to properly fund and ensure the Coast Guard is capable of 
doing all that we ask of it. It is time to turn words into action, so 
that our Coast Guard is no longer the 40th oldest of 42 naval fleets in 
the world, an embarrassing fact that I continue to state year after 
year.
    The Coast Guard should no longer have to say, ``we can do more with 
less.'' It is time for us to remove that phrase from the Coast Guard's 
vocabulary, once and for all. It is unfortunate that a quote I once 
heard from a past Commandant is coming true today . . . that ``doing 
more with less will evolve into doing everything with nothing.'' I 
refuse to accept this statement, which undercuts the very core of our 
homeland security.
    Admiral Collins, our Nation relies upon the Coast Guard today more 
than ever before. I intend to ensure you have the necessary resources 
to carry out the agency's homeland security and traditional missions 
now, and for the future. But I cannot give your men and women the 
assets they require unless you tell us what the Coast Guard needs, not 
what the Office of Management and Budget thinks the Coast Guard should 
have based on its budget models. Let me remind you how the 2004 Coast 
Guard Authorization Bill amended Section 93 of title 14 of the U.S. 
Code: after informing the Secretary, the Coast Guard Commandant is 
authorized to make recommendations to Congress as you consider 
appropriate. Admiral, please use this law as we intended.
    Ms. Wrightson, I want to welcome you again to the Senate and thank 
you for all the service you have provided us in assisting the Coast 
Guard in their endeavors. I look forward to your testimony today.
    Mr. O'Rourke, I welcome you to our committee and look forward to 
your testimony. I have read your recent report on the Coast Guard's 
Deepwater Program and acknowledge your expertise in the national 
defense, homeland security, and shipbuilding issues facing this Nation.
    Again, welcome. I thank you all for appearing today.

    Chairman Stevens?

                STATEMENT OF HON. TED STEVENS, 
                    U.S. SENATOR FROM ALASKA

    The Chairman. Thank you very much.
    I was just sitting here looking at that model and wondering 
where we can hang it from. Not much room up here on this 
committee table for that.
    But I understand every word that the Chair has said. I 
think that those of you at the table really have been magicians 
in fitting in the requirements in the limited budget that's 
been made available to you. So, I hope we'll all keep that in 
mind--and even your request for the Fiscal Year 2006, you've 
got--anticipated costs of maintaining legacy assets has eaten 
up more than a quarter of your Deepwater funding. And we've 
just got to understand that. It's the budget process, not the 
planning process, that has led us to the position we're in. I 
don't disagree with what Senator Snowe has said at all, but I 
do think that it's the same thing we're facing in the services, 
we're facing in many areas, because of the budget constraints 
that we face right now, due to the deficit and the war, that 
we've got to find some way to get through this period without 
destroying the future of the Deepwater Program or of the 
overall military services.
    So, I look forward to your testimony, and I look forward to 
working with Senator Snowe to try to find some way to start the 
process of reducing this sort of eating away at the Deepwater 
funding because of the increased costs of maintaining an aging 
fleet.
    Thank you very much.
    Senator Snowe. Thank you, Mr. Chairman.
    Co-Chair Inouye?

              STATEMENT OF HON. DANIEL K. INOUYE, 
                    U.S. SENATOR FROM HAWAII

    Senator Inouye. Madam Chair, I thank you very much. And I 
wish to associate myself with your opening remarks.
    May I ask that my statement be made a part of the record?
    Senator Snowe. Without objection, so ordered.
    [The prepared statement of Senator Inouye follows:]

 Prepared Statement of Hon. Daniel K. Inouye, U.S. Senator from Hawaii

    We have waited a long time for the revised Deepwater Plan and I 
look forward to discussing it with our esteemed witnesses.
    The Deepwater Program is integral to the evolution of the Coast 
Guard in our post-9/11 world. This revised plan is the first time we 
have been able to examine the Coast Guard's vision for the future. 
Because of an aging fleet and expanded responsibilities, without the 
Deepwater acquisition, the Coast Guard will soon be constrained to meet 
its safety and security responsibilities.
    There are a couple of key issues to consider. First, it is vital 
that we help the Coast Guard move forward with Deepwater in a timely 
manner.
    Second, we need to know why the 20-year revised plan has a notable 
reduction in the number of key assets being requested. I am concerned 
that reducing the number of requested cutters in the face of increased 
need may lead to problems down the road as we rely more heavily on 
legacy assets.
    I understand that many assets will have new communications and 
intelligence capabilities, which should act as ``force multipliers.'' 
However, even the best of such systems need a threshold level of 
physical presence to be effective.
    Third, I am told that no simulation has yet been run using the 
precise mix of assets and capabilities actually provided in the revised 
plan. Thus, we do not know if the plan will meet the needs.
    Fourth, I have concerns regarding the oversight and management of 
the Deepwater project. The only other major government program using a 
Lead System Integrator Approach, the Army's Future Combat System, is 
being reevaluated due to concerns with oversight and conflicts of 
interest.
    I look forward to hearing today about the Coast Guard's efforts to 
deal with these issues.

    Senator Snowe. Ranking Member, Senator Cantwell?

               STATEMENT OF HON. MARIA CANTWELL, 
                  U.S. SENATOR FROM WASHINGTON

    Senator Cantwell. Thank you, Chairwoman Snowe, for holding 
this important Committee hearing and discussing the Deepwater 
Program of the Coast Guard.
    We, obviously, do rely on the Coast Guard for many 
important services, including fisheries enforcement, 
icebreaking, and search and rescue. And, obviously, the Coast 
Guard's mission, when it comes to the expanding homeland-
security needs that we've been outlining as a nation, has 
resulted in a 25 percent increase in responsibility which seems 
to further that Coast Guard long-time motto of ``do more with 
less.'' So, I am sure that if anybody can do it, the Coast 
Guard can, yet the creativity and ingenuity that's going into 
the designing of this system-by-system approach is commendable 
and the acquisition and revitalization of these legacy assets 
is very, very challenging. So, I share some of my colleagues' 
concerns, both on the issues of acceleration, but also on the 
issues that the GAO has raised in recommendations about 
improvement and performance and the prime responsibilities for 
accountability to the outside organizations that are involved 
in integrating these.
    So, I look forward to today's hearing to hear about how you 
are integrating those GAO recommendations and what we need to 
do to make sure that we are addressing some of these challenges 
on capability as we consider acceleration of Deepwater. If 
we're going to continue to discuss acceleration, how do we have 
the increased capability that goes with this particular plan?
    So, I look forward, Madam Chairwoman, to the testimony of 
the panelists. And I want to make sure that I mention that I do 
believe that it's important to look at the oversight 
recommendations by GAO.
    So, with that, Madam Chairwoman, thanks again for holding 
this hearing, and I look forward to the testimony.

Prepared Statement of Hon. Maria Cantwell, U.S. Senator from Washington

    Thank you Senator Snowe, for holding this very important hearing to 
discuss the Coast Guard's Deepwater Program, and the revised plan that 
it recently submitted to Congress.
    The Deepwater Program--the Coast Guard's major recapitalization of 
its some 90 cutters and 200 aircraft--was first conceived long before 
the events of September 11, 2001. Even then, the Coast Guard realized 
the need to significantly upgrade its assets, which include some of the 
oldest vessels of any Coast Guard in the world.
    After September 11, 2001, the Coast Guard's traditional missions of 
law enforcement, maritime safety, drug interdiction and environmental 
protection were expanded to include a much greater emphasis on homeland 
security. With operations for homeland security increasing by about 25 
percent, the Coast Guard's assets have been stretched to the limit. 
Therefore, I am very pleased that the Coast Guard has finally provided 
us with a new Deepwater plan that will achieve all of its missions, 
including its homeland security missions.
    However, I share the concerns of some of my fellow Senators about 
several aspects of the Deepwater Program, and regarding the new plan in 
particular.
    First, the Coast Guard has not adequately demonstrated that the 
increased capability of assets included in the new plan will compensate 
for the plan's reduced capacity--particularly for the $19 million, 20-
year plan that I believe is the current ``going forward'' option. With 
the increased focus on homeland security, and the ever-present need for 
the Coast Guard's work in the more traditional areas, it is unclear to 
me that the Coast Guard can continue to achieve more with less.
    Second, I am concerned that the Coast Guard has changed its plans 
with respect to retiring certain older, ``legacy'' aircraft--its C-130 
fixed-wing airplane and its HH-60 helicopter, which it now intends to 
retain.
    The Coast Guard's has already experienced difficulties that it had 
not predicted, with resultant cost increases, in upgrading its old HH-
65 helicopters and 110, cutters. I wonder if the decision to backtrack 
on purchasing new assets for these two classes of aircraft was 
performance driven, or if rather, it was driven largely through 
budgetary concerns.
    Finally, I am concerned about whether the Coast Guard is doing all 
that it should to ensure proper management and oversight of this long-
term contract.
    The Government Accountability Office (GAO) has long-raised its 
concerns regarding the Coast Guard's decision to use a non-standard 
contract structure. In a 2004 report, GAO found problems with the lack 
of incentives for keeping costs down under this approach--where the 
prime contractor makes all ``make or buy'' decisions without the 
competition required of traditional procurement models.
    It also found serious shortfalls in the Coast Guard's internal 
oversight of the program. While I recognize the progress the Coast 
Guard has made in implementing these recommendations, nine of the 
eleven recommendations remain unmet according to the GAO.
    I wonder if even these recommendations go far enough, given that 
the Deepwater Program could last for as long as 25 years under a single 
prime contractor. My colleague, Senator McCain, recently raised similar 
concerns with an Army program--the Future Combat System. In that case, 
following investigation, the Army returned to a more traditional 
contract format with improved transparency and oversight of the 
program.
    Admiral Collins, I look forward to your testimony today on the 
Coast Guard's revised Deepwater plan, and hope that my concerns will be 
addressed. I also look forward to the testimony of Ms. Wrightson of 
GAO, and of Mr. O'Rourke of the Congressional Research Service, and 
hope that they will have some recommendations on how management of this 
major program can be improved, for the benefit of the Coast Guard, and 
for the benefit of the American people.
    Finally, I thank our Chairwoman, Senator Snowe, once again, for 
holding this hearing today.

    Senator Snowe. Thank you, Senator Cantwell.
    Admiral Collins, you may begin. Welcome.

            STATEMENT OF ADMIRAL THOMAS H. COLLINS,

                 COMMANDANT, U.S. COAST GUARD;

            ACCOMPANIED BY REAR ADMIRAL PAT STILLMAN

    Admiral Collins. Well, good morning, distinguished members 
of the Committee and Madam Chairman. It's a great pleasure for 
me to be with you here today to address the issues of our 
Deepwater Program.
    The Deepwater Program continues the recapitalization of our 
cutters, our boats and aircraft, and supports the 
infrastructure to reverse the declining readiness trends and 
improve the critical operational capabilities and readiness 
that you've mentioned in your opening comments.
    Importantly, it--we are convinced that the system-of-
systems approach is the right approach. It will create an 
interoperable systems of capability that are really force 
multipliers together. The sum is greater than the individual 
parts. It will help us identify and intercept threats well 
before they reach the shore.
    Our revised Deepwater Acquisition and Implementation Plan 
is a performance-based--and I stress that--performance-based 
and goal-driven roadmap with identified phases, timelines, and 
target completion dates that will enable us to ensure that our 
cutters and aircraft are equipped with the right systems, the 
right capabilities to operate successfully in the post-9/11 
environment.
    The enhanced capabilities are in the areas of C4ISR, 
airborne use-of-force, force-protection system, long-range 
surveillance and strategic lift, and CBRN protection. And these 
enhanced capabilities are absolutely critical to ensuring the 
maritime security of America and its $750 billion maritime 
transportation system. The added capabilities will allow us to 
leverage our assets far beyond the current fleet operational 
output. New upgraded interoperable C4ISR capabilities, for 
example, along with airborne use-of-force, will help fuse 
tracking, surveillance/detection, and classification 
information into relevant, usable common operating pictures 
that operational commanders can deploy to execute their 
missions more effectively.
    These same Deepwater assets and capabilities are integral 
to the Coast Guard's ability to perform its missions of ports, 
waterways, and coastal security, migrant and drug interdiction, 
as well as fisheries enforcement and search and rescue.
    For example, C4ISR--command, control, communications, 
computers, intelligence, surveillance, and reconnaissance--
these upgrades to our current cutters, as well as the airborne 
use-of-force capabilities, enabled cutter crews from the 
GALLATIN, from the RUSH, and the THETIS, to collectively seize 
more than 33,900 pounds of cocaine last year. Cutter GALLATIN, 
alone, seized more than 24,000 pounds of cocaine, worth $768 
million. And, overall, we seized 240,000 pound of cocaine last 
year, an all-time record by 100,000 pounds. These achievements 
are a true testament to the value of Deepwater communication 
upgrades and enhancements. Their installations on these aging 
legacy cutters played a significant role in the success here in 
this particular mission.
    We are pleased with the performance enhancements realized 
to date, and we look, with great anticipation, to the 
productivity enhancements that will be realized in the future, 
when new construction and Deepwater assets containing even more 
robust capabilities come into the service later in this decade.
    In essence, the President's budget--2006 budget for the 
Integrated Deepwater System--takes aim on transforming the 
Coast Guard and stemming the decay of declining readiness 
trends. It includes the proper mix of legacy systems, 
enhancements, conversions, sustainment, and platform or system 
replacement to ensure an effective transition from legacy 
systems to new systems over an extended period. This is the 
balance we have to continue to work, the balance between legacy 
investment and new-system investment. It's critical to 
maintaining the right level of operational capability now--we 
have to operate now--and over the entire period of the 
transformation that I've referenced.
    The Coast Guard's Deepwater Implementation Plan, and the 
2006 budget, in particular, is about placing the--it is about 
placing the right tools in the very capable hands of Coast 
Guard men and women. And they have shown, time and time again, 
they know just what to do with it when we get this right. They 
deserve nothing less than our continued support, and we will 
give it to them.
    Thank you for the opportunity to testify today, and I'll be 
happy to answer questions at the appropriate time.
    Thank you.
    [The prepared statement of Admiral Collins follows:]

     Prepared Statement of Admiral Thomas H. Collins, Commandant, 
       U.S. Coast Guard; Accompanied by Rear Admiral Pat Stillman

Introduction
    Good morning Mr. Chairman and distinguished members of the 
Subcommittee. It is a pleasure to have an opportunity to appear before 
you to discuss the Coast Guard's Integrated Deepwater System and the 
positive impact it will have on the Coast Guard's ability to secure 
America's maritime borders, aid persons in distress, facilitate the 
safe and efficient flow of commerce, and respond to the expeditionary 
requirements of U.S. combatant commanders.
    On September 10, 2001, our primary maritime focus was on the safe 
and efficient use of America's waterways. Since 9/11, we have made 
great progress in securing America's waterways, while continuing to 
facilitate the safe and efficient flow of commerce. There is no doubt 
that work remains, but there is also no doubt that we continue to 
improve maritime homeland security each and every day--thanks in large 
part to the continued strong budgetary support of the Administration, 
and Congress, and certainly this Committee.
    The Integrated Deepwater System--the centerpiece for the Coast 
Guard's transformation and my top capital priority--plays an absolutely 
critical role in building a more ready and capable 21st century Coast 
Guard equal to the challenging tasks we face today and anticipate 
tomorrow.
    The Deepwater team's government-industry partnership achieved many 
program milestones during 2004 and strengthened Deepwater's foundation 
by incorporating far-reaching program and contract-management 
improvements in accordance with recommendations from the Government 
Accountability Office.
    With the strong support of the Department of Homeland Security 
(DHS), the Administration, and Congress we are positioned to play an 
even greater role in reducing the future risk of a terrorist event 
against the homeland. During the past 2 years, we have modernized 
select legacy assets to operate more effectively until replaced by 
Deepwater assets. Through the revision of the Integrated Deepwater 
System mission needs statement and implementation plan we have 
established requirements for improved capabilities on converted or new 
Deepwater platforms that are necessary for the Coast Guard to perform 
its full range of post-9/11 missions.
    The revised plan, based on a comprehensive performance-gap 
analysis, updates the original pre-9/11 Deepwater Program by modifying 
the original assets that would have been delivered to incorporate 
improved post-9/11 capabilities; retaining, upgrading, and converting 
aviation legacy assets as part of the final asset mix; and adjusting 
the program's overall asset delivery schedule to maximize operational 
effectiveness. The Revised Implementation Plan ensures Deepwater 
cutters and aircraft will be equipped with the right systems and 
capabilities (summarized below) to operate successfully in the post-9/
11 threat environment. These enhanced capabilities are absolutely 
critical to ensuring the maritime security of America and its $750 
billion maritime transportation system:

   Interoperable network-centric command-and-control system 
        (essential for maritime domain awareness);

   Increased speed and integrated weapons systems on select 
        cutters;

   Helicopter airborne use-of-force and vertical insertion and 
        delivery;

   Improved fixed-wing aircraft long-range surveillance and 
        transport;

   Enhanced anti-terrorist and force protection; and

   Detection-and-defense systems for chemical, biological, and 
        radiological threats.

    Deepwater's revised implementation plan is paramount in addressing 
the goals that Secretary Chertoff has established to integrate 
intelligence and operations across DHS using a rigorous risk-based 
framework for decisionmaking.
    Deepwater cutters and aircraft equipped with these capabilities 
will be leveraged far beyond the operational limitations of original 
Deepwater assets due to recent advancements in maritime domain 
awareness, intelligence, and homeland security partnerships. These 
advancements, combined with enhanced Deepwater capabilities, will 
enable the Coast Guard to close existing operational shortfalls so it 
may execute its full range of homeland security and national-defense 
missions far more effectively, reduce risk in the maritime domain, and 
improve the safety and readiness of all platforms. The revised plan 
also provides for the progressive sustainment, modernization, and 
conversion of aging legacy assets as Coast Guard transitions to a 
recapitalized fleet.
    It is estimated the revised Deepwater long-term acquisition will 
cost between $19 billion and $24 billion over a period of 20 to 25 
years. Because Deepwater is a performance-based acquisition, the 
revised plan projects a range of assets for the final force levels of 
two classes of cutters and some aircraft. As stated in the revised 
implementation plan, the final number of assets will, at a minimum, be 
sufficient to meet Department of Homeland Security and Coast Guard 
long-range performance goals.
    Since we provided Congress with the revised Deepwater 
Implementation Plan in March, we have had a very constructive 
engagement with House and Senate oversight committees. We have now 
provided the Congress with details on the revised plan's asset delivery 
schedules over the life of the program. We fully appreciate the role 
Congress plays in providing for a 21st century Coast Guard and its need 
for more detailed information upon which to make informed decisions.
    Nearly 3 years ago, President Bush said, ``The U.S. Government has 
no more important mission than protecting the homeland from future 
terrorist attacks.'' The revised Deepwater Implementation Plan 
represents a significant investment in ensuring Coast Guard mission 
performance now and in the future. In short, it will result in a Coast 
Guard possessing the 21st Century technologies necessary to safeguard 
the Nation, protect our citizens, and reduce the risk of a terrorist 
attack against the Nation originating in the maritime domain. I look 
forward to further discussing this major milestone with you this 
morning.
    The Coast Guard's 2006 budget includes $966 million for Deepwater, 
a 33 percent increase over last year's appropriation. This investment 
will make important contributions to the DHS strategic goals of 
improving threat awareness, prevention and protection against terrorist 
attacks, and response and recovery should they occur.
    The Deepwater budget's increased asset funding for 2006 will yield 
essential system-wide capabilities for our maritime homeland security 
mission and sustain operational effectiveness in all of the Coast 
Guard's military, multi-mission, and maritime responsibilities. 
Deepwater aligns completely with my overarching budget goals to: (1) 
recapitalize the Coast Guard, (2) implement the Maritime Strategy for 
Homeland Security, and (3) enhance mission performance.

Reducing Maritime Risk
    Today's global maritime safety and security environment demands a 
new level of operations specifically directed against terrorism without 
degrading other critical maritime safety and security missions. Most 
importantly, the Coast Guard must implement the improved Deepwater 
capabilities identified in our revised implementation plan if we are to 
mitigate maritime security risks successfully in the post-
9/11 world.
    Secretary of Homeland Security Chertoff has emphasized that the 
three variables of threat, vulnerability, and consequence serve as the 
appropriate model for assessing risk and deciding on the protective 
measures we undertake as a nation. This is a framework quite familiar 
to Coast Guard men and women who perform multiple missions in our 
Nation's ports, waterways, coastal areas, and on the high seas. In 
terms of threat, vulnerability, and consequence there are few more 
valuable targets than the U.S. maritime transportation system:

   Threat: While the 9/11 Commission notes the continuing 
        threat against our aviation system, it also states that 
        ``opportunities to do harm are as great, or greater, in 
        maritime or surface transportation.''

   Vulnerability: The maritime transportation system annually 
        accommodates 6.5 million cruise ship passengers, 51,000 port 
        calls by over 7,500 foreign ships, at more than 360 commercial 
        ports spread out over 95,000 miles of coastline. The vastness 
        of this system and its widespread and diverse critical 
        infrastructure leave the Nation vulnerable to terrorist acts 
        within our ports, waterways, and coastal zones, as well as 
        exploitation of maritime commerce as a means of transporting 
        terrorists and their weapons.

   Consequence: Contributing nearly $750 billion to U.S. gross 
        domestic product annually and handling 95 percent of all 
        overseas trade each year, the value of the U.S. maritime domain 
        and the consequence of any significant attack cannot be 
        understated. Independent analysis and recent experiences on 9/
        11 and the West Coast dock workers strike demonstrates an 
        economic impact of a forced closure of U.S. ports for a period 
        of only 8 days in excess of $58 billion to the U.S. economy.

    The 9/11 Commission also drew a strong linkage between improved 
defenses with the government's ability to reduce the risk of a 
terrorist attack--a linkage that relates directly to the imperative to 
recapitalize the Coast Guard through an increasingly capable Deepwater 
system of systems. The Commission reported:

        ``Our report shows that the terrorists analyze defenses. They 
        plan accordingly. Defenses cannot achieve perfect safety. They 
        make targets harder to attack successfully, and they deter 
        attacks by making capture more likely. Just increasing the 
        attacker's odds of failure may make the difference between a 
        plan attempted, or a plan discarded. The enemy also may have to 
        develop more elaborate plans, thereby increasing the danger of 
        exposure or defeat. Protective measures also prepare for the 
        attacks that may get through, containing the damage and saving 
        lives.''

    Since 9/11, the President, DHS, and the Coast Guard have made 
significant strides to secure our homeland by instituting these types 
of protective measures to help deter attacks in the maritime domain. 
However, maritime safety and security gaps remain. These gaps present 
risks that must be reduced.
    The Coast Guard guides its efforts by implementing policies, 
seeking resources, and deploying capabilities through the lens of the 
national Maritime Security Strategy. However, continued risk reduction 
is contingent upon Coast Guard capability, capacity, and readiness. 
Without these basic building blocks, implementation of maritime 
security strategies will not be sustainable. With that in mind, my 
highest priority for the Coast Guard's 2006 budget is to continue to 
recapitalize the Coast Guard as a necessary foundation to implementing 
the maritime security strategy, as well as ensuring we continually 
enhance mission performance across the entire suite of Coast Guard 
mission requirements.
    Recapitalizing the Coast Guard is the foundation of our ability to 
continue improving maritime security while facilitating the flow of 
commerce. It is on this foundation that the 2006 budget continues to 
build out Coast Guard Deepwater capabilities necessary to reduce risk 
and implement the national maritime strategy for homeland security--
today, tomorrow, and into the future.
    The 2006 Deepwater budget continues the recapitalization of our 
cutters, boats, aircraft and support infrastructure to reverse 
declining readiness trends and provide critical operational 
capabilities to meet today's maritime security and safety threats. As 
detailed in the National Strategy for Homeland Security, this remains a 
critical need in protecting the homeland.

Recapitalize the Coast Guard
    Despite spending increasing amounts to maintain operational assets, 
the Coast Guard is experiencing a continuing decline in fleet 
readiness. Legacy cutters are now operating free of major equipment 
casualties (equipment failures that significantly impact mission 
performance) less than 50 percent of the time, despite the investment 
per operational day increasing by over 50 percent over the last 6 
years. The resulting ``readiness gap'' negatively impacts both the 
quantity and quality of Coast Guard ``presence''--critical to our 
ability to accomplish all missions.

Readiness Declining
    The majority of the Coast Guard's operational assets, designed for 
the threat environment of the 1960s and 1970s, will soon reach the end 
of their anticipated service lives resulting in rising operating and 
maintenance costs, reduced mission effectiveness, unnecessary risks. 
Listed below are some specific examples highlighting alarming system 
failure rates, increased maintenance requirements, and the subsequent 
impact on mission effectiveness:

   HH-65 helicopter in-flight engine power losses occurred at a 
        rate of 329 mishaps per 100,000 flight hours in Fiscal Year 
        2004. This is up from a Fiscal Year 2003 rate of 63 mishaps per 
        100,000 flight hours. The engine-loss rate has resulted in 
        flight and operational restrictions and high levels of risk to 
        our aircrews. Re-engining the HH-65 will remain the Coast 
        Guard's highest legacy asset priority until complete. We 
        greatly appreciate Congress' support in correcting this 
        critical safety and reliability issue, including transferring 
        an additional $40 million into Deepwater to accelerate this re-
        engining effort in Fiscal Year 2005. The 2006 budget requests 
        $133 million to complete re-engining of the remaining 
        operational HH-65s.

   The 110-foot patrol boat fleet has experienced 23 hull 
        breaches, or openings in the hull from corrosion, requiring 
        emergency dry docks. The resultant loss in operational days 
        poses unacceptable risks to our personnel. By the end of 2005, 
        the Coast Guard will have taken delivery of eight reconfigured 
        123-foot patrol boats, which are upgraded 110-foot patrol boats 
        designed to sustain this cutter class until replacement with 
        the Integrated Deepwater System's Fast Response Cutter.

        Last month, I directed that Deepwater's conversion of 110-ft. 
        patrol boats be terminated at eight hulls for several reasons. 
        First, the pre-9/11 design for the 123-foot patrol boats did 
        not provide needed homeland security capabilities called for in 
        the revised Deepwater mission need statement. Second, the 
        advanced deterioration of the 110-foot patrol boat hulls, 
        increased costs associated with conversion and technical 
        difficulties were also significant parts of this decision. 
        Several steps have been taken to mitigate the near-term 
        operational impact of this termination. For the long term, the 
        Coast Guard has advanced the design and construction of the new 
        Fast Response Cutter by a full decade. The revised Deepwater 
        Implementation Plan builds improved post-9/11 capabilities into 
        this cutter's design and delivers it far sooner than originally 
        planned.

   Our high and medium endurance cutters are experiencing sub-
        system failures due to old and unserviceable systems. The 378-
        foot high endurance fleet averages one main space casualty, 
        with potential to escalate to main space fire, on every patrol. 
        Three out of a total class of 12 ships have recently missed 
        operations due to unscheduled maintenance required to repair 
        failing sub-systems. The total number of unscheduled 
        maintenance days for the major cutter (medium and high 
        endurance cutters) fleet has increased from 85 days in Fiscal 
        Year 1999 to 358 days in Fiscal Year 2004 (over a 400 percent 
        increase over Fiscal Year 1999). This loss of operational 
        cutter days in 2004 equates to losing two major cutters, or 5 
        percent of our major fleet for an entire year. The 2006 budget 
        includes funding for six mission effectiveness projects to help 
        sustain the medium endurance cutter fleet, and funds 
        construction of the third National Security Cutter, the 
        replacement for the Coast Guard's high endurance cutter class.

    These same Deepwater assets are integral to the Coast Guard's 
ability to perform its missions of ports, waterways, and coastal 
security; migrant- and drug-interdiction operations; fisheries 
enforcement, and search and rescue. In 2004, Deepwater legacy assets 
made invaluable contributions to America's maritime security and 
safety:

   Operation ABLE SENTRY blanketed the coastline of Haiti with 
        legacy Coast Guard Deepwater assets, which interdicted more 
        than 1,000 illegal migrants during this operation and deterred 
        many thousand more from taking to sea in unsafe boats.

   The 378-foot Coast Guard cutter GALLATIN, and its Airborne-
        Use-of-Force- (AUF) capable helicopter seized more than 24,000 
        pounds of cocaine worth an estimated $768 million and detained 
        27 suspected smugglers in the span of 7 weeks. The GALLATIN's 
        commanding officer has indicated that the secure-communications 
        improvements made by the Deepwater Program were key to this 
        effort.

   The Coast Guard's aging Deepwater cutters and aircraft 
        patrolled over 28,000 hours in direct support of maritime 
        homeland security missions. 110-foot patrol boats alone 
        patrolled 13,000 hours supporting port and coastal security 
        missions including, cruise ship escorts, critical 
        infrastructure protection, and countless security boardings.

   Working in conjunction with the U.S. Secret Service during 
        the national political conventions, 270-foot medium endurance 
        cutters and 110-foot patrol boats provided maritime security, 
        enforced security zones, and served as command and control 
        platforms coordinating maritime traffic. Deepwater aircraft, 
        equipped with the AUF package, provided air security and 
        conducted maritime security patrols.

    Deepwater's modernization and recapitalization of the Coast Guard 
includes efforts to sustain these legacy assets to continue to perform 
the Coast Guard's missions while replacement assets are being acquired. 
These sustainment and in some cases upgrading efforts are already 
beginning to yield results at sea:

   On February 13, the crew of the 123-foot cutter MATAGORDA, 
        on its first operational patrol following a major conversion as 
        part of the Coast Guard's Deepwater Program, played an 
        instrumental role in intercepting a smuggler's boat attempting 
        to bring 25 Cuban migrants into the country illegally. 
        MATAGORDA, outfitted with a more capable command-and-control 
        system during its recent Deepwater upgrade, assumed the role of 
        on-scene commander in the Florida Straits to coordinate the 
        interdiction effort. After a long chase the smuggling boat was 
        safely stopped two miles south of the Dry Tortugas. The 
        smugglers were turned over to Customs and Border Protection 
        officials, and all of the migrants were repatriated to Bahia de 
        Cabanas, Cuba, on February 14.

   Late last year, crews on the Coast Guard cutters GALLATIN, 
        RUSH, and THETIS collectively seized more than 33,949 pounds of 
        cocaine during law-enforcement deployments--continuing the 
        Coast Guard's record-setting pace established during Fiscal 
        Year 2004 when 240,518 pounds of cocaine were seized 
        (shattering the previous record of 139,000 pounds interdicted 
        in 2001). Deepwater communication upgrades and previous 
        enhancements installed on these aging legacy cutters played a 
        major role in their success, because the operations involved 
        multiple cutters, Federal agencies, and foreign countries--
        mandating seamless connectivity and high levels of 
        interoperability between all participants.

    In each of these recent operations, the Deepwater Program's C4ISR 
(command, control, communications, computers, intelligence, 
surveillance, and reconnaissance) upgrades allowed cutter crews to 
maintain a common operational picture and higher levels of maritime 
domain awareness (MDA). The upgrades included provisions for first-time 
use of a classified Local Area Network and the Secure Internet Protocol 
Router Network (SIPRNET), which commanding officers attribute to 
``revolutionizing their world of work'' because it affords crew access 
to real-time intelligence information and Department of Defense 
satellite imagery during current operations, as well as increased speed 
and size of transmission through compressed bandwidth capability.
    As gratifying as these early demonstrations of the efficacy of the 
Deepwater Program's acquisition strategy may be, they are but a 
harbinger of what the future holds when new-construction Deepwater 
assets possessing more robust capabilities begin to enter service later 
this decade.
    The President's Fiscal Year 2006 budget for the Integrated 
Deepwater System takes aim on reversing the Coast Guard's declining 
readiness trends and transforming the Coast Guard. The budget's level 
of investment in the Integrated Deepwater System provides the Coast 
Guard with the capability and capacity essential to meet our Nation's 
maritime homeland security needs; providing a layered defense 
throughout ports, waterways, coastal regions and extending far 
offshore, as well as sustaining other mission area efforts, such as 
search and rescue and living marine resources. Specifically, the Fiscal 
Year 2006 President's budget requests $966 million for the Integrated 
Deepwater System to:

   Continue acquisition of Eagle Eye tiltrotor Vertical-
        Takeoff-and-Landing Unmanned Aerial Vehicles (VUAVs), including 
        mission sensor packages and ground control technology;

   Complete re-engining of all operational HH-65 helicopters;

   Complete service-life extension, avionics, and radar 
        upgrades for HH-60 helicopters and HC-130H aircraft;

   Procure long-lead material for and production of the third 
        National Security Cutter (NSC);

   Complete design and procurement of long-lead material for 
        the first Offshore Patrol Cutter (OPC);

   Conduct testing and evaluation of the first Fast Response 
        Cutter (FRC);

   Complete mission effectiveness projects on six Medium 
        Endurance Cutters (WMECs) to sustain these cutters until they 
        can be replaced with the OPC; and

   Continue innovative, interoperable network-centric C4ISR 
        system upgrades to improve maritime domain awareness and 
        provide a common operational picture.

    Funding included for legacy asset sustainment projects, such as HH-
65 re-engining and WMEC mission effectiveness projects, is critical to 
sustain capabilities today, while the acquisition of new and enhanced 
Deepwater assets will ensure the Coast Guard has the right capabilities 
tomorrow.

Revised Post-9/11 Deepwater Implementation Plan
    The events of September 11, 2001, have changed the performance 
requirements for Coast Guard people and the assets they use. The 
original Deepwater system designed for September 10, 2001, simply could 
not do all that would be required of it after September 11, 2001.
    The Coast Guard began to adjust Deepwater shortly after the 
contract was awarded in June 2002 by modifying the capabilities 
required of the first major new asset, the NSC. These changes are 
included in the current updated baseline and will enable the first NSC, 
now slated for delivery in 2007, to conduct maritime homeland security 
missions.
    In March, together with Secretary and Mrs. Chertoff, I participated 
in the keel-laying ceremony for our first NSC. Mrs. Chertoff, the 
cutter's sponsor, noted that she looked forward to the day when 
American families can rest a little easier knowing that the men and 
women of the Coast Guard are conducting missions up and down the coasts 
of our Nation in this fine ship. I agree wholeheartedly.
    The keel laying for the first hull in our new class of NSCs marked 
a significant milestone in the Integrated Deepwater System's 
transformation of the Coast Guard for our 21st-century missions. Like 
other Deepwater cutters, aircraft, and systems, the NSC will play a 
major role in safeguarding the maritime security of our Nation for many 
years to come.
    Along with the immediate changes to the NSC's design 
specifications, DHS and the Coast Guard recognized the need to conduct 
a thorough review of the plans for all Deepwater assets. Changes to the 
national strategic security environment after 9/11 necessitated 
modifications to the Deepwater Program focused on defeating terrorist 
threats, addressing contemporary mission demands, and satisfying 
current and emergent operational priorities.
    The revised Integrated Deepwater System mission need statement and 
implementation plan were developed following a comprehensive, year-long 
analysis of the Coast Guard's post-9/11 mission requirements.

Capability
    The revised plan addresses the Coast Guard's dual challenges of 
legacy-asset deterioration and performance gaps by enhancing the 
performance of selected Deepwater assets through added capabilities and 
conversions, including C4ISR systems; adjusting the implementation 
schedule and mix of individual assets over the life of the program; and 
providing necessary balance over the life of the program based on the 
DHS strategic goals, current and emerging mission requirements, and the 
need to provide for a high-quality workplace for Coast Guard men and 
women.
    The revised Deepwater Implementation Plan updates the original plan 
by: (1) modifying the original assets that would have been delivered by 
the Deepwater project to incorporate design requirements for improved 
post-9/11 capabilities; (2) retaining, upgrading, and converting 
aviation legacy assets (C-130s, H-60s, H-65s) as part of the final 
asset mix; and (3) adjusting the program's overall asset delivery 
schedule (e.g., advancing delivery of the FRC and OPC by ten and 5 
years respectively) to maximize operational effectiveness.
    Specific operational enhancements contained in the revised 
Integrated Deepwater Systems implementation plan include:

   An innovative, integrated network-centric C4ISR system to 
        harness the power of an interoperable network to enhance 
        performance in all mission areas, improve MDA, and provide a 
        common operational picture--key to Coast Guard leading the 
        inter-agency effort to know and respond to maritime conditions, 
        anomalies, vulnerabilities, and threats. Improvements to C4ISR 
        enable earlier awareness of events through the more effective 
        gathering and fusing of terrorism-related information, 
        analysis, coordination, response--all critical to detecting, 
        deterring, and defeating terrorist attacks. Upgrades to 
        Deepwater surface assets, for example, contribute directly to 
        improved intelligence collection and fusion through a 
        sophisticated Shipboard Sensitive Compartmentalized Information 
        Facility (S/SCIF), sensors, and increased data-exchange 
        bandwidth;

   Improved maritime-security capabilities such as increased 
        speed and integrated weapons systems on selected Deepwater 
        cutters essential to higher levels of maritime homeland 
        security during a terrorist attack, opposed boardings, and 
        other high-risk operations;

   Airborne use-of-force and vertical insertion and delivery 
        capabilities to allow helicopters to provide warning and/or 
        disabling fire, and to deploy, deliver, and recover boarding 
        teams safely and more effectively;

   Improved fixed-wing aircraft long-range surveillance to 
        increase MDA and reduce maritime patrol aircraft shortfalls in 
        operating hours; organic Coast Guard air transport capability 
        will enable deployment of Maritime Safety and Security Teams 
        and National Strike Force teams for faster, more effective 
        response;

   Improved capabilities for anti-terrorist/force protection on 
        select Deepwater assets with all-weather self-defense and the 
        ability to protect high-value assets; assets will have the 
        capability to engage terrorists with higher assurance of 
        survivability and continued mission capability; and

   Improved asset capabilities for detection and defense for 
        chemical-biological-radiological (CBR) threats--essential to 
        survival and continued operations during a CBR attack involving 
        a weapon of mass destruction.

