[Senate Hearing 109-1132]
[From the U.S. Government Publishing Office]



                                                       S. Hrg. 109-1132
 
                   THE COAST GUARD'S FISCAL YEAR 2007
                             BUDGET REQUEST

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

                                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

                             SECOND SESSION

                               __________

                             JUNE 15, 2006

                               __________

    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

                             SECOND 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
             Kenneth R. Nahigian, 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 15, 2006....................................     1
Statement of Senator Cantwell....................................     3
Statement of Senator Inouye......................................     5
    Prepared statement...........................................     6
Statement of Senator Lott........................................    44
Statement of Senator Snowe.......................................     1

                               Witnesses

Allen, Admiral Thad W., Commandant, U.S. Coast Guard.............     6
    Prepared statement...........................................     7
Caldwell, Stephen L., Acting Director, Homeland Security and 
  Justice Issues, U.S. Government Accountability Office..........    12
    Prepared statement...........................................    15

                                Appendix

Response to written questions submitted to Admiral Thad W. Allen 
  by:
    Hon. Maria Cantwell..........................................    72
    Hon. Daniel K. Inouye........................................    64
    Hon. Frank R. Lautenberg.....................................    82
Response to written questions submitted to Stephen L. Caldwell 
  by:
    Hon. Maria Cantwell..........................................    62
    Hon. Daniel K. Inouye........................................    61