    These are ``must-have'' capabilities in today's threat environment 
and the Nation would be remiss to build out a Coast Guard without them. 
Consider the 96 hour advanced notice of arrival requirement for vessels 
arriving in U.S. ports--just one of the many improvements to maritime 
security resulting from the landmark Maritime Transportation Act of 
2002. This reporting requirement enables the Coast Guard to identify 
threats before they enter our ports where they can do the most harm. 
The revised post-9/11 capabilities listed above enable the Coast Guard 
to respond quickly and forcefully to neutralize these threats before 
they enter our Nation's ports, waterways and coastal areas.
    The revised implementation plan maximizes existing capabilities by 
calling for the conversion of H-60 and H-65 airframes to serve as 
multi-mission helicopters. Again, this is a prudent and reasonable 
investment decision reflecting the many years of experience we have 
operating and maintaining these aircraft.
    The rigorous periodic depot-level maintenance process addresses 
corrosion and technology obsolescence issues on a recurring basis. When 
these helicopters are converted, the airframes will be taken apart down 
to the structural-component level based on a standard maintenance 
cycle. In addition to planned technical upgrades, strict specifications 
govern the requirement for refurbishment or replacement of aircraft 
components.
    Deepwater's original implementation plan proposed by ICGS 
recognized the Coast Guard's ability to sustain aircraft indefinitely 
provided sufficient funding was available for necessary maintenance, 
repairs, and periodic system upgrades. In the original plan, the H-65 
was selected for the final Deepwater force structure as a multimission 
cutter helicopter (MCH), and the H-60 was to be retained through at 
least 2022. Under the new plan both helicopters have been selected for 
the final Deepwater force structure.
    The H-65 re-engining is well underway, setting the stage for the 
additional upgrades identified in the revised implementation plan. 
Earlier this month, Coast Guard Air Station Atlantic City, NJ, accepted 
its fifth re-engined aircraft, and one was delivered to Coast Guard Air 
Station Savannah, GA.

Capacity
    The Deepwater system's performance-based acquisition strategy 
allows the Coast Guard to respond to changing conditions and threats, 
and provides a vehicle for capability and schedule adjustments over the 
life of the program--maximizing value and performance through 
technology refreshment and innovation. For example, capability 
improvements incorporated at both the asset and system level in the 
revised implementation plan resulted in adjusting the original mix of 
some platforms. Owing to planned increases in C-130 aircraft for long-
range surveillance and transport, for example, it is possible to adjust 
the number of CASA CN-235 aircraft (MRS) originally planned for the 
program.
    Similarly, the AB-139 helicopter, originally proposed by Integrated 
Coast Guard Systems (ICGS) as a notional future platform, was 
determined not to possess the endurance and power necessary to meet 
post-9/11 requirements such as the need to transport six-member 
boarding teams, plus equipment, for vertical insertions to ships at 
ranges up to 200 nautical miles from a cutter or shore station; it also 
did not meet other requirements associated with airborne use-of-force 
and operating in known icing conditions. Existing Coast Guard H-60 
helicopters are capable of meeting these requirements and also have a 
mature logistics and training base in the armed forces that we may 
leverage.
    The flexibility inherent in Deepwater's acquisition will enable the 
Coast Guard to adjust the final mix of selected platforms as overall 
system-of-systems capability improvements are generated by, for 
example, significant improvements to the program's system for C4ISR or 
Unmanned Aerial Vehicle technology.
    Legitimate questions have been raised regarding our decision to 
project a range for the numbers of some assets--the system's capacity--
when the Deepwater acquisition is completed some 20 to 25 years from 
now under current funding projections.
    It is very difficult to predict today, with precise accuracy, what 
the optimum mix of Deepwater assets will be 15, 20, or 25 years from 
now. For that reason, our long-range projection for the acquisition 
depicts a range of numbers for five of our 11 Deepwater assets. From 
its inception, Deepwater has been a performance-based program. The 
final mix of assets and fleet size will be based on assessments of our 
threat environment, mission requirements, the actual performance of 
each asset, and the overall Deepwater system of systems' performance. 
This approach is both consistent with our long-range acquisition 
strategy and reflects good stewardship of the taxpayer's dollars.
    A more complete explanation of the Deepwater acquisition strategy 
helps to explain the rationale behind the projected range of asset 
numbers. In short, more capable assets will be able to do a great deal 
more than those reflected in the pre-9/11 Deepwater construct--just as 
modern power tools and materials enable a carpenter to build a home in 
a shorter amount of time than the days when hand saws and hammers were 
the norm.
    We believe our plan to incorporate improved post-9/11 operational 
capabilities on all major surface and aviation platforms will reap 
significant system-wide performance improvements that will have a 
bearing on capacity requirements. In the world of C4ISR, for example, 
we have already seen how command-and-control upgrades to our legacy 
cutters serve as a force multiplier to generate impressive dividends in 
operational effectiveness and efficiency. Armed with earlier, more 
accurate, and continuously streamed intelligence and operational data 
to maintain a common operating picture, commanders can employ their 
assets far more effectively than in the past.
    The Coast Guard faces the same resource constraints as every other 
Federal agency today, and it would be a breach of responsible 
stewardship to acquire additional capacity if a smaller force is able 
to satisfy our long-term performance goals. We will not know the answer 
to that question for a number of years. Deepwater's final number and 
mix of assets will, at a minimum, be sufficient to meet DHS and Coast 
Guard long-term performance goals. The program's alternative 
acquisition schedules provide far more meaningful vehicles for 
assessing the program's current and future direction.
    For this reason, our emphasis to identify and incorporate the 
correct design requirements for the many improved capabilities needed 
to perform the Coast Guard's post-9/11 missions is the correct priority 
at this point in the Deepwater acquisition. We will have many years to 
adjust Deepwater's final capacity based on the system's actual 
performance, changes to mission requirements, and the future threat 
environment.

A Year of Achievement
    As part of our efforts to enhance mission performance, it is 
appropriate to acknowledge that Deepwater's Coast Guard-industry team 
marked numerous important milestones during 2004. Beyond the past 
year's success story of C4ISR upgrades to legacy cutters, Deepwater's 
C4ISR shore-side upgrade was completed in 2004, at the Communications 
Area Master Station Pacific (CAMSPAC) facility at Point Reyes, Calif. 
The first shore-based IDS communications upgrade was completed in 2003 
at Communications Area Master Station Atlantic (CAMSLANT).
    As I discussed, we laid the keel for our first NSC in late March. 
The contract for that cutter was awarded just last June to Integrated 
Coast Guard Systems (ICGS, a joint venture between Lockheed Martin and 
Northrop Grumman). The Coast Guard's contract for the second cutter in 
the class was awarded to ICGS in early January. Northrop Grumman Ship 
Systems is leading the production effort, with Lockheed Martin 
responsible for the design, manufacture, and integration of the 
cutter's systems for C4ISR. From start-up to keel laying in a little 
less than 2 years, this is an impressive achievement.
    Also last June, the Coast Guard awarded a contract to ICGS to begin 
the design and final requirements work for the OPC, Deepwater's medium-
sized cutter. The design and final requirements for the third class of 
Deepwater cutters, the FRC, also will move forward smartly in 2005.
    There also was steady progress in Deepwater's modernization and 
recapitalization of Coast Guard aviation assets last year. For example, 
the first production re-engined HH-65 helicopter incorporating 
Deepwater upgrades completed its test flights successfully in September 
and entered full operational service at Aviation Training Center, 
Mobile, Alabama, in early October. We are evaluating the feasibility of 
opening a second production line to allow the Coast Guard to accelerate 
this critical upgrade on our HH-65s, mindful of their reputation as the 
``workhorse of the fleet.''
    Similar progress is evident in the recapitalization of the Coast 
Guard's fixed-wing aircraft inventory. In 2003, the Coast Guard awarded 
a contract to ICGS for concept and technology development of our new 
maritime patrol aircraft. Initial contracts between Lockheed Martin and 
EADS CASA are for the procurement of three CN-235-300M medium-range 
surveillance maritime patrol aircraft. Delivery is scheduled for 2007 
following configuration for Coast Guard missions. The contract also 
includes an option for spare parts and integrated logistic support, as 
well as an option for five additional aircraft. The CN-235-300M 
completed a successful preliminary design review in December. 
Deepwater's Eagle Eye tiltrotor VUAV successfully completed its 
preliminary design review last March and underwent its critical design 
review in January 2005.
    These milestones also illustrate the Deepwater Program's important 
industrial-base ramifications. Shipbuilding, aviation, and information 
technology systems come to mind immediately, but it is worth noting 
that Lockheed Martin and Northrop Grumman, joint partners in Integrated 
Coast Guard Systems (ICGS), have contracts with companies producing 
supplies or conducting work for the IDS program in 41 states.

National Fleet
    Deepwater's recapitalization of the Coast Guard also plays a key 
enabling role in providing the means to achieve the national fleet 
policy's goals for interoperable Coast Guard and Navy assets. The 
policy is in place to ensure our two services work together to 
synchronize our multi-mission platforms, infrastructure, and personnel 
to provide the highest level of naval and maritime capability for the 
Nation's investment. This, of course, is absolutely essential if we are 
to obtain the highest levels of operational effectiveness in maritime 
homeland security and homeland defense operations, as well as in the 
performance of our national-defense responsibilities providing 
expeditionary support to U.S. joint combatant commanders around the 
world.
    Admiral Clark, the Chief of Naval Operations, has said that the 
global war on terrorism's heightened requirement for improved homeland 
defense and maritime security has produced a Navy-Coast Guard 
partnership unlike anything the sea services have experienced in many 
years. Partnership with the Navy and the Department of Defense allows 
an effective two-way flow of capability to meet both expeditionary and 
domestic security imperatives--all very much in the national interest. 
A number of initiatives are in motion to advance the national fleet 
concept following my senior-level talks with Admiral Clark last 
November. Deepwater's contribution to national fleet policy objectives 
will only increase as the Program continues to gain momentum during the 
years ahead.
    The Deepwater Program is actively working with the Littoral Combat 
Ship (LCS) program at a functional level on small boat launch and 
recovery, weapons and combat systems, and mission modules. We are 
exploring other collaborative opportunities with the Naval Air Systems 
Command and the Marine Corps Systems Command.
    The revised Deepwater Implementation Plan directly supports this 
inter-agency collaboration with the Navy. The plan's provisions for 
more capable Coast Guard cutters, aircraft, patrol boats, and C4ISR 
systems will enable us to achieve the national fleet policy's call for 
the highest level of naval and maritime operational integration for 
improved maritime security.
    Assistant Secretary of Defense for Homeland Security, Paul McHale, 
recently emphasized this compelling requirement. ``It is in the 
maritime domain that I believe we have our single greatest opportunity 
to enhance our domestic U.S. security,'' he said. ``We must achieve, in 
short, complete synchronization of Coast Guard and Navy capabilities.''

Program Management
    Deepwater also has made steady progress implementing 
recommendations from the Government Accountability Office (GAO) to 
improve program management and oversight. Last year, GAO identified 13 
items of concern in two separate audit reports. The Deepwater Program 
has worked diligently and successfully to address them.
    Since its March 2004 report was issued, we have updated GAO 
regularly on the implementation of these improvements through four 
detailed reports, six overall program briefings, and multiple on-site 
meetings regarding specific topic areas, and four briefs, including a 
day-long conference in January. We have taken specific actions to 
improve program management efforts to measure and evaluate cost, 
schedule, and performance; improve communications, and to encourage 
future cost control through rigorous competition.
    In short, the Coast Guard has embraced the GAO's recommendations. 
Eleven recommendations were grouped by three categories: program 
management, contractor accountability, and cost controls through 
competition. GAO has closed two of the eleven recommendations as 
completed by the Coast Guard, and we anticipate further closures and 
satisfactory progress during the weeks ahead. These GAO closure actions 
and Coast Guard progress reports document the work the Coast Guard has 
done to comply with the GAO recommendations. Two recommendations of the 
13 total, contained in a second separate audit report, addressed 
updating the Deepwater acquisition schedule. The Coast Guard complied 
with this request as part of the Fiscal Year 2006 budget process.
    To improve program management, we have restructured Deepwater's 
Integrated Product Teams (IPTs) to comport with GAO best practices, 
improved electronic information sharing systems, stabilized the 
workforce through human capital improvements, and standardized 
information flow from the program to field units to facilitate delivery 
of, and transition to upgraded Deepwater legacy platforms.
    Regarding contractor accountability, the Coast Guard has refined 
the ICGS performance criteria to standardize input and increase the 
objectivity of annual assessments. To continually monitor contractor 
performance, the Coast Guard employs a ``balanced score card'' and an 
earned value-management system (both of which are considered ``industry 
best practices'').
    To ensure cost control through competition, the Coast Guard reviews 
the competition of ICGS subcontracts through periodic evaluations. 
Additionally, ICGS has agreed to notify the Coast Guard prior to 
deviating from the accepted contract proposal if they decide to execute 
work in-house above $10 million that was proposed to be subcontracted 
by a company other than the ICGS prime contractor.
    The Coast Guard welcomed the GAO's recommendations last year. We 
viewed them as an independent review of IDS contract-management 
practices. During her testimony to the Senate last month on the 
Deepwater Program, I was gratified to hear Ms. Margaret Wrightson, 
GAO's Director for Homeland Security and Justice Issues, describe the 
Coast Guard's response to her agency's review of our Deepwater Program 
as a ``constructive engagement'' on the issues. I share Ms. Wrightson's 
assessment and remain committed to the success of what I judge is a 
collaborative, complementary effort.
    We fully recognize that GAO still sees the potential for our 
contracting approach to pose a number of inherent risks that, left 
unaddressed, could lead to increased costs and schedule adjustments in 
the Deepwater Program, but I restate today the Coast Guard's unwavering 
commitment to good stewardship. The Deepwater-industry team is a 
developing organization fully committed to continuous process 
improvement, the adoption of best-business practices, and an open frame 
of reference leading to continued refinement of its acquisition 
strategy and business plan.
    We take our stewardship seriously, and we will achieve program 
success through performance measures and accountability. Simply stated, 
the GAO is making active contributions to help us successfully execute 
this critical Deepwater Program.

Conclusion
    I appreciate your strong support of the Deepwater Program over the 
past several years in providing the Coast Guard with the tools 
necessary to meet our multi-mission and military demands and to fight 
the Global War on Terrorism. I am extremely proud of our Coast Guard's 
accomplishments since 9/11 as we strive to increase maritime homeland 
security while continuing to perform a myriad of critical maritime 
safety functions.
    Funding requested for the Deepwater Program will positively impact 
our ability to deliver the maritime safety and security America demands 
and deserves by focusing resources toward our three critical 
priorities: recapitalize the Coast Guard, implement the Maritime 
Strategy for Homeland Security, and enhance mission performance.
    The revised Deepwater Implementation Plan's progressive 
modernization and recapitalization will provide improved, critically 
needed capabilities that are fundamental to the Coast Guard's ability 
to deliver required levels of operational excellence necessary for the 
security of the Nation and the safety of our citizens.
    Thank your for the opportunity to testify before you today on the 
Deepwater Program. I will be happy to answer any questions you may 
have.

    Senator Snowe. Thank you.
    Ms. Wrightson?

         STATEMENT OF MARGARET T. WRIGHTSON, DIRECTOR,

                 HOMELAND SECURITY AND JUSTICE,

             U.S. GOVERNMENT ACCOUNTABILITY OFFICE

    Ms. Wrightson. Thank you. I'm pleased to be here today to 
discuss Deepwater Program implementation, focusing on the 
results of our work for this Subcommittee on the condition----
    The Chairman. Would you pull that mike up a little, please?
    Ms. Wrightson. A little--OK. Can you get it there? Have I--
OK. I'll start over.
    I'm pleased to be here today to discuss Deepwater Program 
implementation, focusing on the results of our work for this 
Subcommittee on the condition of the Coast Guard's legacy 
Deepwater assets, actions the Coast Guard has taken to maintain 
these assets, and on the management challenges the Coast Guard 
faces in acquiring replacements.
    The bottom line of our work to date is this; the costly and 
important Deepwater Program will continue to carry substantial 
risk, and, therefore, need constant monitoring and management 
attention to successfully accomplish its goals of maximizing 
effectiveness, minimizing total ownership costs, and satisfying 
the assets' users. The substantial revisions to the Coast 
Guard's mission needs statement and its Deepwater 
Implementation Plan, as well as recent funding uncertainties, 
are the latest evidence of the complexity and challenges the 
Coast Guard faces.
    With respect to the risks, our work has identified three 
main points:
    First, the need to replace or upgrade deteriorating legacy 
assets is considerable. While the Coast Guard lacks measures 
that clearly demonstrate how this deterioration affects its 
ability to perform missions, it is clear that Deepwater legacy 
assets are insufficient in the post-9/11 environment.
    Second, although the need to replace and upgrade assets is 
strong, the acquisition management and oversight risks we have 
identified will likely increase under a more aggressive 
acquisition schedule. The cost increases, schedule slippages, 
and project cancellations that have occurred so far are warning 
signs. We will continue to work with the Coast Guard to 
determine how best to manage these risks so that Deepwater 
missions can be accomplished in the most cost-effective way, 
going forward.
    Third, there are signs that, as the Deepwater Program moves 
ahead, the Coast Guard will continue to report additional 
problems with existing assets. Some of these problems, such as 
those of the 378-foot cutters, are included in the compendium 
the Coast Guard uses to set sustainment priorities and plan 
budgets, but have not yet been funded, because they pertain to 
assets that are first to be replaced. However, projects such as 
these to address problems that, may be today or on the horizon, 
nevertheless, are likely going to be needed.
    Turning to some of the very important details--and I'm 
going to try and shorten my statement, in the interest of time 
here--our analysis of the most recent 5 years shows that the 
condition of the assets generally declined during the period, 
but the available condition measures do not demonstrate that 
rate of decline to be as fast or clear cut as the Coast Guard 
has asserted. Also, not all assets showed similar downward 
trends. We believe the trends, however, should be viewed with 
deep caution. While there is no systematic quantitative 
evidence sufficient to demonstrate that we're headed for a 
train wreck here, this does not mean that the assets are in 
good condition or have been performing their missions safely, 
reliably, and at levels that meet or exceed Coast Guard 
standards. Rather, evidence from our site visits showed aging 
and obsolete systems and equipment as a major cause of the 
reduction in mission capabilities for a number of Deepwater 
legacy aircraft and cutters.
    Turning to the Coast Guard efforts to address the problems 
with their assets. Beginning in 2002, the Coast Guard has 
annually issued a compendium consolidating information needed 
to make planning and budgeting decisions regarding maintenance 
and upgrades. Also, and very significantly, Coast Guard crews 
have been spending increasingly more time between missions to 
prepare for the next deployment. Such efforts are likely to 
help prevent a more rapid decline in the condition of the 
assets, but it is important to note that, even with increasing 
amounts of maintenance, these assets are still losing mission 
capabilities due to equipment and system failures.
    In reality, our work suggests that simply working harder 
may not be enough. In this regard, the Coast Guard has recently 
begun to develop a strategy, known as CAMS, to better 
prioritize the projects needed to upgrade legacy assets in 
order to achieve the greatest overall mix of capabilities that 
maximizes performance across missions. Although it is too soon 
to assess the effectiveness of this strategy, we regard it as a 
good-faith effort toward more knowledge-based budgeting for 
legacy asset sustainment.
    In addition to this effort at the operational level, the 
Coast Guard's Pacific Area Command has recognized that a 
different approach to maintaining and sustaining its 378-foot 
cutters may be needed, in light of the slippage in dates for 
its replacement. As a first step, command officials have 
launched an initiative applying new business principles to the 
problem, including ensuring that operation and maintenance 
staff work closely together to determine priorities and 
accepting the proposition that, with constrained funding, not 
all cutters will be fully capable to perform all types of 
missions. The PAC approach has potential; but, as the 
Commander, himself, told us, it is likely there will be needed 
an infusion of funding, no matter what.
    With respect to the challenges the Coast Guard faces to 
replace or upgrade its legacy assets, as you know, Madam 
Chairman and others, from the outset, we have expressed concern 
about the risks involved in the Coast Guard's approach. Last 
year, we reported that, well into the second year, key 
components needed to manage the program and oversee the 
contractor had not been effectively implemented. The Coast 
Guard also had not updated its master schedule, and costs were 
rising above original estimates. More recently, we have seen 
slippages in the national security cutter and emergency 
acceleration, such as for the HH-65. Unobligated balances are 
growing. We have also seen at least one instance of a serious 
performance problem, this being hull breaches on the first 
converted 123-foot patrol boats.
    We have made numerous recommendations to improve the 
program's management and oversight, and the Coast Guard has 
agreed with nearly all of them, and they have made progress. 
However, management issues remain, that I'd be happy to 
discuss, that may take some time to fully address.
    Additionally, there is uncertainty around the mission needs 
statement and the implementation plan, which, at the end of the 
day, is based on models and assumptions, rather than facts, and 
we'll need some time to see if it will play out.
    Finally, there are uncertainties around Deepwater funding. 
When the program began, we expressed the concern that this 
program would need stable funding over the 20-year period. In 4 
years, funding has not stabilized. If funding does not 
stabilize at whatever level you all decide, that will increase 
the risk to the program.
    And since I've hit a red light, I'm going to thank you very 
much and look forward to your questions.
    [The prepared statement of Ms. Wrightson follows:]

    Prepared Statement of Margaret T. Wrightson, Director, Homeland 
      Security and Justice, U.S. Government Accountability Office

    Madame Chairwoman and Members of the Subcommittee:
    I am pleased to be here today to discuss our preliminary 
observations on the condition of Deepwater legacy assets; \1\ actions 
the Coast Guard has taken to maintain, upgrade, and better manage these 
assets; and management challenges the Coast Guard faces in acquiring 
replacements for them. Deepwater legacy assets consist mainly of 
aircraft and cutters capable of operating further out to sea, but 
missions may begin at ports, waterways, and coasts and extend seaward 
to wherever the Coast Guard is required to take action. The Coast Guard 
uses these assets to perform a variety of missions, such as 
interdicting illicit drug shipments or attempted landings by illegal 
aliens, rescuing mariners in difficulty at sea, protecting important 
fishing grounds, and responding to marine pollution. After the events 
of September 11, 2001, these missions were expanded to include a 
greater emphasis on ports, waterways, and coastal security. The Coast 
Guard's expanded responsibilities caused changes in how the Deepwater 
legacy assets are used--for example, in conducting more security 
patrols--and they also created a need to make adjustments in mission 
requirements for assets that would be updated or built as part of the 
long-term acquisition program.
    Many Deepwater legacy assets are at or approaching the end of their 
estimated service lives. In 2002, the Coast Guard began a multiyear 
Integrated Deepwater System acquisition program to replace or modernize 
the legacy assets. The Coast Guard's new implementation plan estimates 
the cost for the Deepwater Program at $19 billion to $24 billion. From 
Fiscal Years 2002 through 2005, the Coast Guard was appropriated nearly 
$2.2 billion for the Deepwater Program. This amount included close to 
$1.3 billion for new acquisitions and $460.5 million for upgrades of 
the legacy assets. Further, because the Coast Guard must continue to 
operate the Deepwater legacy assets until the new assets are acquired, 
the Coast Guard has spent close to $594 million during Fiscal Years 
2002 through 2004 to fund intermediate- and depot-level maintenance of 
these assets.\2\
    The Administration is requesting $966 million for the Deepwater 
Program for Fiscal Year 2006--$242 million more than Congress 
appropriated for the program last year. Part of this request ($239.5 
million) is for maintenance and upgrades to some Deepwater legacy 
assets and is predicated, in part, on the Coast Guard's assertion that 
its Deepwater legacy assets are ``failing at an unsustainable rate.'' 
Faced with this concern, the Coast Guard has studied options for 
replacing Deepwater legacy assets more rapidly than initially planned 
and thereby avoiding some of the costs that might be involved in 
upgrading these assets sufficiently to keep them running for longer 
periods. In the coming years, both the Coast Guard and Congress will 
likely be considering the advisability of such changes in the program.
    The House Appropriations Committee recently requested information 
from the Coast Guard about its revised Deepwater Implementation Plan. 
Because the Coast Guard was unable to present information that the 
Committee deemed satisfactory, the Committee recommended reducing the 
Coast Guard's Fiscal Year 2006 Deepwater budget request of $966 million 
by nearly 50 percent. In late May, the Coast Guard submitted 
documentation to the Committee in an effort to comply with it's 
request. As of early June 2005, the Coast Guard's Fiscal Year 2006 
appropriation was still pending.
    My testimony today addresses three issues related to these 
considerations:

   Changes in the condition of Deepwater legacy assets during 
        Fiscal Years 2000 through 2004;

   Actions the Coast Guard has taken to maintain, upgrade, and 
        better manage Deepwater legacy assets; and

   Management challenges the Coast Guard faces in acquiring new 
        assets, especially if a more aggressive schedule is adopted.

    My testimony is based on past and current work for this 
subcommittee and other Congressional committees. Our current work 
included analyzing data and condition measures \3\ used by the Coast 
Guard for determining Deepwater legacy assets' condition,\4\ reviewing 
Coast Guard actions to maintain and upgrade the legacy assets, meeting 
with operations and maintenance staff covering each type of Deepwater 
legacy aircraft and each class of Deepwater legacy cutter, assessing 
the improvements the Coast Guard is making in its management of the 
Deepwater acquisition. We will be following up this testimony with a 
written report that will contain additional, detailed information 
related to the condition of Deepwater legacy assets, and the actions 
the Coast Guard is taking to maintain and upgrade them. As part of the 
follow-on report, we will also further examine the Coast Guard's 
management of the Deepwater Program and follow up on recommendations 
made in a prior GAO report.\5\ Our work was carried out in accordance 
with generally accepted governmental auditing standards.
    In summary, our work thus far shows the following:

   Coast Guard condition measures show that the Deepwater 
        legacy assets generally declined between Fiscal Years 2000 and 
        2004, but the Coast Guard's available condition measures are 
        inadequate to capture the full extent of the decline in the 
        condition of Deepwater assets with any degree of precision. 
        While there is no systematic, quantitative evidence sufficient 
        to demonstrate that Deepwater legacy assets are ``failing at an 
        unsustainable rate'' as the Coast Guard has asserted, this does 
        not mean that the assets are able to perform their missions 
        safely, reliably, and at levels that meet or exceed Coast Guard 
        standards. Evidence we gathered in ways other than reviewing 
        condition measures, such as interviewing Coast Guard operations 
        and maintenance staff, showed significant problems in a variety 
        of the assets' systems \6\ and equipment that will need to be 
        addressed if the assets are to continue performing their 
        missions at or near current levels until replacement assets 
        become operational. These problems are not necessarily 
        reflected in the condition measures. For example, the Coast 
        Guard's HH-65 helicopter consistently exceeded the Coast 
        Guard's primary condition measure during Fiscal Years 2000 
        through 2004, yet its engine is being replaced because it lacks 
        sufficient power to meet mission requirements. The Coast Guard 
        has acknowledged that it needs measures that more clearly 
        demonstrate the extent to which asset conditions affect mission 
        capabilities, but such measures have not yet been finalized or 
        implemented.

   The Coast Guard has taken several types of actions to keep 
        existing assets operational, but these actions, while helpful, 
        may not fully address mission capability issues and may require 
        additional funding. The Coast Guard now compiles information 
        that can be used to better identify and prioritize the 
        maintenance or upgrade projects that need to be done to keep 
        existing assets operating. Coast Guard personnel, according to 
        evidence obtained during our site visits, are also performing 
        more maintenance on these assets than they have in the past--
        for example, spending additional time on maintenance when 
        cutters are in port between deployments. These additional 
        maintenance efforts are likely helping to prevent a more rapid 
        decline in the condition of these assets, but it is important 
        to note that even so, cutters and aircraft are still losing 
        mission capabilities because of equipment and system failures. 
        The Coast Guard's Pacific Area Command, which is heavily 
        dependent on deteriorating 378-foot cutters, is attempting to 
        use new strategies to help sustain the operation of these 
        cutters through 2016, when they are currently scheduled to be 
        fully replaced with newer cutters. According to the Pacific 
        Area Commander, however, doing so is likely to require an 
        additional infusion of funds--something the Coast Guard has so 
        far not included in its budget requests or plans. Finally, in 
        an effort to address our recommendations for developing a more 
        proactive approach for prioritizing the maintenance and 
        capability enhancement projects needed on its legacy assets, 
        the Coast Guard is developing a new system for providing more 
        objective data on where to best spend budget dollars to achieve 
        the greatest enhancements in mission capabilities.

   The Coast Guard's Fiscal Year 2006 budget request of $966 
        million for the Deepwater Program reflects significant 
        revisions to the program's requirements, capabilities, and 
        schedule in light of the homeland security mission. We have not 
        yet analyzed the likely cost and schedule impact of these 
        revisions. However, if a more aggressive acquisition schedule 
        is adopted, the Coast Guard would likely continue to face a 
        number of management challenges that have already affected its 
        ability to effectively administer the Deepwater Program. From 
        the outset, we have expressed concern about the risks involved 
        with the Coast Guard's acquisition strategy, which involves 
        relying on a prime contractor (or ``system integrator'') to 
        identify the assets needed, using tiers of subcontractors to 
        design and build the actual assets. Last year, we reported that 
        well into the contract's second year, key components needed to 
        manage the program and oversee the system integrator's 
        performance had not been effectively implemented. We made a 
        number of recommendations in the areas of program management, 
        contractor accountability, and cost control through 
        competition. While the Coast Guard agreed with nearly all of 
        these recommendations and has initiated actions to address 
        these problems, we remain concerned that the program still 
        carries major and inherent risks. Most of our recommendations 
        have not been fully addressed. Recent information shows 
        continued challenges in the areas of overall system 
        integration, cost and schedule management, and integrated 
        product teams, which consist of contractor and government 
        personnel and are the Coast Guard's principal tool for managing 
        the Deepwater Program. In our opinion, the uncertainties 
        associated with the proposed revisions to the Deepwater Program 
        only heighten these risks.

Background
    As the lead Federal agency for maritime homeland security within 
the Department of Homeland Security, the Coast Guard is responsible for 
homeland and non-homeland security missions, including ensuring 
security in ports and waterways and along coastlines, conducting search 
and rescue missions, interdicting drug shipments and illegal aliens, 
enforcing fisheries laws, and responding to reports of pollution. The 
Deepwater fleet, which consists of 186 aircraft and 88 cutters of 
various sizes and capabilities, plays a critical role in all of these 
missions. As shown in table 1, the fleet includes fixed-wing aircraft, 
helicopters, and cutters of varying lengths.

          Table 1: Deepwater Legacy Aircraft and Cutter Fleets
                            (as of June 2005)
------------------------------------------------------------------------
    Deepwater asset      Number                 Description
------------------------------------------------------------------------
                                Aircraft
------------------------------------------------------------------------
HC-130 (long-range           27   This is the largest aircraft in the
 surveillance                      Coast Guard's fleet. It has a planned
 airplane)                         crew size of 7, a maximum speed of
                                   290 knots, and an operating range of
                                   2,600 nautical miles. The original
                                   estimated service life of the HC-130
                                   was 30 years or 40,000 flight hours.a
                                   The in-service fleet average age for
                                   the Coast Guard's HC-130H aircraft is
                                   21.9 years.
------------------------------------------------------------------------
HU-25 (medium-range          23   This is the fastest aircraft in the
 surveillance                      Coast Guard's fleet. It has a planned
 airplane)                         crew size of 5, a maximum speed of
                                   410 knots, and an operating range of
                                   2,045 nautical miles. The original
                                   estimated service life of the HU-25
                                   was 20 years or 20,000 flights or
                                   30,000 flight hours.a The in-service
                                   fleet average age for the Coast
                                   Guard's HU-25 aircraft is 22.1 years.
------------------------------------------------------------------------
HH-60 (medium-range          41   This helicopter has a planned crew
 recovery helicopter)              size of 4, a maximum speed of 160
                                   knots, and a maximum range of 700
                                   nautical miles. It is capable of
                                   flying 300 miles offshore, remaining
                                   on scene for 45 minutes, hoisting 6
                                   people on board, and returning to its
                                   point of origin. The original
                                   estimated service life of the HH-60
                                   was approximately 20 years or 10,000
                                   flight hours.a The in-service fleet
                                   average age for the Coast Guard's HH-
                                   60 helicopters is 12.6 years.
------------------------------------------------------------------------
HH-65 (short-range           95   This helicopter has a planned crew
 recovery helicopter)              size of 3, a maximum speed of 165
                                   knots, a maximum range of 400
                                   nautical miles, and a maximum
                                   endurance of 3.5 hours. It is capable
                                   of flying 150 miles offshore. The
                                   original estimated service life of
                                   the HH-65 was 20 years.a The in-
                                   service fleet average age for the
                                   Coast Guard's HH-65 helicopters is
                                   17.6 years.
------------------------------------------------------------------------
                                 Cutters
------------------------------------------------------------------------
378-foot high-               12   This is the largest cutter in the
 endurance cutter                  Coast Guard's Deepwater fleet. It has
                                   a planned crew size of 167, a maximum
                                   speed of 29 knots, and a cruising
                                   range of 14,000 nautical miles. It
                                   can support helicopter operations.
                                   The estimated service life of the 378-
                                   foot cutter is about 40 years. The
                                   average age of the Coast Guard's 378-
                                   foot cutters is 35.3 years.
------------------------------------------------------------------------
270-foot medium-             13   This cutter has a planned crew size of
 endurance cutter                  98, a maximum speed of 19.5 knots,
                                   and a cruising range of 10,250
                                   nautical miles. It can support
                                   helicopter operations. The estimated
                                   service life of the 270-foot cutter
                                   is 30 years. The average age of the
                                   Coast Guard's 270-foot cutters is
                                   17.0 years.
------------------------------------------------------------------------
210-foot medium-             14   This cutter has a planned crew size of
 endurance cutter                  75, a maximum speed of 18 knots, and
                                   a cruising range of 6,100 nautical
                                   miles. It can support short-range
                                   recovery helicopter operations. The
                                   estimated service life of the 210-
                                   foot cutter is from 43 to 49 years.
                                   The average age of the Coast Guard's
                                   210-foot cutters is 37.3 years.
------------------------------------------------------------------------
110-foot and 123-foot        49   The patrol boats have a planned crew
 patrol boats                      size of 16 and a maximum speed of
                                   29.5 knots. The 110-foot patrol boat
                                   has a cruising range of between 3,300
                                   and 3,500 nautical miles, and the 123-
                                   foot patrol boat has a cruising range
                                   of 3,180 nautical miles, depending on
                                   the class of the patrol boat. The
                                   estimated service life of the patrol
                                   boats is from 14 to 20 years. The
                                   average age of the Coast Guard's
                                   patrol boats is 15.4 years.
------------------------------------------------------------------------
Source: Developed by GAO from U.S. Coast Guard data.
aBecause of scheduled depot-level maintenance and upgrades that the
  Deepwater aircraft have received or will receive, the service lives
  can be extended beyond the original estimated service lives. For the
  HH-65 helicopter, a Coast Guard aviation official told us that the
  aircraft had no original estimated service life in terms of flight
  hours, but rather can continue to be operated as long as the structure
  of the aircraft is sound.

    Some Coast Guard Deepwater cutters were built in the 1960s. 
Notwithstanding extensive overhauls and other upgrades, a number of the 
cutters are nearing the end of their estimated service lives. 
Similarly, while a number of the Deepwater legacy aircraft have 
received upgrades in engines, operating systems, and sensor equipment 
since they were originally built, they too have limitations in their 
operating capabilities.
    In 1996, the Coast Guard began developing what came to be known as 
the Integrated Deepwater System acquisition program as its major effort 
to replace or modernize these aircraft and cutters. This Deepwater 
Program is designed to replace some assets--such as deteriorating 
cutters--with new cutters and upgrade other assets--such as some types 
of helicopters--so they can meet new performance requirements.\7\
    The Deepwater Program represents a unique approach to a major 
acquisition in that the Coast Guard is relying on a prime contractor--
the system integrator--to identify and deliver the assets needed to 
meet a set of mission requirements the Coast Guard has specified.\8\ In 
2002, the Coast Guard awarded a contract to Integrated Coast Guard 
Systems (ICGS) as the system integrator for the Deepwater Program. ICGS 
has two main subcontractors--Lockheed Martin and Northrop Grumman--that 
in turn contract with other subcontractors. The resulting program is 
designed to provide an improved, integrated system of aircraft, 
cutters, and unmanned aerial vehicles to be linked effectively through 
systems that provide command, control, communications, computer, 
intelligence, surveillance, reconnaissance, and supporting logistics. 
We have been reviewing the Deepwater Program for several years. In 
recent reports we have pointed out difficulties the Coast Guard has 
been having in managing the Deepwater Program and ensuring that the 
acquisition schedule is up to date and on schedule.\9\
    The existing schedule calls for acquisition of new assets under the 
Coast Guard's Deepwater Program to occur over an approximately 20-year 
period. By 2007, for example, the Coast Guard is to receive the first 
National Security Cutter, which will have the capability to conduct 
military missions related to homeland security. Plans call for 6 to 8 
of these cutters to replace the 12 existing 378-foot cutters. However, 
in order to carry out its mission effectively, the Coast Guard will 
also need to keep all of the Deepwater legacy assets operational until 
they can be replaced or upgraded.

Deepwater Legacy Assets Show General Decline in Condition, but Current 
        Measures Do Not Capture True Extent
    Coast Guard condition measures show that the Deepwater legacy 
assets generally declined between 2000 and 2004, but the Coast Guard's 
available condition measures are inadequate to capture the full extent 
of the decline in the condition of Deepwater assets with any degree of 
precision. Other evidence we gathered, such as information from 
discussions with maintenance personnel, point to conditions that may be 
more severe than the available measures indicate. The Coast Guard 
acknowledges that it needs better condition measures but has not yet 
finalized or implemented such measures.