           THE COAST GUARD'S FISCAL YEAR 2007 BUDGET REQUEST

                              ----------                              


                        THURSDAY, JUNE 15, 2006

                               U.S. Senate,
     Subcommittee on Fisheries and the Coast Guard,
        Committee on Commerce, Science, and Transportation,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 10:30 a.m. in 
room SD-562, Dirksen 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. The hearing will come to order.
    I'm pleased to be able to call this hearing today in order 
to focus the Committee's attention, as well as the Senate, on 
one of the most critical issues facing our Nation's homeland 
security, and that is to ensure the viability and ongoing 
success of the United States Coast Guard.
    As Chair of the Fisheries and Coast Guard Subcommittee, I 
am convening today's hearing to review the ongoing challenges 
confronting the military service, such as readiness concerns 
due to overall degradation of legacy assets, as well as to 
examine the Coast Guard's budget request for Fiscal Year 2007, 
in light of its multiple increasing responsibilities.
    Before we turn to these issues in-depth, I'd first like to 
thank Admiral Allen for being here today, as well as Mr. 
Caldwell for testifying, as well, on behalf of the GAO.
    Admiral Allen, I extend to you my sincerest congratulations 
on assuming the position of Coast Guard Commandant last month. 
You will face many challenges in the next 4 years, yet I'm 
confident in your ability to maintain and protect our homeland 
security. I would be remiss if I did not also mention the debt 
of gratitude this Nation owes you for your service in the Gulf 
shore region in the aftermath of Hurricane Katrina. You single-
handedly righted a ship that was sinking fast and plotted a 
course to save thousands and thousands of lives. So, we're 
deeply indebted to you, Admiral Allen.
    I also want to thank you, and congratulate you, Mr. 
Caldwell, on recently assuming the position of Director for 
Homeland Security with the Government Accountability Office. 
Your assistance to Congress and the Coast Guard will be crucial 
to our collective success.
    As we all know, the Coast Guard serves as a cornerstone of 
our Department of Homeland Security and is uniquely positioned 
to perform a wide variety of missions critical to protecting 
American lives and property.
    Last year alone, the brave men and women of the Coast Guard 
responded to more than 32,000 calls for assistance, and saved 
nearly 38,000 lives, most of which occurred in the wake of 
Hurricane Katrina. Few will be able to forget the Coast Guard's 
outstanding displays of courage and heroism in the aftermath of 
such devastation.
    We also cannot forget that search-and-rescue is but one of 
the many vital missions of the Coast Guard, and that it 
performed admirably in other areas as well. In 2005, the Coast 
Guard prevented 348,000 pounds of marijuana and cocaine from 
crossing our borders. It also prevented more than 9,500 illegal 
immigrants from reaching our shores, conducted over 6,000 
boardings to protect our vital fishery stock, and responded to 
more than 23,000 pollution incidents. The Coast Guard also 
aggressively defended our homeland by conducting more than 
286,000 port security patrols, conducted 26,000 security 
boardings, escorted over 10,000 vessels, and maintained more 
than 50,000 Federal aids-to-navigation along 25,000 miles of 
marine transportation routes.
    While I applaud the Coast Guard for this record of success, 
I'm greatly concerned about its ability to sustain this level 
of performance. The President's request that we're considering 
today recommends approximately $8.4 billion in funding for the 
Coast Guard, which is only 4 percent more than last year's 
enacted level. While any funding increases may appear to be 
good news, I'm concerned that this is not enough to meet our 
Nation's critical and ever increasing homeland security 
maritime protection imperatives. For example, I regret that I 
must once again address the issue of how the Coast Guard's high 
operational tempo combines with legacy asset degradation to 
hamper the service's overall readiness, an issue that plagues 
the Coast Guard and its personnel year in and year out. The 
Coast Guard hopes to remedy this problem through its Deepwater 
Fleet Modernization Program, but the budget request does not 
significantly increase funding for this. More critically, the 
Administration's request of $934 million would maintain this 
program on a 20-year-plus timeline, which does not allow the 
Coast Guard to fulfill the obligations the Nation has bestowed 
on it. We simply cannot expect the Coast Guard to do its job 
with unreliable or broken resources.
    I will continue to fight for Deepwater acceleration, 
because it is the best and most cost-effective way to remedy 
the Coast Guard's readiness problems and provide the Coast 
Guard with the tools it requires to carry out all of its 
missions.
    The FY07 budget request contains other items that raise 
considerable concern, as well. For example, it recommends 
inheriting an additional mission known as the National Capital 
Region Air Defense, in which the Coast Guard now would be 
responsible for intercepting wayward or hostile air incursions 
over Washington, D.C. Undoubtedly, this will put a severe 
strain on already limited personnel, assets, and financial 
resources. In addition, projects aimed at sustaining our aging 
legacy assets continue to absorb millions of dollars, such as 
the mission-effectiveness projects for both the 210- and 270-
foot cutters.
    Moreover, authorizing $50 million for construction of a new 
Coast Guard headquarters facility at the site of historic St. 
Elizabeth's Hospital campus does not appear to pass the test of 
cost effectiveness, accessibility, infrastructure capability, 
or even worker quality of life. I remain strongly opposed to 
this proposal, and I have incorporated language in this year's 
Coast Guard authorization bill that would require an additional 
extensive review of the proposal, as well as an analysis of 
more viable alternatives.
    Our Committee's responsibility here today is to ensure that 
the Coast Guard is well positioned and prepared to meet our 
future maritime challenges and threats head on and to 
successfully fulfill its diverse, yet vital, missions. While 
the Coast Guard desperately requires additional resources, our 
new realities also require it to efficiently and effectively 
maintain a proper mission balance.
    In today's hearing, I expect to learn how Congress can best 
facilitate achievement of that goal. As I'm sure Mr. Caldwell 
will discuss, we have to balance the available resources with 
our expectations for mission performance. The time to act on 
these issues is now, before we are further in crisis.
    Admiral Allen, I look forward to discussing your agency's 
budget request today, as well as the other issues that I have 
raised, and any others that you want to put before this 
Subcommittee. Obviously, our country relies on you more than 
ever before, and the types of missions that you do. And, 
frankly, I don't think that we give you enough of the resources 
that are essential to carry out all of your missions. We're 
asking you to do more with less continuously, and I know that 
is a very difficult responsibility. But you perform it well, as 
do all the men and women who are part of the Coast Guard.
    I also, Mr. Caldwell, want to welcome you to the Senate. 
And I know that the Coast Guard and the Committee welcomes your 
recommendations and your constructive advice and guidance. So, 
we thank you, as well.
    And before we turn to our witnesses, I will turn to the 
Ranking Member of this Subcommittee, Senator Cantwell, for any 
comments that she might care to make.