Coast Guard's Condition Measures Show General Decline in Deepwater 
        Assets, With Some Fluctuations
    During Fiscal Years 2000 through 2004, the Coast Guard's various 
condition measures show a general decline, although there were year-to-
year fluctuations (see table 2). For Deepwater legacy aircraft, a key 
summary measure of the condition--the availability index (the 
percentage of time aircraft are available to perform their missions)--
showed that except for the HU-25 medium-range surveillance aircraft, 
the assets continued to perform close to or above fleet availability 
standards over the 5-year period. In contrast, other condition measures 
for aircraft, such as cost-per-flight-hour and labor hours per flight 
hour, generally reflected some deterioration. For cutters, a key 
summary measure of condition--percent of time free of major casualties 
\10\--fluctuated but generally remained well below target levels. The 
number of major casualties generally rose from Fiscal Years 2000 
through 2003, and then dropped slightly in Fiscal Year 2004.\11\

         Table 2: Synopsis of Deepwater Legacy Assets' Condition
------------------------------------------------------------------------
     Deepwater legacy asset        Synopsis of general asset condition
------------------------------------------------------------------------
HC-130 aircraft                  The percentage of time the HC-130 fleet
                                  was available to perform missions
                                  nearly met or exceeded the Coast
                                  Guard's target level during Fiscal
                                  Years 2000 through 2003, but dropped
                                  below the target level in Fiscal Year
                                  2004.
HU-25 aircraft                   The percentage of time the HU-25 fleet
                                  was available to perform missions
                                  varied from year to year, but was
                                  consistently below the Coast Guard's
                                  target level during Fiscal Years 2000
                                  through 2004.
HH-60 aircraft                   The percentage of time the HH-60 fleet
                                  was available to perform missions met
                                  or was just below the Coast Guard's
                                  target level during Fiscal Years 2000
                                  though 2004.
HH-65 aircraft                   The percentage of time the HH-65 fleet
                                  was available to perform missions
                                  consistently exceeded the Coast
                                  Guard's target level during Fiscal
                                  Years 2000 through 2004.
378-foot high-endurance cutters  The percentage of time the 378-foot
                                  cutter fleet has operated free of
                                  deficiencies in mission-essential
                                  equipment remained substantially below
                                  the Coast Guard's target level during
                                  Fiscal Years 2000 through 2004.
270-foot and 210-foot medium-    The percentage of time the 210-foot and
 endurance cutters                270-foot cutter fleets have operated
                                  free of deficiencies in mission-
                                  essential equipment was well below the
                                  Coast Guard's target level during
                                  Fiscal Years 2000 through 2004, but
                                  showed slight improvement in Fiscal
                                  Year 2004.
110-foot and 123-foot patrol     The percentage of time the patrol boat
 boats a                          fleet has operated free of
                                  deficiencies in mission-essential
                                  equipment was below, but near the
                                  Coast Guard's target level during
                                  Fiscal Years 2000 and 2001, but
                                  declined in more recent years.
------------------------------------------------------------------------
Source: GAO analysis of data provided by the U.S. Coast Guard.
a Data on the 123-foot patrol boats were not compiled until Fiscal Year
  2004. That year's data were added to the 110-foot patrol boat data to
  arrive at totals for the patrol boat fleet.

    Another, albeit less direct, measure of an asset's condition is 
deferred maintenance--the amount of scheduled maintenance that must be 
postponed on an asset in order to pay for unscheduled repairs. Such 
deferrals can occur when the Coast Guard does not have enough money to 
absorb unexpected maintenance expenditures and still perform all of its 
scheduled maintenance, thus creating a backlog. For example, in Spring 
2004, while on a counter-drug mission, the 210-foot cutter Active 
experienced problems in the condition of its flight deck that were to 
be corrected during its scheduled depot-level maintenance. However, 
because of a shortage of maintenance funds, the maintenance was 
deferred and the flight deck not repaired. As a result, the cutter lost 
50 percent of its patrol time, since the required support helicopters 
could not take off from or land on it.
    As table 3 shows, deferred maintenance does not show a clear 
pattern across all classes of Deepwater legacy assets. For the 
Deepwater legacy aircraft, the overall amount of estimated deferred 
maintenance increased each year during Fiscal Years 2002 through 2004, 
from $12.3 million to about $24.6 million. However, most of the 
increase came for one type of asset, the HH-60 helicopter, and the 
increase came mainly from shortening the interval between scheduled 
depot-level maintenance from 60 months to 48 months--thereby increasing 
the scheduled maintenance workload--and not from having to divert money 
to deal with unscheduled maintenance. For the Deepwater cutters, the 
amount of estimated deferred maintenance increased from Fiscal Year 
2002 to 2003, but then dropped significantly in Fiscal Year 2004. The 
decrease in Fiscal Year 2004 came mainly because: (1) the Coast Guard 
ceased maintenance on an icebreaker, thus freeing up some maintenance 
funds; and (2) the Coast Guard also received additional operational and 
maintenance funding, allowing it to deal with both scheduled and 
unscheduled maintenance. Thus, the drop in the estimate of deferred 
maintenance costs for Fiscal Year 2004 is not necessarily an indicator 
that the condition of the legacy assets was improving; it could result 
from the Coast Guard having more money to address the maintenance 
needs.

  Table 3: Estimated Costs for Deferred Maintenance of Deepwater Legacy
              Aircraft and Cutters, Fiscal Years 2002-2004
------------------------------------------------------------------------
                                 Fiscal year   Fiscal year   Fiscal year
        Deepwater asset             2002          2003          2004
------------------------------------------------------------------------
HC-130                            $4,691,000    $7,016,000    $5,737,000
HU-25                                      0      $201,000             0
HH-60                             $7,630,000    $9,436,000   $18,824,000
HH-65                                      0             0             0
------------------------------------------------------------------------
    Subtotal for aircraft        $12,321,000   $16,653,000   $24,561,000
------------------------------------------------------------------------
378-foot cutters                  $2,556,000    $8,135,000    $3,000,000
270-foot cutters                  $2,070,000      $870,000             0
210-foot cutters                    $786,000    $1,137,000             0
110-foot patrol boats             $1,618,000    $1,961,000      $500,000
------------------------------------------------------------------------
  Subtotal for cutters            $7,030,000   $12,103,000    $3,500,000
========================================================================
    Total for all Deepwater      $19,351,000   $28,756,000   $28,061,000
     legacy assets
------------------------------------------------------------------------
Source: U.S. Coast Guard.
Note: The Coast Guard estimates the cost for aircraft deferred
  maintenance by multiplying a percentage of average depot maintenance
  costs by the number of aircraft overdue for depot maintenance
  overhauls, plus the annual cost for extension inspections each year.
  The Coast Guard generally does not track deferred maintenance costs by
  cutter class, but compiled these data at GAO's request for Fiscal
  Years 2002 through 2004. The Coast Guard estimated the costs of only
  the planned cutter maintenance that had to be deferred to the
  following year and not the amount of maintenance that should have been
  conducted and was not funded.

Current Condition Measures Not Robust Enough to Clearly Link Condition 
        With 
        Effect on Mission Capabilities
    At the time we began our work, the Coast Guard's condition measures 
were not sufficiently robust to systematically link assets' condition 
with degradation in mission capabilities. As we discussed with Coast 
Guard officials, without such condition measures, the extent and 
severity of the decline in the existing Deepwater legacy assets and 
their true condition cannot be fully determined. As a result, the 
picture that emerges regarding the condition of the Deepwater legacy 
assets based on current Coast Guard condition measures should be viewed 
with some caution. While there is no systematic, quantitative evidence 
sufficient to demonstrate that its Deepwater legacy assets are 
``failing at an unsustainable rate'' as the Coast Guard has asserted, 
this does not mean the assets are in good condition or have been 
performing their missions safely, reliably and at levels that meet or 
exceed Coast Guard standards. We identified two factors that need to be 
considered to put these condition measures in proper context.
    The first factor deals with limitations in the measures themselves. 
Simply put, the Coast Guard's measures of asset condition do not fully 
capture the extent of the problems. As such, they may understate the 
decline in the legacy assets' condition. More specifically, Coast Guard 
measures focus on events, such as flight mishaps or equipment 
casualties, but do not measure the extent to which these and other 
incidents degrade mission capabilities. Here are two examples in which 
the Coast Guard's current measures are not sufficiently robust to 
systematically capture degradation in mission capabilities:

   The surface search radar system on the HC-130 long-range 
        surveillance aircraft, called the APS-137 radar, is subject to 
        frequent failures and is quickly becoming unsupportable, 
        according to Coast Guard staff with whom we met. Flight crews 
        use this radar to search for vessels in trouble and to monitor 
        ships for illegal activity, such as transporting illicit drugs 
        or illegal immigrants. When the radar fails, flight crews are 
        reduced to looking out the window for targets, greatly reducing 
        mission efficiency and effectiveness. A flight crew in Kodiak, 
        Alaska, described this situation as being ``like trying to 
        locate a boat looking through a straw.'' Mission capability 
        degradations such as these are not reflected in the Coast 
        Guard's current condition measures.

   The 378-foot cutter JARVIS recently experienced a failure in 
        one of its two main gas turbines shortly after embarking on a 
        living marine resources and search and rescue mission. While 
        JARVIS was able to accomplish its given mission, albeit at 
        reduced speeds, this casualty rendered the cutter unable to 
        respond to any emergency request it might have received--but 
        did not in this case--to undertake a mission requiring higher 
        speeds, such as drug interdiction. The Coast Guard condition 
        measures are not robust enough to capture these distinctions in 
        mission capability.

    The second factor that needs to be kept in mind is the compelling 
nature of the other evidence we gathered apart from the Coast Guard's 
condition measures. This evidence, gleaned from information collected 
during our site visits and discussions with maintenance personnel, 
indicated deteriorating and obsolete systems and equipment as a major 
cause of the reduction in mission capabilities for a number of 
Deepwater legacy aircraft and cutters. Such problems, however, are not 
captured by the Coast Guard's condition measures. One example of this 
involves the HH-65 short-range recovery helicopter. While this 
helicopter consistently exceeded availability standards established by 
the Coast Guard over the 5-year period we examined, it is currently 
operating with underpowered engines that have become increasingly 
subject to power failures. As a result, Coast Guard pilots employ a 
number of work-arounds, such as dumping fuel or leaving the rescue 
swimmer on scene if the load becomes too heavy. Further, because of 
increasing safety and reliability problems, the Coast Guard has also 
implemented a number of operational restrictions--such as not allowing 
the helicopter to land on helipads--to safeguard crew and passengers 
and prevent mishaps until all of the fleet's engines can be replaced.
    The Coast Guard has recently recognized the need for improved 
measures to more accurately capture data on the extent to which its 
Deepwater legacy assets are degraded in their mission capabilities, but 
as of April 2005, such measures had not yet been finalized or 
implemented. Subsequent to our inquiries regarding the lack of 
condition and mission capability measures, Coast Guard naval engineers 
reported that they had begun developing a ``percent of time fully 
mission capable'' measure to reflect the degree of mission capability, 
as well as measures to track cutter readiness. We agree that measures 
like this are needed--and as soon as possible. Further, current plans 
call for the measure, if approved, to be used for cutters, but not for 
aircraft. Consequently, even if this measure were to be implemented 
across the Coast Guard, there would still be no measure to address 
degradation in mission capabilities for aircraft. We will be exploring 
this issue further in our follow-on report.

Actions To Maintain, Upgrade, and Better Manage Deepwater Legacy Assets 
        Are Under Way, but Condition Issues Remain
    The Coast Guard has taken several actions to maintain, upgrade, and 
better manage its Deepwater legacy assets. These include establishing a 
compendium of information for making decisions regarding maintenance 
and upgrades; performing more extensive maintenance between 
deployments; applying new business rules and strategies, at the Pacific 
Area Command, to better sustain the 378-foot high-endurance cutters 
through 2016; and exploring additional strategies for prioritizing the 
maintenance and capability enhancement projects needed on its legacy 
assets in an effort to provide more objective data on where to best 
spend budget dollars to achieve the greatest enhancements in mission 
capabilities. These additional efforts are likely helping to prevent a 
more rapid decline in the condition of these assets, but condition 
problems continue, and the efforts will likely involve additional 
costs.

Compendium of Needs Is Being Compiled and Used
    Since 2002, the Coast Guard has annually issued a Systems 
Integrated Near Term Support Strategy compendium. Among other things, 
this compendium consolidates information needed to make planning and 
budgeting decisions regarding maintenance and upgrades to sustain 
legacy assets. Its purpose is to serve as a tool for senior Coast Guard 
management in setting priorities and planning budgets. From this 
strategic document, the Coast Guard has identified a number of upgrades 
to improve the capabilities of the Deepwater legacy aircraft and 
cutters. The most recent compendium (for Fiscal Year 2006) lists more 
than $1 billion worth of upgrades to the Deepwater legacy assets. The 
planned upgrades identified in the compendium that have been approved 
and received initial funding account for an estimated $856 million the 
Coast Guard anticipates it will need to complete those projects. The 
approved upgrades for Deepwater legacy assets are shown in table 4.

  Table 4: Approved Upgrades for Deepwater Legacy Aircraft and Cutters
------------------------------------------------------------------------
                        Synopsis of planned        Estimated costs and
  Deepwater asset             upgrades           timeframes of upgrades
------------------------------------------------------------------------
HC-130 aircraft      The Coast Guard is         The radar system
                      beginning to replace       replacement is
                      aircraft's dated and       projected to cost $78
                      difficult to support       million and be
                      surface search radar       completed in Fiscal
                      system.                    Year 2008. A total of
                                                 $9 million has been
                                                 allocated to date.
HH-60 aircraft       The Coast Guard has begun  The service life
                      a service life extension   extension program is
                      plan and a replacement     estimated to cost $16
                      of the avionics suite.     million and be
                                                 completed by Fiscal
                                                 Year 2009. The avionics
                                                 replacement program is
                                                 projected to cost $121
                                                 million and be
                                                 completed by Fiscal
                                                 Year 2010. A total of
                                                 $32.8 million has been
                                                 allocated to date for
                                                 these upgrades.
HH-65 aircraft       Serious safety and         The Coast Guard plans to
                      reliability problems       re-engine 84 HH-65
                      with the engine led the    aircraft at a projected
                      Coast Guard to place       cost of $349 million,
                      operational restrictions   now estimated to be
                      on the HH-65 fleet in      completed by February
                      October 2003.              2007. A total of $160.7
                                                 million has been
                                                 allocated to date.
270-foot and 210-    During Fiscal Year 2005    The MEP is projected to
 foot medium-         these cutters are to       cost a total of $292
 endurance cutters    enter a legacy asset       million and to be
                      sustainment project        completed by Fiscal
                      known as the Mission       Year 2015. The medium-
                      Effectiveness Program      endurance cutters will
                      (MEP) aimed at             ultimately be replaced
                      increasing their service   by the offshore patrol
                      lives until their          cutter. A total of
                      replacement by a new       $12.5 million has been
                      cutter. The MEP includes   allocated to date.
                      upgrading major
                      engineering subsystems
                      such as evaporators,
                      sewage systems, and
                      gyrocompasses.
------------------------------------------------------------------------
    Total                                       $856 million total
                                                 needed to fund these
                                                 projects, of which $215
                                                 million has been
                                                 allocated to date.
------------------------------------------------------------------------
Source: GAO analysis of data provided by the U.S. Coast Guard.
Note: While no funds have been allocated for upgrades to the HU-25
  aircraft, the 378-foot cutters, or the 110-foot and 123-foot patrol
  boats, since all of these Deepwater legacy assets are scheduled to be
  replaced, each of these assets has upgrades listed in the Systems
  Integrated Near Term Support Strategy compendium. The HU-25 aircraft
  has an engine replacement project estimated to cost $78.1 million; the
  378-foot cutter has an MEP estimated to cost $137.8 million; and the
  patrol boats have three projects--replacement of the fin stabilizer
  system that is estimated to cost $10.4 million, an MEP that is
  estimated to cost $162 million, and replacement of the ship service
  generators that is estimated to cost $20.7 million. If the Coast Guard
  were to request funding for all of these sustainment projects, it
  would cost an additional $409 million.

    Among the projects already begun is the re-engining of the HH-65 
helicopters to increase the helicopter's power and capabilities. The 
Coast Guard is also upgrading several other aviation systems in an 
effort to improve aircraft capabilities. Enhancements are also planned 
for certain classes of Deepwater cutters. For example, during this 
Fiscal Year, the Coast Guard is to begin a maintenance effectiveness 
project on the 210-foot and 270-foot cutters. This project includes 
replacing major engineering subsystems with the goal of extending the 
cutters' service lives until their replacement by the Offshore Patrol 
Cutter. Of the $856 million total estimated costs needed for the 
planned upgrades to the Deepwater legacy assets listed above, $215 
million has been allocated through Fiscal Year 2005 and the Coast Guard 
has requested another $217.3 million in its Fiscal Year 2006 budget. 
The remaining estimated costs of $423.7 million would have to be funded 
beyond Fiscal Year 2006.

Increasing Amounts of Maintenance Are Being Performed, but Loss of 
        Mission 
        Capabilities Continues
    Coast Guard personnel consistently reported to us that crew members 
have to spend increasingly more time between missions to prepare for 
the next deployment. For example, to prevent further corrosion-related 
problems, air station maintenance personnel at the locations we visited 
said they have instituted additional measures, such as washing and 
applying fluid film to the aircraft prior to each deployment. Similar 
accounts were told by personnel working on cutters. For example, 
officers of the 270-foot cutter Northland told us that because of dated 
equipment and the deteriorating condition of its piping and other 
subsystems, crew members have to spend increasingly more time and 
resources while in port to prepare for their next deployment. While we 
could not verify these increases in time and resources because the 
Coast Guard does not capture data on these additional maintenance 
efforts, the need for increasing amounts of maintenance was a message 
we consistently heard from the operations and maintenance personnel 
with whom we met.
    Such efforts are likely helping to prevent a more rapid decline in 
the condition of these Deepwater legacy assets, but it is important to 
note that even with the increasing amounts of maintenance, these assets 
are still losing mission capabilities because of deteriorating 
equipment and system failures. For example, in Fiscal Year 2004, one 
378-foot cutter lost 98 counterdrug mission days because of a number of 
patrol-ending casualties--including the loss of ability to raise and 
lower boats and run major electrical equipment--requiring $1.2 million 
in emergency maintenance. Another 378-foot cutter lost 27 counterdrug 
mission days in the Fall of 2004, when it required emergency dry-dock 
maintenance because of hydraulic oil leaking into the reduction gear.
New Initiative for Maintaining 378-Foot Cutters Is Under Way
    One effort is under way at the Coast Guard's Pacific Area Command 
to improve maintenance practices for the 378-foot cutters.\12\ Pacific 
Area Command officials have recognized that a different approach to 
maintaining and sustaining legacy cutters may be needed and, as a first 
step, they have undertaken an initiative applying what they refer to as 
``new business rules and strategies'' to better maintain the 378-foot 
high-endurance cutters through 2016. Under the original Deepwater 
proposal, the final 378-foot cutter was to be decommissioned in 2013, 
but by 2005, that date had slipped to 2016. To help keep these cutters 
running through this date, Pacific Area Command officials are applying 
such rules and strategies as: (1) ensuring that operations and 
maintenance staffs work closely together to determine priorities, (2) 
recognizing that maintaining or enhancing cutter capabilities will 
involve trade-off determinations, and (3) accepting the proposition 
that with limited funding not all cutters will be fully capable to 
perform all types of missions. Pacific Area Command officials believe 
that in combination, these principles and strategies will result in 
more cost-effective maintenance and resource allocation decisions--
recognizing that difficult decisions will still have to be made to 
balance maintenance and operations.
    The Pacific Area Command's new initiative has the potential for 
assisting the Coast Guard in making more informed choices regarding the 
best use of their resources, but the approach will likely require that 
the Coast Guard allocate additional maintenance funds. In particular, 
the Pacific Area Commander told us that in order for the 378-foot 
cutters to be properly maintained until their replacements become 
operational; the Coast Guard will have to provide additional funding 
for sustaining the 378-foot cutters. So far, the Coast Guard's budget 
plans or requests do not address this potential need.

Coast Guard Is Developing a Strategy To Better Prioritize Upgrades and 
        Maximize Asset Capabilities
    In the past, we have recommended that the Coast Guard develop a 
long-term strategy to set and assess levels of mission performance.\13\ 
We found this was an important step for the Coast Guard to take because 
it links mission performance levels to measurable outputs and goals so 
that the Coast Guard can better decide how limited budget dollars 
should be spent. The Coast Guard has recently begun to apply the 
principles behind such a strategy to (1) better prioritize the projects 
needed to upgrade legacy assets that will be part of the Deepwater 
Program and (2) obtain the greatest overall mix of capabilities for its 
assets within its budget in order to maximize mission performance. The 
tool it is developing is called the Capital Asset Management Strategy 
(CAMS).
    CAMS, once fully implemented, is expected to help the Coast Guard 
to better manage its assets by linking funding decisions to asset 
condition. Unlike the Coast Guard's current compendium, CAMS is 
designed to provide analyses on the capability trade-offs for upgrades 
and maintenance projects across asset classes, thereby allowing the 
Coast Guard to determine which combination of projects will provide the 
most capability for the dollars invested. For example, when trying to 
decide among potential project upgrades such as a HC-130 weather radar 
replacement, an HH-65 sliding cabin door replacement, or a 110-foot 
patrol boat fin stabilizer replacement, CAMS, once fully implemented, 
could provide the program managers with a recommended mix of project 
upgrades that would achieve the greatest capability enhancements based 
on the available budget.
    CAMS analyses are to be based on legacy asset condition and 
readiness data, asset retirement and replacement timelines, asset 
degradation estimates, project production rates, cost data, and mission 
utility rankings. Mission utility rankings will grade an asset's 
importance to specific missions, such as search and rescue or 
counterdrug operations. Rankings may also be assigned to an asset's 
critical subsystems, or may be altered based on an asset's geographic 
location. For example, a 378-foot cutter may be critical to the success 
of fisheries patrols in the Pacific, but may not be as important for 
alien/migrant interdiction operations in the Caribbean. In addition, 
the Coast Guard plans to rank its missions based on their relative 
importance.\14\ Each of these elements is to form the basis for 
recommendations regarding which combination of upgrade and maintenance 
projects will provide the greatest enhancements to fleet capabilities.
    CAMS recommendations are not intended to be a replacement for the 
budget development process, but rather are to augment the information 
currently provided to decision-makers and be reviewed by several 
internal Coast Guard officials before final funding decisions are made. 
Further, in order to prevent user ``gaming''--making assumptions in 
such a way as to assure a positive recommendation or outcome for a 
particular project--the Coast Guard is developing a series of job aids, 
manuals and training courses to ensure data consistency.
    Coast Guard officials expect to have the CAMS fully implemented by 
September 2005 and intend to use it while developing the Coast Guard's 
Fiscal Year 2008 budget submission. Although it is too soon to assess 
the effectiveness of CAMS, we view this approach as a good faith effort 
toward knowledge-based budgeting for legacy asset sustainment.
Management Challenges Faced in Acquiring New Assets Remain 
        Significant
    Since the inception of the Deepwater Program, we have expressed 
concerns about the degree of risk in the acquisition approach and the 
Coast Guard's ability to manage and oversee the program. Last year, we 
reported that, well into the contract's second year, key components 
needed to manage the program and oversee the system integrator's 
performance had not been effectively implemented.\15\ We also reported 
that the degree to which the program was on track could not be 
determined, because the Coast Guard was not updating its schedule.\16\ 
We detailed needed improvements in a number of areas, shown in table 5. 
These concerns have a direct bearing on any consideration to increase 
the program's pace. Because the Coast Guard was having difficulty 
managing the Deepwater Program at the pace it had anticipated, 
increasing the pace by attempting to speed the acquisition would only 
complicate the problem.


    The Coast Guard agreed with nearly all of our recommendations and 
has made progress in implementing some of them. In most cases, however, 
while actions are under way, management challenges remain that are 
likely to take some time to fully address.
Improvement of Program Management and Contractor Oversight Is Mixed
    We have seen mixed success in the Coast Guard's efforts to improve 
management of the program and contractor oversight. All four areas of 
concern--improving integrated project teams (IPT), ensuring adequate 
staff for the program, planning for human capital requirements for 
field units receiving new assets, and updating the program's schedule--
have yet to be fully addressed.

Strengthening Integrated Product Teams
    Although the Deepwater Program has made some efforts to improve the 
effectiveness of IPTs, we continue to see evidence that more 
improvements are needed for the teams to do their jobs effectively. 
These teams, the Coast Guard's primary tool for managing the program 
and overseeing the contractor, are generally chaired by a subcontractor 
representative and consist of members from subcontractors and the Coast 
Guard. The teams are responsible for overall program planning and 
management, asset integration, and overseeing delivery of specific 
Deepwater assets. Since our March 2004 report, the teams have been 
restructured, and 20 teams have charters setting forth their purpose, 
authority, and performance goals. And new, entry-level training is 
being provided to team members.
    Despite this progress, however, the needed changes are not yet 
sufficiently in place. A recent assessment by the Coast Guard of the 
system integrator's performance found that roles and responsibilities 
in some teams continue to be unclear. Decisionmaking is to a large 
extent stovepiped, and some teams still lack adequate authority to make 
decisions within their realm of responsibility. One source of 
difficulty for some team members has been the fact that each of the two 
major subcontractors has used its own databases and processes to manage 
different segments of the program. Decisions on air assets are made by 
Lockheed Martin, while decisions regarding surface assets are made by 
Northrop Grumman. This approach can lessen the likelihood that a 
``system of systems'' outcome will be achieved. Officials told us that 
more attention is being paid to taking a system-wide approach and that 
the Coast Guard has emphasized the need to ensure that the two major 
subcontractors integrate their management systems.

Ensuring Adequate Staffing for the Deepwater Program
    The Coast Guard has taken steps to more fully staff the Deepwater 
Program, with mixed effects. In February 2005, the Deepwater Program 
executive officer approved a revised human capital plan. The plan 
emphasizes workforce planning, including determining needed knowledge, 
skills, and abilities and developing ways to leverage institutional 
knowledge as staff rotate out of the program. This analysis is intended 
to help determine what gaps exist between needed skills and existing 
skills and to develop a plan to bridge these gaps. The Coast Guard has 
also taken some short-term steps to improve Deepwater Program staffing, 
hiring contractors to assist with program support functions, shifting 
some positions from military to civilian to mitigate turnover risk, and 
identifying hard-to-fill positions and developing recruitment plans 
specifically for them. Finally, the Deepwater Program and the Coast 
Guard's acquisition branch have begun using an automated system for 
forecasting military rotation cycles, a step Deepwater officials 
believe will help with long-range strategic workforce planning and 
analysis.
    Despite these actions, however, vacancies remain in the program, 
and some metrics that may have highlighted the need for more stability 
in the program's staff have been removed from the new human capital 
plan. As of January 2005, 244 positions were assigned to the program, 
but only 206 of these were filled, a 16 percent vacancy rate. A year 
ago, 209 staff were assigned to the program. Further, the new human 
capital plan removes a performance goal that measured the percentage of 
billets filled at any given time. Coast Guard officials acknowledged 
that the prior plan's goal of a 95 percent or higher fill rate was 
unduly optimistic and was a poor measure of the Coast Guard's ability 
to meet its hiring goals. For example, billets for military personnel 
who plan to rotate into the program in the summer are created at the 
beginning of the budget year, leading the metric to count those 
positions as vacant from the beginning of the budget year until summer. 
Other performance metrics that were included in the prior plan to 
measure progress in human capital issues have also been removed. For 
example, to help ensure that incoming personnel received acquisition 
training and on-the-job training, a billet was included in the prior 
plan to serve as a floating training position that replacement 
personnel could use for a year before the departure of military 
incumbents. This position was never funded, and the new plan removes 
the billet.

Improving Communication With Personnel Who Will Use the New Assets
    The Coast Guard recognizes the critical need to inform the 
operators who are to use the Deepwater assets of progress in the 
program, and officials stated that, on the basis of our 
recommendations, they have made a number of improvements in this area. 
A November 2004 analysis of the Deepwater Program's communication 
process, conducted in coordination with the National Graduate School, 
found that the communication and feedback processes were inadequate. 
Emphasis has now been placed on outreach to field personnel, with a 
multi-pronged approach involving customer surveys, face-to-face 
meetings, and presentations. We have not yet evaluated the 
effectiveness of the new approach.
    Human capital requirements for the Deepwater Program--such as crew 
numbers and schedules, training, and support personnel--will have an 
increasing impact on the program's ability to meet its goals as the 
pace at which assets are delivered to field units picks up. Recent 
assessments by Coast Guard performance monitors show this to be an area 
of concern.\17\ Coast Guard officials have expressed concern about 
whether the system integrator is appropriately considering human 
capital in systems engineering decisions. The system integrator is 
required to develop a workforce management plan for Deepwater, as well 
as ``human factors engineering'' plans for each Deepwater asset and for 
the overall system of systems. The Coast Guard rejected the 
contractor's workforce management plan and several of the proposed 
human factors engineering plans as being inadequate. The rejections 
were due, in part, to the lack of an established and integrated system-
level engineering approach that shows how issues relating to human 
capabilities and limitations of actually performing with the system 
will be approached. One performance monitor noted that, as of late 
2004, requirements for staffing and training of maintenance facilities 
and organizations had yet to be determined. According to the Coast 
Guard, emphasis on a contractor's approach to addressing human capital 
considerations is necessary to ensure that Deepwater goals are met, 
especially as they pertain to operational effectiveness and total 
ownership cost.

Updating the Acquisition Schedule
    The Coast Guard has recently undertaken efforts to update the 
original 2002 Deepwater acquisition schedule--an action that we 
suggested in our June 2004 report.\18\ The original schedule had 
milestone dates showing when work on an asset would begin and when 
delivery would be expected, as well as the integrated schedules of 
critical linkages between assets, but we found that the Coast Guard was 
not maintaining an updated and integrated version of the schedule.\19\ 
As a result, the Coast Guard could not demonstrate whether individual 
components and assets were being integrated and delivered on schedule 
and in critical sequence. As recently as October 2004, Deepwater 
performance monitors likewise expressed concern that the Coast Guard 
lacked adequate visibility into the program's status and that lack of 
visibility into the schedules for component-level items prevented 
reliable forecasting and risk analysis. The Coast Guard has since taken 
steps to update the outdated schedule and has indicated that it plans 
to continue to update the schedule each month for internal management 
purposes and semiannually to support its budget planning efforts. We 
think this is an important step toward improving the Coast Guard's 
management of the program because it provides a more tangible picture 
of progress as well as a baseline for holding contractors accountable. 
We will continue to work closely with the Coast Guard to ensure 
progress is made and to monitor how risks are mitigated.

Procedures for Ensuring System Integrator Accountability Are More 
        Rigorous, but Concerns Remain
    We have seen progress in terms of the rigor with which the Coast 
Guard is periodically assessing the system integrator's performance, 
but concerns remain about the broader issues of accountability for 
achieving the overarching goals of minimizing total ownership costs and 
maximizing operational effectiveness.

Improving Criteria for Assessing Performance
    Improvements continue to be made to the criteria for assessing the 
system integrator's performance. In March 2004, we reported that the 
process for assessing performance against specific contract tasks 
lacked rigor. The criteria for doing so have since been revised to more 
clearly reflect those that are objective, (that is, measured through 
automated tools against established metrics), and those that are 
subjective, meaning the narrative comments by Coast Guard performance 
monitors. Weights have been assigned to each set of evaluation factors, 
and the Coast Guard continues to refine the distribution of the weights 
to reach an appropriate balance between automated results and the 
eyewitness observations of the performance monitors. Coast Guard 
officials told us that they have also provided additional guidance and 
training to performance monitors. We found that efforts have been made 
to improve the consistency of the format used for their input in 
assessments of the system integrator's performance. Coast Guard 
officials said that they are continuing to make improvements to ensure 
that performance monitors' relevant observations are appropriately 
considered in making award fee determinations.
    It is important to note that although performance monitor comments 
are considered subjective, they are valuable inputs to assessing the 
system integrator's performance, particularly when they are tied to 
measurable outcomes. It will be necessary for the Coast Guard to 
continue refining the award fee factors as the program progresses. In 
some cases, we noted that the performance monitors' assessments 
differed vastly from the results of automated, data-driven assessments. 
For example, while schedule management is discussed in the Coast 
Guard's most recent assessment of the system integrator's performance 
as a major area of challenge and risk, the objective measure showed 100 
percent compliance in this area. Another metric assesses the extent to 
which integrated product teams consider the impact of their decisions 
on the overall cost and effectiveness of the Deepwater Program. 
Performance monitors reported that because system-level guidance had 
not been provided to the teams responsible for specific assets, they 
had a limited ability to see the whole picture and understand the 
impact of decisions on total ownership costs and operational 
effectiveness. However, the automated measure was again 100 percent 
compliance. Coast Guard officials said that, in some cases, the data-
driven metrics do not accurately reflect the contractor's performance. 
For the next award fee assessment, Deepwater officials plan to revise 
the metrics and place more weight on the performance monitors' input, 
while ensuring that it is based on measurable outcomes.

Holding the System Integrator Accountable for Effectiveness of Project 
        Teams
    Changes have been made to the award fee metrics that place 
additional emphasis on the system integrator's responsibility for 
making integrated project teams effective. Award fee criteria now 
incorporate specific aspects of how the integrator is managing the 
program, including administration, management commitment, 
collaboration, training, and empowerment of these teams. However, as 
discussed above, concerns remain about whether the teams are 
effectively accomplishing their goals.

Evaluation of Operational Effectiveness and Total Ownership Cost
    While the Coast Guard has developed models to measure the system 
integrator's performance in operational effectiveness and total 
ownership costs, concrete results have not yet emerged. Minimizing 
total ownership costs and maximizing operational effectiveness are two 
of the overarching goals of the Deepwater Program. The system 
integrator's performance in these two areas will be a critical piece of 
information when the Coast Guard makes a decision about whether to 
award the contractor the first contract option period of 5 years. 
Initial decisionmaking is to start next year.
    With regard to the operational effectiveness of the program, 
measuring the system integrator's impact has yielded limited results to 
date because few of the new assets are operational. The Coast Guard has 
developed modeling capabilities to simulate the effect of the new 
capabilities on its ability to meet its missions. However, until 
additional assets become operational, progress toward this goal will be 
difficult to determine.
    With regard to total ownership costs, the Coast Guard does not plan 
to implement our recommendation. It has not adhered to its original 
plan, set forth in the Deepwater Program management plan, of 
establishing as its baseline, a cost not to exceed the dollar value of 
replacing the assets under a traditional approach (e.g., on an asset-
by-asset basis rather than a system-of-systems approach). Although a 
cost baseline consistent with the program management plan's approach 
was initially established, this number has not been re-baselined, as 
has the system integrator's cost estimate baseline, and is not being 
used to evaluate the contractor's progress in holding total ownership 
costs down. In practice, the baseline being used to measure total 
ownership cost is the system integrator's own cost estimate. As we 
reported in March 2004, we believe that measuring the system 
integrator's cost growth compared with its own cost proposal will tell 
the government nothing about whether it is gaining efficiencies by 
turning to the system of systems concept.

Establishing Criteria and Documenting Changes to the Baseline
    Coast Guard officials stated that the contract total ownership cost 
and operational effectiveness baseline is adjusted based on approved 
decision memorandums from the Agency Acquisition Executive, the Vice 
Commandant of the Coast Guard.

Coast Guard Has Taken Steps To Hold the System Integrator Accountable 
        for 
        Competition
    The Coast Guard reported taking steps to address our 
recommendations concerning cost control through competition. Our 
recommendations pertained to competition among second-tier suppliers 
and notification of ``make'' decisions. \20\

   Competition among second-tier suppliers. Coast Guard 
        officials told us that in making the decision about whether to 
        award the first contract option, the government will 
        specifically examine the system integrator's ability to control 
        costs by assessing the degree to which competition is fostered 
        at the major subcontractor level. The evaluation will consider 
        the subcontractors' project management structure and processes 
        to control costs, as well as how market surveys of similar 
        assets and major subsystems are implemented. The Coast Guard is 
        focusing its attention on those areas that were priced after 
        the initial competition for the Deepwater contract was 
        completed, such as the HH-65 re-engining and the C-130J 
        missionization. \21\ For example, a new process implemented for 
        the C-130J missionization was a requirement for competition in 
        subcontracting and government approval of all subcontracts 
        exceeding $2 million in order for the Coast Guard to monitor 
        the integrator's competition efforts.

   Notification of make decisions. According to the Federal 
        Acquisition Regulation, the prime contractor is responsible for 
        managing contract performance, including planning, placing, and 
        administering subcontracts as necessary to ensure the lowest 
        overall cost and technical risk to the government. When ``make-
        or-buy programs'' are required, the government may reserve the 
        right to review and agree on the contractor's make-or-buy 
        program when necessary to ensure negotiation of reasonable 
        contract prices, among other things. We recommended that the 
        Coast Guard be notified of make decisions over $5 million in 
        order to facilitate controlling costs through competition. We 
        suggested the $5 million threshold because Lockheed Martin, one 
        of the major subcontractors, considers that amount to be the 
        threshold for considering its suppliers major. The Coast Guard 
        has asked the system integrator, on a voluntary basis, to 
        provide notification 1 week in advance of a make decision of 
        $10 million or more based on the criteria in the Federal 
        Acquisition Regulation. \22\ According to Coast Guard 
        officials, to date, no make decision has exceeded $10 million 
        since the request was made. The details implementing this 
        recommendation have not yet been worked out, such as 
        specifically who in the Coast Guard will monitor the 
        subcontractors' make decisions to ensure that the voluntary 
        agreement is complied with.

Concluding Observations
    Our work to date suggests the costly and important Deepwater 
Program will need constant monitoring and management attention to 
successfully accomplish its goals. In this respect, we identified three 
points that should be kept in mind in considering how to proceed with 
the program.

   First, the need to replace or upgrade deteriorating legacy 
        assets is considerable. While the Coast Guard is making 
        progress on developing (1) measures that better demonstrate how 
        the deteriorating condition of the legacy assets impact on 
        mission capabilities and (2) a strategy to better prioritize 
        upgrades and maximize capabilities, it is clear that the 
        Deepwater legacy assets are insufficient for meeting all of the 
        Coast Guard's missions.

   Second, although the need to replace and upgrade assets is 
        strong, there still are major risks in the Coast Guard's 
        acquisition approach. The cost increases and schedule slippages 
        that have already occurred are warning signs. We will continue 
        to work with the Coast Guard to determine how best to manage 
        these risks so that the Deepwater missions can be accomplished 
        in the most cost-effective way.

   Third, there are signs that as the Deepwater Program moves 
        ahead, the Coast Guard will continue to report more problems 
        with sustaining existing assets, together with the attendant 
        need for additional infusions of funding to deal with them. 
        Some of these problems, such as those on the 378-foot cutters, 
        are included in the compendium the Coast Guard uses to set 
        sustainment priorities and plan budgets, but the Coast Guard 
        has not allocated funds because the problems pertain to assets 
        that are among the first to be replaced. However, projects to 
        address these problems are nevertheless likely to be needed. We 
        will continue to work with the Coast Guard to determine if 
        there is a more systematic and comprehensive approach to 
        keeping the Congress abreast of the potential bill for 
        sustaining these assets.

    Mr. Chairman 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.

Acknowledgements
    Other individuals making key contributions to this testimony 
include Steven Calvo, Jerry Clark, Christopher Conrad, Adam Couvillion, 
Michele Fejfar, Geoffrey Hamilton, Julie Leetch, Michele Mackin, 
Christopher Miller, Stan Stenersen, and Linda Kay Willard.

ENDNOTES
    \1\ For purposes of this testimony, we use the term ``legacy 
assets'' to refer to the existing fleet of Deepwater aircraft and 
cutters. These legacy assets include the HC-130H, HU-25, HH-60, and HH-
65 aircraft and the 378-foot high-endurance cutters, the 210-foot and 
270-foot medium-endurance cutters, and the 110-foot and 123-foot patrol 
boats. We did not include the 213-foot ACUSHNET, the 230-foot STORIS, 
or the 282-foot ALEX HALEY, as part of our analyses of the Deepwater 
legacy assets because they are one-of-a-kind vessels.
    \2\ Intermediate-level and depot-level maintenance include repairs 
and upgrades that are too time-consuming or complicated to be performed 
at the unit level. For aircraft, this would include repairing, 
overhauling, or rebuilding parts, components, and end items and 
emergency manufacturing of unavailable parts. For cutters, 
intermediate- and depot-level maintenance would include preventive or 
corrective maintenance, as well as a major overhaul or complete rebuild 
of parts, assemblies, and end items; as well as major hull repairs, 
general modifications, and testing.
    \3\ To assess the reliability of the Coast Guard's data and 
condition measures, we questioned knowledgeable officials and reviewed 
existing documentation about the data and the systems that produced the 
data. We determined that the data were sufficiently reliable for the 
purposes of this testimony.
    \4\ In assessing the condition of Deepwater aircraft and cutters 
for this testimony, we analyzed what Coast Guard officials told us were 
the best available condition measures. For Deepwater aircraft, we 
reviewed the availability index (percentage of time aircraft were 
available to complete missions), cost per flight hour, labor hours per 
flight hour, programmed flight hours per year, scheduled versus 
unscheduled maintenance expenditures, and estimated deferred 
maintenance. For cutters, we reviewed the number of major casualties, 
the percent of time free of major casualties, scheduled versus 
unscheduled maintenance, and estimated deferred maintenance. We also 
reviewed data on mishaps and the dispatch reliability index for 
aircraft, and lost cutter days and unscheduled maintenance days for 
cutters. We did not use data on these measures, though, because the 
data were either not relevant to our analysis, incomplete, not 
available for the entire time period covered by our review, or not 
sufficiently reliable for our purposes.
    \5\ GAO, Contract Management: Coast Guard's Deepwater Program Needs 
Increased Attention to Management and Contractor Oversight, GAO-04-380 
(Washington, D.C.: March 9, 2004).
    \6\ For purposes of this testimony, we use the term ``systems'' to 
include all the electrical; mechanical; heating, ventilation, and air 
conditioning; and other systems on the Deepwater assets.
    \7\ Current plans call for the Coast Guard to replace all of its 
Deepwater legacy cutters and patrol boats, beginning with the 378-foot 
cutters. The Coast Guard also plans to replace the HU-25 aircraft, but 
will upgrade the existing HC-130 aircraft and HH-60 and HH-65 
helicopters to extend their service lives.
    \8\ The mission requirements include such things as the ability to 
(1) respond to 90 percent of all distress incidents within 2 hours; (2) 
detect and track targets of any material such that the probability of 
detection is at least 90 percent for small targets, such as a person in 
the water or a single-engine civil aircraft; and (3) respond to 
National Emergency Response Operations within 48 hours.
    \9\ See GAO, Coast Guard: Deepwater Program Acquisition Schedule 
Update Needed, GAO-04-695 (Washington, D.C.: June 14, 2004); Coast 
Guard: Key Management and Budget Challenges for Fiscal Year 2005 and 
Beyond, GAO-04-636T (Washington, D.C.: April 7, 2004); and GAO-04-380.
    \10\ A casualty is a deficiency in mission-essential equipment; a 
major casualty causes the major degradation or loss of at least one 
primary mission.
    \11\ However, major casualties for the 378-foot high-endurance 
cutters continued to increase in 2004.
    \12\ The Pacific Area Command is responsible for operations 
covering 74 million square miles, ranging from South America, north to 
the Arctic Circle and west to the Far East.
    \13\ GAO, Coast Guard: Comprehensive Blueprint Needed to Balance 
and Monitor Resource Use and Measure; GAO, Coast Guard: Strategy Needed 
for Setting and Monitoring Levels of Effort for All Missions (GAO-03-
155, Washington, D.C.: November 12, 2002).
    \14\ A mission's relative importance will be determined by Coast 
Guard operational decisionmakers. These determinations will not be 
static, but rather will be reviewed and revised to reflect changing 
priorities.
    \15\ GAO-04-380.
    \16\ GAO-04-695.
    \17\ Performance monitors are contracting officers' technical 
representatives, who represent the contracting officer in monitoring 
the contractor's performance.
    \18\ GAO-04-695.
    \19\ Not maintaining a current and integrated schedule lessens the 
Coast Guard's ability to monitor the system integrator's performance 
and take early action to resolve risks that could become problems 
later. Maintaining such a schedule is an industry best practice; the 
Department of Defense is required to do so in order to be able to 
report any breaches in cost, schedule, or performance targets.
    \20\ A ``make item'' means an item or work effort to be produced or 
performed by the prime contractor or its affiliates, subsidiaries, or 
divisions.
    \21\ The C-130J missionization, planned for the Coast Guard's six 
C-130J aircraft, is intended to modify and install mission-essential 
equipment to convert the aircraft into C-130J long-range surveillance 
maritime patrol aircraft.
    \22\ Federal Acquisition Regulation Sec. 15.407-2, ``Make or Buy 
Programs.''

    Senator Snowe. Thank you very much, Ms. Wrightson.
    Mr. O'Rourke? Thank you.

 STATEMENT OF RONALD O'ROURKE, SPECIALIST IN NATIONAL DEFENSE, 
                 CONGRESSIONAL RESEARCH SERVICE

    Mr. O'Rourke. Madam Chair, distinguished Members of the 
Subcommittee, it's an honor to be here today to talk about the 
Deepwater Program.
    The Coast Guard believes the revised Deepwater force is the 
highest-performing force that can be acquired for $19 to $24 
billion, and that it would generate much more performance than 
the baseline force. The Coast Guard also states, however, that 
the revised force might not have enough capacity to perform 
certain operations that might be of interest to policymakers. 
Specifically, the revised force might not have enough capacity 
to perform certain Level 2 operations, which include achieving 
an increased degree of maritime domain awareness and 
maintaining two cutters in the Bering Sea. The revised force 
almost certainly would not have enough capacity to perform 
certain Level 3 operations, which include operations for fully 
achieving long-term FY 05-FY 09 Government Performance and 
Results Act goals. And the revised force wouldn't have enough 
capacity to perform what can be called Level 4 operations, 
which include certain fisheries enforcement and counterdrug 
operations.
    Potential oversight questions include the following:
    First, Why was the revised force optimized within a cost of 
$19 to $24 billion?
    Second, Why wasn't it, instead, optimized to fully meet the 
long-term GPRA goals at lowest cost?
    Third, What are the potential operational risks of not 
having enough capacity for doing things like achieving a Level 
2 degree of maritime-domain awareness, or maintaining two 
cutters in the Bering Sea, or fully meeting the long-term GPRA 
goals?
    And, fourth, What would be the composition and cost of an 
optimized force that could perform all operations up through 
Level 2, or Level 3, or Level 4?
    Supporters of the two shipyards that build the Navy's 
larger surface combatants are concerned there might not be 
enough work over the next several years to adequately support 
both of them. Accelerating procurement of Deepwater cutters 
could help support these yards while reducing total Deepwater 
acquisition costs. Accelerating procurement of these cutters 
might not increase the Coast Guard's Deepwater management 
burdens, and might actually reduce them, as long as design work 
is completed before procurement is accelerated. Procuring four 
or five large and medium Deepwater cutters per year, rather 
than the currently planned one to three cutters per year, could 
provide about as much shipyard work as procuring one of the 
Navy's planned DD(X) destroyers per year.
    Some DOD officials have recently said that the Navy's new 
Littoral Combat Ship, or LCS, might be suitable, not just for 
its originally stated missions, but for homeland defense 
operations that Deepwater cutters, in some cases, might also be 
capable of performing. Although the revised Deepwater plan does 
not substantially increase the planned number of cutters, the 
Navy, this year, has substantially increased the planned number 
of LCSs.
    This raises a question about whether the Coast Guard and 
Navy have a common view on the division of responsibilities for 
conducting ship-based homeland defense and homeland security 
operations, and whether the two services have adequately 
coordinated the numerical requirements for the two groups of 
ships.
    Until April 29 of this year, Deepwater cost and schedule 
information available to Congress appears to have been much 
less detailed than information made available to Congress in 
February or March of each year on comparable Defense 
acquisition programs. The Congressional defense committees 
considered not just the delivery, but the timely delivery, 
early in the budget review season, of detailed cost and 
schedule information, as necessary for ensuring adequate 
program oversight.
    This raises a question of whether the Coast Guard should be 
more explicitly required to provide Congress, in February or 
March, rather than late April or late May, with the same kind 
of detailed cost and schedule information that DOD provides to 
Congress in February or March on its major acquisition 
programs.
    Last, the Deepwater Program and the Army's Future Combat 
System, or FCS Program, are both large system-of-systems 
acquisition programs for acquiring multiple types of equipment 
that are to operate in a networked environment. And both 
programs are being executed for the government by an industry 
entity acting as lead integrator. This approach appears to be a 
first for both services. Due partly to concerns over this 
approach, the Army program has been a recent focus of 
Congressional oversight, and the Army recently restructured the 
business aspects of the FCS program to strengthen the Army's 
arrangements for managing it.
    The broad similarities in the Deepwater and FCS 
acquisitions strategies raise potential oversight questions 
regarding how the Coast Guard's arrangements for managing the 
Deepwater Program compare to the Army's arrangements for 
managing the FCS Program, and whether the two services have 
instituted a process for sharing ideas on how to better manage 
the two programs.
    Madam Chair, this concludes my opening statement, and I'll 
be pleased to respond to any questions the Subcommittee might 
have.
    [The prepared statement of Mr. O'Rourke follows:]

Prepared Statement of Ronald O'Rourke, Specialist in National Defense, 
                     Congressional Research Service

    Madam Chair, Senator Cantwell, distinguished members of the 
Subcommittee, thank you for the opportunity to appear before you to 
discuss issues relating to the Coast Guard's revised Deepwater 
Implementation Plan. My testimony will focus on the following:

   the level of overall mission performance that would be 
        achieved under the revised implementation plan;

   the option of accelerating and possibly expanding 
        procurement of Deepwater National Security Cutters (NSCs) and 
        Offshore Patrol Cutters (OPCs);

   the relationship between Deepwater cutters and the Navy's 
        planned Littoral Combat Ship (LCS) for homeland security/
        homeland defense operations;

   the timeliness of delivery to Congress of detailed Deepwater 
        cost and schedule information, and potential implications for 
        Congressional oversight of the Deepwater Program; and

   the acquisition strategy for the Deepwater Program and 
        potential implications for government management of the 
        program.
Mission Performance Under Revised Implementation Plan \1\

Deepwater Capability and Capacity Levels
    In discussing the revised Deepwater Implementation Plan, the Coast 
Guard uses ``capability'' to refer to the kinds of tasks that 
individual Deepwater platforms (ships and aircraft) will be equipped to 
perform, and ``capacity'' to refer to the numbers of platforms that 
will be available for performing these tasks. The Deepwater force's 
overall mission performance, the Coast Guard says, will be a product of 
its capability and capacity. Differing combinations of capability and 
capacity, the Coast Guard says, would result in differing levels of 
overall mission performance.
    The Coast Guard has identified the following Deepwater capability 
and capacity levels.

Capability Levels
   Baseline (or Increment 0), which is the capability of 
        platforms as proposed under the original Deepwater plan;

   Increment I, the lowest-cost addition to the baseline, which 
        the Coast Guard describes as the minimal additional 
        capabilities needed to begin aligning the Deepwater platforms 
        with Department of Homeland Security (DHS) goals;

   Increment II, the middle-cost addition to the baseline, 
        which the Coast Guard describes as adding a larger amount of 
        homeland security-related capabilities to a larger fraction of 
        the platforms; and

   Increment III, the highest-cost addition to the baseline, 
        which the Coast Guard describes as the changes that would fully 
        align Deepwater platforms with DHS goals, but would still not 
        meet the new Deepwater Program System Performance 
        Specifications (SPS v2.0).

Capacity Levels

   Baseline (or Level 0), which the Coast Guard describes as 
        the force levels sufficient to perform Coast Guard missions at 
        1998 (i.e., pre-Deepwater) levels;

   Level 1, which the Coast Guard describes as the Baseline 
        plus additional forces for performing the additional port, 
        waterways, and coastal security operations that were added 
        after 9/11;

   Level 2, which the Coast Guard describes as Level 1 plus 
        additional forces for:

        -- achieving an increased degree of maritime domain awareness 
        (MDA);

        -- maintaining continuous presence of two cutters (i.e., 2.0 
        presence) in the Bering Sea; and

        -- performing additional air interdiction operations; \2\

   Level 3, which the Coast Guard describes as Level 2 plus 
        additional forces for achieving long-term (FY 2005-FY 2009) 
        Government Performance and Results Act (GPRA) goals; and

   Level 4, which the Coast Guard describes as Level 3 plus 
        additional forces for:

        -- conducting fisheries enforcement in certain areas where 
        fisheries enforcement is not currently performed; and

        -- performing additional counter-drug operations, should the 
        Department of Defense (DOD) reduce its efforts in this area so 
        as to make DOD resources available for other DOD missions.\3\

    Level 4, the Coast Guard says, is the level that RAND used in its 
2004 report on the Deepwater Program. The RAND report calculated force 
levels that would be required for fully performing both traditional 
Deepwater missions and emerging (i.e., post-9/11) Deepwater 
responsibilities.\4\

Force Recommended Under Revised Implementation Plan
    Figure 1 below, which was created by CRS on the basis of 
consultations with the Coast Guard, depicts in graphic form the Coast 
Guard's view of the combinations of capability and capacity recommended 
under the revised implementation plan, under the originally planned 
Deepwater force, and in the 2004 RAND report.
    As can be seen in the figure, the Coast Guard states that the force 
recommended under the revised implementation plan falls between 
Increments 2 and 3 in terms of capability, and between Levels 1 and 2 
in terms of capacity. In comparison, the Coast Guard states, the 
originally planned Deepwater force and the force recommended in the 
2004 RAND report used platforms with baseline-level capabilities. In 
terms of capacity, the originally planned Deepwater force was between 
Baseline and Level 1, the Coast Guard states, while the force in the 
force in the 2004 RAND report was at Level 4.



    While the number of platforms in the revised implementation plan is 
not obviously higher than the number in the originally planned 
Deepwater force, the Coast Guard believes that the value of networking, 
superior knowledge, and better tools (i.e., equipment) on the platforms 
will permit the revised Deepwater force to achieve a higher level of 
capacity per platform than the originally planned Deepwater force. In 
this sense, the Coast Guard's revised implementation plan is implicitly 
arguing, in a reversal of the old force-planning aphorism, that 
``quality has a quantity all its own.''

A Force Optimized Within a Certain Resource Level
    The Coast Guard believes that the force recommended under the 
revised implementation plan represents the highest-performing 
combination of capability and capacity with a total acquisition cost of 
$19 billion to $24 billion. The recommended force, in other words, can 
be viewed as one that the Coast Guard believes has been optimized for 
overall mission performance within a total acquisition resource level 
of $19 billion to $24 billion.
    As shown by the sloped lines in Figure 2 below, Deepwater forces 
consisting of other combinations of capability and capacity could be 
acquired for a total acquisition cost of $19 billion to $24 billion. 
The slope of the lines in the figure is notional and is intended only 
to illustrate the general principle that, within a certain total 
acquisition cost, capability and capacity can be traded against one 
another. The Coast Guard believes, based on its analysis, that other 
capability-capacity combinations lying along these lines would result 
lower levels of overall mission performance than its recommended force.
    Forces with total acquisition costs lower or higher than $19 
billion to $24 billion would lie along sloped lines that would be 
shifted to the left and right, respectively, of the lines in Figure 2.



Performance of the Revised Force
    Although the Coast Guard states that the Deepwater force 
recommended under the revised implementation plan would generate much 
more overall mission performance than the originally planned force, and 
would be able to meet certain DHS and Coast Guard long-range 
performance goals, the Coast Guard also stated to CRS that the revised 
Deepwater force:

   might not have enough capacity for performing certain 
        operations included in Level 2;

   almost certainly would not have enough capacity for 
        performing certain operations included in Level 3, which 
        includes operations for fully achieving long-term (FY 2005-FY 
        2009) Government Performance and Results Act (GPRA) goals; and

   would not have enough capacity for performing certain 
        operations included in Level 4.

Potential Oversight Questions for Congress
    Potential oversight questions for Congress arising out of this 
discussion include the following:

   Why was a range of $19 billion to $24 billion, rather than 
        some lower or higher figure, used as the acquisition cost range 
        within which to optimize the revised Deepwater force?

   Rather than optimizing the force to achieve the highest 
        possible performance within an acquisition cost of $19 billion 
        to $24 billion, why was the force not optimized to fully meet 
        the long-term (FY 2005-FY 2009) GPRA goals at the lowest cost?

   What are the potential operational risks of not having 
        enough capacity for certain operations included in Levels 2, 3, 
        and 4? What are the operational potential risks, in other 
        words, of not having enough capacity to:

        -- achieve a Level 2 degree of maritime domain awareness?

        -- maintain a 2.0 cutter presence in the Bering Sea?

        -- conduct Level 2 air interdiction operations not conducted by 
        other agencies?

        -- conduct Level 3 operations needed to fully meet the long-
        term (FY 2005-FY 2009) GPRA goals?

        -- conduct Level 4 fisheries enforcement and counter-drug 
        operations?

   What would be the most cost-effective combination of 
        capability and capacity that could perform all Level 2 
        operations (or all Level 3 operations, or all Level 4 
        operations)? What would be the composition of this force in 
        terms of platform types, platform numbers, and platform 
        features? What would be the acquisition cost of this force?

Accelerating and Possibly Expanding NSC/OPC Procurement
Congressional Interest
    There has been interest in Congress since 2002 in the idea of 
accelerating Deepwater procurement so as to compress the program's 
acquisition period from 20 or more years to as little as 10 years.\5\ 
Supporters of accelerating Deepwater procurement argue that it would 
reduce total Deepwater acquisition costs and more rapidly increase 
Coast Guard capabilities toward post-9/11 requirements.

Surface Combatant Industrial Base
    As discussed in CRS reports on the Deepwater Program and Navy ship-
acquisition programs, accelerating procurement of Deepwater National 
Security Cutters (NSCs) and Offshore Patrol Cutters (OPCs) could help 
support the two shipyards that have built the Navy's larger surface 
combatants in recent years--General Dynamics' Bath Iron Works (GD/BIW) 
of Bath, ME, and Northrop Grumman's Ingalls Shipyard of Pascagoula, MS, 
which forms part of Northrop Grumman Ship Systems (NGSS).\6\
    GD/BIW and Ingalls currently face some uncertainties regarding the 
amount of Navy surface combatant construction work they will receive 
over the next several years. The FY 2006-FY 2011 Future Years Defense 
Plan (FYDP) reduces planned DD(X) destroyer procurement to one per year 
in FY 2007-FY 2011. In addition, the Navy is interested in changing the 
shipyard portion of the acquisition strategy for the DD(X) program.\7\ 
Estimated DD(X) procurement costs, moreover, have recently increased 
significantly, raising questions about the DD(X) program's prospective 
affordability and cost effectiveness. These developments have 
heightened concerns among supporters of GD/BIW and Ingalls regarding 
the futures of the two yards.

Potential Annual Rates and Total Procurement Quantities
    Ship deliveries as shown in the revised Deepwater Implementation 
Plan suggest that the plan would procure National Security Cutters 
(NSCs) at a rate of one per year over the next few years, and Offshore 
Patrol Cutters (OPCs) at a rate of one per year starting a few years 
from now, growing to two or three per year a few years after that. It 
appears that a combined NSC-OPC procurement rate of three ships per 
year is reached around the end of this decade or early in the next 
decade, depending on which funding plan is pursued, and that in almost 
all cases, the three ships procured each year are all OPCs.
    Although the shipyard skill mix for building NSCs and OPCs is 
somewhat different from the shipyard skill mix for building DD(X)s, 
based on their light-ship displacements, procuring a total of four or 
five NSCs and OPCs per year might provide about as much total shipyard 
work as procuring one DD(X) per year. The Coast Guard currently 
estimates that, in FY 2002 dollars, NSCs will cost about $277 million 
each to procure (or somewhat more if the design is expanded to include 
certain additional equipment), and that OPCs would cost an average of 
about $200 million each to procure. The Navy currently estimates that 
in FY 2002 dollars, follow-on DD(X)s would cost roughly $2.1 billion 
each to procure. Using these figures, procuring four or five NSCs and 
OPCs per year would cost roughly half as much as procuring one DD(X) 
per year.
    If the scope of the Deepwater Program is expanded to include a 
higher level of capacity, the total number of NSCs and OPCs might 
increase. The 2004 RAND report recommended a Deepwater Force with Level 
4 capacity that included, among other things, 44 NSCs and 46 OPCs. As 
shown earlier in Figure 1, however, the RAND analysis used Deepwater 
platforms equipped with a Baseline-level of capability. The force 
levels recommended under the Coast Guard's revised implementation plan 
suggest that, if Deepwater platforms are equipped with a level of 
capability equivalent to Increment II or III, then a Deepwater force 
with Level 4 capacity might include substantially fewer than 44 NSCs 
and 46 OPCs, and that a Level 3 or Level 2 force would include even 
smaller numbers.
    Even so, an optimized Deepwater force with increased unit 
capability and Level 3 or -4 capacity would likely include more than 
the total of 31 to 33 larger cutters (6 to 8 NSCs and 25 OPCs) that are 
included in the revised implementation plan. Since differences in 
recommended ship numbers between the revised plan and the 2004 RAND 
report are more dramatic for NSCs than they are for OPCs, increasing 
the Deepwater Program to an optimized force with Level 3 or Level 4 
capacity might increase the number of NSCs more dramatically than the 
number of OPCs. An optimized Deepwater force with increased unit 
capability and Level 2 capacity might include slightly more than 31 to 
33 cutters.

Management Burden of Cutter Acceleration
    Accelerating the entire Deepwater Program could increase the Coast 
Guard's burden in managing the large and complex Deepwater Program, and 
thereby increase program risk. Accelerating procurement of NSCs and 
OPCs only, however, might not materially increase the Coast Guard's 
management burden--provided that design work on each class of cutter 
was completed before procurement of that class was accelerated--because 
NSCs and OPCs are to incorporate proven rather than developmental 
systems and because the Coast Guard already plans to overlap 
procurement of the two classes.
    Indeed, accelerating NSC and OPC procurement might actually reduce 
the Coast Guard's Deepwater management burden by eliminating more 
quickly the management challenges associated with maintaining legacy 
cutters, and by shortening the period during which the Coast Guard 
would have to manage NSC and OPC procurement.
Summary of Potential Advantages and Disadvantages
    Potential Advantages. Potential advantages of accelerating and 
possibly expanding procurement of NSCs and OPCs include the following:

   reducing NSC and OPC unit procurement costs by achieving 
        better production economies of scale (i.e., more economic rates 
        of production);

   more quickly replacing the high operation and support (O&S) 
        costs of legacy cutters with the lower O&S costs of new 
        cutters;

   more quickly increasing the Coast Guard's capabilities 
        toward post-9/11 requirements;

   more quickly eliminating the management burdens associated 
        with maintaining legacy cutters and supervising procurement of 
        the new cutters; and

   providing additional work for GD/BIW and Ingalls during a 
        period of uncertain Navy surface combatant construction work.

    Potential Disadvantages. Potential disadvantages of accelerating 
and possibly expanding procurement of NSCs and OPCs include the 
following:

   increased annual funding requirements for the next several 
        years for procurement of NSCs and OPCs, which could require, in 
        a situation of constrained funding, offsetting reductions in 
        annual funding for procurement of other Deepwater assets, other 
        Coast Guard priorities, or other DHS priorities;

   a shorter procurement time period to learn about better 
        technologies and incorporate them into cutters that have not 
        yet been built;

   increased shipyard (as opposed to Coast Guard) management 
        burdens associated with supervising a larger number of workers 
        involved in building NSCs and OPCs;

   increased Coast Guard management burdens associated with 
        training crews for the new cutters; and

   a more compressed cutter retirement period (i.e., bloc 
        obsolescence) years from now, when the new Deepwater cutters 
        reach the ends of their service lives, possibly requiring a 
        similarly compressed procurement period at that point to 
        replace the retiring ships.

Navy LCSs vs. Coast Guard Cutters for Homeland Defense

    The Littoral Combat Ship (LCS) is a planned new Navy surface 
combatant. The Navy announced the start of the LCS program in November 
2001 as part of a larger restructuring of its surface combatant 
acquisition efforts. The LCS is to be a small, fast ship that would use 
modular ``plug-and-fight'' mission payload packages, including unmanned 
vehicles (UVs).
    The LCS, with a full load displacement of 2,500 to 3,000 tons, is 
to be close in size to the 3,200-ton OPC. Navy officials in the early 
stages of the LCS program said that the LCS might prove suitable as the 
basis for the OPC design, but the Coast Guard did not adopt this 
approach, apparently in part because of the LCS's cost. The Navy wants 
each LCS to cost no more than $220 million to procure, exclusive of its 
modular mission packages, while the OPC, as mentioned earlier, is to 
cost an average of about $200 million, including all of its built-in 
mission equipment.
    The Navy's primary intended missions for the LCS are countering 
enemy mines, submarines, and fast attack craft (i.e., ``swarm boats'') 
in heavily contested littoral (near-shore) waters. Secondary LCS 
missions, also to be performed in littoral waters, include 
intelligence, surveillance, and reconnaissance (ISR); maritime 
intercept; special operations forces (SOF) support; and logistics 
support for movement of personnel and supplies.
    In recent months, some DOD and Navy officials have stated that the 
LCS might also be suitable for homeland defense operations.\8\ Such 
missions, however, might also be performed by NSCs, OPCs, and other 
Deepwater assets.
    Navy officials earlier spoke about building a total of perhaps 30 
to 60 LCSs. A March 2005 report to the Congressional defense committees 
on potential future Navy force levels, however, shows a potential total 
force level of 63 to 82 LCSs.\9\ The Chief of Naval Operations has 
spoken of the possibility of building a total of 75 to 100 LCSs.\10\
    Navy statements about the LCS's possible suitability for homeland 
defense, and the recent apparent increase in the Navy's planned number 
of LCSs, raise several potential oversight questions for Congress, 
including the following:

   Do the Coast Guard and Navy have a common view on the 
        division of responsibilities between Navy LCSs and Coast Guard 
        NSCs, OPCs, and other Deepwater assets for performing homeland 
        defense and homeland security missions? Have the two services 
        adequately coordinated their plans for procuring assets that 
        can perform homeland defense and homeland security missions, 
        consistent with the Navy-Coast Guard National Fleet policy 
        statement? \11\

   Does the Coast Guard believe that the LCS would be better 
        than NSCs, OPCs, or other Deepwater assets for performing 
        certain homeland defense and homeland security missions? If so, 
        which ones, and why? If the Coast Guard believes the LCS would 
        be better for performing these missions, should the revised 
        Deepwater plan be amended to include the procurement of LCSs 
        for the Coast Guard?

   Was the Coast Guard's revised Deepwater Implementation Plan 
        influenced by an awareness that the Navy might be interested in 
        using the LCS for homeland defense missions, and if so, in what 
        way was the plan influenced?

   What role, if any, did the homeland defense mission play in 
        the Navy's decision to increase the planned procurement 
        quantity of LCSs from a range of 30 to 60, to a range of 63 to 
        82 (or possibly 75 to 100)?

Timeliness of Detailed Cost and Schedule Information
    The Deepwater Program is comparable in terms of total acquisition 
cost, complexity, and lengthy period of acquisition to major DOD 
acquisition programs. Until the submission to Congress on April 29, 
2005, of the Deepwater supplement to the Coast Guard's FY 2006 
budget,\12\ however, information available to Congress on the cost and 
procurement schedule of the Deepwater Program, particularly for years 
beyond FY 2006, appears to have been much less detailed and complete 
than information that is normally made available to Congress in 
February or March of each year on the costs and procurement schedules 
of typical DOD ship or aircraft acquisition programs.
    For DOD acquisition programs, information on the costs and 
procurement schedules of major acquisition programs for the Fiscal Year 
under consideration and the next four or 5 years (e.g., FY 2006 and FY 
2007-FY 2011, respectively) is presented in detail in the Future Years 
Defense Plan (FYDP) and extensive supporting budget-justification 
documents. This information is usually submitted each year soon after 
the initial submission of the top-line DOD budget in early February. 
The defense committees of Congress consider this detailed information 
on costs and procurement schedules necessary, even critical, to 
ensuring adequate Congressional oversight of these programs. Receiving 
this detailed information in February or March permits the defense 
committees to review it in depth in preparing for their budget-review 
hearings in February, March, and early April. Receiving it in late 
April, after most or all of these hearings are usually concluded, would 
significantly reduce its value in supporting the defense committees' 
oversight and markup activities.
    In past years, when planned Coast Guard acquisition programs were 
not of the scale and complexity contemplated in the Deepwater Program, 
the absence until late April of detailed future-year cost and 
procurement schedule information may have had only a limited effect on 
Congress' ability to conduct effective oversight of Coast Guard 
acquisition efforts. With the advent of the Deepwater Program, however, 
the absence of this kind of detailed information until late April 
raises the following potential issues for Congress:

   If the submission to Congress in February or March of 
        detailed, multi-year information on costs and procurement 
        schedules of major DOD acquisition programs is considered 
        necessary, even critical, to ensuring adequate Congressional 
        oversight of these DOD programs, why would the submission to 
        Congress in February or March of detailed, multiyear 
        information on costs and procurement schedules of the Deepwater 
        Program or other large Coast Guard (or DHS) acquisition 
        programs not be necessary or critical to ensure adequate 
        oversight of these Coast Guard (or DHS) programs?

   If, for the Deepwater Program, Congress lacks, until late 
        April, the kind of detailed, multiyear information on costs and 
        procurement schedules that is typically made available to 
        Congress in February or March for major DOD acquisition 
        programs, how might this affect Congress' ability to consider 
        potential adjustments to the Deepwater Program that could 
        affect procurement schedules and funding requirements in future 
        years?

   Should the Coast Guard (or DHS) be required, for the 
        Deepwater Program or other major acquisition efforts, to 
        provide Congress in February or March with the same kind of 
        detailed, multiyear information on costs and procurement 
        schedules that DOD provides to Congress in February or March 
        for its major acquisition programs?

   Should the Coast Guard be given more autonomy to share with 
        Congress detailed information on costs and procurement 
        schedules for the Deepwater Program or other acquisition 
        programs?

Deepwater Acquisition Strategy
    The Government Accountability Office (GAO) has testified and 
reported several times on the Deepwater Program's acquisition strategy 
and the issues this strategy raises regarding Coast Guard management of 
the program.
    In addition to this work, it can be noted that the Deepwater 
acquisition strategy appears similar in certain basic respects to the 
acquisition strategy for the Army's Future Combat System (FCS), which 
aims at acquiring an integrated collection of manned and unmanned 
ground vehicles, air vehicles, sensors, and munitions for the Army.\13\ 
In particular, the Deepwater and FCS programs are both large, system-
of-systems acquisition programs for acquiring multiple types of 
equipment that are to operate in a networked environment, and both 
programs are being executed for the government by an industry entity 
acting as the prime contractor and system integrator. For the Deepwater 
Program, the prime contractor and system integrator is Integrated Coast 
Guard Systems (ICGS), a business entity jointly owned by Northrop 
Grumman and Lockheed Martin, while for the FCS program, the lead system 
integrator (LSI) is Boeing and Science Applications International 
Corporation (SAIC). Using a private-sector lead integrator to execute a 
large, system-of-systems acquisition program appears to be a first for 
both services.
    Using a private-sector lead integrator to execute a large, system-
of-systems acquisition program offers potential advantages for the 
government in terms of taking full advantage of the lead integrator's 
knowledge of available technologies and integration approaches, and 
giving the lead integrator flexibility to make tradeoffs between 
individual systems so as to optimize the government's investment at the 
overall, system-of-systems level. As a consequence of these potential 
advantages, some observers believe that the lead-integrator approach 
may offer a potential model for future system-of-systems acquisition 
efforts by DHS, DOD, or other executive branch departments.
    Other observers, while acknowledging these potential benefits, are 
concerned that relying on a private-sector lead integrator to execute a 
large, system-of-systems acquisition program can also create one or 
more of the following risks for the government:

   Cost control and overall system optimization might be 
        reduced because the lead integrator, in deciding who should 
        provide various parts of the system, might not always employ 
        full and open competition between potential supplier firms, or 
        might sometimes face a conflict of interest in assessing bids 
        from its own subsidiaries against those made by other firms.

   Cost control and innovation might be reduced because the 
        lead integrator, as the incumbent on a large, complex effort, 
        might face little or no real risk of losing the contract in any 
        subsequent competition, and might reject innovations offered by 
        outside firms that could threaten the lead integrator's chosen 
        approach to the problem.

   The government's visibility into program costs and tradeoffs 
        might be inadequate, and the government's in-house capacity for 
        making independent assessments concerning the program might 
        atrophy, possibly making the government overly dependent on 
        information from the lead integrator for tracking, assessing, 
        or making key decisions about the program.

    Due in part to concerns over its acquisition strategy, the FCS 
program, in recent months, has been a matter of oversight concern in 
Congress.\14\ On April 5, 2005, the Army announced that it was 
restructuring the business aspects of the FCS program. The 
restructuring included, among other things, the following actions 
intended to strengthen the Army's management of the program:

   The Secretary of the Army and the Chief of Staff of the Army 
        will conduct an indepth review of the program at least three 
        times a year.

   The Secretary and the Chief of Staff will serve as the lead 
        Army officials for all major changes to the program.

   The Army will establish an Army Modular Force Integration 
        Office to ensure that FCS technologies are incorporated into 
        the Army as soon as they are ready, and to integrate and 
        coordinate the FCS program with evolving Army warfighting 
        doctrine and the Army's emerging global communication and 
        information infrastructure. The new office will be overseen by 
        the Acting Under Secretary of the Army and the Vice Chief of 
        Staff of the Army.

   As an additional oversight measure, the Army Audit Agency, 
        the Army Science Board, and an outside panel of advisors will 
        conduct periodic independent assessments of program cost, 
        schedule, and technical viability.\15\

    As points of comparison with the last of the above actions by the 
Army, the Coast Guard, has done, or is doing, the following:

   During the source-selection phase of the Deepwater Program, 
        the Coast Guard used an Independent Analysis Government 
        Contractor (or IAGC, staffed originally by the MITRE 
        Corporation and later by Booz Allen Hamilton) to provide the 
        Coast Guard with independent assessments of the bids submitted 
        by the three industry teams that competed for the right to 
        become the Deepwater Program prime contractor. The IAGC was 
        stood down following the completion of source selection.\16\

   During the source-selection phase and on two subsequent 
        occasions (including, most recently, during the analysis that 
        led to the revised implementation plan), the Coast Guard turned 
        to the Logistics Management Institute (LMI) for independent 
        cost estimates relating to the Deepwater Program.\17\

   In early 2004, the Coast Guard used MITRE to perform an 
        independent assessment of the process the Coast Guard had 
        developed for performing the Performance Gap Analysis (PGA) 
        that eventually led to the revised Deepwater Implementation 
        Plan.\18\

   As of late-April 2005, a third-party assessment of the use 
        of competition by ICGS was in progress.\19\

    The broad similarities between the Deepwater and FCS acquisition 
strategies, and the Army's recent actions to strengthen its management 
of the FCS program, raise the following potential oversight questions 
for Congress:

   How do the Coast Guard's arrangements for managing the 
        Deepwater Program compare to the Army's arrangements, as 
        recently restructured, for managing the FCS program?

   Are the Army's arrangements for managing the FCS program 
        stronger in some ways than the Coast Guard's arrangements for 
        managing the Deepwater Program, and if so, should the Coast 
        Guard consider adopting the stronger Army measures?

   How does the Coast Guard compare to the Army in terms of in-
        house acquisition-management and system-integration expertise? 
        Does the Coast Guard have enough in-house system-integration 
        expertise to conduct complete and fully independent assessments 
        of ICGS decisions and recommendations regarding the Deepwater 
        Program's system-integration approach?

   Should the Coast Guard establish a standing independent 
        organization--perhaps similar to the Deepwater source-selection 
        IAGC (but permanent in nature), or to the Army's outside board 
        of advisors for the FCS program--to provide periodic and 
        ongoing assessments of ICGS decisions and recommendations 
        regarding the Deepwater Program, including decisions relating 
        to the program's system-integration approach, or to solicit and 
        assess, on an ongoing basis, proposed innovations for the 
        Deepwater Program, particularly from firms outside the ICGS 
        team?

   Have the Coast Guard and Army established a regular process 
        for sharing with each other their experiences in managing the 
        Deepwater and FCS programs, and for trading ideas for improving 
        their management of the programs? If not, would the Coast Guard 
        and Army benefit from establishing such a process?

    Madam Chair, Senator Cantwell, distinguished Members of the 
Subcommittee, this concludes my testimony. Thank you again for the 
opportunity to appear before you to discuss these issues. I will be 
pleased to respond to any questions you might have.