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

    Senator Cantwell. Thank you Chairwoman Snowe. And thank you 
for holding this important hearing.
    I would also like to thank Admiral Allen for his presence 
here today, and Mr. Caldwell, for joining us to discuss the 
President's Fiscal Year 2007 budget request and the critical 
role that the U.S. Coast Guard plays in keeping the waters and 
coast of the United States safe, secure, and free from 
environmental harm.
    Admiral Allen, as you know, America expects a lot out of 
the Coast Guard, as my colleague just said, and we are always 
asking you to do more with less. In the post-9/11 era, the 
Coast Guard has elevated its homeland security mission in 
response to the very real threat of terrorist attacks on our 
ports and harbors. This is a big issue in my State, where the 
Ports of Seattle and Tacoma--combined--represent the third 
largest regional cargo load center in the Nation. The Coast 
Guard's nonsecurity missions are also challenging in our region 
and throughout the country. Fisheries enforcement, search-and-
rescue, and polar icebreaking are also very essential. And I 
want to assure you that I'm going to remain committed to making 
sure that the resources are there and available for those 
important missions.
    I was pleased to see that, given the Coast Guard's growing 
homeland security responsibility, this year's budget request 
contains a 6.4 percent increase over 2006 enacted levels for 
that homeland security mission. However, I'm concerned that the 
nonsecurity missions take a 6.1 percent decrease from 2006, and 
I plan to ask you, Admiral Allen, for your opinion on the 
proper balance between the Coast Guard's security mission and 
their nonsecurity missions.
    With the budgets as tight as they are, it is increasingly 
important that all Government agencies, including the Coast 
Guard, make efficient and effective use of taxpayer dollars 
allotted to them. And so, like Chairwoman Snowe, I am concerned 
that two of the Coast Guard's biggest acquisition projects, the 
Deepwater Program and the Rescue 21 Program, are behind 
schedule and face massive cost overruns. As has already been 
said by the chairwoman, we know you're up to a tough task. You 
performed admirably for our Nation in dealing with the 
aftermath of Katrina. But the Deepwater Program, I think, 
remains a very big challenge for the Coast Guard and for our 
country. According to a new GAO report that Senator Snowe and I 
requested, the Deepwater Program is having numerous problems 
moving forward with the construction of the Fast Response 
Cutter, the boat to replace the Coast Guard's workhorse 110-
foot cutter. I understand that, although Coast Guard has spent 
nearly $25 million developing the Fast Response Cutter, we have 
little to show for it, and the project is 3 years behind 
schedule.
    Similarly, a recent GAO report found that Rescue 21, the 
Coast Guard's new system to track and respond to mayday calls, 
is 5 years behind schedule, with total acquisition costs 
estimated at $872 million, $161 million more than the Coast 
Guard's most recent estimate.
    The GAO also indicates that system testing has shown up to 
10 percent communication coverage gaps when the Coast Guard had 
originally promised 2 percent. And I also understand that 
Rescue 21 has encountered setbacks in implementing vessel asset 
tracking and other components of the system.
    Obviously, the search-and-rescue missions are very 
important. I say that coming from a State which has more than 
264,000 registered recreational boats, and a $3 billion 
commercial fishing industry, with a fleet of over 9,500 
different vessels. On average, 27 people die in Washington 
State each year in recreational boating accidents. So, I want 
to get your opinion on the best way to move forward on the 
Rescue 21 system, and what we should do to help implement 
better safety and security.
    I'm also concerned that the Deepwater and Rescue 21 
Programs are indications of a fundamental problem with the 
Coast Guard's acquisition management and contracting approach. 
I have several questions I'm going to be asking you about that. 
And I would appreciate your honesty in how you think we move 
forward on that program and oversight, and if there are changes 
that we--should be made to how that contract responsibility 
functions today.
    Admiral Allen, I would like to commend you, again, for your 
service in Katrina and Rita, because part of, I think, our 
challenge, moving forward--while we've seen the devastation of 
coastlines in Louisiana and Mississippi, we saw the massive 
environmental damage that transpired there, and I think that 
one of the big challenges that we also face is the estimated 9 
million gallons of oil that was spilled into the Gulf of 
Mexico. So, I'm concerned that the nearly $1 billion price tag 
for cleanup of spills may end up liquidating the Oil Spill 
Trust Fund, which certainly, I think, should be a national 
priority for us in moving forward on oil spill response and 
assuring essential safety in various regions of the country. In 
Washington State, over 750 oil tankers transited Washington 
State waters just in this last year. And just 2 years ago, 
money from the fund was used to mount a rapid response 
following the Dalco oil spill, which contaminated miles of 
shoreline across the southern parts of Puget Sound.
    Again, I would just reiterate to you how big I know the 
challenge is facing the Coast Guard, and how important it is, 
in your new leadership, to make these decisive decisions and to 
help us move forward on further reforms.
    I think, again, the State of Washington represents such a 
complex waterway system in which the Coast Guard is demanded to 
do so much. Besides the Ports of Seattle and Tacoma moving 
millions of cargo containers, we have cruise ship traffic, we 
have a ferry system that transports more people across Puget 
Sound than Amtrak, and you're very involved in the safety and 
security measures on our ferry system, as well as those other 
issues that I mentioned, about drug interdiction, polar 
icebreaking, and a variety of other issues that you are charged 
with on a day-to-day basis that make for a very, very complex 
challenge in organization.
    But we look forward to your comments, and to Mr. 
Caldwell's, on how we can improve the accounting and oversight 
of the contract of these very, very big expenditures in the 
Deepwater and Rescue 21 Program.
    I thank the Chair.
    Senator Snowe. I thank you, Senator Cantwell.
    I'm also pleased to welcome the Co-Chairman of this 
Commerce Committee, Senator Inouye, if there are any comments 
he cares to make.