ENDNOTES
    \1\ This section is based largely on an April 28, 2005, Coast Guard 
briefing to CRS and follow-on April 29, 2005, telephone discussion with 
CRS, on the performance gap analysis and force structure determination 
process underlying the revised Deepwater Implementation Plan, and on 
supporting documents provided by the Coast Guard to CRS.
    \2\ Coast Guard officials stated that the Bureau of Immigration and 
Customs Enforcement (ICE) is, for the time being, performing the fixed-
wing portion of these operations.
    \3\ The briefing materials used by the Coast Guard for its April 
28, 2005, briefing to CRS show an unlabeled capacity level beyond Level 
3 that fits the description provided here. Coast Guard officials agreed 
at the briefing that, for purposes of this discussion, this capacity 
level could be called Level 4.
    \4\ John Birkler et al., The U.S. Coast Guard's Deepwater Force 
Modernization Plan, Can It Be Accelerated? Will It Meet Changing 
Security Needs? RAND Corporation, Santa Monica (CA), 2004. See 
especially Table 4-2 on page 70.
    \5\ For example, Section 888(i) of H.R. 5005/P.L. 107-296 of 
November 25, 5 2002, the bill that established DHS, required a report 
to Congress on feasibility and potential implications for cost, 
capability, readiness, and operational efficiency of compressing 
Deepwater procurement from 20 years to 10 years.
    \6\ See CRS Report RS21059, Navy DD(X) and CG(X) Programs: 
Background and Issues for Congress, by Ronald O'Rourke; CRS Report 
RL32109, Navy DD(X), CG(X), and LCS Ship Acquisition Programs: 
Oversight Issues and Options for Congress, by Ronald O'Rourke; and 
RS21019, Coast Guard Deepwater Program: Background and Issues for 
Congress, by Ronald O'Rourke.
    \7\ Until recently, the DD(X) was being developed by a national 
industry team lead by NGSS and Raytheon. The team also included GD/BIW 
as well as Lockheed Martin, Boeing, and several other companies. Under 
the Navy's DD(X) acquisition strategy of record, which was approved by 
DOD in February 2004, the first DD(X) would be built by NGSS, the 
second DD(X) would be built GD/BIW, and contracts for building the 
first six DD(X)s would be equally divided between NGSS and GD/BIW.
    In February 2005, Navy officials announced that they would seek 
approval from DOD to instead hold a one-time, winner-take-all 
competition between NGSS and GD/BIW to build all DD(X)s. On April 20, 
2005, DOD deferred this proposal as premature, but agreed to a Navy 
proposal to separate the DD(X) system-development and software-
development contracts from the DD(X) detailed-design effort. Section 
1019 of the Emergency Supplemental Appropriations Act for 2005 (H.R. 
1268/P.L. 109-13 of May 11, 2005) effectively prohibits a winner-take-
all competition to build all DD(X)s. The provision does not prohibit 
the Navy from shifting to a new DD(X) acquisition strategy that somehow 
involves a second shipyard, even if that involvement were limited, for 
example, to building only one ship in the DD(X) program.
    On May 25, 2005, the Navy announced that, in light of Section 1019, 
it wants to shift to a DD(X) acquisition strategy under which two 
DD(X)s would be procured in FY 2007, with one to be designed and built 
by NGSS and the other by GD/BIW. Each ship might be split-funded (i.e., 
incrementally funded) in FY 2007 and FY 2008. The two yards might then 
compete for the right to build all subsequent DD(X)s, in which case 
this strategy could be viewed, at that point, as a ``winner-takes-all-
remaining-ships'' approach.
    \8\ See, for example, John T. Bennett, ``Defense Officials Say 
Littoral Combat Ships Could Defend U.S. Shores,'' Inside the Pentagon, 
October 21, 2004.
    \9\ For more on the LCS program, see RS21305, Navy Littoral Combat 
Ship (LCS): Background and Issues for Congress, by Ronald O'Rourke, and 
CRS Report 32109, op cit.
    \10\ A recent press article stated that Admiral Vernon Clark, the 
Chief of Naval Operations, is ``absolutely convinced'' there will be 
``a rush to [build] 50,'' and then a move to construct another 25 or 50 
ships. ``I think well see more than'' just 50 or 60 of the vessels, he 
said in an interview.

        (Dave Ahearn, ``CNO Clark Sees LCS Fleet Of 75-100 Ships,'' 
        Defense Today, June 3, 2005: 1-3. Bracketed word as in the 
        article.)

    An earlier article stated that in a January 2005 speech at the 
annual Surface Navy Association symposium,

        the CNO acknowledged that ``the navy is not correctly balanced 
        and optimised for the world of the future, and . . . faces a 
        three-decade-long effort to fully reform its forces to 
        accommodate national security needs such as anti-terrorism and 
        homeland security.''

        ``This is going to be a dramatically different navy,'' Adm 
        Clark concluded. ``I expect to have 50 to 75, maybe even 100 
        LCSs out there. Why? Because I think that's the kind of 
        platform you're going to need for the world that we're living 
        in.''

    (Scott C. Truver, ``Transformation: A Bridge Too Far,'' Jane's Navy 
International, March 2005: 24-26, 28-31. Ellipsis as in the article.)
    \11\ The National Fleet policy statement is a joint Navy-Coast 
Guard document first signed in 1998 and updated in 2002 that commits 
the two services to coordinate their activities in several areas, 
including acquisition. Among other things, the document commits each 
service ``to build a National Fleet of multi-mission surface 
combatants, major cutters, patrol boats, and aircraft to maximize our 
effectiveness across all naval and maritime missions.''
    \12\ U.S. Coast Guard, Budget Estimates, Fiscal Year 2006, 
Integrated Deepwater System. 50 pp. Page ii of the document states that 
it is a supplement to the Coast Guard's FY 2006 budget submission. The 
Coast Guard submitted this document to Congress on April 29, 2005, and 
provided CRS a copy on May 3, 2005. The Coast Guard submitted to 
Congress another document containing additional information on May 31, 
2005, and provided CRS a copy on June 15, 2005.
    \13\ For more on the FCS program, see CRS Report RL32888, The 
Army's Future Combat System (FCS): Background and Issues for Congress, 
by Andrew Feickert.
    \14\ See, for example, Jen DiMascio, ``McCain Questions Army 
Leaders About FCS Contracting Agreement,'' Inside the Army, March 21, 
2004; Jonathan Karp and Andy Pasztor, ``Army Program Run By Boeing 
Faces Challenge By Sen. McCain,'' Wall Street Journal, March 15, 2005: 
4. See also John Liang, ``Wynne: LSI Concept Working Well For Army's 
Future Combat System,'' InsideDefense.com, February 13, 2005; Scott 
Nance, ``Army Likely To Increase Use Of Systems Integration 
Contractors,'' Defense Today, January 10, 2005: 1, 2; Dave Ahearn, 
``Boeing Doesn't Eclipse Army Oversight Of FCS: General,'' Defense 
Today, October 27, 2004.
    \15\ U.S. Army News Release, ``Army Announces Business 
Restructuring of the FCS Program,'' April 5, 2005. [http://
www4.army.mil/ocpa/print.php?story_
id_key=7125] See also Jen DiMascio, ``Army Announces Future Combat 
System Contract Restructuring,'' Inside the Army, April 11, 2005; and 
Jonathan Karp and Andy Pasztor, ``About-Face: Army's Decision On Boeing 
Changes Philosophy,'' Wall Street Journal, April 6, 2005.
    \16\ Source: Telephone consultation with Deepwater Program office, 
May 3, 2005.
    \17\ Ibid.
    \18\ MITRE Corporation, Independent Assessment of U.S. Coast Guard 
Deepwater Performance Gap Analysis Process, McLean (VA), 2004. (Version 
1.0, March 30, 2004, MITRE Center for Enterprise Modernization, McLean, 
Virginia) A copy of this report was provided to CRS by the Coast Guard 
during the April 28, 2005 briefing.
    \19\ U.S. Coast Guard. Oversight and Management of the Coast 
Guard's Integrated Deepwater System, Washington, 2005. (Rear Adm. 
Patrick M. Stillman, USCG, Program Executive Officer, Integrated 
Deepwater System, U.S. Coast Guard Headquarters, Washington, D.C., 27 
April 2005) p. 5.

    Senator Snowe. Thank you. Thank you all very much.
    Admiral Collins, in just, you know, evaluating this plan, 
getting back to the original question as to why the Coast Guard 
would be recommending a decreasing number of ships from the 
pre-9/11 plan to the post-9/11 plan. On what basis is that 
recommendation made?
    Admiral Collins. Actually, it's--of course, the new 
implementation plan is a range that is recommended, and the 
range from--as you can see, the numbers are very, very close to 
what the pre-9/11 numbers were. So, the--from my perspective, 
the default setting, going in here, is the high-end of the 
range, and should be tempered by actual performance that we 
continue to examine and model. We're underway with the fourth 
level of a--or performance gap analysis will--the very--all the 
specific numbers now in that range will be modeled, through the 
course of this summer and into the fall, to simulate and gain 
detailed numbers on the operational effectiveness of the 
specific implementation plan in the respective ranges.
    Our emphasis in 2006 is to get the capability part right, 
as a priority. It's very, very important, in this phase of this 
systems-of-systems, to get the lineup correct, and lineup in 
terms of what--when do we introduce what platform, on what set 
of capabilities? How to get that right is a matter of priority 
as we go and design, and so forth, the systems. Where we are in 
time mandates that we do that as a matter of priority. That's 
where we put--that's where we put our priorities this year. And 
I'm very, very pleased that we did get a new mission needs 
statement approved in the Department, a new mission needs 
statement approved in the White House, and a strong receptivity 
on the Hill, in terms of these capabilities.
    So, that's been our priority. We will temper the capacity 
part, the numbers part, for the duration of the project. And I 
see that as a dynamic process, not as a static process. If we 
find that the promised performance enhancements of this new 
enhanced system-by-system that we're developing doesn't pan 
out, then we're going to have to adjust those numbers. But I 
see it as a dynamic process, not as a point estimate in time, 
but something you temper with modeling and actual performance 
after the systems get delivered. And we will continue to do 
that, and that's our full intent.
    Senator Snowe. Well, my concern is the fact that, in terms 
of the numbers here, that the primary investments are made, 
and, obviously, retrofitting current assets, aging assets, and 
not really making a request for new and additional assets. I do 
not think that it reflects reality, to be honest with you. I 
have always been told--and I used to chair the Sea Power 
Subcommittee, that quantity was a quality of its own. And I 
know Mr. O'Rourke said in his statement, that this is turning 
it on its head here now, that it's quality is a quantity all of 
its own. And I know in this environment and what you are 
requested to do each and every day, I just do not see how this 
is going to bear out, in terms of realistic demands on the 
Coast Guard.
    Admiral Collins. Let me just make a--if I could, Madam 
Chairman, just a point in clarification on the money invested 
in legacy systems. The type of investment we're making in the 
legacy system, the nature of the investment, is crucial here, 
because if you look at the total amount of money that we're 
investing in legacy systems in 2006, under the President's 
request, the vast preponderance of that is not for sustainment. 
The vast preponderance of that is conversion, and it's to take 
the assets and make them Deepwater assets. So, that's a long-
term investment that'll pay off in the 40-year framework. The 
true maintenance/sustainment part is only--is mostly focused on 
the surface fleet. And in the case of the 2006 budget, it's 
$37.5 million, what we call a mission-effectiveness program. 
So, the real focus put the Band-Aids on the systems and keep 
them running--is $37.5. The enhancement part is all the rest of 
that money, $133 million of which, alone, is for the new 
engines on the helicopter, and that's the Deepwater investment.
    Senator Snowe. Well, I am going to disagree on the 
fundamental premise, on the issue of capacity versus 
capabilities. I just think that the demand is much greater on 
Coast Guard, and particularly in the homeland-security area, 
and, obviously, in the traditional missions of the Coast Guard. 
I understand, on the conversions and enhancing performance--I 
mean, I think we all understand that. But the fact that you're 
diminishing the numbers here is what concerns me in this 
environment. If you were requesting that pre-9/11, and now 
we're saying, ``Well, we can do more with less''--I know we're 
refitting, I know we're converting, but you're still sustaining 
the legacy assets in maintenance is drawing 25 percent of the 
Deepwater Program currently. And that will only get worse over 
time.
    Ms. Wrightson--and I would like to have you address this, 
as well, Admiral Collins and Mr. O'Rourke--the issue of 
acceleration. You know, which is worse? Being able--you know, 
the degrading readiness of the Coast Guard's assets or trying 
to grapple with the idea of acceleration that in--many of the 
studies have indicated it will save taxpayers money. If you go 
from a 10- to 15-year program, it'll save $4 billion.
    Ms. Wrightson. I knew you'd ask the question, so I prepared 
my response.
    First, I want to agree with the Commandant that the 
statistics that have been talked about, in terms of how much 
money is actually going into sustained legacy assets that are 
planned for replacement is now 3.9 percent of the requested 
proposal. That is less than is going into management of the 
contract. That's important.
    In terms of acceleration, the real issue here is about 
balancing the risks. There is no doubt that there could be cost 
savings in a perfect world, where you could simply put another 
asset on the water, or in the air. However, managing the risk, 
going forward, is not a simple issue, and it won't--it doesn't 
allow me a simple answer.
    I want to say one thing that I think you would like to 
hear, which is that if the Coast Guard were to--and if we're 
able to--see a quick implementation over the year of our 
recommendations, to the point where GAO would be able to close 
those recommendations, then we would think there would be far 
less risk to moving forward. That said, it also makes sense for 
the Coast Guard to consider targeted accelerations of assets 
that are proven and tested on the water, rather than just 
putting money into the program and pushing every acquisition 
forward. The former is a much less risky approach. So, for 
example, it might for the NSC versus, say, putting it into all 
the other assets all at once. So, that's a less risky approach 
to the situation.
    Senator Snowe. Mr. O'Rourke--thank you for that comment--
Mr. O'Rourke, what is your opinion on that?
    Mr. O'Rourke. My testimony about accelerating is focused on 
accelerating the procurement of the larger cutters in the 
program, and I have focused on that because there is a linkage 
between this issue and an issue concerning the Navy's surface 
combatant industrial base.
    When I testify on Navy shipbuilding issues, I try to 
sensitize people to the option of looking to the Deepwater 
Program as a way of helping to maintain the surface combatant 
industrial base. And, in my work with people who work on Coast 
Guard issues, I try and sensitize them to the fact that the 
Deepwater Program can help maintain the Navy's shipbuilding 
capacity in that area. I think each side needs to be sensitive 
to how something on the other side can link into this.
    My view is that, because these larger cutters are not 
revolutionary designs--they are designs that will incorporate 
well-understood hull forms and technologies--and because the 
Coast Guard is not attempting something tremendously new with 
these cutters, that the risk in accelerating them would not be 
great, as long as you locked down the design of the ships 
before you began accelerating them.
    And, further, it might actually reduce the Coast Guard's 
management burdens over time to accelerate the procurement of 
these ships, once they're designs were stabilized, because you 
would have less time involved in managing the procurement of 
those ships, and because you would have a shorter period of 
time during which you would have to devote management attention 
to the sustainment of the older cutters.
    Senator Snowe. Thank you.
    Chairman Stevens?
    The Chairman. It seems the CRS and GAO have the luxury of 
accelerating when there's no money. I don't know if you realize 
the President requested $66 million for Deepwater. The Senate 
appropriations currently is at $906. The House is at $466. And 
the House authorization is $1.4 billion. I think that the 
responsibility for this modernization lies in the Congress, not 
in the White House, not in the Coast Guard. I do believe so.
    Admiral Collins, have you ever tried to work out a joint 
procurement schedule with the Navy? Why do we have these two 
ships that are so close together in size and function, and 
being built by different specifications, different shipyards? 
Industrial base is one thing, but do we need two industrial 
bases?
    Admiral Collins. We've been closely allied with the Navy on 
the performance requirements of this whole program. When we 
developed the performance specification for Deepwater, we did 
it in conjunction with the Navy. We went to the Navy and asked 
what their--we call it Navy--Naval operational requirements, we 
need to embed in the performance contract. We did that.
    But they're fundamentally two different missions--the 
missions set. If you take a look at the Littoral Combat Ship, 
for example, that's a premium on speed. It's a premium on 
speed, in modular approach to their mission. We're--we have a 
different mission dynamic. Ours is persistent presence for 
interdiction, apprehension, prosecution, arrest. And we get the 
speed, not through the platform; we get the speed through a--of 
the system--the fast small boat, the fast helicopter, with the 
ship. And we think that's a--for us, it's a better-value 
proposition.
    Speed costs a bunch of money. You buy a 45-knot ship, and 
it's a very expensive ship. Our--the comparable ship to the 
Littoral Combat Ship is our medium ship, the offshore patrol 
cutter. It will be a much more affordable ship for the United 
States Coast Guard, designed to cost $200 million. The Littoral 
Combat Ship is a $200 to $300 million ship, before you put one 
mission module on there. That's going to be pushing upward to 
$400 million by the time it's through.
    So, I think it's a better-value proposition for us. It's 
built-in Navy requirements into it, so it can--it's 
interoperable with the Navy. And we have, of course, a national 
fleet policy statement that ensures that we manage and deploy 
our ships synergistically. So, I think we've got the best 
balance, Senator, on the mission, the requirement, and the 
collaboration with the Navy under the present approach.
    The Chairman. Good. I appreciate your answer. That 
clarifies it.
    Ms. Wrightson, what do you say about that answer?
    Ms. Wrightson. I'm going to defer to the Coast Guard on 
that. We haven't done an analysis of the relationship between 
the Navy acquisition and the Coast Guard acquisition. Perhaps 
Mr. O'Rourke wants to comment.
    The Chairman. Mr. O'Rourke?
    Mr. O'Rourke. I guess what I would say is that, on the 
industrial base, the linkage is not with the Littoral Combat 
Ship; it's with the Navy's DD(X) destroyer program. The Navy 
has reduced planned procurement of that ship to one per year, 
and there's concern about whether a one-per-year rate would be 
enough to sustain the two yards that build the Navy's larger 
surface combatant. So, from an industrial-base perspective, you 
look at the DD(X) program and what might happen to that, and 
use that to inform a decision on how Coast Guard procurement of 
larger cutters might be able to help that situation.
    The Chairman. Well, did CRS and GAO look at the problem the 
Coast Guard has, in terms of the increasing cost of maintenance 
of aging vessels, when there is no funding for replacement?
    Mr. O'Rourke. I understand that in a situation of 
constrained resources, if you were to accelerate cutter 
procurement, you're going to have to get that money from 
somewhere, and you're going to have to reduce something else to 
do it. In the longer run, if you accelerate cutter procurement, 
you will reduce the cost of those cutters through better 
economies of scale, and you'll also reduce the legacy costs 
associated with maintaining the older cutters sooner.
    The Chairman. Are you implying that Congress ought to have 
a BRAC process to tell the Coast Guard to shut down some of 
these aging ships?
    Mr. O'Rourke. I guess what I'm saying is that, in a 
constrained funding environment, Congress will have to make 
difficult choices, but they should at least understand what 
some of their options are, and what the tradeoffs are involved 
in those options.
    The Chairman. Is one of the options to shut down some of 
these old vessels that cost so much to maintain?
    Mr. O'Rourke. The option I'm suggesting, that people at 
least be aware of, is purchasing the cutters sooner, once their 
design was locked down, getting a better price on them, and 
saving money there, and also possibly saving money because 
you're getting rid of the older cutters sooner, as a 
consequence of getting the new cutters into service sooner.
    The Chairman. Ms. Wrightson?
    Ms. Wrightson. Yes, we attempted to do an analysis of 
whether or not there would be cost savings to accelerate the 
program, but it was--in the end of the day, the Coast Guard 
really didn't have the data that we would need to look at it 
from a systems-of-systems perspective. From an asset-by-asset 
procurement, you probably could do that analysis, although it 
still is an open question as to whether we would have the data 
for it.
    I want to make two points about the acceleration. You 
can't--when you think about whether or not you should 
accelerate, it's not just about the impact on the industrial 
base, although that certainly is important. You also ask--have 
to ask about risks. And one that hasn't been mentioned is human 
systems engineering. You know, we already recognize that as a 
major risk, and that's the people aspect of Deepwater. So, 
there's training, operations, and maintenance----
    The Chairman. Stop right there, ma'am. I want to hear 
Admiral Collins----
    Ms. Wrightson. Sure.
    The Chairman.--and my time's already up. What do you say 
about that, Admiral?
    Admiral Collins. Sir, about--of course, I bristle at the 
thought of laying up ships without replacement, Senator, 
because that just exacerbates further our capacity issue. I 
mean, we have ships that--particularly up in your great State 
of Alaska, elderly ships holding up the----
    The Chairman. They're almost as old as I am, Admiral.
    Admiral Collins. Sir, they're mature. We call them mature 
cutters.
    [Laughter.]
    Admiral Collins. But to retire them without replacement 
is--would be a huge impact on our readiness and our mission 
accomplishment, so----
    The Chairman. That's the answer I expected. You don't have 
that option.
    Admiral Collins. No, sir. I think the--what we're doing is 
trying to invest prudently in the current systems to keep them 
at the readiness level they are, and then to move as quickly as 
affordability issues and budget constraints and everything else 
would allow us to do.
    Example: the Fast Response Cutter. We----
    The Chairman. I'm out of time. Thanks.
    Admiral Collins. Yes, sir.
    The Chairman. Yes, go ahead.
    Admiral Collins. Sir, we've advanced that from--that's 
originally a 2017 entry into the fleet--we've moved that up 
from--to 2007. That is--because why? Because that is one of the 
legacy systems that are old and tired, wearing out, and we've 
got to get on with that. We also advanced, by 5 years, the 
design of the medium cutter--originally, like, a 2012 type of 
thing, and we're designing that as we speak. So, we've taken an 
asset-by-asset look, and say, ``What are the old tired ones? 
What are the ones we have to advance?'' So, we--part of the 
implementation plan was moving those two systems forward, and 
we had to make some tradeoffs because of affordability and 
budget constraint. We had to move some of the aircraft to the 
right, to keep it in balance. So, that's our dilemma, Senator.
    The Chairman. In view of the generosity of the Chairman, do 
you want to finish, Ms. Wrightson?
    Ms. Wrightson. If I could. The--I agree with what the 
Commandant has said about the cutters, the decision to take a 
look at those and to, sort of, target your risks in order to 
make sure that the assets that you're investing in are the ones 
you need the most. That makes sense.
    The human systems engineering point I was going to make is 
an important one, because, right now, what we're seeing, that 
is a growing risk in the Deepwater Program. It's the people 
side of this program. And, currently, even the Coast Guard is 
dissatisfied with ICGS there. So, going forward, when we look 
at the mission needs statement in this coming year, and analyze 
it, and when we look at the management of the program, we're 
going to focus on this issue, as well as others related to the 
adequacy and sufficiency of the MNS plan to see if it really 
does the things the Coast Guard's going to need. So--and you've 
requested us to do that.
    Thank you.
    Senator Snowe. Thank you.
    Co-Chair Inouye?
    Senator Inouye. Admiral Collins, at the present time you 
have in your inventory 91 legacy cutters, is that correct?
    Admiral Collins. Depending on--it's over 200 if you include 
patrol boats and the whole fleet, Senator.
    Senator Inouye. But the big ones?
    Admiral Collins. The big ones, the--yes, that's the 
approximate number. Yes.
    Senator Inouye. How many did you have on 9/11?
    Admiral Collins. I think that a side-by-side comparison, 
I'll have to provide for the record. It----
    Senator Inouye. About the same, isn't it? No increase.
    Admiral Collins. No, we're not increasing over the pre-9/11 
levels. There are even less assets than the pre-9/11 levels. 
And our whole acquisition strategy is not a one-for-one 
replacement; it's looking at the performance of the system, is 
our approach.
    Senator Inouye. And your legacy cutters are the oldest 
vessels now floating?
    Admiral Collins. Of 41 nations, Senator, that have 
comparable coast guards or navies, we rank 39th oldest out of 
41. Philippines and Mexico are the only nations that have older 
fleets.
    Senator Inouye. Should we be proud of that?
    Admiral Collins. No, sir.
    Senator Inouye. Now, as to legacy aircraft, do we have more 
since 9/11, or do we have less?
    Admiral Collins. Our implementation plan, if you look at 
the numbers prior to 9/11--this is the HU-25, the C-130, the 
helicopter, the two helicopters we have--it's about the same in 
our revised plan, at the upper limit--about the same number, 
and we're just replacing some with a different type. And 
including--if I might add--and including unmanned airborne 
vehicles to the mix, so it actually enhances the overall 
surveillance capability of the fleet.
    Senator Inouye. So, you have some of the oldest vessels 
floating on this globe, plus no increase in aircraft, but yet 
you've had an increase in assignments, your wartime assignments 
in the Gulf and surrounding waters have not diminished?
    Admiral Collins. Yes, sir.
    Senator Inouye. Do you still think you can do it?
    Admiral Collins. I think that we're going to have to keep 
evaluating the numbers. And I think it'll be--as I mentioned 
before, it'll be a dynamic process, year by year. We'll keep 
modeling. We'll look at the performance. This should be a 
performance-driven budget evolution that will allocate budget 
based upon performance of the system. And, if it's inadequate--
they will continue to model, and we look forward to the GAO's 
participation in that--continue to model, and if the 
performance isn't right, I'll be the first one to push that 
up--that range up to the right--you know, increase that--based 
upon what we find, over time.
    Senator Inouye. My last question. You've added 40,000 
officers since 9/11. Is that correct?
    Admiral Collins. No, we've added about--we've gone about 
12.5 percent to a 47,000 total workforce, including about 7,000 
civilians.
    Senator Inouye. What are you doing with the increased 
personnel if you have no ships?
    Admiral Collins. Sir, the number--part of those--that 
workforce growth was to go to new units that we've created. 
Their focus is security. Example: maritime safety and security 
teams. We created 13 of these teams around the country--70-
person active-duty, augmented with reservists. And they went--
the additional folks that we've got--the 12.5 percent force-
structure growth--went to building those units, brand-new 
units, to give enhanced security capability to the Nation. And 
we also added people to oversee the new port and vessel 
security code that we put--regulation that the Maritime 
Transportation Security Act called for. And we added over--
close to 500 people, if I have my numbers correct, to ensure 
compliance with those new standards--security standards. So, 
those are a couple of examples of where the new resource, the 
new force structure, has gone.
    Senator Inouye. At the rate we're progressing, when do you 
think we'll have the tenth newest fleet in the world?
    Admiral Collins. Again, sir, what will be the----
    Senator Inouye. You said our fleet is the third oldest 
fleet in the world. When will we have the tenth newest?
    Admiral Collins. I don't know. I'll give you a--it depends 
on the funding. I'll--this all revolves on the funding. And we 
talk about the--my biggest challenge--take a look at the 2006 
budget. Senator Stevens mentioned it. It's a reflection of the 
cash-flow and stable funding. Right now, I have a House mark 
that lopped off $466 million out of the President's request. 
The President and OMB were--very strongly supported our revised 
plan, to the tune of $966 million, substantial growth over 
prior years. My challenge is support in the Hill. I've got--
when I get a mark like that in the House, and I--we didn't get 
the President's request on the Senate side, either, although a 
great--very favorable consideration on the Senate side; it's 
much closer to the target. But that's the challenge, Senator. I 
need to have at least the President's request. Prior to, even, 
the implementation plan being changed, up and through, like, 
2005, we were, cumulatively, down over $200 million from what 
the baseline capital funding for Deepwater was.
    So, we've been continually shorted in this program. The 
marks that we have currently for 2006, both in the House and 
the Senate, cause me great concern that this project, if we 
don't recover from those kind of marks, will implode. This 
acquisition strategy in this project will implode.
    So, I guess it's--you know, you--first, you keep the ship 
from sinking, you know, in terms of a damage control, and we've 
got to stop the hemorrhaging here, from the budget 
perspective--that's my greatest challenge, sir.
    Capacity issue certainly is a relevant issue. We've got to 
keep hammering away what the right number is. Capacity is 
high--capability--getting the capability right--that means 
getting the ship designs right--is a real priority. But, also, 
getting the budget flow right. And that's what I'm really 
concerned about, sir.
    Senator Inouye. I thank you very much, Admiral.
    Thank you, Madam Chair.
    Senator Snowe. Thank you.
    Senator Cantwell?
    Senator Cantwell. Thank you, Madam Chair. I know there's a 
vote on, so I will try to be brief.
    Admiral, the Coast Guard did a series of analyses of 
different levels of performance and capability based on 
different levels of investment. But I think those were all done 
prior to submitting this particular plan. Is that correct? This 
plan doesn't have an accurate assessment of what these 
capabilities will actually produce?
    Admiral Collins. We did--we've done a series of--phases of 
studies in modeling--phase one, two, and three. And they first 
looked at gaps, and they ranked gaps, and they did--we've done 
risk analysis. The last phase, or the fourth performance gap 
assessment work--that's what we call it--will take a look at--
model the specific numbers in ranges that are reflected in the 
current implementation plan. But all that work was supportive 
of that implementation plan. It's just doing a simulation in 
modeling on the specific numbers. Because those numbers have 
danced around. As we've gone through the budget process, 
they've danced a bit, you know, upon review after review. And 
now we've, in the terms of this implementation plan, fixed 
them, and we'll do with--the last refined operational 
effectiveness modeling here with the specific numbers.
    Senator Cantwell. And when can we expect that? Because, 
obviously, our challenge here is to debate, with less 
resources, what our capabilities really are and what capacity 
we will get with this particular proposal. So, how can we get 
that information so we can do a better job at oversight?
    Admiral Collins. Let me ask Admiral Stillman, who is the 
guy in the hot-seat managing the project, in the specifics on 
what the timeline is on that last phase of the assessment.
    Admiral Stillman. Senator, that will be done in August of 
this year, as far as the campaign-level modeling. But I would 
also add that there are different types of analysis models that 
we're using. If you look at this particular system, and assess 
the capability of the national security cutter, the ship in 
production right now, compared to the 378-foot cutter that 
sails out of Washington and other states, we will quadruple our 
surveillance capability with respect to those platforms.
    Senator Cantwell. I think what we want is an accurate 
assessment, so we're all looking at the same set of numbers.
    Admiral Stillman. You bet.
    Senator Cantwell. We need accurate data, so that we can 
then discuss whether we think issues of acceleration need to be 
further considered, or whether we don't think they're wise. I 
think that's the big mystery here, right? We want to see the 
actual analysis of capability that goes with this particular 
proposal that's been submitted.
    Admiral Collins. But we would anticipate, Senator, by the 
end of the summer, that, you know, we'd be able to provide you 
that information. And, as I mentioned earlier in my testimony, 
we see this as not a done deal. We'll continue to evaluate and 
evaluate as this project matures and as we actually deliver the 
asset and it's in actual operation. So, it's--I think this is a 
never-ending journey. We continue to refine the information and 
make the best assessments we possibly can.
    Senator Cantwell. Can I ask another question? Because then 
we're going to be out of time. The lead-system integrator 
approach--which seems like the Army is the only other Armed 
Service that uses that--is that really the best way to keep 
cost controls in the system? And since the Army is backing away 
from that approach, shouldn't the Coast Guard look differently 
on that particular model of controlling costs?
    Admiral Collins. Well, I--it's interesting. It's a common 
question we get. I think, when we were initially going into 
this, and we looked at the risks--and I think you've got to 
look at risk and cost schedule and performance, all three of 
those, and what are the greatest risks--we felt, after 
extensive study and third-party oversight--we brought in 
acquisition specialists--third-party private firms in to look 
at it--the biggest--the most powerful risk mitigator--although 
it's still high risk, this project--the biggest risk mitigator 
was the systems integration. I can't imagine us trying to tie 
all these assets together and do--be our own integrator. The 
risks will go up dramatically, in terms of cost schedule and 
performance. And every way we've looked at that, we've come to 
that conclusion.
    The early estimate would be another 15 percent, at least, 
in cost that it would cost us to do individual procurements. 
And then we wouldn't end up with a system of systems; we've end 
up with individual things that may or may not be tied together.
    So, we've looked at this since the mid-1990s, every which 
way to Sunday. We've come back to the same conclusion, that the 
systems integrator is the most----
    Senator Cantwell. What would you say, Admiral, is unique 
about the Coast Guard, then, juxtaposed to other parts of our 
Armed Services, with respect to this approach?
    Admiral Collins. I think one of the things that was unique, 
that, Senator, all these assets were coming at the end of their 
service life--i.e., reaching technological obsolescence at the 
same time. And I don't think any other service had a full range 
of its assets expiring at the same time. And so, this lent 
itself, clearly, to that approach. And our capacity to manage, 
you know, 15-16 individual contracts was beyond the scope of 
our organization.
    Senator Cantwell. Thank you, Admiral.
    Senator Snowe. Thank you, Senator Cantwell.
    And I'll just ask a final question, and then I'll close out 
the hearing, because we have a luncheon at the White House at 
11:30.
    But I just want to follow up on this issue, because 
obviously, the Congress bears responsibility, as well, in terms 
of the funding. And, obviously, the House has its issues, 
seeking more information from the Coast Guard with respect to 
the recent cut, at least from what I've read. I hope that that 
will be honored so that we can get that squared away and bring 
it back up to a higher level. But, second, what is driving this 
process? In the end, I think we all understand, it's being 
driven on a theoretical budgetary model that is being, 
obviously, galvanized by the Office of Management and Budget. 
And that's what we have to deal with here today. I have no 
doubt that if we were to put forward a proposal that provides 
significantly more funding, we would still be facing and 
discussing the same challenges that we are here today. It's the 
focus of this hearing. Because I know all of the analysis 
that's been done, whether it's the RAND study or the Center for 
Naval Analysis, even your own internal performance-gap 
analysis, when I look at the contrasting plans internally, and 
the numbers, you obviously were proposing a higher number. I 
don't have any doubt that you would have proposed a higher 
number, given what your service is facing in the challenges 
each and every day.
    So, that's what we're dealing with here. It's a number 
that's driven by the Office of Management and Budget. And, 
obviously, Congress has contributed to that with the erratic 
nature and inconsistent levels of funding year to year. But it 
is a problem that we must address and grapple with, both on our 
end, as well as, obviously, down at the other end, as well. 
Pennsylvania Avenue, when it comes to these issues--I mean, 
this is the reality. We can postpone the reality, but the 
reality is going to continue to exist, at great cost to this 
country, and great cost to the men and women who have to serve 
in these aging assets. It speaks volumes. The Coast Guard is 40 
out of 42 of the oldest naval fleets in the world. That is not 
going to get better over time; it's going to get worse.
    And so, we obviously have our part to do, in our role and 
our responsibility, but I just think that it would be a major 
omission here if we didn't discuss what's driving this, as 
well. Because I don't know that anybody has asked, ultimately, 
in all the bases, all the studies--internally, externally, and 
otherwise--suggesting that we should have a decreased number of 
assets in this moment in time in our Nation's history.
    So, I hope we all understand that. I look at the numbers of 
your own Deepwater force-structure studies and the issues that 
Ron O'Rourke raised, as well, in his analysis, where you should 
be in that spectrum, and what will happen as a result of not 
being in that spectrum--and so, that's what we have to grapple 
with. We're all going to play this numbers game. And 
unfortunately, you bear the brunt, as well, and that's what 
we--I think, we have to deal with here. What can we do? My 
colleagues have to recognize that responsibility, as well. So, 
I think, the Office of Management and Budget, that is what is 
really driving this revised implementation plan. And I think we 
all have to know what the consequences are.
    Admiral Collins. Clearly, the President's request was--
coming forward in 2006, was a function of our participation in 
the Department of Homeland Security, participation in OMB. We 
all have perspective on this requirement, and, obviously, it 
was a joint effort to come to the conclusions we did, relative 
to the level.
    Let me say--let me say this, that I'm extraordinarily 
pleased that we were able to submit a budget at a $966 million 
level. That was a huge breakthrough for us. And, I tell you----
    Senator Snowe. It could have been worse----
    Admiral Collins.--it----
    Senator Snowe.--I understand that.
    Admiral Collins.--it took a lot of work----
    Senator Snowe. I understand.
    Admiral Collins.--to get to that level.
    Senator Snowe. I understand that.
    Admiral Collins. And the other thing that--so, that's--that 
reflects even--you know, it's strong support by OMB to support 
that level. That was a huge thing for them to bite off on and 
support that level for us. And it reflects their interest in 
this program.
    The other thing that was a major win, I think--and I know 
you're as much interested in the capacity part as the 
capability part; it's very, very obvious--but the--but to get 
our capability enhancements reviewed and approved at the 
departmental level and at OMB, I think, is a major, major 
victory. That is a significant up-tick in the acquisitions 
costs--you know, in terms of the range, the 20--up to $24 
billion--$19 to $24----
    Senator Snowe. Yes, 20 years from now, though.
    Admiral Collins. Yes, I--well, everything--we'll----
    Senator Snowe. I know.
    Admiral Collins.--tackle one challenge at a time. But that 
was a huge, huge----
    Senator Snowe. Really.
    Admiral Collins.--advance for this program. So, I'm very 
pleased with the $966 million. I'm very pleased that we got the 
capability part approved. And I hope--my next-biggest challenge 
is to get the support in Congress for the President's request. 
If we don't--I mean, that's challenge number uno right now--if 
we don't, then all of these things are going to set back. For 
example, just one example, one of the things in both the House 
mark and the Senate mark was that they rescinded the money--
patrol-boat money. If that stays, then all the progress we've 
made on replacing the Fast Response Cutter, advancing that from 
2017 to the current time, is going to go right down the tube. 
So, again, the priority is to get the capability right and get 
the President's request, and then we can continue to examine 
and evaluate the capacity part, and continue to get that right, 
over time.
    Senator Snowe. Well, I appreciate it. I wish we could 
continue on this whole discussion, but I have to depart. My 
time has expired in the vote. And so, lucky for you.
    But, in any event, I appreciate that. We're going to have a 
number of follow-up questions. And, also, on the whole issue of 
targeting the acceleration and some of the assets that both Ms. 
Wrightson and Mr. O'Rourke have also raised, I'd like to 
evaluate that. And also, Mr. O'Rourke, what you're talking 
about in the Littoral Combat Ship and the Deepwater assets, 
what can we do, in that respect, to, sort of, integrate--
complement these programs, and so on? I think that's an 
interesting question that we ought to continue to explore. And 
I will work with Chairman Stevens, as well, on these issues.
    But, suffice it to say we have significant challenges, and, 
obviously, we assume responsibility, as well, you know, for 
what we haven't done. But I just think that it requires both 
branches of government to understand the enormous ramifications 
if we defer this so far out into the future that will invite, 
exponentially greater problems, without question. And we know 
the anecdotal evidence that comes in, as you well do, Admiral 
Collins, and our inability, because of these failing assets, 
and what that does to jeopardize the men and women who have to 
use these assets on a daily, life-threatening circumstance.
    So, I thank you all. I thank you for your contributions. 
I'm going to follow up with a number of questions on a number 
of the issues that you have raised.
    This hearing stands adjourned.
    [Whereupon, at 11:25 a.m., the hearing was adjourned.]

                            A P P E N D I X

  Response to Written Questions Submitted by Hon. Olympia J. Snowe to 
                       Admiral Thomas H. Collins

    Question 1. How will the Coast Guard maintain heightened operation 
levels as well as surge response with fewer available assets as this 
plan indicates?
    Answer. The 25-year, $24 billion Revised Deepwater Implementation 
Plan gives the Coast Guard greater capability than that planned in the 
original Deepwater baseline plan. The end-state asset numbers reflected 
in the revised plan represent a net increase in total force strength 
above the original Deepwater baseline level with an additional 17 
fixed-wing aircraft and 8 helicopters. Moreover, the revised plan 
leverages improved capabilities on all assets to increase system-wide 
surveillance, detection, identification, classification, and 
prosecution. These capabilities enhance the Coast Guard's ability to 
maintain heightened levels of operations and meet surge needs with 
fewer assets than the Legacy system being retired. For example, a force 
package composed of 1 National Security Cutter (NSC), 1 Multi-Mission 
Cutter Helicopter (MCH), and 2 Vertical Unmanned Aerial Vehicles 
(VUAVs) will be able to conduct surveillance over 56,000 square miles 
compared to a current 378, High Endurance Cutter (WHEC) force package 
which only covers about 13,500 square miles on a daily basis. 
Furthermore, the NSC force package will be programmed to operate 230 
days/year compared to 185 days/year for a 378, WHEC.