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

    Senator Inouye. Thank you very much, Madam Chair.
    I just wanted to come by to demonstrate my support for the 
Coast Guard and to thank them for all the work they've done for 
the people of Hawaii.
    I would like to also state that the funding suggested is 
not quite adequate for the activities of the Coast Guard, and 
we're going to do our very best to lift it.
    Madam Chair, may I have my full statement made part of the 
record?
    Senator Snowe. Without objection, it's so ordered.
    [The prepared statement of Senator Inouye follows:]

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

    I would like to welcome Admiral Allen back to our Committee. I also 
would like to welcome Mr. Caldwell, the new Director of the Homeland 
Security office within the Government Accountability Office (GAO).
    The Coast Guard's importance to the Nation cannot be overstated. It 
ensures the safety of our coastal communities, protects our natural 
resources, aids our country's national defense at home and abroad, and 
is widely recognized as the lead agency for port security.
    The Coast Guard has always served an essential role to ensure 
safety and security on the ocean and in our ports. Earlier this year, 
in my state, the Coast Guard played a particularly critical role in 
rescue efforts on Kauai during the heavy, destructive flooding.
    While the Administration has requested an increase in Coast Guard 
funding for Fiscal Year 2007, I am not convinced that it adequately 
addresses all of the Coast Guard's security and nonsecurity missions. 
Five years after September 11, 2001, we are still struggling to find 
the right balance in funding and resource allocation to meet all of the 
Coast Guard's critical duties.
    We all recognize that homeland security is among our highest 
priorities. Yet other key missions such as maritime safety and the 
protection of our living marine resources, also must be a high 
priority.
    Last year, just as in the four preceding years, the Coast Guard 
failed to detect any of the illegal fishing vessels spotted by other 
U.S. sources within the Western/Central Pacific area of the U.S. 
Exclusive Economic Zone. I am concerned that the problem stems from the 
fact that District 14, the largest Coast Guard district in the U.S., 
commands fewer assets than any other district in terms of personnel, 
aircraft, and cutters.
    I also am frustrated by recent reports regarding the cost overruns 
and delays in two key modernization programs. Delays and cost overruns 
are particularly of concern, and the Coast Guard needs to address these 
issues. These programs must succeed, and I would like to know what is 
being done to rectify the current problems.

    Senator Inouye. Thank you very much.
    Senator Snowe. Thank you. Thank you very much, Senator 
Inouye.
    Admiral Allen, please proceed. And welcome to your first 
testimony before this Committee in your new capacity as 
Commandant. Welcome.

        STATEMENT OF ADMIRAL THAD W. ALLEN, COMMANDANT, 
                        U.S. COAST GUARD

    Admiral Allen. Thank you, Madam Chairman.
    I have a statement for the record, and, with your 
permission, I will submit it for the record and make a very 
brief opening statement.
    Senator Snowe. Without objection, so ordered.
    Admiral Allen. On the 25th of May, Madam Chairman, I made a 
compact with the people of the Coast Guard, and I stated it 
publicly in my state-of-the-command speech, that our focus 
would be mission execution and mission excellence.
    We had an extraordinary year, this last year in the Coast 
Guard, with the operations associated with hurricane response, 
but, as you know, since 9/11, we've had an extraordinary amount 
of expectations created for the Coast Guard. We need to be able 
to deliver the kind of performance the country expects of us. 
And, in my focus as Commandant, in a very opening conversation 
with my people, I've told them I'm going to focus on mission 
execution, but, behind that are the platforms and the equipment 
we give our people, and the people we put out there, and the 
competencies that we provide them, and, behind that, the 
command-and-control system and the mission-support systems.
    The issues that you've talked about here this morning 
already, whether the acquisition issues or the mission-balance 
issues, all relate to balancing that portfolio of missions the 
Coast Guard is assigned, and how we do that on a day-to-day 
basis, taking the pulse of the areas of responsibilities that 
our field commanders are given, and then allocating resources, 
based on risk, to the highest area possible.
    I have committed to doing some immediate reviews that will 
impact some of the areas that were raised in your statements, 
and I can talk about these in greater detail. We are going to 
look at the entire command-and-control structure in the Coast 
Guard, how we deliver support services. We are going to look at 
the acquisition organization of the Coast Guard and see how 
that might be better aligned. And, in general, we are going to 
focus on--in terms of acquisition, both Rescue 21 and 
Deepwater. The term I've given my folks is ``ruthless 
execution''--cost, schedule, and performance controls, lockdown 
requirements, get these pieces of equipment, these platforms, 
into production and put them in the hands of our people. 
They're very capable platforms, whether you're talking about 
Rescue 21 or Deepwater. The tools we're going to give our 
people are going to be very, very significantly better than the 
ones they have right now. We need to get these things into 
production, solve the problems, and move on. We need to cut 
steel and float boats, Madam Chairman.
    I'd be glad to take any questions.
    [The prepared statement of Admiral Allen follows:]

       Prepared Statement of Admiral Thad W. Allen, Commandant, 
                            U.S. Coast Guard

Introduction
    Good morning Madam Chair and distinguished members of the 
Committee. I am humbled by the confidence President Bush has placed in 
me with my recent appointment as the 23rd Commandant of the United 
States Coast Guard, and honored to be before you today. In my new 
capacity, I would like to discuss the Coast Guard's FY 2007 budget 
request, and how it will support our commitment to mission execution; a 
commitment my predecessor Admiral Collins established during his tenure 
as Commandant. Admiral Collins' commitment is my commitment.
The Coast Guard's ``World of Work''
    The Coast Guard operates on and around our oceans, seas, lakes, 
rivers, bays, sounds, harbors and waterways--this is the maritime 
domain and it is unique. Distinct from land borders characterized by 
clear legal boundaries, our oceans represent the last global commons. 
As the Committee knows well, we live in an interconnected world. 
Nowhere is this fact more clearly demonstrated than in the maritime 
domain. Safe and unfettered access to this domain is fundamental to our 
own and the international community's economic prosperity. As a result, 
maritime safety and security are not just issues of U.S. national 
interest and security, but of global stability. The maritime domain is 
also enormously complex, with an unparalleled variety of users. From 
the world's largest cruise ships and tankers to professional fishermen 
and weekend boaters, the profiles of maritime users are as varied as 
the jagged coastlines surrounding our country.
    Thankfully, the Nation has a Coast Guard able to successfully 
operate in this complex and unique environment. Single-purpose agencies 
such as the Revenue Cutter Service, the Lifesaving Service, and the 
Lighthouse Service have been integrated over the last century into the 
uniquely effective and efficient Service we are today. The Coast Guard 
you oversee, the Coast Guard that we have collectively built has a 
relatively straightforward purpose--exercise authorities and deploy 
capability to guarantee the safety, security and stewardship of the 
U.S. maritime domain. That is who we are, what we are charged to do, 
and represents the core character of the service.
    While the character and nature of our Service are clear, our 
missions are not static. New threats emerge as others are mitigated; 
Coast Guard capabilities, competencies, organizational structure and 
processes must change accordingly.
    The work of this Committee helped ensure that the Coast Guard was 
transferred intact to the Department of Homeland Security. We now must 
adapt to the reality of an ever-changing maritime domain. Our mandate 
and responsibility, indeed our passion, is serving the Nation with the 
best leadership, authorities and capability we can muster.
Priorities . . . Right Tasks . . . Right People and Tools . . . 
        Effective, 
        Integrated Support
    Secretary Chertoff has set forth a six-point agenda to guide near 
term Department of Homeland Security priorities and initiatives.