    Question 2. Do you believe that acceleration of Deepwater is not 
necessary, or simply not possible due to the amount of funding you 
receive?
    Answer. The Fiscal Year 2006 President's request of $966 million 
for Deepwater makes a strong statement regarding the urgency of this 
program by advancing critical elements such as HH-65 re-engining by 5 
years, Fast Response Cutter development by 10 years, and OPC design and 
materials procurement by 5 years while keeping essential NSC 
construction on schedule.
    Implementing the revised Deepwater plan, as submitted by the 
Administration, will recapitalize and modernize the Coast Guard with 
enhanced maritime safety and security capabilities necessary to ensure 
operational success across all of our missions at a rate that balances 
risk and affordability.

    Question 3. What level of funding would have to be provided in 
Fiscal Year 2006 to accelerate the revised Deepwater Program to a 15-
year completion date? Can you estimate what savings would be achieved 
by accelerating the program to a 10-year timeline? 15-year?
    Answer. Accelerating Deepwater to a 15-year completion date (from 
the 2002 contract award) would require completion of the program 
funding by 2016. Currently, the $24 billion acquisition cost is spread 
out over 25 years. Approximately $2.18 billion has been expended in the 
first 4 years of the acquisition. Spreading the remaining $21.8 billion 
dollars over the period from Fiscal Year 2006 through 2016 would 
require an average annual investment of $1.98 billion dollars beginning 
in Fiscal Year 2006. Completion of the Deepwater Program on a 10-year 
timeline would require its funding be completed by Fiscal Year 2011. 
Given the complexity and number of assets involved in the Deepwater 
system of systems acquisition, the Coast Guard does not believe the 
program could be executed by 2011. Completing the system by 2016 (a 15-
year timeline) could be executed and would potentially yield savings. 
The Coast Guard has conducted some informal assessments as to the 
potential cost savings and cost avoidance if the acquisition was 
completed sooner. To date, our assessments have identified the 
following potential savings:

   Contract Performance Management: If Deepwater were to be 
        completed sooner, total project cost of system integrator and 
        government contract management personnel would be reduced. 
        Additionally, a shorter contract term will lessen the number of 
        performance award fee determinations paid out contributing to 
        further future years savings. These award fees typically 
        average approximately $5 million, minus 10 percent, and will 
        undoubtedly grow with inflation and asset delivery in future 
        years.

   Legacy Cutter Maintenance Costs: Legacy cutters could be 
        retired much sooner. Due to increasing age and continued high-
        op tempo, legacy cutter maintenance costs have been increasing 
        at a rate much greater than estimated in our Deepwater pre-9/11 
        baseline planning. The early retirement of these assets will 
        stop these increasing costs sooner. It will also reverse the 
        trend of increasing lost days due to unscheduled maintenance to 
        repair casualties.

   Legacy Asset Modernization and Service Life Extension: If 
        replacement assets were provided sooner, currently anticipated 
        service life extension projects such as 210-foot Medium 
        Endurance Cutter (WMEC) sustainment projects or aircraft 
        avionics upgrades would no longer be required.

    Question 4. What are the cost estimates for legacy asset 
sustainment in the coming years? Will it be more than 25 percent of the 
Deepwater budget that is now requested?
    Answer. The cost estimates for out-year legacy asset projects have 
been provided to Congress in the Deepwater Fiscal Year 2006 Capital 
Investment plan. The Coast Guard places Deepwater legacy asset 
Acquisition, Construction, and Improvement (AC&I) maintenance projects 
into three categories: sustainment, enhancement, and conversion. These 
projects will amount to $1.945 billion, less than 8.25 percent of the 
overall Deepwater acquisition cost and are further described below.

   Sustainment projects are designed to maintain existing 
        legacy asset capabilities and ensure the reliability of these 
        assets until they are replaced by their Deepwater counterparts. 
        An example of a sustainment project is the Mission 
        Effectiveness Project planned for Coast Guard's 210-foot and 
        270-foot WMEC fleet, where obsolete and failing engineering 
        subsystems are being renewed. The Coast Guard's legacy asset 
        maintenance plan includes $338 million in sustainment projects, 
        or approximately 1.5 percent of the total Deepwater acquisition 
        cost.

   Enhancement projects are designed to improve capabilities 
        onboard legacy assets in the interim before these assets are 
        replaced by their Deepwater counterpart, per the Revised 
        Deepwater Implementation Plan. An example of an enhancement 
        project is the upgrade of Command, Control, Communications, 
        Computer, Intelligence, Surveillance, and Reconnaissance 
        (C4ISR) equipment onboard WMECs and WHECs. The Coast Guard's 
        legacy asset maintenance plan includes $103 million in 
        enhancement projects, or less than half of 1 percent of the 
        total Deepwater acquisition cost.

   Conversion projects are designed to renovate and upgrade 
        existing legacy assets to the point where they are incorporated 
        as part of the final Integrated Deepwater Solution (IDS) force 
        structure. An example of a conversion project is the ongoing 
        HH-60J avionics modernization project. The Coast Guard's legacy 
        asset maintenance plan includes $1.504 billion in conversion 
        projects. Legacy conversions total approximately 6.25 percent 
        of the overall Deepwater acquisition cost.

    Question 5. How do you explain moving forward with Deepwater under 
the onus of ``more capable'' versus ``more capacity''?
    Answer. The answer is in the post-9/11 capabilities added to the 
Deepwater System in the revised implementation plan. They include the 
improved C4ISR, greater speed and stopping power, airborne use-of-
force, and intelligence capabilities Deepwater delivers. These 
capabilities will enable the Coast Guard to put the right asset in the 
right place at the right time for years to come. The Coast Guard has 
already seen results with the use of these new capabilities recently 
installed on legacy assets. For example, enhanced C4ISR capabilities 
enable better use of intelligence, which when combined with airborne 
use-of-force capabilities, is the primary reason the Coast Guard has 
shattered drug interdiction records in recent years. These are revised 
Deepwater capabilities in action; once they are installed in the new 
Deepwater assets the Coast Guard will see similar performance across 
all its mission areas. Having more capable assets is the first step to 
increased performance.
    More capable assets will be able to do a great deal more than those 
reflected in the pre-9/11 Deepwater construct--just as modern power 
tools and materials enable a carpenter to build a home in a shorter 
amount of time than the days when hand saws and hammers were the norm.
    Furthermore, our risk analysis indicates that the same capabilities 
added for increased performance across all the missions are essential 
for lowering the risk for a variety of the most consequential maritime 
terrorist threat scenarios.

    Question 6. When the 110-foot patrol boats were being delivered to 
the Coast Guard, the Coast Guard established a pre-commissioning 
facility in New Orleans to support the pre-commissioning crew during 
its familiarization period prior to delivery of each cutter, as well as 
after delivery of each cutter as each crew developed proficiency in 
operating the cutter before transiting to homeport. The facility was 
located relatively close to the construction shipyard so that warranty 
items identified by the crew could be quickly resolved prior to the 
cutter's departure for homeport. Naval Station Pascagoula seems ideally 
situated to serve as such a facility for the Deepwater cutters being 
constructed in Mississippi. Does the Coast Guard intend to establish a 
similar facility for those cutters, and if so, would the Coast Guard 
consider locating it at Naval Station Pascagoula?
    Answer. The Coast Guard is establishing a Gulf Coast Primary Crew 
Assembly Facility (PCAF) to support the training and on-site logistics 
demands of the NSC and Offshore Patrol Cutter (OPC) pre-commissioning 
crews. The initial PCAF crew of 6 military personnel will be operating 
from contractor-provided spaces at Northrop-Grumman Ship Systems 
Ingalls Shipyard in Pascagoula, MS, to support the NSC and OPC.

    Question 7. Admiral Collins, in a previous response, you indicated 
that the HH-65 helicopter re-engining program would send two helos to 
Columbus, MS in FY05 and six helos there in FY06. However, Columbus has 
the capacity to perform more conversions during those 2 years and the 
Coast Guard plans to deliver 10 helos to ARSC during FY07. 
Additionally, the total number of helos delivered to ARSC and Columbus 
combined is planned to be 29 in FY05 and 51 in FY06. It seems to me 
that the re-engining project could be completed faster if more helos 
were sent to Columbus, especially in FY05. Why is this not being done?
    Answer. In December 2004, to accelerate the HH-65 re-engining 
project, the Coast Guard delivered a helicopter to Columbus, MS. With 
its Deepwater contractor, Integrated Coast Guard Systems (ICGS), the 
Coast Guard is examining the quality and suitability of this second re-
engining facility. The Columbus facility projects completing this first 
re-engining in September 2005. This first job is currently 80 percent 
complete. If the Columbus facility meets quality and suitability 
requirements, the Coast Guard plans to fund a total of five helicopters 
for conversion in Columbus with Fiscal Year 2005 funds and seven in 
Fiscal Year 2006.
    Along with awaiting the completion and assessment of the first 
aircraft to be re-engined in Columbus, there are two other factors that 
limit the rate at which re-engining can be accomplished. First, the 
schedule for conversions is dependent on the availability of engines 
and airframe kits. The manufacturer is producing these items as quickly 
as possible. Second, removing more helicopters from service than called 
for in the current schedule could jeopardize the Coast Guard's ability 
to respond to operational missions. These two factors have been 
carefully considered in developing an ambitious schedule to re-engine 
all operational aircraft by February 2007.

    Question 8. Admiral Collins, the Coast Guard and MariTEL Inc. have 
been struggling to find a resolution to their seemingly conflicting 
concerns: the Coast Guard wants to use the VHF-FM spectrum differently 
than originally envisioned and MariTEL wants to retain enough useable 
VHF-FM spectrum to develop a viable business. The difficulty in 
achieving both objectives seems to be technological, in that their 
respective uses of the VHF-FM spectrum present potential interference 
problems with each other. MariTEL believes that a technological 
solution to this interference problem that would enable both the Coast 
Guard and MariTEL to fully develop this spectrum for their respective 
purposes does not currently exist, but may be possible to develop. Does 
the Coast Guard agree with this assessment?
    Answer. The Coast Guard does not concur with this assessment.
    The Coast Guard is not using the VHF-FM spectrum differently than 
originally envisioned as the question assumes. The use of the VHF-FM 
maritime spectrum has not changed since the Coast Guard originally 
supported the designation of two VHF-FM channels for an Automatic 
Identification System (AIS) by the International Telecommunications 
Union World Radio Conference in 1997. Additionally, the Federal 
Communications Commission set aside frequencies for AIS in 1998, before 
MariTEL purchased VHF-FM frequencies at auction. While the Coast 
Guard's designed use of the VHF-FM spectrum has not changed, the events 
of September 11 and the subsequent adoption of the Maritime 
Transportation Security Act of 2002 (MTSA) expedited the implementation 
of AIS and expanded AIS carriage requirements.
    With regard to a technological solution to potential interference 
problems within the VHF-FM spectrum, confirmed by a study conducted by 
the Department of Defense Joint Spectrum Center in February 2004, the 
Coast Guard has identified readily available interference mitigation 
techniques that would permit: (1) the mandated nationwide 
implementation of AIS operations in accordance with the MTSA for 
maritime safety and homeland security communications; and (2) the 
development of the rest of the spectrum by MariTEL for commercial 
maritime communication services.
                                 ______
                                 
  Response to Written Questions Submitted by Hon. Daniel K. Inouye to 
                       Admiral Thomas H. Collins

    Question 1. The revised Deepwater plan lists a number of enhanced 
capabilities that will be provided to the Coast Guard. Understandably, 
most of these capabilities are aimed at the Coast Guard's security 
mission. How will these new capabilities also help the Coast Guard 
fulfill its non-security related missions, such as fisheries 
enforcement?
    Answer. The Coast Guard is acquiring a future fleet that is made up 
of a balanced system consisting of the right blend of capability (the 
individual ability of each asset) and capacity (the total number and 
mix of assets). These capabilities are designed to enhance multi-
mission performance. Although our re-baselining effort focused on 
homeland security missions, the capabilities selected for inclusion 
into the system enhance performance in other critical mission areas 
such as search and rescue, fisheries enforcement, and drug and migrant 
interdiction. Fisheries enforcement, for example, will benefit from the 
enhanced surveillance, detection, and classification capability built 
into the NSC and OPC which will extend about four times the number of 
square miles that a WHEC provides today.

    Question 2. I am a bit concerned that the new plan reduces the 
total number of assets, especially given the need for physical presence 
in areas like the Western and Central Pacific. Being able to see and to 
identify an illegal foreign fishing vessel with this cutting-edge 
technology is all well and good, but how will the Coast Guard catch 
them unless a cutter is out there too?
    Answer. Though the Revised Deepwater Implementation plan provides 
fewer major cutters than the current legacy Coast Guard fleet, it 
provides 97 percent of the total number of current patrol days due to 
increased operational efficiencies. The revised Deepwater plan also 
provides 21 percent more fixed-wing aircraft and 18 percent more patrol 
boats. Under this more efficient force structure, the increased numbers 
of patrol boats assume more duties in the littoral waters and free 
major cutters to patrol further offshore, such as in the Western and 
Central Pacific.
    Significantly improved intelligence gained from the new Deepwater 
system including the use of Unmanned Aerial Vehicles (UAV), Automatic 
Identification Systems (AIS) and common operation picture will enable 
our new Deepwater assets to patrol much more efficiently and 
effectively. These capabilities are true force multipliers and will 
allow us to leverage our assets for far beyond the current fleet's 
ability and capacity.

------------------------------------------------------------------------
                                                        Number
           System                 Patrol Days/Hrs       Assets    Total
------------------------------------------------------------------------
Legacy Major Cutters         185 Days                       42     7,770
Deepwater Major Cutters      230 Days                       33     7,590
Legacy Patrol Boats          1900 Hrs                       49    93,100
Deepwater Patrol Boats       3000 Hrs                       58   174,000
Legacy Fixed-Wing            800 Hrs                        48    38,400
Deepwater Fixed-Wing         800/1200 Hrs                   58    60,800
------------------------------------------------------------------------

    Question 3. Given all of the problems that the Coast Guard has 
experienced with its two major legacy programs thus far, the HH-65 
helicopters and the 110, cutter conversions, I am surprised to see that 
the new plan would upgrade rather than replace 22 of your C-130 
aircraft, and all of your HH-60 helicopters. (1) Why did the Coast 
Guard make this significant change in the plan? (2) Is this really the 
best decision in your opinion, in terms of long-term performance?
    Answer. (1) The Coast Guard is confident that conversion of legacy 
aviation assets to meet post-9/11 mission requirements today and in the 
future will be the most operationally effective and affordable final 
Deepwater solution. The Coast Guard agrees that the 123, project has 
had problems, but would disagree with the characterization of HH-65s as 
problematic. The HH-65 power and reliability has been a significant 
problem in the past, but the HH-65 re-engining project is very much a 
success. It is consistent with the original Deepwater MCH conversion 
plan and has given the Coast Guard positive insight into successful 
strategies for other aviation conversion projects. The first re-engined 
HH-65 was flying within 8 months of initiation of the project. The 
seven HH-65s delivered to date are performing as required and the 
project is scheduled to be complete in February 2007 instead of the 
projected date of July 2007. The success of the HH-65 re-engining was 
one input used to make the decision to upgrade and convert C-130 and 
HH-60 aircraft into Deepwater end-state assets. The 123, conversion was 
a very different kind of project. Cutters and aircraft are designed to 
different standards and specifications and are maintained in an 
entirely different manner. Aircraft are enrolled in a very specific and 
systematic maintenance program while cutters have a more flexible, 
``on-condition'' based maintenance schedule. The 123, conversion 
project involved major structural alterations with the addition of 13 
feet to the hull. The MCH, like the other legacy aviation conversions, 
is not receiving major structural alterations but will incorporate more 
reliable, commercially available off-the-shelf engines, upgraded main 
transmission, sensors, and avionics.
    (2) Yes. The Coast Guard is confident that conversion of legacy 
aviation assets will assure their long-term performance. The revised 
Deepwater Implementation Plan calls for extending the service life of 
Coast Guard HC-130s, HH-60s, and HH-65s in order to keep them in 
service for 20+ more years. This service life extension is possible due 
to the sound depot-level maintenance practices employed by the Coast 
Guard's Aircraft Repair and Supply Center in Elizabeth City, NC. The 
aircraft are taken down to bare metal and re-built every 4-6 years, 
giving the airframes and many aircraft subsystems renewed service life. 
Extended aircraft service life is not unique to the Coast Guard. The 
Air Force fleet of B-52s began service in the 1940s and is currently 
projected to remain in service through at least 2015.

    Question 4. How can we be sure that the HH-60 and C-130 aircraft 
will not have problems in the long run? The Air Force has found that 
the older C-130J aircraft have cracks in the wing-boxes. And in 
December 2004, during an attempted search and rescue of the fishing 
vessel, the NORTHERN EDGE, 3 out of 4 of the Coast Guard's HH-60 
helicopters were forced to return to Cape Cod Air Station due to 
mechanical problems. Five of the NORTHERN EDGE crew member died. Did 
the Coast Guard inspect its entire C-130 fleet prior to deciding to 
keep them in use? Has the Coast Guard fully inspected all of its HH-60s 
recently?
    Answer. The Coast Guard's Aircraft Repair and Supply Center (ARSC) 
performs routine Programmed Depot Maintenance (PDM) on all HH-65s, HH-
60s, and HU-25s. PDM is an intrusive corrosion inspection/structural 
repair done every 48 months. The Coast Guard has also established 
original equipment manufacturer support for all legacy airframes well 
into the future.
    As seen in the photos below, this ``routine'' aircraft maintenance 
is extensive, involving stripping each aircraft to the ``green'' frame 
and rebuilding it. Currently, contractor support is used to provide PDM 
on the Service's HC-130Hs. ARSC is establishing organic HC-130H PDM 
capability by Fiscal Year 2006.



    In March 2005, the C-130 manufacturer, Lockheed Martin Aero (LMA), 
changed the inspection guidelines for C-130 wing-boxes based on 
cracking found in Air Force C-130s of about the same age as Coast Guard 
C-130s. The wing-box problem is not unique to the Coast Guard, but 
applies to all C-130s worldwide. As a result of flight hour 
limitations/restrictions identified in LMA Service Bulletin (SB1), the 
5 Coast Guard 1500 series airframes are limited to restricted 
operations until they are properly inspected over the next 6 months. 
The second service bulletin, overdue from LMA, will provide the non-
destructive inspection procedures for determining the condition of the 
wing-box. The decision to keep HC-130Hs in use was made prior to LMA 
SB1 notification. If the 1500 series center wing-boxes are found 
undamaged, operating restrictions will likely be lifted. If serious 
structural cracking is found during inspections, the Coast Guard will 
have to make a decision on whether to refurbish the affected aircraft 
at an approximate cost of $10M per aircraft to keep them in service for 
another 25 years or remove them from service.
    The HH-60J failed sorties on the NORTHERN EDGE search and rescue 
case were associated with component failures. Each HH-60J failed sortie 
was caused by a different component, and these specific component 
failures are rare in the HH-60J fleet. One failure, a frozen fuel 
selector, was the first time that problem had ever been encountered. 
The entire HH-60J fleet is inspected daily through pre-flight/thru-
flight/post-flight inspections and preventive maintenance. The pre-
flight inspection is accomplished prior to the first flight of the day 
and remains effective for 24 hours, provided no subsequent maintenance 
has been performed. The pre-flight inspection consists of checking the 
aircraft for flight preparedness by performing visual examinations and 
operational tests to discover defects and maladjustments which, if not 
corrected, could adversely affect safety or mission accomplishment.

    Question 5. Why did the Coast Guard submit not one, but two 
different funding scenarios for its revised Deepwater plan? Which one 
do you really want?
    Answer. The Coast Guard is going to use the $24B/25-Year Capital 
Investment Plan (CIP).
    The asset deployment schedule (a.k.a. table runner) for this plan 
is attached. It shows the delivery timeline of the assets in the plan. 
The delivery timeline lags behind the funding timeline shown in the 
Capital Investment Plan based on design/construction schedules of the 
individual assets. The table runner is a graphic description of the 
current notional plan. The actual out-year delivery schedule is 
predicated on funding availability and Coast Guard priorities. Future 
Coast Guard budget submissions may include additional sustainment, 
enhancement, and conversion projects within the AC&I account. This 
account is subject to yearly availability of appropriations.

    Question 6. Does the fact that the Coast Guard submitted a $24 
billion plan mean that the $19 billion plan will not in fact allow the 
Coast Guard to achieve its performance goals for all of its many 
missions?
    Answer. The Coast Guard is going to use the $24 billion/25-year CIP 
plan.
    Previously, the Coast Guard submitted a plan that delivered a range 
of assets funded at between $19 billion and $24 billion. The $19 
billion force level would only achieve Coast Guard performance goals if 
the system actually out-performed projections. The $24 billion force 
level assures a minimum threshold of performance as projected by models 
used in the planning process.

    Question 7. Why are both of the plans significantly more expensive 
than the original projection of $17 billion for completion of the 
program? Are all of the costs attributable to the new capabilities 
Coast Guard would acquire?
    Answer. The new plan is more expensive because it buys enhanced 
post-9/11 capabilities. In addition, legacy asset sustainment projects 
are funded in this plan at a higher rate than in the original plan, but 
still amount to less than half of 1 percent of the overall acquisition 
cost.
                                 ______
                                 
   Response to Written Questions Submitted by Hon. Maria Cantwell to 
                       Admiral Thomas H. Collins

    Question 1. Will the new mix of capability and capacity of assets 
ensure that the Coast Guard will be able to meet its performance goals 
for all of its security and non-security missions?
    Answer. Yes. The new mix of assets in our revised Deepwater 
Implementation plan will enable the Coast Guard to meet its pre- and 
post-9/11 mission requirements. Post-9/11 mission capabilities added 
include:

   Network-Centric C4ISR Interoperability

   Maritime Security Capability

   Helicopter Airborne Use of Force and Vertical Insertion and 
        Delivery

   Additional Fixed-wing Aircraft

   Anti-Terrorism/Force Protection

   Chemical, Biological, Radiological (CBR) Detection and 
        Defense

    Optimizing the Coast Guard's mission performance outcomes across 
all the long-term goals was a key driver for selection of these 
particular homeland security capability enhancements. Each capability 
contributes across multiple missions.

    Question 2. Which level of funding--$19 billion or $24 billion--is 
needed for the Coast Guard to implement all of its missions? Does the 
inclusion of a $24 billion plan mean that the $19 billion plan--$2 
billion higher than the original cost estimate for Deepwater--will 
somehow fall short?
    Answer. The Coast Guard is going to use the $24 billion/25-year 
CIP.
    Previously, the Coast Guard submitted a plan that delivered a range 
of assets funded at between $19 and $24 billion. The $19 billion force 
level would achieve Coast Guard performance goals if the system 
actually out-performed projections. The $24 billion force level assures 
a minimum threshold of performance as projected by models used in the 
planning process.

    Question 3. What steps has the Coast Guard or ICGS taken to examine 
other assets such as the Littoral Combat Ship that Navy is acquiring, 
as an alternative to the cutters in the Deepwater Program? Could you 
describe what kind of analysis was done to evaluate the benefits of 
such alternatives as part of this revised plan?
    Answer. There is a limited amount of operational overlap between 
the Littoral Combat Ship (LCS) and the Deepwater Program. The Coast 
Guard cutters in the Deepwater Program are multi-mission assets 
designed to meet all the Coast Guard's homeland security and non-
homeland security missions. Just as the Coast Guard's statutory 
authority differs greatly from the Navy's, so too do the tasks required 
of the Deepwater cutters differ from LCS tasking. The diagram below 
highlights some of these differences.



    There is an overlap between Homeland Security (HLS) and Homeland 
Defense (HLD) mission tasking that the Coast Guard fills because of its 
law enforcement and military authority. The Coast Guard is uniquely 
suited to ensure a seamless hand-off when necessary between HLS and HLD 
tasking. To achieve this hand-off, all the Deepwater assets are 
designed to be interoperable with DOD assets, and where appropriate, 
have similar technologies to accomplish this tasking. As appropriate, 
Deepwater assets are taking advantage of LCS design work.
    To achieve this, the Coast Guard has been closely engaged with the 
LCS program since its inception. Admiral Stillman, the Deepwater 
Program Executive Officer, was a member of the evaluation board for the 
LCS and the Coast Guard has a Memorandum of Understanding with the LCS 
program office. The Coast Guard is partnering with the LCS where it 
makes sense to do so. For example, Deepwater and the LCS project are 
both contracting with Lockheed Martin for integration, and command and 
control technology.
    The Deepwater cutters are being designed with the requirements to 
be interoperable with all Navy ships, not just the LCS. The Deepwater 
Program has been jointly developing the MK110 57MM gun with the Navy's 
LCS and DD(X) programs. Deepwater cutters are also expected to share a 
common integrated combat management system with LCS. Additionally, both 
programs are using vertical take-off and landing UAVs with a common 
landing system, and are relying upon similar small boat stern launch 
technology.

    Question 4. Since you haven't yet completed the Performance Gap 
Analysis on the fleet mixture contained in the revised Deepwater plan, 
how can you be confident that you have achieved the proper mix of 
capabilities and quantities of assets?
    Answer. Though Part IV of the Performance Gap Analysis (PAG) study 
has not been completed, sufficient information was provided by Parts I 
through III to make a reasoned determination of the fleet mixture 
needed in the revised Deepwater plan.
    Part I of the PGA involved 40 operations, C4ISR and logistics 
experts from around the Coast Guard, supported by Coast Guard and 
industry operations research analysts. The team incorporated previous 
bodies of work including the Deepwater studies from CNA and the 
aviation studies, research from Brookings, and others. Using a variety 
of force structure projection models, the PGA I team captured the 
capability and capacity gaps of the 2002 baseline Deepwater proposal, 
proposed a revised System Performance Specification that closed 
capability gaps, and projected three candidate force structures to 
close capacity gaps.
    Part II of the PGA study assessed the Operational Effectiveness 
(OpEff) of the three force structures developed by the PGA I process 
using the Coast Guard's Deepwater Maritime Operational Effectiveness 
Simulation (DMOES) campaign model. This modeling effort simulated PGA I 
force structures with the same baseline capabilities as the 2002 
baseline Deepwater proposal. The study concluded that, though the 
larger force resulted in increased OpEff, capacity alone would not 
maximize system-wide performance and that a proper balance of 
capability and capacity would be required to ensure alignment of the 
IDS with post-9/11 mission demand.
    Concurrent with the PGA II process, the PGA team initiated an 
effort to determine the new asset capabilities that would be required 
to meet post-9/11 mission requirements. These capabilities have been 
grouped into the following functional capabilities:

        1. Network-Centric Command, Control, Communications, Computer, 
        Intelligence, Surveillance, and Reconnaissance (C4ISR) 
        Interoperability

        2. Maritime Security Capabilities

        3. Helicopter Airborne Use of Force and Vertical Insertion and 
        Delivery

        4. Fixed-Wing Aircraft

        5. Anti-Terrorism/Force Protection

        6. CBR Detection and Defense

    Part III of the PGA assessed and prioritized the application of 
these capabilities on the Deepwater system. The PGA III effort 
developed three increments of capability application and assessed their 
impact on the system. The PGA III also developed a qualitative 
description of the return on investment for the improved capabilities 
across all mission sets. For example, the airborne use-of-force 
capability yields significant positive results not only for the 
homeland security mission but for traditional counter-drug and law 
enforcement missions.
    PGA I provided a force structure framework that PGA II and III 
enhanced with the needed capabilities. These studies provided modeled 
parameters from which the final force structure and capabilities in the 
revised Deepwater Implementation Plan were interpolated. The PGA, like 
any modeling analysis, is simply a tool for seasoned, experienced 
decisionmakers. Leaders use models, but are not led by them alone. The 
Coast Guard is confident that PGA IV, which will model the final force 
structure with the final enhanced capabilities, will support the 
decisions it made in the revised Deepwater Implementation Plan.

    Question 5. Is it possible, given the needs for shore-based 
facilities and personnel training, for the Coast Guard to implement its 
entire Deepwater plan in a shorter time frame?
    Answer. The Office of Management and Budget, the Department of 
Homeland Security, the Government Accountability Office (GAO), non-
governmental third party reviewers like the RAND Corporation, and the 
Coast Guard have reviewed the time to implement the Deepwater project. 
There are various factors that limit the speed of build-out including 
those noted in the question. The Coast Guard has concluded that the $24 
billion over 25 years is the most appropriate time period.

    Question 6. What new assets would be easiest to accelerate and 
could be accelerated with the least risks in terms of the GAO concerns?
    Answer. GAO's concerns were that accelerating several platforms 
would require design and development efforts. These multiple, 
simultaneous development efforts were assessed as overly risky. The 
Coast Guard has advanced the scheduled delivery of the Fast Response 
Cutter by 10 years and the OPC by 5 years. Selectively accelerating one 
asset over another is not the most efficient implementing tactic for 
Deepwater, and in fact, would not deliver the operating benefits 
derived from Deepwater's System of systems design. To achieve improved 
operations, assets must be acquired in concert with each other in order 
to achieve the desired level of operational results and 
interoperability of the IDS. For example, accelerating the NSC ahead of 
the VUAV and MCH would result in delivery of an incomplete ``Force 
Package'' and a NSC with decreased operational capability. This would 
also result in a decrease to system performance.

    Question 7. GAO has raised concerns about what acceleration would 
mean in terms of program management. Do you share those concerns?
    Answer. GAO's concerns were that accelerating several platforms 
would require design and development efforts. These multiple, 
simultaneous development efforts were assessed as overly risky. The 
Coast Guard has advanced the scheduled delivery of the Fast Response 
Cutter by 10 years and the OPC by 5 years. Developing these new major 
assets while also developing and building the NSC and other assets 
currently in development, is a major challenge and no doubt presents 
risks. However, there are also significant risks to continuing to watch 
the readiness of Coast Guard assets decline. The Coast guard will 
continue making every effort to exercise due diligence and mitigate any 
and all contracted risks.

    Question 8. I'd like for all the witnesses to elaborate on this 
question I posed to Admiral Collins during the hearing. The Army--the 
only other Armed Service to use the ``Lead Systems Integrator'' 
approach--recently backed away from that approach in their Future 
Combat Systems procurement due to concerns over lack of cost control. 
These are similar to the concerns that GAO raised on the Deepwater 
Program. (1) Are the Army's new arrangements for managing this contract 
similar to those that the Coast Guard has in place? (2) Should the 
Coast Guard use this approach to ensure that the costs are kept down?
    Answer. (1) Currently, the Coast Guard relies upon ICGS for both 
system integration and the supplier function. Were the Coast Guard to 
serve as its own general contractor for the system, the work and the 
risk for the Coast Guard would increase significantly. The Coast Guard 
would not only have to ensure cost, schedule, and performance of the 
integrator for multiple contracts, the Coast Guard would also have to 
resolve differences between those contractors in order to achieve 
systems integration. ICGS can leverage its industrial position and 
long-standing relationships to shape the integrated solution and derive 
savings in ways that the Coast Guard simply could not. ICGS manages 
both the system integrator and general contractor role, effectively 
reducing risk and making the overall acquisition more efficient. The 
risk GAO refers to would not be resolved by a change in approach. That 
risk can best be mitigated by meeting the challenge to shape the 
existing partnership.
    (2) The Coast Guard had a study conducted by an independent 
Federally Funded Research and Development Center (FFRDC), Logistics 
Management Institute (LMI) on pursuing Deepwater as a traditional asset 
replacement acquisition where each asset was stove-piped. These are the 
ten major projects I discussed. LMI found that in using a traditional 
acquisition approach the projected government cost goal would be $62.9B 
in FY 1998 dollars to replace Deepwater assets and that there would be 
an estimated 15 percent cost avoidance by using the Deepwater system of 
systems approach with a systems integrator. Even if the cost avoidance 
is only 5 percent, the Coast Guard can put these savings to better use 
in performing the mission instead of using the funds to hire a large 
number of Federal employees to acquire Deepwater.

    Question 9. Should the Coast Guard conduct an analysis of 
alternatives to ensure the Deepwater Program is on the right track?
    Answer. Consistent with departmental major acquisition guidance, 
the Coast Guard conducted an assessment of alternatives prior to 
awarding the contract to ICGS. This assessment was at the asset and 
system levels. At the same time, the Coast Guard organized its 
oversight of the Deepwater acquisition into three parts. The interplay 
of these three organizational elements obviates the need for an 
additional assessment of alternatives at this time.
    The first element is the program organization, the Deepwater 
Directorate, headed by the Program Executive Officer (PEO). The PEO is 
the acquirer and is responsible for ensuring that the Deepwater 
contract is efficiently ensuring that all cost, schedule and 
performance parameters are being achieved. The PEO is also responsible 
for the process by which ICGS is regularly evaluated and will be 
evaluated for the award term recommendation of whether or not to retain 
ICGS as the Deepwater contractor in future years.
    The second Coast Guard organization element charged with overseeing 
the Deepwater acquisition is the Deepwater sponsor organization. The 
sponsor organization is independent of the PEO and represents the 
operational customer who will ultimately use the Deepwater system to 
achieve Coast Guard mission performance requirements. The sponsor 
organization participates in the Deepwater enterprise at the asset and 
system development level. At the asset level, the sponsor is 
represented in the Integrated Product Teams, delivering operational 
expertise to the shaping of each asset. At the system level, the 
sponsor is represented in the overarching matrix team and other flag-
level Deepwater decisionmaking events. The sponsor prepared the 
Deepwater Performance Gap Analysis and revised Mission Need Statement 
reflecting post-9/11 mission requirements. At both the asset and the 
system level, the sponsor challenges ICGS' proposed solutions and 
offers alternatives to meet operational requirements.
    The third Coast Guard organizational element that shapes Deepwater 
acquisition is the Agency Acquisition Executive (AAE). The role of the 
AAE is played by the Vice Commandant of the Coast Guard, the number two 
person in the Coast Guard. The AAE reviews any major changes to the 
Deepwater acquisition, like the extensive modification to the NSC, and 
exercises senior leadership by serving as a final appeal authority when 
the program and sponsor organizations differ over ICGS' proposed asset 
and system level solutions.
    The Coast Guard is actively engaged in the critical oversight of 
ICGS from both a contract performance and an alternative solution 
perspective. No ICGS decision is beyond scrutiny.

    Question 10. How many of the issues GAO raised have been 
successfully dealt with or ``Closed''? Why is it taking so long to 
proceed with the other recommendations?
    Answer. It is the Coast Guard's intent to close out all eleven 
items in the GAO report. Three have been closed to date and significant 
action has started on the other eight. The Coast Guard feels that all 
the GAO findings and recommendations related to improving the Deepwater 
Program are important and will continue to first resolve each issue and 
mitigate the risk and then work with GAO to reach agreement that the 
issue has been resolved and the identified risk has been sufficiently 
mitigated.

    Question 11. Should the Coast Guard use an independent entity to 
help evaluate the decisions by the prime contractor, ICGS, (1) such as 
decisions to purchase certain assets, or (2) decisions to build such 
assets in-house rather than subcontract them to another company?
    Answer. As the largest acquisition ever undertaken by the Coast 
Guard, every dollar spent by the Deepwater acquisition is rigorously 
overseen and internally challenged. Three internal Coast Guard 
organizational elements exercise this governance and reflect the tight-
fisted ethos.
    The first element is the program organization, the Deepwater 
Directorate, headed by the PEO. The PEO is the acquirer and is 
responsible for ensuring that the Deepwater contract is efficiently 
executed by ensuring that all cost, schedule, and performance 
parameters are being achieved, and that appropriate make-buy decisions 
are made. This began early at the proposal development phase, when the 
ICGS proposal was accepted with several major components (e.g., 123, 
WPB conversions, CASA MPA, and VUAVs) of the ICGS solution were not 
made by the ICGS' partners Lockheed Martin and Northrop Grumman. During 
the execution phase the PEO has acted to ensure that ICGS' make or buy 
decisions deliver the best value while meeting the performance 
requirements. PEO oversight has been shaped by GAO best practices as 
well as GAO audit recommendations.
    The second Coast Guard organization element charged with overseeing 
the Deepwater acquisition is the Deepwater sponsor organization. The 
Sponsor organization is independent of the PEO and represents the 
operational customer who will ultimately use the Deepwater system to 
achieve Coast Guard mission performance requirements. The sponsor 
organization participates in the Deepwater enterprise at the asset and 
system development level. At the asset level, the sponsor is 
represented in the integrated product teams delivering operational 
expertise to the shaping of each asset. At the system level, the 
sponsor is represented in the Overarching Matrix Team and other flag-
level Deepwater decisionmaking events. As the final customer, the 
sponsor is an active watchdog of the Deepwater procurement interjecting 
best-value judgments in each decision.
    The third Coast Guard organizational element that shapes Deepwater 
acquisition is the AAE. The role of the AAE is played by the Vice 
Commandant of the Coast Guard, the number two person in the Coast 
Guard. The AAE ensures that the funds appropriated for all Coast Guard 
major acquisitions are spent wisely and exercises senior leadership by 
serving as a final appeal authority when the program and sponsor 
organizations differ over ICGS' proposed asset and system level 
solutions.
    The interplay of the PEO, the Sponsor, and the AAE bolstered by 
GAO's constructive engagement ensure that limited Deepwater dollars are 
wisely spent. It would be an unnecessary additional expense to hire an 
independent entity to review ICGS' make-buy decisions.