   Increase overall preparedness, particularly for catastrophic 
        events;

   Create better transportation security systems;

   Strengthen border security, interior enforcement, and reform 
        immigration processes;

   Enhance information sharing with our partners;

   Realign the Department of Homeland Security (DHS) 
        organization to maximize mission performance; and

   Improve DHS financial management, human resource 
        development, procurement, and information technology.

    I will work collaboratively throughout the Administration and with 
the Congress to translate this agenda into action. I will focus on:

   Mission execution . . . performing the right tasks with the 
        right doctrine to reduce risk, mitigate threats, improve 
        response, increase preparedness, and enhance our ability to 
        recover from events that occur;

   Capabilities and competencies . . . we are nothing without 
        our people, and our people cannot be effective without the 
        right tools; and

   Coast Guard organizational structure that optimizes mission 
        execution . . . aimed at field support, leveraging partnerships 
        at all levels of government, and internally aligned with DHS 
        systems.

    Embracing the Department's agenda, we will strengthen the Nation's 
layered maritime security regime. Our shore-based operations, maritime 
patrol and presence and deployable, specialized forces create a 
strategic trident for integrating with our partners and responding to 
all threats . . . all hazards . . . at all times. We have taken bold 
steps forward already by creating Sectors for shore-based operations, 
and we have taken equally bold steps by advancing the Deepwater 
acquisition for maritime presence, patrol, and response. We must now 
organize our agile, deployable forces and support them with proper 
doctrine, equipment, logistics, training and exercises. Across all of 
our forces, we will partner with other services and agencies to 
integrate and coordinate our efforts. To improve mission execution of 
this strategic trident, we will analyze our command and control 
structure. We will also re-evaluate and realign our mission support 
system, including organizational structures, human resources, 
maintenance, logistics, financial management and information systems to 
fully support the Secretary's and the Coast Guard's priorities.
    The Coast Guard continues to adapt to growing mission demands to 
enhance maritime security, while appropriately meeting other mission 
requirements. For example, in 2005, the Coast Guard:

    Secured the maritime border:

   Completed verification of security plans, required by the 
        Maritime Transportation Security Act (MTSA), for U.S. port and 
        facilities and vessels operating in U.S. waters;

   Completed 31 foreign port security assessments in order to 
        improve our awareness of foreign port compliance with 
        international requirements;

   Prevented more than 338,000 pounds of cocaine (an all-time 
        maritime record) and over 10,000 pounds marijuana from reaching 
        the United States; and

   Interdicted nearly 9,500 undocumented migrants attempting to 
        enter the country illegally by sea, the second highest number 
        of any average year in the past 20 years.

    Enhanced national maritime preparedness:

   Began comprehensive security reviews of waterside nuclear 
        power plants;

   Created formal processes for addressing security concerns 
        and requirements involving the citing of new shore-side 
        Liquefied Natural Gas facilities; and

   Established a new Area Maritime Security Exercise program 
        requiring annual local exercises, and designed to assess the 
        effectiveness of the Area Maritime Security Plans and the port 
        community's preparedness to respond to security threats and 
        incidents.

    Strengthened partnerships:

   Established a National Maritime Security Advisory Committee 
        to provide a strategic public-private forum on critical 
        maritime security topics;

   Launched America's Waterways Watch, a citizen involvement 
        program that leverages the Coast Guard's relationship with the 
        maritime public;

   Deployed the Homeport information sharing web portal, which 
        allows for collaboration and communication in a controlled 
        security environment (for sensitive but unclassified material) 
        among Area Maritime Security Committee members and port 
        stakeholders at large;

   Conducted more than 268,000 port security patrols, 5,800 air 
        patrols and 26,000 security boardings; and

   Provided security escorts to over 10,000 vessels.

    Saved lives and property:

   Saved over 33,000 lives in the wake of Hurricanes Katrina 
        and Rita, one of the largest search-and-rescue operations in 
        United States history;

   In addition to hurricane response, responded to more than 
        32,000 calls for maritime rescue assistance; and

   Saved the lives of over 5,600 mariners in distress.

    Protected the environment:

   Boarded more than 6,000 fishing vessels to enforce safety 
        and fisheries management regulations, a 30 percent increase 
        over 2004;

   Conducted more than 3,000 inspections aboard mobile offshore 
        drilling units, outer continental shelf facilities and offshore 
        supply vessels; and

   Responded to 23,904 reports of water pollution or hazardous 
        material releases from the National Response Center, resulting 
        in 4,015 response cases.

    Facilitated maritime commerce:

   Kept shipping channels and harbors open to navigation during 
        the Great Lakes and New England winter shipping season;

   Ensured more than 1 million safe passages of commercial 
        vessels through congested harbors, with Vessel Traffic 
        Services; and

   Maintained more than 50,000 Federal aids-to-navigation along 
        25,000 miles navigation channels.

    Supported national defense

   Safely escorted more than 169 military sealift movements at 
        13 different major U.S. seaports, carrying more than 20 million 
        square feet of cargo; and

   Maintained an active patrol presence in the Arabian Gulf in 
        support of the U.S. Navy and allied naval units.

    More than singular statistics or accomplishments, the above list, 
in total, demonstrates the winning formula of a military, multi-mission 
Service founded on core operational principles of flexibility, on-scene 
initiative and unity of effort. It is this time-tested and trusted 
operational model that allows the Coast Guard to meld its public safety 
and national security roles into a seamless set of maritime strategies 
that also protect and ensure the economic viability of the U.S. 
maritime domain.

2007 Budget
    The above accomplishments are only possible with a Coast Guard that 
is Ready, Aware and Responsive. The President, Congress and public 
expect nothing less: Ready to prevent and respond to a broad range of 
maritime safety and security requirements; Aware of what is going on in 
our ports, along our coasts and on the high seas; and most of all, 
Responsive whenever and wherever there is a need for the Coast Guard to 
save lives, secure maritime borders, protect natural resources, 
facilitate maritime commerce or contribute to national defense. The 
Fiscal Year 2007 request delivers on these expectations through its 
focus on three key investment priorities:



    The Integrated Deepwater System (IDS) acquisition program remains 
the centerpiece of a more ready, aware and responsive 21st century 
Coast Guard. The 2007 Budget provides a Deepwater investment plan that 
provides funding for:

   Constructing the fourth National Security Cutter;

   Acquiring the sixth Maritime Patrol Aircraft;

   Bolstering the network of command, control, communications, 
        computers, intelligence, surveillance and reconnaissance 
        (C4ISR) technology;

   Completing the HH-65 re-engining; and

   Initiating several essential legacy conversion projects, 
        including installation of airborne use of force equipment 
        aboard 36 helicopters.

    While the Deepwater program necessarily invests in capabilities 
adequate to operate in the often unforgiving offshore environment, it 
is these same capabilities that are instrumental to effective response 
operations in port and coastal areas as well. As an example, assets 
scheduled for modernization under the Deepwater program include every 
Coast Guard aircraft type. These aircraft are critical parts of our 
port and coastal response infrastructure as well as extended offshore 
operations. The Deepwater program's conversion and/or enhancement of 
legacy aircraft and cutters are making an impact now. The operational 
benefits were apparent during the Coast Guard's response to Hurricane 
Katrina. Three more powerful re-engined HH-65C helicopters flew 85 
sorties to save 305 lives. The converted aircraft can hoist 280 more 
pounds and stay on-scene longer than their predecessors. Similarly, the 
C4ISR improvements to high and medium endurance cutters enabled more 
effective on-scene coordination of rescue operations in New Orleans, 
LA, and Gulfport, MS during Hurricanes Katrina and Rita, with local 
first responders and other Federal agencies.
    Preserve Preparedness. Strengthening preparedness within the U.S. 
maritime domain is a core competency and responsibility of the Coast 
Guard. It depends directly on the readiness of Coast Guard cutters and 
aircraft, infrastructure and personnel, as well as the coordination of 
a robust response posture through partnerships with DHS, DOD and other 
Federal, state and local entities. The FY 2007 requests funding to 
preserve and strengthen Coast Guard readiness. Relevant budget 
initiatives include:

   Depot level maintenance and energy account: $51.3 million to 
        close inflationary cost growth gaps. These are bills that must 
        be paid; without increased funding, Coast Guard readiness will 
        be eroded.

   Medium endurance cutter mission effectiveness project: $37.8 
        million to support the Mission Effectiveness Project (MEP) for 
        270-foot and 210-foot Medium Endurance Cutters (WMEC). Our 210-
        foot and 270-foot cutters are currently operating with obsolete 
        equipment and subsystems that must be replaced. The project 
        includes replacing major subsystems such as small boat davits, 
        oily water separators, air conditioning and refrigeration 
        plants, and drinking water evaporators. The main propulsion 
        control and monitoring systems will also be upgraded. This 
        effort is vital to sustain our legacy fleet of medium endurance 
        cutters until they are recapitalized.