    Question 12. What is being done by ICGS and the Coast Guard to 
improve competition for subcontracts?
    Answer. Competition for subcontractors below the first tier of the 
Integrated Coast Guard System partners, Lockheed-Martin and Northrop 
Grumman, was provided during the award process of the Deepwater prime 
contract. The principle of competition has been central to the 
Deepwater Program since inception. The initial competition started with 
four industry teams. From these four teams, there was a down-select to 
three teams. Their proposals included who was designated to actually do 
the task orders such as ICGS partners or the next level subcontractors, 
with full cost and pricing data, for the first 5 years. Based on that 
background, the GAO agreed with the Coast Guard that any deliveries 
planned for the first 5 years met the criteria for full and open 
competition. These included the 123, conversion, the NSC, the short 
range prosecutor small boat, the long range interceptor small boat, the 
HH-65 conversion to the MCH, VUAV, and maritime patrol aircraft.
    The post-9/11 revised Deepwater Implementation Plan retains all of 
those assets with the exception of the VRS helicopter; the 
functionality of the VRS will be filled by the current HH-60 being 
converted to a Deepwater end-state asset. Effectively, there are really 
only three major assets where new competition will make a difference: 
the OPC, FRC, and eventually the high altitude/high endurance UAV.
    The Coast Guard has made provisions for ensuring that it manages 
cost aggressively by using third-party independent cost estimates for 
the OPC and FRC to ensure that cost remains paramount as these assets 
are acquired. Given the phenomenal rate of technical advancements, the 
Coast Guard will ensure that a full and open competition is conducted 
to obtain high altitude/high endurance UAV services. Subcomponents of 
the VUAV, such as the control system and radar, will also be competed.
    The Coast Guard also recently conducted a third-party competition 
review that included a review of the competitive procedures of the 
purchasing and/or contracting departments both contractors had in place 
and determined that these procedures were being followed. The Coast 
Guard plans to conduct this review on a recurring basis. This review is 
in addition to the regularly scheduled Defense Contract Audit Agency 
monitoring of both major contractors purchasing and/or contracting 
departments.
    Given this background and Coast Guard actions to date, adequate 
competition was ensured for the first 5 years and will be achieved in 
the future for any Deepwater subcontracts.

    Question 13. GAO recommended in its 2004 report last year, that the 
Coast Guard should compare the growing total ownership costs of the 
prime contractor's Deepwater solution against a neutral baseline of 
what the costs would be in a traditional procurement. Instead, the 
Coast Guard is measuring the actual costs against the prime 
contractor's own original cost estimates. GAO states that ``measuring 
the system integrator's cost growth compared with its own cost proposal 
will tell the government nothing about whether it is gaining 
efficiencies by turning to the `system of systems' concept.'' Why isn't 
the Coast Guard following GAO's advice on this matter?
    Answer. The Coast Guard had a study conducted by an independent 
Federally Funded Research and Development Center (FFRDC), Logistics 
Management Institute (LMI) on pursuing Deepwater as a traditional asset 
replacement acquisition where each asset was obtained by a separate 
major acquisition project and then traditional Coast Guard efforts were 
employed to integrate these separate acquisitions. LMI reported that 
using a traditional acquisition approach would have projected a 
government cost of $62.9 billion in Fiscal Year 1998 dollars to replace 
Deepwater assets. The system integrator's projected baseline for the 
same period was $50.4 billion in Fiscal Year 1998 dollars.
    Since the system integrator's cost was lower than a traditional 
acquisition approach cost, the Coast Guard used it as a baseline. From 
this baseline the Coast Guard projected the annual amount of Total 
Ownership Cost (TOC) from 2002 to 2041 in Then-Year dollars. Along with 
projecting the TOC, the Coast Guard measured the actual 2002 and 2003 
TOC using a standard, repeatable methodology and the results are shown 
below. The current trend is positive with the actual TOC being $200 
million lower than the annual baseline amount in Fiscal Year 2002, and 
$280 million lower in Fiscal Year 2003.

------------------------------------------------------------------------
                  Total Ownership Cost                     2002    2003
------------------------------------------------------------------------
Annual Baseline                                            $1.82   $2.13
Actual                                                     $1.62   $1.85
------------------------------------------------------------------------
    Variation from Annual Baseline                         $0.20   $0.28
------------------------------------------------------------------------
In Billion ``Then-Year'' dollars

    The Fiscal Year 2004 actual data is being prepared and will be 
available by October 2005.
    It is the Coast Guard's position that given the significantly lower 
cost, $50.4B v. $62.9B, delivered by the LMI study that any updated 
study of the same question would deliver a similar lower cost for a 
system acquisition. Any further study of comparative TOC projections 
would not be a good investment. Instead the Coast Guard focuses on 
monitoring actual TOC.

    Question 14. What kind of impacts are the maintenance issues on the 
378-foot cutters having on mission performance and time at sea? What is 
Coast Guard is doing to address these problems? If this issue is as 
serious as it sounds, why did the replacement date slip from 2013 to 
2016?
    Answer. WHEC 378 maintenance issues are having an increasing 
negative impact on mission performance. The percent of time free from a 
deficiency in mission critical equipment which causes a major 
degradation or loss of a primary mission decreased from 26 percent in 
Fiscal Year 2003, to 7 percent in Fiscal Year 2004. Additionally, 
unscheduled maintenance days (lost underway days) for the WHEC fleet 
have increased from 49 in Fiscal Year 2003, to 229 in Fiscal Year 2004.
    The Coast Guard has identified the top ten maintenance issues for 
the WHEC 378 class. Repair strategies have been developed and funded 
for six of these issues. Implementation plans are proceeding.
    The original plan reflected the desire to decommission 378s as 
rapidly as possible. The new plan reflects the desire to decommission 
the 210s and 378s. The material condition of the different cutters in a 
class varies. Effectively, the new plan saves the ``best'' of the 378s 
for a couple years so that the ``worst'' of the 210 can be 
decommissioned.
                                 ______
                                 
  Response to Written Questions Submitted by Hon. Olympia J. Snowe to 
                         Margaret T. Wrightson

    Question 1. Have you investigated the progress that the Coast Guard 
has made in addressing and implementing GAO's recommendations since the 
release of the report?
    Answer. In 2004, we reported that well into the contract's second 
year, key components needed to manage the program and oversee the 
system integrator's performance had not been effectively 
implemented.\1\ We also reported that the degree to which the program 
was on track could not be determined because the Coast Guard was not 
updating its schedule.\2\ They are depicted in Table 5 of my prepared 
statement (pg. 32 of this hearing).
---------------------------------------------------------------------------
    \1\ GAO, Contract Management: Coast Guard's Deepwater Program Needs 
Increased Attention to Management and Contractor Oversight, GAO-04-380 
(Washington, D.C.).
    \2\ GAO, Coast Guard: Deepwater Program Acquisition Schedule Update 
Needed, GAO-04-695 (Washington, D.C.: June 14, 2004).
---------------------------------------------------------------------------
    As of July 2005, we have seen mixed success in the Coast Guard's 
effort to improve management of the program and contractor oversight. 
Three of the recommendations--updating the Deepwater Integrated Master 
Schedule, developing measurable award fee criteria consistent with 
guidance from the Office of Federal Procurement Policy and 
subcontractor notification to the Coast Guard of decisions over $5 
million--have been fully addressed. The Coast Guard has made progress 
on implementing most of the remaining recommendations, though we 
continue to see evidence that more improvements are needed.
    Although the Coast Guard has been responsive to our concerns over 
the past year, three issues remain highly significant and, 
notwithstanding the progress we have seen thus far, likely will take 
some time to resolve. These are: (1) the effectiveness of the Coast 
Guard's primary tool for overseeing the system integrator (integrated 
product teams); (2) the attention paid to the affect of programmatic 
decisions on overall costs and capabilities (operational effectiveness 
and total ownership cost); and (3) proper planning for transitioning 
Coast Guard personnel to the new assets in terms of operations, 
training, and logistics (human systems engineering).
    Assessing the Coast Guard's performance in implementing the 
remaining recommendations will be a focus of our follow-on review of 
the Deepwater revised implementation plan that is to commence in August 
2005. To that end, we are working on an audit plan to assess the 
additional progress the Coast Guard has made and will report the 
results on a timely basis to this Subcommittee and to the Coast Guard.

    Question 2. Has the Coast Guard taken steps to hold the systems 
integrator more accountable for the performance of and costs incurred 
by subcontractors?
    Answer. In 2004 we (GAO) made several recommendations to improve 
procedures to hold the contractor more accountable for the performance 
of and costs incurred by subcontractors. Of these, one recommendation 
has been fully addressed--developing measurable award fee criteria--and 
progress has been made on most of the remaining recommendations, such 
as holding the contractor accountable for improved integrated product 
team effectiveness and establishing criteria and documenting change to 
the program baseline.
    In terms of improving criteria for assessing performance, the Coast 
Guard has fully addressed our recommendation by providing additional 
rigor to the performance criteria used to measure contractor 
performance to reflect those measures that are clearly objective and 
those that are subjective, meaning the narrative comments by Coast 
Guard performance monitors. Weights have been assigned to each set of 
evaluation factors, and the Coast Guard continues to refine the 
distribution of the weights to achieve an appropriate balance between 
automated results and the eyewitness observations of the performance 
monitors.
    With regard to holding the system integrator accountable for 
effectiveness of product teams, the Coast Guard has also made changes 
to the award fee measures that place additional emphasis on the system 
integrator's responsibility for making integrated product teams 
effective. Award fee criteria now incorporate specific aspects of how 
the integrator is managing the program, including administration, 
management commitment, collaboration, training, and empowerment of 
these teams. However, concerns remain about whether the teams are 
effectively accomplishing their goals.
    Further, concerns remain about the broader issues of accountability 
for achieving the overarching goals of minimizing total ownership cost 
and maximizing operational effectiveness. While the Coast Guard has 
developed models to measure the system integrator's performance in 
operational effectiveness and total ownership cost, concrete results 
have not yet emerged. In terms of modeling operational effectiveness, 
the Coast Guard's models are capable of simulating the effect of the 
new asset capabilities on its ability to meets its missions; however, 
until additional assets become operational, progress toward this goal 
will be difficult to determine.
    With regard to total ownership cost, the Coast Guard does not plan 
to implement our recommendation. Despite concurring with it at the time 
of our March 2004 report, the Coast Guard has not adhered to its 
original plan, set forth in the Deepwater Program management plan, of 
establishing as its baseline a cost not to exceed the dollar value of 
replacing the assets under a traditional approach (e.g., on an asset-
by-asset basis rather than a system of systems approach). Although the 
Coast Guard initially established a cost baseline consistent with the 
program management plan's approach, the Coast Guard has not updated it 
to reflect changes made to the system integrator's cost estimate 
baseline, and therefore, is not being used to evaluate the contractor's 
progress in holding down total ownership cost. As a result, the cost 
baseline being used to measure total ownership cost is not the Coast 
Guard's, but rather is the system integrator's own cost estimate. As we 
reported in March 2004,\3\ we believe that measuring the system 
integrator's cost growth compared with its own cost proposal will tell 
the government nothing about whether it is gaining efficiencies by 
turning to the system of systems concept rather than the traditional 
asset-by-asset approach. Although the Deepwater Program has undergone a 
number of alterations since the contract was awarded in 2002, the Coast 
Guard has not studied whether the system of systems approach is still 
more cost effective as opposed to a traditional acquisition approach. 
Thus, the Coast Guard will lack this information as it prepares to 
decide whether to award the first contract option beginning in June 
2006.
---------------------------------------------------------------------------
    \3\ GAO-04-380.
---------------------------------------------------------------------------
    The Coast Guard has made progress in implementing our 
recommendation to establish criteria and document changes to the 
Deepwater Program baseline. Coast Guard officials stated that the 
contract total ownership cost and operational effectiveness baseline is 
adjusted based on approved decision memorandums from the Agency 
Acquisition Executive, the Vice Commandant of the Coast Guard. Such 
memorandums were originally approved by the Program Executive Officer 
on a case-by-case basis. As we reported in March 2004,\4\ establishing 
a solid baseline against which to measure progress in lowering total 
ownership cost is critical to holding the contractor accountable.
---------------------------------------------------------------------------
    \4\ GAO-04-380.
---------------------------------------------------------------------------
    Assessing the Coast Guard's performance in continuing to implement 
these recommendations will be a focus of our follow-on review of the 
Deepwater revised implementation plan that is to commence in August 
2005. To that end, we are working on an audit plan to assess the 
additional progress the Coast Guard has made and will report the 
results on a timely basis to this Subcommittee and to the Coast Guard.

    Question 3. Is the systems integrator awarding subcontracts on a 
competitive basis?
    Answer. The Coast Guard has made progress in implementing our 
recommendations aimed at ensuring adequate competition among 
subcontractors. To that end, the Coast Guard reported that it is taking 
steps concerning cost control through competition among second-tier 
suppliers and notification of ``make'' decisions.\5\ While we have not 
assessed the effectiveness of the Coast Guard's actions regarding 
competition among second-tier suppliers, we are satisfied with its 
efforts regarding notification of make decisions. It should be noted, 
though, that we have not assessed the effectiveness of the following 
actions.
---------------------------------------------------------------------------
    \5\ A ``make item'' means an item or work effort to be produced or 
performed by the prime contractor or its affiliates, subsidiaries, or 
divisions.
---------------------------------------------------------------------------
    Coast Guard officials told us that in making the decision about 
whether to award the first contract option, the government will 
specifically examine the system integrator's ability to control costs 
by assessing the degree to which competition is fostered at the major 
subcontractor level. The evaluation will consider the subcontractors' 
project management structure and processes to control costs, as well as 
how market surveys of similar assets and major subsystems are 
implemented. The Coast Guard is focusing its attention on those areas 
that were priced after the initial competition for the Deepwater 
contract was completed, such as the HH-65 re-engining and the C-130J 
missionization.\6\ For example, a new process implemented for the C-130 
missionzation was a requirement for competition in subcontracting and 
government approval of all subcontracts exceeding $2 million in order 
for the Coast Guard to monitor the integrator's competition efforts.
---------------------------------------------------------------------------
    \6\ The C-130J missionization, planned for the Coast Guard's six C-
130J aircraft, is intended to modify and install mission-essential 
equipment to convert the aircraft into C-130J long-range surveillance 
maritime patrol aircraft.
---------------------------------------------------------------------------
    According to the Federal Acquisition Regulation, the prime 
contractor is responsible for managing contract performance, including 
planning, placing, and administering subcontracts as necessary to 
ensure the lowest overall cost and technical risk to the government. 
The Federal Acquisition Regulation further provides that when ``make-
or-buy programs'' are required, the government may reserve the right to 
review and agree on the contractor's make-or-buy program when necessary 
to ensure negotiation or reasonable contract prices, among other 
things. We recommended that the Coast Guard be notified of make-or-buy 
decisions over $5 million in order to facilitate controlling costs 
through competition. We suggested the $5 million threshold because 
Lockheed Martin, one of the major subcontractors, considers that amount 
to be the threshold for considering its suppliers major. The Coast 
Guard has asked the system integrator, on a voluntary basis, to provide 
notification 1 week in advance of a make decision of $10 million or 
more based on the criteria in the make-or-buy program provisions of the 
Federal Acquisition Regulation. According to Coast Guard officials, to 
date, no make decision has exceeded $10 million since the request was 
made. While we are satisfied with the Coast Guard's progress on this 
issue thus far, the details implementing this recommendation have not 
yet been worked out, such as specifically who in the Coast Guard will 
monitor the subcontractors' make decisions to ensure that the voluntary 
agreement is complied with.
    While these are important improvements in internal controls, it is 
too soon to know whether they have resulted in adequate competition or 
whether other actions may be needed. We will continue to monitor the 
Coast Guard's progress in implementing this recommendation during our 
pending review of the revised Deepwater Implementation Plan that is to 
commence in August 2005. To that end, we are working on an audit plan 
to assess the additional progress the Coast Guard has made and will 
report the results on a timely basis to this Subcommittee and to the 
Coast Guard.

    Question 4. In GAO's opinion, which is the greater problem, the 
documented rapid degradation of the Coast Guard's assets, or the 
potential management problems with an accelerated Deepwater acquisition 
schedule?
    Answer. The question as posed is difficult to answer in general 
because (1) the asset conditions vary with some being worse off than 
others, (2) some new assets are further along on the acquisition 
timeframe than others, and (3) acceleration does not necessarily 
translate into a more efficient replacement strategy, particularly if 
it results in performance problems or assets that when fielded do not 
meet requirements. GAO would be far more comfortable with an 
accelerated acquisition schedule if and when our recommendations are 
implemented; we will review the Coast Guard's progress in implementing 
these recommendations in the upcoming year. Perhaps the Coast Guard 
could consider a less risky acceleration strategy using a targeted 
approach that considers both the condition of particular assets and the 
acquisition schedule for their replacements on a more integrated 
schedule, as discussed below.
    The current Deepwater fleet faces a number of well-documented 
logistical and maintenance challenges, such as accelerated aging 
through accumulated wear and tear and systems obsolescence, though the 
extent of degradation varies among asset types. Much of the critical 
equipment on many cutters, for example, is highly maintenance intensive 
in the event of failure and becoming unsupportable. Potentially 
compounding this problem is the fact that AC&I funding typically used 
for major asset sustainment projects is now grouped in the same funding 
stream as new Deepwater asset acquisition dollars, which forces these 
legacy asset sustainment projects to ``compete'' with new Deepwater 
acquisitions (or conversion into new Deepwater assets) for funding. In 
addition, a substantial portion of legacy asset sustainment AC&I funds 
in recent years have gone toward the re-engining of the HH-65 
helicopter, leaving fewer funds available for other legacy asset 
sustainment projects that might be needed.
    Acceleration of the Deepwater acquisition schedule, of course, 
poses its own set of challenges. Testing of the new assets is a 
critical factor when considering acceleration; we feel that bringing a 
few new assets online and having them fielded and tested before 
considering accelerating their production would carry far less risk to 
the program than accelerating untested, unproven assets. Also, though 
the Coast Guard has made progress in implementing a number of our prior 
recommendations regarding program management, GAO would feel more 
confident about any possible acceleration if our recommendations were 
implemented in full. We plan to engage in a constructive review of the 
Coast Guard's progress in fully implementing our recommendations in the 
upcoming year.
    If the Coast Guard does consider accelerating its acquisition of 
new assets, it could perhaps consider a less risky strategy using a 
targeted approach that considers both the condition of particular 
assets and the acquisition schedule for their replacements on a more 
integrated schedule. For example, the National Security Cutter (NSC) 
could be a target of opportunity for acceleration, since the condition 
of the 378-foot high endurance cutter (which it is replacing) has been 
particularly problematic. Once the first NSC is fully tested, 
accelerating production of the remaining NSCs would pose little risk.

    Question 5. In your opinion, does the Coast Guard have the 
performance measures necessary to prioritize legacy asset maintenance/
repair needs and to weigh the costs and benefits of performing 
continued maintenance versus the acceleration of new asset production?
    Answer. We do not believe the Coast Guard currently has the 
performance measures it needs to effectively weigh the costs and 
benefits of performing continued maintenance versus the acceleration of 
new asset production, but it is making progress in this area. Our 
recent review of Coast Guard Deepwater legacy assets found that the 
Coast Guard's available measures are inadequate to capture the full 
extent of the decline in the condition of Deepwater assets with any 
degree of precision and are insufficient for determining the impact on 
mission capabilities. More specifically, the Coast Guard measures we 
assessed focus on events, such as flight mishaps or equipment 
casualties, but do not measure the extent to which these and other 
incidents degrade mission capabilities. On the basis of our inquiries 
and discussions, the Coast Guard has begun developing improved measures 
to more accurately capture data on the extent to which its Deepwater 
legacy assets' deteriorating condition affects mission capabilities. In 
addition, the Coast Guard is developing a knowledge-based model to 
provide more objective data on where to best spend budget dollars to 
achieve the greatest enhancements in mission capabilities. These Coast 
Guard efforts are described below.
    To improve the performance measures for its Deepwater legacy 
aircraft, the Coast Guard is working to improve its dispatch 
reliability index measure, which provides causal information on 
delayed, aborted, or canceled missions. The Coast Guard can use the 
dispatch reliability index--in conjunction with data captured by unit-
level and depot-level maintenance staff--to determine which components 
and systems are failing most frequently, and thus, causing degradation 
in aircraft availability and mission performance. For its cutters, 
Coast Guard naval engineers are finalizing a ``percent of time fully 
mission capable'' measure. As part of this measure, the Coast Guard is 
developing mission criticality codes, which would rank the degree of 
importance of each piece of a cutter's equipment to each mission that 
the cutter performs. These codes would then be linked to electronic 
casualty reports for each cutter to provide the engineers and operators 
with information on the impact that the equipment casualties would have 
on each type of mission. This casualty report/mission criticality 
linkage will then be factored into the calculation of the percent of 
time fully mission capable measure for each cutter class and mission 
type. Coast Guard officials could then review this measure to 
determine, for example, the degree of capability that its 270-foot 
medium endurance cutter fleet has to conduct search and rescue missions 
at any given time. Because these measures have not been finalized or 
fully implemented, we were unable to assess their effectiveness. 
However, we view these tools as a positive step toward providing Coast 
Guard decisionmakers with more detailed information on the primary 
factors leading to mission degradation.
    In addition to improving its performance measures, the Coast Guard 
is also developing a knowledge-based model to (1) better prioritize the 
projects needed to upgrade legacy assets that will be part of the 
Deepwater Program and (2) obtain the greatest overall mix of 
capabilities for its assets within its budget in order to maximize 
mission performance. The tool it is developing is called the Capital 
Asset Management Strategy (CAMS). Once fully implemented, CAMS is 
designed to provide analyses on the capability trade-offs for upgrades 
and maintenance projects across asset classes, thereby allowing the 
Coast Guard to determine which combination of projects will provide the 
most capability for the dollars invested. For example, when Coast Guard 
officials are trying to decide among potential project upgrades such as 
a HC-130 weather radar replacement, an HH-65 sliding cabin door 
replacement, or a 110-foot patrol boat fin stabilizer replacement, 
CAMS, once fully implemented, could provide the officials with a 
recommended mix of project upgrades that would achieve the greatest 
capability enhancements based on the available budget.
    CAMS analyses are to be based on legacy asset condition and 
readiness data, asset retirement and replacement timelines, asset 
degradation estimates, project production rates, cost data, and mission 
utility rankings. Mission utility rankings will grade an asset's 
importance to specific missions, such as search and rescue or 
counterdrug operations. Rankings may also be assigned to an asset's 
critical subsystems or may be altered based on an asset's geographic 
location. Each of these elements is to form the basis for 
recommendations regarding which combination of upgrade and maintenance 
projects will provide the greatest enhancements to fleet capabilities.
    According to Coast Guard staff, CAMS recommendations are not a 
replacement for the existing budget development process, but rather are 
to augment and make more consistent the information currently provided 
to decisionmakers. Because the recommendations are to be based, in 
part, on user assumptions, CAMS recommendations are to be reviewed by 
several internal Coast Guard officials before any final funding 
requests are made. Further, in order to prevent user ``gaming''--making 
assumptions in such a way as to ensure a positive recommendation or 
outcome for a particular project--the Coast Guard is developing a 
series of job aids, manuals, and training courses to ensure data 
integrity and consistency.
    Coast Guard officials expect to have the CAMS fully implemented by 
September 2005 and intend to use it while developing the Coast Guard's 
Fiscal Year 2008 budget submission. Although it is too soon to assess 
the effectiveness of CAMS, we view this approach as a good faith effort 
toward knowledge-based budgeting for legacy asset sustainment.
                                 ______
                                 
  Response to Written Questions Submitted by Hon. Daniel K. Inouye to 
                         Margaret T. Wrightson

    Question 1. The revised Deepwater plan lists a number of enhanced 
capabilities that will be provided to the Coast Guard. Understandably, 
most of these capabilities are aimed at the Cost Guard's security 
mission. How will these new capabilities also help the Coast Guard to 
fulfill its non-security related missions, such as fisheries 
enforcement?
    Answer. GAO has not performed the audit work necessary to examine 
the potential impact of the new asset requirements and capabilities as 
outlined in the mission needs statement and revised implementation 
plan. On the face of it, it is clear that many of these enhancements 
are designed to provide the Coast Guard with increased capabilities for 
its law enforcement and ports, waterways, and coastal security (PWCS) 
missions. However, other enhancements, such as command, control, 
communications, computer, intelligence, surveillance, reconnaissance 
(C4ISR), and supporting logistics equipment would appear to also 
benefit non-homeland security missions. Without a more detailed 
analysis, it would be impossible for us to draw firm conclusions as to 
how these new capabilities will differentially affect the Coast Guard's 
various missions.

    Question 2. I am a bit concerned that the new plan reduces the 
total number of assets, especially given the need for physical presence 
in areas like the Western and Central Pacific. Being able to see and it 
identify an illegal foreign fishing vessel with this cutting-edge 
technology is all well and good, but how will the Coast Guard catch 
them unless a cutter is out there too?
    Answer. As the Coast Guard has asserted, under the Deepwater plan, 
the system of assets will have greater technological and surveillance 
capabilities, which should result in greater performance of the system 
as a whole. On the other hand, your point is a good one--in the final 
analysis, getting ``steel on target'' is a necessary component of the 
Coast Guard's various enforcement missions. Ultimately, it will be 
difficult to tell what synergies will be realized by improved system 
capabilities without seeing these new assets in operation.

    Question 3. Given all of the problems that the Coast Guard has 
experienced with its two major legacy programs thus far, the HH-65 
helicopters and the 110-ft cutter conversions, I am surprised to see 
that the new plan would upgrade rather than replace 22 of your C-130 
aircraft, and all of your HH-60 helicopters. Why did the Coast Guard 
make this significant change in the plan? Is this really the best 
decision in your opinion, in terms of long-term performance?
    Answer. We have not examined the Coast Guard's rationale for the 
changes it has made to the program. As you know, as part of the review 
we will conduct at the request of this Subcommittee, we will examine 
capability and capacity issues under the revised implementation plan. 
However, even after conducting such an analysis, the performance-based 
``system of systems'' approach used in implementing the Deepwater plan 
make it very difficult to draw conclusions regarding whether specific 
assets provide the best value to the government. Since Deepwater is not 
intended to be an asset-by-asset replacement, it is difficult if not 
impossible to address the advisability of the replacement of each asset 
type, since the performance of one would affect the performance of all.

    Question 4. How can we be sure that the HH-60 and C-130 aircraft 
will not have problems in the long-run? The Air Force has found that 
the older C-130J aircraft have cracks in their wing-boxes. And in 
December 2004, during an attempted search and rescue of the fishing 
vessel, the NORTHERN EDGE, 3 out of 4 of the Coast Guard's HH-60 
helicopters were forced to return to Cape Cod Air Station due to 
mechanical problems. Five of the NORTHERN EDGE crew members died. Did 
the Coast Guard inspect its entire C-130 fleet prior to deciding to 
keep them in use? Has the Coast Guard fully inspected all of its HH-60s 
recently?
    Answer. It would be impossible to know with complete assurance 
whether these assets will encounter problems in the long run, although 
the Air Force's findings are indeed troubling. Neither GAO nor the 
Department of Homeland Security's Office of Inspector General has 
reviewed the incident in question.
    We defer to the Coast Guard regarding their inspection procedures 
for HC-130 and HH-60 aircraft.

    Question 5. Does the fact that the Coast Guard submitted a $24 
billion plan mean that the $19 billion plan will not in fact allow the 
Coast Guard to achieve its performance goals for all of its many 
missions?
    Answer. While we have not assessed the Deepwater revised 
implementation plan, according to Coast Guard documents, the two cost 
estimates reflect potential differences in funding streams, time-lines 
(20 to 25 years), and potentially capacity. According to the Coast 
Guard, they are modeling the plans to determine their affect on 
potential performance. They intend to refine their models and update 
performance projections based on the lessons learned from real world 
operations as Deepwater assets and capabilities are introduced.
    The Deepwater revised implementation plan will be a focus of our 
follow-on review that is to commence in August 2005. To that end, we 
are working on an audit plan that will assess the revised 
implementation plan and will report the results on a timely basis to 
this subcommittee and to the Coast Guard.

    Question 6. Why are both of the plans significantly more expensive 
than the original projection of $17 billion for completion of the 
program? Are all of the costs attributable to the new capabilities 
Coast Guard would acquire?
    Answer. We have not conducted the work needed to properly respond 
to this question. That said, this will be a focus of our upcoming 
review of the revised implementation plan scheduled to commence in 
August 2005. We are currently working on an audit plan that will assess 
the revised implementation plan and will report the results on a timely 
basis to this subcommittee and to the Coast Guard.
                                 ______
                                 
   Response to Written Questions Submitted by Hon. Maria Cantwell to 
                         Margaret T. Wrightson

    Question 1. Will the new mix of capability and capacity of assets 
ensure that the Coast Guard will be able to meet its performance goals 
for all of its security and non-security missions?
    Answer. We have not yet performed the audit work necessary to 
answer this question. However, this question will be a focus of our 
follow-on review of the Deepwater revised implementation plan that is 
to commence in August 2005. To that end, we will report the results of 
our work on a timely basis to this Subcommittee and to the Coast Guard.

    Question 2. Which level of funding--$19 billion or $24 billion--is 
needed for the Coast Guard to implement all of its missions? Does the 
inclusion of a $24 billion plan mean that the $19 billion plan--$2 
billion higher than the original cost estimate for Deepwater--will 
somehow fall short?
    Answer. While we have not assessed the Deepwater revised 
implementation plan, according to Coast Guard documents, the two cost 
estimates reflect potential differences in funding streams, time-lines 
(20 to 25 years), and potentially capacity. According to the Coast 
Guard, they are modeling the plans to determine their affect on 
potential performance. They intend to refine their models and update 
performance projections based on the lessons learned from real world 
operations as Deepwater assets and capabilities are introduced.
    The Deepwater revised implementation plan will be a focus of our 
follow-on review that is to commence in August 2005. To that end, we 
are working on an audit plan that will assess the revised 
implementation plan and will report the results on a timely basis to 
this subcommittee and to the Coast Guard.

    Question 3. What steps, if any, should the Coast Guard or ICGS take 
to examine other assets such as the Littoral Combat Ship that Navy is 
acquiring, as an alternative to the cutters in the Deepwater Program?
    Answer. Certainly, as we have said in other GAO reports, the Coast 
Guard will need to exploit its partnerships with other Federal agencies 
in order to fulfill is missions as efficiently and economically as 
possible. To that end, according to Coast Guard documents, the Navy and 
the Coast Guard have formed a working group specifically designed to 
ensure close coordination and cooperation between the two programs. 
Specifically, the working group is intended to identify common 
technologies, systems, and processes critical to both the Navy's 
Littoral Combat Ship (LCS) and the Deepwater Program's National 
Security Cutter (NSC), medium endurance cutter (MEC), and patrol boat 
developments, and to recommend those areas that will benefit both 
programs through a cooperative organization, business, and/or technical 
approach to the program sponsors.
    While we have not examined the extent of the coordination or 
cooperation between the two programs, the Coast Guard will need to 
exploit its partnerships with other Federal agencies in order to 
fulfill its missions as efficiently and economically as possible. 
Certainly, as we have said in the past, it makes eminent good sense to 
engage in such efforts.

    Question 4. Is it possible, given the needs for shore-based 
facilities and personnel training, for the Coast Guard to implement its 
entire Deepwater plan in a shorter time frame?
    Answer. The question is not whether it is possible, but how well an 
acceleration of the program could be executed. Increasing the pace of 
the acceleration does not increase its likelihood of success and can 
inject a great deal of additional risk into the program. As stated in 
testimony, although the Coast Guard is making progress on a number of 
our recommendations, some recommendations, will take time to resolve. 
The least well-developed aspect of the Deepwater Program may be its 
planning for the transition of Coast Guard personnel to the new assets, 
particularly in terms of operations, training, and logistics. The risk 
of a measured, targeted acceleration could lessen the risk were the 
Coast Guard to demonstrate full and appropriate integration between 
this aspect of the Deepwater Program coupled with the stable 
acquisition of hard assets.

    Question 5. What new assets would be easiest to accelerate, and 
could be accelerated with the least risks in terms of the GAO concerns?
    Answer. If the Coast Guard does consider accelerating its 
acquisition of new assets, it could perhaps consider a less risky 
strategy using a targeted approach that considers both the condition of 
particular legacy assets and the acquisition schedule for their 
replacements on a more integrated schedule. For example, the National 
Security Cutter (NSC) could be a target of opportunity for 
acceleration, since the condition of the 378-foot high endurance cutter 
(which it is replacing) has been particularly problematic. Once the 
first NSC has been delivered and is fully tested, accelerating 
production of the remaining NSCs could pose little risk. That said, in 
order to avoid injecting additional risk into a targeted acceleration 
plan, the Coast Guard would have to ensure that proper planning and 
necessary actions for transitioning personnel to the new assets on an 
accelerated scale are implemented.

    Question 6. I'd like for all the witnesses to elaborate on this 
question I posed to Admiral Collins during the hearing. The Army--the 
only other Armed Service to use the ``Lead Systems Integrator'' 
approach--recently backed away from that approach in their Future 
Combat Systems procurement due to concerns over lack of cost control. 
These are similar to the concerns that GAO raised on the Deepwater 
Program. Are the Army's new arrangements for managing this contract 
similar to those that the Coast Guard has in place? Should the Coast 
Guard use this approach to ensure that the costs are kept down?
    Answer. We have not carried out the analysis on the developments 
within the Army's Future Combat Systems program, and how similar 
actions may be applied to the Coast Guard's Deepwater Program, required 
to answer this question.
    We are continuing to monitor and assess the Coast Guard's progress 
on implementing our recommendations from our recent reports pertaining 
to Deepwater Program management issues, as it will be a focus of our 
follow-on review of the Deepwater revised implementation plan that is 
to commence in August 2005.\1\ To that end, we are working on an audit 
plan to assess the additional progress the Coast Guard has made and 
will report the results on a timely basis to this subcommittee and to 
the Coast Guard.
---------------------------------------------------------------------------
    \1\ GAO, Contract Management: Coast Guard's Deepwater Program Needs 
Increased Attention to Management and Contractor Oversight, GAO-04-380 
(Washington, D.C., March 7, 2004) and GAO, Coast Guard: Deepwater 
Program Acquisition Schedule Update Needed, GAO-04-695 (Washington, 
D.C.: June 14, 2004).

    Question 7. Should the Coast Guard conduct an analysis of 
alternatives to ensure the Deepwater Program is on the right track?
    Answer. The Department of Defense requires an analysis of 
alternatives at major milestone decisions for all major defense 
acquisition programs. Analyses of alternatives (AOA) are an important 
element of the defense acquisition process. An AOA is an analytical 
comparison of the operational effectiveness, suitability, and life-
cycle cost of alternatives that satisfy established capability needs. 
While an AOA is usually required at Milestone B (which usually 
represents the first major funding commitment to the acquisition 
program), the AOA is used to justify the rationale for formal 
initiation of the acquisition program. An AOA normally is not required 
at Milestone C (prior to low-rate initial production) unless 
significant changes to threats, costs, or technology have occurred, or 
the analysis is otherwise deemed necessary by the Milestone Decision 
Authority.
    We have not performed the audit work necessary to adequately answer 
this question as it pertains specifically to the Deepwater Program. 
That said, this will be a focus of our follow-on review that is to 
commence in August 2005.

    Question 8. How many of the issues GAO raised has been successfully 
dealt with or ``Closed''? Why is it taking so long to proceed with the 
other recommendations?
    Answer. In 2004, we reported that well into the contract's second 
year, key components needed to manage the program and oversee the 
system integrator's performance had not been effectively 
implemented.\2\ We also reported that the degree to which the program 
was on track could not be determined because the Coast Guard was not 
updating its schedule.\3\ We made a series of recommendations that are 
depicted in Table 5 of my prepared statement (pg. 32 of this hearing).
---------------------------------------------------------------------------
    \2\ GAO-04-380.
    \3\ GAO-04-695.
---------------------------------------------------------------------------
    As of July 2005, we have seen mixed success in the Coast Guard's 
effort to improve management of the program and contractor oversight. 
Three of the recommendations--updating the Deepwater Integrated Master 
Schedule, developing measurable award fee criteria consistent with 
guidance from the Office of Federal Procurement Policy and 
subcontractor notification to the Coast Guard of decisions over $5 
million--have been fully addressed. The Coast Guard has made progress 
on implementing most of the remaining recommendations, though we 
continue to see evidence that more improvements are needed.
    Although the Coast Guard has been responsive to our concerns over 
the past year, three issues remain highly significant and, 
notwithstanding the progress we have seen thus far, likely will take 
some time to resolve. These are: (1) the effectiveness of the Coast 
Guard's primary tool for overseeing the system integrator (integrated 
product teams); (2) the attention paid to the affect of programmatic 
decisions on overall costs and capabilities (operational effectiveness 
and total ownership cost); and (3) proper planning for transitioning 
Coast Guard personnel to the new assets in terms of operations, 
training, and logistics (human systems engineering).
    Assessing the Coast Guard's performance in implementing the 
remaining recommendations will be a focus of our follow-on review of 
the Deepwater revised implementation plan that is to commence in August 
2005. To that end, we are working on an audit plan to assess the 
additional progress the Coast Guard has made and will report the 
results on a timely basis to this Subcommittee and to the Coast Guard.
    With regard to your question as to why it is taking so long for the 
Coast Guard to implement these recommendations, we would defer to the 
Coast Guard for a proper response.

    Question 9. Should the Coast Guard use an independent entity to 
help evaluate the decisions by the prime contractor, ICGS, such as 
decisions to purchase certain assets, or decisions to build such assets 
in-house rather than subcontract them to another company?
    Answer. GAO's general approach to assessing acquisition oversight 
issues is to comment on the adequacy of an agency's processes, 
procedures, and internal controls. GAO has not examined whether the 
independent entity is needed to help evaluate decisions or what 
standards or criteria would be applied.

    Question 10. What is being done by ICGS and the Coast Guard to 
improve competition for subcontracts?
    Answer. The Coast Guard has made progress in implementing our 
recommendations aimed at ensuring adequate competition among 
subcontractors. To that end, the Coast Guard reported that it is taking 
steps concerning cost control through competition among second-tier 
suppliers and notification of ``make'' decisions.\4\ While we have not 
assessed the effectiveness of the Coast Guard's actions regarding 
competition among second-tier suppliers, we are satisfied with its 
efforts regarding notification of make decisions. It should be noted, 
though, that we have not assessed the effectiveness of the following 
actions.
---------------------------------------------------------------------------
    \4\ A ``make item'' means an item or work effort to be produced or 
performed by the prime contractor or its affiliates, subsidiaries, or 
divisions.
---------------------------------------------------------------------------
    Coast Guard officials told us that in making the decision about 
whether to award the first contract option, the government will 
specifically examine the system integrator's ability to control costs 
by assessing the degree to which competition is fostered at the major 
subcontractor level. The evaluation will consider the subcontractors' 
project management structure and processes to control costs, as well as 
how market surveys of similar assets and major subsystems are 
implemented. The Coast Guard is focusing its attention on those areas 
that were priced after the initial competition for the Deepwater 
contract was completed, such as the HH-65 re-engining and the C-130J 
missionization.\5\ For example, a new process implemented for the C-130 
missionzation was a requirement for competition in subcontracting and 
government approval of all subcontracts exceeding $2 million in order 
for the Coast Guard to monitor the integrator's competition efforts.
---------------------------------------------------------------------------
    \5\ The C-130J missionization, planned for the Coast Guard's six C-
130J aircraft, is intended to modify and install mission-essential 
equipment to convert the aircraft into C-130J long-range surveillance 
maritime patrol aircraft.
---------------------------------------------------------------------------
    According to the Federal Acquisition Regulation, the prime 
contractor is responsible for managing contract performance, including 
planning, placing, and administering subcontracts as necessary to 
ensure the lowest overall cost and technical risk to the government. 
The Federal Acquisition Regulation further provides that when ``make-
or-buy programs'' are required, the government may reserve the right to 
review and agree on the contractor's make-or-buy program when necessary 
to ensure negotiation or reasonable contract prices, among other 
things. We recommended that the Coast Guard be notified of make-or-buy 
decisions over $5 million in order to facilitate controlling costs 
through competition. We suggested the $5 million threshold because 
Lockheed Martin, one of the major subcontractors, considers that amount 
to be the threshold for considering its suppliers major. The Coast 
Guard has asked the system integrator, on a voluntary basis, to provide 
notification 1 week in advance of a make decision of $10 million or 
more based on the criteria in the make-or-buy program provisions of the 
Federal Acquisition Regulation. According to Coast Guard officials, to 
date, no make decision has exceeded $10 million since the request was 
made. While we are satisfied with the Coast Guard's progress on this 
issue thus far, the details implementing this recommendation have not 
yet been worked out, such as specifically who in the Coast Guard will 
monitor the subcontractors' make decisions to ensure that the voluntary 
agreement is complied with.
    While these are important improvements in internal controls, it is 
too soon to know whether they have resulted in adequate competition or 
whether other actions may be needed. We will continue to monitor the 
Coast Guard's progress in implementing this recommendation during our 
pending review of the revised Deepwater Implementation Plan that is to 
commence in August 2005. To that end, we are working on an audit plan 
to assess the additional progress the Coast Guard has made and will 
report the results on a timely basis to this Subcommittee and to the 
Coast Guard.
                                 ______
                                 
  Response to Written Questions Submitted by Hon. Olympia J. Snowe to 
                            Ronald O'Rourke

    Question 1. Is there replication within Deepwater and the LCS 
program that can be avoided in hopes of acquiring a cost savings to the 
Nation?
    Answer. Although the Navy's Littoral Combat Ship (LCS) was 
originally justified primarily in connection with performing certain 
missions in enemy littoral (near-shore) waters overseas, some DOD and 
Navy officials in recent months have stated that the LCS might also be 
suitable for homeland defense operations. The Navy in recent months has 
also increased the total number of LCSs that it wants to build, from an 
earlier potential range of 30 to 60 to a new potential range of 63 to 
82. The Chief of Naval Operations has spoken of the possibility of 
building 75 to 100.
    The Navy has not explained in detail why its desired number of LCSs 
has increased in recent months. The absence of such a detailed 
explanation, combined with statements concerning the potential 
suitability of the LCS for homeland defense operations, raise the 
possibility that homeland defense operations form part of the Navy's 
basis for increasing its desired number of LCSs.
    Since the homeland defense operations that the Navy has in mind for 
the LCS might also be performed by Deepwater assets such as National 
Security Cutters (NSCs) and Offshore Patrol Cutters (OPCs), these 
recent developments concerning the LCS program raise the question of 
whether the Navy and Coast Guard have adequately coordinated their 
force structure (i.e., numerical) requirements for LCSs and Deepwater 
assets such as NSCs and OPCs.
    When asked about coordination between the LCS and Deepwater 
Programs, Navy and Coast Guard officials have generally responded by 
noting how the two services have worked to ensure that LCSs and 
Deepwater cutters will take maximum advantage of opportunities for 
using common technologies and components. This is not the same, 
however, as coordinating the force structure requirements for the two 
programs. It also does not address the question of whether the homeland 
defense operations the Navy has in mind for the LCS could be performed 
more cost effectively by LCSs or by Deepwater assets such as NSCs and 
OPCs.
    Potential questions that arise out of this situation, particularly 
for those who follow the Coast Guard and the Deepwater Program, include 
the following:

   Is the Navy, as part of an effort to justify an increase in 
        its desired number of LCSs, seeking to appropriate some of the 
        Coast Guard's homeland defense or homeland security 
        responsibilities?

   Would the homeland defense operations that the Navy has in 
        mind for the LCS be performed more cost effectively by LCSs, or 
        by Deepwater assets such as NSCs and OPCs?

    If the answer to the first question is yes, then there may be some 
duplication in mission justification between the LCS program and the 
Deepwater Program.
    If the answer to the second question is that the homeland defense 
operations in question would be more cost effectively performed by 
Deepwater assets such as NSCs and OPCs, then the total cost to the 
Nation for performing maritime homeland defense operations might be 
reduced by decreasing the Navy's recently announced planned number of 
LCSs and possibly increasing total planned numbers of Deepwater assets 
such as NSCs and OPCs.

    Question 2. How much confidence do you put in the accuracy of the 
revised implementation plan? The RAND study?
    Answer. Revised Implementation Plan. The accuracy of the revised 
implementation plan depends to a large degree on the accuracy of the 
analytical models that were used to generate the plan. The briefing I 
received from the Coast Guard on these models gave me no immediate 
reason to believe that they were fundamentally flawed. Such flaws, 
however, are sometimes observable only through a detailed inspection of 
a model's underlying features. In addition, even if a model contains no 
such flaws, the many assumptions that are sometimes necessarily built 
into such a model can provide the user an opportunity to vary 
assumptions so as to achieve a preferred result.
    The Coast Guard contracted with the MITRE Corporation to conduct an 
independent assessment of the process that the Coast Guard used for its 
Deepwater performance gap analysis (PGA). MITRE performed the 
assessment between January 15 and March 1, 2004, and issued a report on 
its assessment on March 30, 2004. The Coast Guard provided CRS with a 
copy of the report. The report stated:

        As part of the Deepwater PGA process, MITRE noted a number of 
        strengths in the Deepwater PGA effort. These strengths 
        underscore the credibility of the results produced. In general, 
        MITRE found that the Deepwater PGA process, and the resulting 
        analytic results, was likely the most complete and 
        comprehensive campaign-level study conducted by any uniformed 
        service in recent times.

        The principal strengths of the Deepwater PGA process involve 
        the composition of the Deepwater PGA Teams, the foundation for 
        the Deepwater PGA, the involvement of senior Coast Guard 
        leadership, the models and processed used in the analysis, and 
        the consistency of the results, which tends to verify the 
        reasonableness and accuracy of the analysis performed. The work 
        performed by the Deepwater PGA Teams successfully met the 
        requirements contained in the Executive Steering Committee 
        charter that guided the work.

        MITRE developed a number of recommendations based upon the 
        findings and independent assessment of the Deepwater PGA 
        process, the documentation provided and reviewed, and the 
        personnel interviews conducted. The primary recommendation is 
        to continue the process initiated in the Deepwater PGA as a 
        point of departure for revising the proposal of the prime 
        contractor, Integrated Coast Guard System, for the Integrated 
        Deepwater System. The remaining recommendations focus on areas 
        of improvement for subsequent analyses.\1\
---------------------------------------------------------------------------
    \1\ Independent Assessment of U.S. Coast Guard Deepwater 
Performance Gap Analysis Process. McLean, VA, MITRE, 2004. (Version 
1.0, March 30, 2004, Center for Enterprise Modernization) p. i.

---------------------------------------------------------------------------
    Potential oversight questions include the following:

   Is the MITRE assessment the only independent assessment that 
        was performed of the process that the Coast Guard used to 
        arrive at its revised implementation plan? If not, what were 
        the other assessments, and what were their findings, 
        conclusions, and recommendations? If the MITRE assessment was 
        the only independent assessment, has the Coast Guard contracted 
        for an independent assessment of the post-March 2004 portion of 
        its work to develop the revised implementation plan? If the 
        Coast Guard has not contracted for such an assessment, should 
        Congress require one?

   Did the Coast Guard implement all of MITRE's ``remaining 
        recommendations [that] focus on areas of improvement for 
        subsequent [i.e., post-March 2004] analyses? If not, which of 
        MITRE's recommendations were not implemented, and why?

   As an entity with a possible interest in securing future 
        Coast Guard contracts, did MITRE have an incentive to avoid 
        significantly criticizing the Coast Guard's PGA process or to 
        avoid recommending changes that might have significantly 
        delayed the Coast Guard's schedule for completing the revised 
        plan? Was MITRE, in other words, a truly independent assessor 
        in this instance? Should the Government Accountability Office 
        (GAO) be asked to perform an independent assessment of the 
        Coast Guard's process for developing the revised plan?

   To what degree can the results of the Coast Guard's 
        analytical models be varied by varying the models' assumptions? 
        What assumptions did the Coast Guard plug into the models, and 
        did these assumptions tend to increase or reduce the size of 
        the Deepwater force required to perform various missions?

    In addition to the above issues, there is a more general question 
concerning the policy question that the models were used to answer. The 
models might provide a reasonably accurate answer to the question: 
``What is the highest-performing force that can be acquired for a total 
of $19 billion to $24 billion?'' If so, however, that answer might not 
be the same as an accurate answer to the question: ``What is the 
lowest-cost force that can perform all the missions we want the 
Deepwater force to be able to perform?''
    Regarding the potential difference between these two questions, the 
Coast Guard states that while the revised Deepwater force is, in its 
view, the highest-performing force that can be acquired for a total of 
$19 billion to $24 billion, this force would not have enough capacity 
to perform certain missions of potential interest to policymakers. In 
particular, the Coast Guard states, the revised force:

   might not have enough capacity for performing certain Level-
        2 operations, which include:

        -- achieving an increased degree of maritime domain awareness 
        (MDA),

        -- maintaining continuous presence of two cutters (i.e., 2.0 
        presence) in the Bering Sea; and

        -- performing additional air interdiction operations;

   almost certainly would not have enough capacity for 
        performing certain Level-3 operations, which include operations 
        for fully achieving long-term (FY 2005-FY 2009) Government 
        Performance and Results Act (GPRA) goals; and

   would not have enough capacity for performing certain Level-
        4 operations, which include:

        -- conducting fisheries enforcement in certain areas where 
        fisheries enforcement is not currently performed; and

        -- performing additional counter-drug operations, should the 
        Department of Defense (DOD) reduce its efforts in this area so 
        as to make DOD resources available for other DOD missions.

    If policymakers determine that the revised force should perform 
some or all of the above operations, then the revised implementation 
plan, though perhaps accurately calculated for achieving the highest 
performance for a total acquisition cost of $19 billion to $24 billion, 
would not be accurately calculated for performing all missions of 
interest to policymakers.
    RAND Study. I have no reason to doubt that the RAND study 
accurately calculated the number of platforms with Baseline-level 
(i.e., Increment 0) capability that would be needed to perform all 
Level-4 operations. One option for Congress would be to direct the 
Coast Guard to contract with RAND for a follow-on study that would 
calculate:

   required numbers of platforms, assuming the same combination 
        of platform capability (i.e., between Increment II and 
        Increment III) and force capacity (i.e., between Level 1 and 
        Level 2) as reflected in the Coast Guard's revised plan; and

   required numbers of platforms, and resulting acquisition 
        costs, to perform all Level 2 (or all Level 3, or all Level 4) 
        operations, assuming different platform capability levels.

    Question 3. Do you believe that the proposed increased capabilities 
outweigh the urgent need for a significant increase in capacity of 
cutters and planes?
    Answer. Achieving a proper balance between the capability of 
individual platforms (i.e., ships or aircraft) and numbers of platforms 
(i.e., capacity) is a longstanding problem in maritime force planning. 
Increasing platform capability can often reduce the number of platforms 
required to perform a given set of missions. The potential for 
increased platform capability to translate into reduced platform 
numbers, however, can be limited by a requirement in the set of 
missions to be performed to maintain a platform presence in a minimum 
number of separate operating areas at the same time.
    Whether the Coast Guard has accurately calculated the reduction in 
required platform numbers that results from the revised plan's proposed 
increase in platform capability depends to a large degree on the 
accuracy of the Coast Guard's analytical models. As discussed above, 
one potential option for Congress would be to have GAO conduct an 
independent assessment of these models. Such an assessment could 
include, among other things, an examination of whether the models 
accurately translate increased platform capability into reduced 
platform numbers after taking into account requirements for maintaining 
platform presence in separate areas at the same time.

    Question 4. Were you surprised at the recommendations of the 
revised implementation report? What aspect of the report concerns you 
the most?
    Answer. In light of the Coast Guard's expanded post-9/11 mission 
demands and the significantly higher platform numbers recommended in 
the 2004 RAND report for meeting those demands, I was surprised that 
the revised implementation plan did not recommend platform numbers that 
were generally higher than those in the original (1998) Deepwater plan. 
I was not surprised that the numbers in the revised plan were below 
those in the RAND report because articles in the trade press suggested 
that this would be the case. But I did not anticipate that the Coast 
Guard would calculate that increased unit capability would be 
sufficient to avoid a general increase in platform numbers above those 
in the original Deepwater plan.
    The revised force appears to have been optimized for an acquisition 
cost of $19 billion to $24 billion. I do not understand why a range of 
$19 billion to $24 billion, rather than some lower or higher figure, 
was used as the acquisition cost range within which to optimize the 
revised force, or why the Coast Guard didn't instead optimize the force 
to fully achieve long-term (FY 2005-FY 2009) Government Performance and 
Results Act (GPRA) goals (i.e., perform all Level 3 operations) at 
lowest cost. Federal programs must take limits on available resources 
into account, but as a result of being optimized within an acquisition 
cost of $19 billion to $24 billion, the revised force almost certainly 
would not have enough capacity to fully achieve the GPRA goals, which 
presumably are of some importance to the policymakers who established 
them. The Coast Guard did not (and was not required to) include in the 
revised plan information on the composition and cost of alternative 
Deepwater forces that could perform all Level 2 operations (or all 
Level 3 operations, or all Level 4 operations) at lowest cost. Congress 
consequently does not have this information, which would assist 
Congress, as a policymaking body, in considering potentially important 
tradeoffs between achieving certain levels of Deepwater performance and 
meeting goals for other Federal programs.

    Question 5. Can the United States shipbuilding industry handle an 
acceleration of this project to 10 or 15 years?
    Answer. I believe the U.S. shipbuilding industrial base could 
accommodate an acceleration of the Deepwater Program under which the 
NSCs and OPCs included in the revised plan are procured in a period of 
10 to 15 years, provided that design work on each class of cutter was 
completed before procurement of that class was accelerated. The yards 
that could build these cutters have more than enough unused production 
capacity to accommodate such an increase, and these cutters are 
relatively low-risk designs that are to incorporate proven rather than 
developmental systems. The 2004 RAND report similarly concluded that 
the U.S. shipbuilding industrial base could accommodate a compression 
of the NSC and OPC procurement period to 10 or 15 years.\2\
---------------------------------------------------------------------------
    \2\ John Birkler et al., The U.S. Coast Guard's Deepwater Force 
Modernization Plan, Can It Be Accelerated? Will It Meet Changing 
Security Needs? RAND Corporation, Santa Monica (CA), 2004. pp. xxv-
xxvi, 32-41, 53-61.

    Question 6. What shipyards can accommodate the new contracts that 
would be associated with building Deepwater cutters?
    Answer. U.S. shipyards that could accommodate new contracts 
associated with building Deepwater cutters include the two yards 
currently involved in building larger Navy surface combatants--the 
Ingalls shipyard that forms part of Northrop Grumman Ship Systems 
(NGSS), and General Dynamics' Bath Iron Works (GD/BIW). Both of these 
yards currently have considerable unused capacity. Other shipyards that 
could accommodate the new contracts include yards that currently build 
larger ships of other types, but have past experience in building 
cutters or larger Navy surface combatants, such as the Avondale 
shipyard that forms part of NGSS, or Northrop Grumman Newport News 
(NGNN).
                                 ______
                                 
  Response to Written Questions Submitted by Hon. Daniel K. Inouye to 
                            Ronald O'Rourke

    Question 1. The revised Deepwater plan lists a number of enhanced 
capabilities that will be provided to the Coast Guard. Understandably, 
most of these capabilities are aimed at the Coast Guard's security 
mission. How will these new capabilities also help the Coast Guard to 
fulfill its non-security related missions, such as fisheries 
enforcement?
    Answer. Ship and aircraft capabilities useful for performing 
homeland security missions in some cases can also be useful for 
performing non-homeland security missions such as fisheries 
enforcement. Consequently, increasing planned Deepwater ship and 
aircraft capabilities so as to enhance the Deepwater force's ability to 
perform homeland security missions might in some cases also improve its 
ability to perform non-homeland security missions such as fisheries 
enforcement. For example, the higher maximum speeds now planned for the 
Offshore Patrol Cutters (OPCs) and Fast Response Cutters (FRCs) and the 
improved sensors now planned for the HC-130 Long Range Search (LRS) 
aircraft and the H-65C Multi-Mission Cutter Helicopter (MCH) might 
improve the Deepwater force's ability to detect, track, and intercept 
ships or boats engaged in illegal fishing operations.

    Question 2. I am a bit concerned that the new plan reduces the 
total number of assets, especially given the need for physical presence 
in areas like the Western and Central Pacific. Being able to see and to 
identify an illegal foreign fishing vessel with this cutting-edge 
technology is all well and good, but how will the Coast Guard catch 
them unless a cutter is out there too?
    Answer. Cutters and their embarked helicopters and interceptor 
boats are central to the Coast Guard's ability to halt and board 
fishing vessels that are operating beyond the range of shore-based 
helicopters and interceptor boats. The Coast Guard states that the 
revised Deepwater force:

   might not have enough capacity (i.e., platforms) for 
        performing certain Level-2 operations;

   almost certainly would not have enough capacity for 
        performing certain Level-3 operations; and

   would not have enough capacity for performing certain Level-
        4 operations.

    Level-2 operations include, among other things, maintaining 
continuous presence of two cutters in the Bering Sea.
    Level-3 operations include additional forces for achieving long-
term (FY 2005-FY 2009) Government Performance and Results Act (GPRA) 
goals. The GPRA goal for living marine resources is to maintain a 97 
percent observed domestic compliance rate by commercial fishers.
    Level-4 operations include, among other things, conducting 
fisheries enforcement in certain areas where fisheries enforcement is 
not currently performed. The Coast Guard states that in the Pacific, 
these areas include waters between Hawaii and Australia covered by the 
Western and Central Pacific Tuna agreement and waters extending from 
Baja, Mexico, down past the Galapagos islands, and west about three-
quarters of the way to Hawaii that are covered by the Inter-American 
Tropical Tuna Commission.

    Question 3. Given all of the problems that the Coast Guard has 
experienced with its two major legacy programs thus far, the HH-65 
helicopters and the 110, cutter conversions, I am surprised to see that 
the new plan would upgrade rather than replace 22 of your C-130 
aircraft, and all of your HH-60 helicopters. Is this really the best 
decision in your opinion, in terms of long-term performance?
    Answer. A decision on whether to upgrade rather than replace a 
group of aircraft can depend on several things, including the 
industrial-base implications of upgrading vs. building new aircraft, 
the potential impact of an upgrade program on near-term aircraft 
availability (particularly for numerically small aircraft fleets with 
high operational tempos), the time horizon for calculating cost 
effectiveness (i.e., how many future years ``long term'' is defined to 
include), the accuracy of performance estimates for upgraded and 
replacement aircraft, and the accuracy of cost estimates for upgrading 
existing aircraft, procuring replacement aircraft, and operating and 
supporting the upgraded or replacement aircraft. Some observers believe 
that cost and schedule estimates for upgrading existing aircraft carry 
more risk of being inaccurate because of the difficulty of predicting 
certain problems associated with aircraft aging. Confidence in the 
Coast Guard's decisions regarding its C-130 aircraft and HH-60 
helicopters could depend in part on how well the Coast Guard is judged 
to have incorporated lessons learned from past Coast Guard and DOD 
upgrade programs.

    Question 4. How can we be sure that the HH-60 and C-130 aircraft 
will not have problems in the long-run? The Air Force has found that 
the older C-130J aircraft have cracks in their wing-boxes. And in 
December 2004, during an attempted search and rescue of the fishing 
vessel, the NORTHERN EDGE, 3 out of 4 of the Coast Guard's HH-60 
helicopters were forced to return to Cape Cod Air Station due to 
mechanical problems. Five of the NORTHERN EDGE crew members died.
    Answer. Careful inspection and maintenance of older aircraft can 
reduce the probability that they will experience problems in operation, 
but some probability would remain. Although the military services have 
growing experience in operating aircraft to advanced ages, some 
observers are concerned that the aging mechanisms for certain aircraft 
components, and thus the risks of operating aircraft to advanced ages, 
are not yet fully understood. Technical issues involved include items 
such as corrosion, metal fatigue (particularly on components that 
undergo aerodynamic stress), and wire embrittlement.

    Question 5. Does the fact that the Coast Guard submitted a $24 
billion plan mean that the $19 billion plan will not in fact allow the 
Coast Guard to achieve its performance goals for all of its many 
missions?
    Answer. The Coast Guard states that, until Deepwater assets are 
actually fielded, the exact amount of mission performance they will 
generate is uncertain. The Coast Guard wants the Deepwater force to 
achieve a certain level of overall mission performance. The Coast Guard 
appears confident that the larger $24 million force would achieve that 
level of overall mission performance, but believes that the smaller $19 
billion force might be able to do so, depending on the actual amount of 
mission performance generated by the new Deepwater assets. The ultimate 
force procured to achieve the intended level of overall mission 
performance, the Coast Guard states, could be the $19 billion force, 
the $24 billion force, or perhaps something in between.
    Although the force that is ultimately procured would be capable of 
achieving a certain level of overall mission performance desired by the 
Coast Guard and the Department of Homeland Security (DHS), this force 
would not have enough capacity to perform certain missions of potential 
interest to policymakers. In particular, the Coast Guard states, the 
revised force:

   might not have enough capacity for performing certain Level-
        2 operations, which include:

        -- achieving an increased degree of maritime domain awareness 
        (MDA),

        -- maintaining continuous presence of two cutters (i.e., 2.0 
        presence) in the Bering Sea, and

        -- performing additional air interdiction operations;

   almost certainly would not have enough capacity for 
        performing certain Level 3 operations, which include operations 
        for fully achieving long-term (FY 2005-FY 2009) Government 
        Performance and Results Act (GPRA) goals; and

   would not have enough capacity for performing certain Level 
        4 operations, which include:

        -- conducting fisheries enforcement in certain areas where 
        fisheries enforcement is not currently performed, and

        -- performing additional counter-drug operations, should the 
        Department of Defense (DOD) reduce its efforts in this area so 
        as to make DOD resources available for other DOD missions.

    Question 6. Why are both of the plans significantly more expensive 
than the original projection of $17 billion for completion of the 
program? Are all of the costs attributable to the new capabilities 
Coast Guard would acquire?
    Answer. Potential sources of acquisition cost growth from the 
earlier figure of $17 billion to the new estimated cost of $19 billion 
to $24 billion include:

   additional equipment to be installed on previously planned 
        platforms;

   additional platforms to be acquired; and

   repricing of previously planned items due to revised 
        inflation indices or a revised understanding of the intrinsic 
        cost of those items.

    This first item clearly accounts for some portion of the increase 
above the $17 million figure. The second item may account for an 
additional portion, particularly in the case of the $24 billion plan.
                                 ______
                                 
   Response to Written Questions Submitted by Hon. Maria Cantwell to 
                            Ronald O'Rourke

    Question 1. Will the new mix of capability and capacity of assets 
ensure that the Coast Guard will be able to meet its performance goals 
for all of its security and non-security missions?
    Answer. Although the Coast Guard states that the Deepwater force 
recommended under the revised implementation plan would generate much 
more overall mission performance than the originally planned force, and 
would be able to meet certain DHS and Coast Guard long-range 
performance goals, the revised Deepwater force would not have enough 
capacity to perform certain missions of potential interest to 
policymakers. In particular, the Coast Guard states, the revised force:

   might not have enough capacity for performing certain Level-
        2 operations, which include:

        -- achieving an increased degree of maritime domain awareness 
        (MDA),

        -- maintaining continuous presence of two cutters (i.e., 2.0 
        presence) in the Bering Sea, and

        -- performing additional air interdiction operations;

   almost certainly would not have enough capacity for 
        performing certain Level 3 operations, which include operations 
        for fully achieving long-term (FY 2005-FY 2009) Government 
        Performance and Results Act (GPRA) goals; and

   would not have enough capacity for performing certain Level 
        4 operations, which include:

        -- conducting fisheries enforcement in certain areas where 
        fisheries enforcement is not currently performed, and

        -- performing additional counter-drug operations, should the 
        Department of Defense (DOD) reduce its efforts in this area so 
        as to make DOD resources available for other DOD missions.

    Question 2. Which level of funding--$19 billion or $24 billion--is 
needed for the Coast Guard to implement all of its missions? Does the 
inclusion of a $24 billion plan mean that the $19 billion plan--$2 
billion higher than the original cost estimate for Deepwater--will 
somehow fall short?
    Answer. The Coast Guard states that, until Deepwater assets are 
actually fielded, the exact amount of mission performance they will 
generate is uncertain. The Coast Guard wants the Deepwater force to 
achieve a certain level of overall mission performance. The Coast Guard 
appears confident that the larger $24 billion force would achieve that 
level of overall mission performance, but believes that the smaller $19 
billion force might be able to do so, depending on the actual amount of 
mission performance generated by the new Deepwater assets. The ultimate 
force procured to achieve the intended level of overall mission 
performance, the Coast Guard states, could be the $19 billion force, 
the $24 billion force, or perhaps something in between.
    Although the force that is ultimately procured would be capable of 
achieving a certain level of overall mission performance desired by the 
Coast Guard and the Department of Homeland Security (DHS), as discussed 
in the answer to the previous question, this force would not have 
enough capacity to perform certain missions of potential interest to 
policymakers relating to Level 4, Level 3, and possibly Level 2 
operations.

    Question 3. What steps if any should the Coast Guard or ICGS take 
to examine other assets such as the Littoral Combat Ship that Navy is 
acquiring, as an alternative to the cutters in the Deepwater Program?
    Answer. The 2004 RAND report on the Deepwater Program recommended 
that the Coast Guard explore alternative platforms and technologies for 
meeting the service's expanded post-9/11 mission demands. The report 
states that the Coast Guard can meet its expanded post-9/11 
responsibilities:

        only by acquiring significantly more cutters, unmanned air 
        vehicles (UAVs), and helicopters than are in the current [1998 
        Deepwater] acquisition program, or by mixing into the program 
        other platforms and technologies that provide the same or 
        additional capabilities . . . .

        We recommend that the USCG pursue a two-pronged strategy. The 
        USCG should meet its mission demands and start replacing its 
        aging assets by (1) accelerating and expanding the asset 
        acquisitions in the current Deepwater Program and, at the same 
        time, (2) identifying and exploring new platform options, 
        emerging technologies, and operational concepts that could 
        leverage those assets. Such a two-pronged strategy may satisfy 
        demand more quickly and at less cost than expanding the 
        original Deepwater plan.

        While we recommend that the USCG accelerate Deepwater and buy 
        more assets than in the current plan, we also recommend that 
        USCG leaders bear in mind that buying more of today's assets 
        may not provide an optimal solution over the long-term. To 
        handle some of the responsibilities currently handled by 
        traditional assets, the USCG could, for example, employ 
        offshore rigs and airships, or realize emerging UAV concepts. 
        Placing rigs near sea-lanes may enable the USCG to base and 
        sustain surface and air assets in Deepwater environments, while 
        lessening its traditional reliance on cutters. Employing 
        airships or relying more heavily on UAVs, particularly those 
        able to stay aloft for long periods and to cover significant 
        territory, may allow the USCG to enhance its surveillance, 
        reconnaissance, and search and rescue capabilities. Such 
        alternatives may involve less-costly assets than platforms the 
        USCG currently uses to handle its responsibilities.

        We provide a preliminary analysis of cost and performance for a 
        100-percent force structure. Our analysis is sufficient for 
        order-of-magnitude comparisons; however, more work would be 
        required to produce budget-level cost estimates and analysis of 
        operational effectiveness. Policymakers should use the order-
        of-magnitude estimates of the 100-percent force structure as an 
        upper bound against which they can explore and evaluate 
        alternative concepts and assets that provide the same or 
        improved capabilities at less cost, rather than as a road map 
        to pinpoint specific acquisition decisions.\1\
---------------------------------------------------------------------------
    \1\ John Birkler et al., The U.S. Coast Guard's Deepwater Force 
Modernization Plan, Can It Be Accelerated? Will It Meet Changing 
Security Needs? RAND Corporation, Santa Monica (CA), 2004. pp. xix-xx, 
xxviii-xxix. Italics added for emphasis.

    In addition to the systems mentioned above (offshore rigs, 
airships, and emerging UAV concepts), potential alternative ship 
platforms for meeting the Coast Guard's post-9/11 mission demands 
---------------------------------------------------------------------------
include, but are not limited to, the following:

   the Littoral Combat Ship (LCS), which currently exists in 
        two designs--a high-speed monohull and a high-speed trimaran;

   a ship like the Navy's recently built high-speed catamaran 
        X-Craft (previously known as the Littoral Support Craft-
        Experimental, or LSC-X); or

   ships like the high-speed catamaran ferries that the Defense 
        Department has leased in recent years for experiments and 
        operational evaluations.

    Question 4. Is it possible, given the needs for shore-based 
facilities and personnel training, for the Coast Guard to implement its 
entire Deepwater plan in a shorter timeframe?
    Answer. If annual funding were sufficiently high, the systems 
envisioned in the revised implementation plan could be acquired in 
something less than the 20 to 25 years contemplated in the revised 
plan. In general, the more the acquisition period for the entire plan 
is compressed, the greater the burden of managing the program would be, 
and the higher the risk of a problem occurring in program execution. 
Again assuming sufficient annual funding, the Coast Guard could 
accelerate its plans for shore-based facilities and personnel training 
to meet a compressed platform-acquisition schedule, but the more the 
acquisition period is compressed, the greater the management burden 
associated with preparing shore-based facilities and training personnel 
would become. The 2004 RAND report stated:

        With respect to accelerating Deepwater acquisitions, it should 
        be noted that both of the acceleration schedules we examined--
        the 10-year and the 15-year--are feasible. However, to assess 
        the ability of the USCG to integrate assets it would acquire 
        using either of those schedules was beyond the scope of this 
        study.\2\ Without that assessment, we are reluctant to make a 
        recommendation on whether to go with a 15-year or a 10-year 
        acquisition schedule.\3\
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    \2\ At this point, the RAND report has a footnote that reads: ``By 
integrate, we mean providing the facilities, training, manpower, and 
other implications that such a force structure might require.''
    \3\ Ibid, p. xxix.

    Question 5. What new assets would be easiest to accelerate, and 
could be accelerated with the least risks in terms of the GAO concerns?
    Answer. Assuming sufficient annual funding, assets whose 
procurement would be the easiest to accelerate, and could be 
accelerated with the least risk, would be those:

   whose producers currently have unused production capacity;

   whose designs are complete and relatively stable (i.e., not 
        likely to be revised significantly in the near term); and

   whose systems and technologies are proven and well 
        understood rather than developmental or novel.

    Among the Deepwater assets that can be viewed as currently meeting 
all three criteria is the National Security Cutter (NSC). The Offshore 
Patrol Cutter (OPC) can be viewed as currently meeting the first and 
third criteria. With regard to the second criterion, the FY 2006 
Deepwater budget request includes funding to complete the design for 
the OPC.

    Question 6. I'd like for all of the witnesses to elaborate on this 
question I posed to Admiral Collins during the hearing. The Army--the 
only other Armed Service to use the ``Lead Systems Integrator'' 
approach--recently backed away from that approach in their Future 
Combat Systems procurement due to concerns over lack of cost control. 
These are similar to the concerns that GAO raised on the Deepwater 
Program. Are the Army's new arrangements for managing this contract 
similar to those that the Coast Guard has in place? Should the Coast 
Guard use this approach to ensure that the costs are kept down?
    Answer. As part of a restructuring of the business aspects of the 
Future Combat System (FCS) program announced on April 5, 2005, the 
Secretary of the Army directed that the FCS Other Transaction Agreement 
(OTA) with the lead system integrator, Boeing/SAIC, be changed to a 
Federal Acquisition Regulation (FAR)-based contract that includes the 
Truth in Negotiations Act, the Procurement Integrity Act, cost 
accountability standards, and an organizational conflicts of interest 
clause. Boeing/SAIC remains the lead systems integrator for the FCS 
program. The FCS program is still a large, system-of-systems 
acquisition program that is being executed for the government by an 
industry entity acting as lead system integrator, and the FCS program 
continues to share this basic structural similarity with the Deepwater 
acquisition program.
    The Army's recent restructuring of the FCS program also included 
the following actions intended to strengthen the Army's management of 
the program:

   The Secretary of the Army and the Chief of Staff of the Army 
        will conduct an in-depth review of the program at least three 
        times a year.

   The Secretary and the Chief of Staff will serve as the lead 
        Army officials for all major changes to the program.

   The Army will establish an Army Modular Force Integration 
        Office to ensure that FCS technologies are incorporated into 
        the Army as soon as they are ready, and to integrate and 
        coordinate the FCS program with evolving Army warfighting 
        doctrine and the Army's emerging global communication and 
        information infrastructure. The new office will be overseen by 
        the Acting Under Secretary of the Army and the Vice Chief of 
        Staff of the Army.

   As an additional oversight measure, the Army Audit Agency, 
        the Army Science Board, and an outside panel of advisors will 
        conduct periodic independent assessments of program cost, 
        schedule, and technical viability.\4\
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    \4\ U.S. Army News Release, ``Army Announces Business Restructuring 
of the FCS Program,'' April 5, 2005. [http://www4.army.mil/ocpa/
print.php?story_id_key=7125] See also Jen DiMascio, ``Army Announces 
Future Combat System Contract Restructuring,'' Inside the Army, April 
11, 2005; and Jonathan Karp and Andy Pasztor, ``About-Face: Army's 
Decision On Boeing Changes Philosophy,'' Wall Street Journal, April 6, 
2005.
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    As points of comparison with the last of the above actions by the 
Army, the Coast Guard, has done, or is doing, the following:

   During the source-selection phase of the Deepwater Program, 
        the Coast Guard used an Independent Analysis Government 
        Contractor (or IAGC, staffed originally by the MITRE 
        Corporation and later by Booz Allen Hamilton) to provide the 
        Coast Guard with independent assessments of the bids submitted 
        by the three industry teams that competed for the right to 
        become the Deepwater Program prime contractor. The IAGC was 
        stood down following the completion of source selection.\5\
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    \5\ Source: Telephone consultation with Deepwater Program office, 
May 3, 2005.

   During the source-selection phase and on two subsequent 
        occasions (including, most recently, during the analysis that 
        led to the revised implementation plan), the Coast Guard turned 
        to the Logistics Management Institute (LMI) for independent 
        cost estimates relating to the Deepwater Program.\6\
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    \6\ Ibid.

   In early 2004, the Coast Guard used MITRE to perform an 
        independent assessment of the process the Coast Guard had 
        developed for performing the Performance Gap Analysis (PGA) 
        that eventually led to the revised Deepwater Implementation 
        Plan.\7\
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    \7\ MITRE Corporation, Independent Assessment of U.S. Coast Guard 
Deepwater Performance Gap Analysis Process, McLean (VA), 2004. (Version 
1.0, March 30, 2004, MITRE Center for Enterprise Modernization, McLean, 
Virginia). A copy of this report was provided to CRS by the Coast Guard 
during the April 28, 2005 briefing.

   As of late-April 2005, a third-party assessment of the use 
        of competition by ICGS was in progress.\8\
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    \8\ U.S. Coast Guard. Oversight and Management of the Coast Guard's 
Integrated Deepwater System, Washington, 2005. (Rear Adm. Patrick M. 
Stillman, USCG, Program Executive Officer, Integrated Deepwater System, 
U.S. Coast Guard Headquarters, Washington, D.C., 27 April 2005) p. 5.

    The broad similarities between the Deepwater and FCS acquisition 
strategies, and the Army's recent actions to strengthen its management 
of the FCS program, raise the following potential oversight questions 
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for Congress:

   How do the Coast Guard's arrangements for managing the 
        Deepwater Program compare to the Army's arrangements, as 
        recently restructured, for managing the FCS program?

   Are the Army's arrangements for managing the FCS program 
        stronger in some ways than the Coast Guard's arrangements for 
        managing the Deepwater Program, and if so, should the Coast 
        Guard consider adopting the stronger Army measures?

   How does the Coast Guard compare to the Army in terms of in-
        house acquisition-management and system-integration expertise? 
        Does the Coast Guard have enough in-house system-integration 
        expertise to conduct complete and fully independent assessments 
        of ICGS decisions and recommendations regarding the Deepwater 
        Program's system-integration approach?

   Should the Coast Guard establish a standing independent 
        organization--perhaps similar to the Deepwater source-selection 
        IAGC (but permanent in nature), or to the Army's outside board 
        of advisors for the FCS program--to provide periodic and 
        ongoing assessments of ICGS decisions and recommendations 
        regarding the Deepwater Program, including decisions relating 
        to the program's system-integration approach, or to solicit and 
        assess, on an ongoing basis, proposed innovations for the 
        Deepwater Program, particularly from firms outside the ICGS 
        team?

   Have the Coast Guard and Army established a regular process 
        for sharing with each other their experiences in managing the 
        Deepwater and FCS programs, and for trading ideas for improving 
        their management of the programs? If not, would the Coast Guard 
        and Army benefit from establishing such a process?

    Question 7. Should the Coast Guard conduct an analysis of 
alternatives to ensure the Deepwater Program is on the right track?
    Answer. The Coast Guard may believe that the performance gap 
analysis (PGA) and associated analytical work that the Coast Guard did 
to arrive at the revised implementation plan amounts to an updated 
Deepwater analysis of alternatives (AOA), and that another AOA 
consequently is not needed at this point. As a cross-check on the Coast 
Guard's work, a possible option for Congress would be to direct DHS to 
contract for an independent AOA to be performed by an entity outside of 
DHS that has the requisite analytical capability and independence from 
DHS.
    As discussed in relation to an earlier question, the 2004 RAND 
report on the Deepwater Program recommended that the Coast Guard 
explore alternative platforms and technologies for meeting the 
service's expanded post-9/11 mission demands. An AOA could form part of 
the process for exploring such alternative platforms and technologies.