   Operations and Maintenance for new assets: $30.5 million to 
        fund operations and personnel for the airborne use of force 
        program, the first national security cutter, new maritime 
        patrol aircraft and secure communications systems; $42.3 
        million for Deepwater logistics support.

   Personnel protective equipment: $7.2 million to replace 
        obsolete oxygen breathing apparatus aboard ships and training 
        centers with safer self-contained breathing apparatus (SCBA). 
        Over the past 30 years, all shore-based Federal and DOD fire 
        fighters, the Military Sealift Command, all western navies, all 
        merchant ships, the U.S. Air Force and all U.S. Navy flight 
        deck personnel have adopted and use exclusively the open 
        circuit SCBA. The Navy is currently replacing all their OBAs 
        with SCBAs. This leaves the Coast Guard as the only fire 
        fighting organization without SCBAs for its personnel. In order 
        to ensure the personal protection of Coast Guard personnel 
        while serving aboard Coast Guard cutters, the transition from 
        using the obsolete OBA to the SCBA is essential.

   Shore infrastructure and aids-to-navigation: $25.9 million 
        to recapitalize aids-to-navigation nationwide and rebuild or 
        improve aged shore facilities in Cordova, Alaska (housing); 
        Integrated Support Command Seattle, Washington; and Base 
        Galveston, Texas. These funds are necessary to improve critical 
        shore infrastructure essential to supporting Coast Guard 
        personnel as they execute missions and operational 
        requirements.

    Maximize Awareness. Securing our vast maritime borders depends upon 
our ability to enhance maritime domain awareness (MDA). Effectively 
addressing maritime vulnerabilities requires maritime strategies, 
through partnerships with the Navy and other maritime entities that not 
only ``harden'' targets but detect and defeat threats as far from U.S. 
shores as possible. Identifying threats as far from U.S. shores as 
possible requires improved awareness of the people, vessels and cargo 
approaching and moving throughout U.S. ports, coasts and inland 
waterways. Relevant budget initiatives include:

   Nationwide Automatic Identification System: $11.2 million to 
        continue procurement plans and analysis for deployment of a 
        nationwide system to identify, track and exchange information 
        with vessels in the maritime domain.

   Maritime Domain Awareness: $17 million to support follow-on 
        and new initiatives, including a new Coast Guard 
        counterintelligence program, prototype Sector and Joint Harbor 
        Operation Center support, and expanded secure communications 
        system infrastructure.

   Deepwater C4ISR: $60.8 million to develop and install 
        systems and subsystems that are part of the Deepwater Command, 
        Control, Communications, Computer, Intelligence, Surveillance 
        and Reconnaissance (C4ISR) system. This system is designed to 
        support designated Coast Guard commanders in the exercise of 
        authority while directing all assigned forces and first 
        responders across the full range of Coast Guard operations. 
        This system of ``eyes and ears'' allows us to see, hear and 
        communicate activity occurring within the maritime domain, 
        which is critical to deterring and defeating threats before 
        reaching our shores.

    Enhance Capability. Just as important to being ready and aware is 
equipping and training Coast Guard personnel with the capabilities and 
competencies to respond effectively. For example, the advance 
information required from vessels calling upon United States ports is 
critical to understanding who and what is arriving in order to identify 
potential threats. However, if Coast Guard cutters and aircraft do not 
have the capabilities necessary to deal with identified threats early 
and effectively, an opportunity to mitigate risk is lost. Relevant 
budget initiatives include:

   Deepwater: $934.4 million (total). The FY 2007 request for 
        the Deepwater program reflects the Administration's continued 
        commitment to the recapitalization of the Coast Guard's 
        aircraft and ships and the network that links them together 
        into an integrated system. More capable and reliable cutters, 
        boats, aircraft and associated systems will enhance safety and 
        security in U.S. ports by improving the Coast Guard's ability 
        to perform all its missions. Specifically, the FY 2007 request 
        provides funding for: the fourth National Security Cutter, the 
        first Fast Response Cutter, HH-65 and HH-60J conversions, new 
        maritime patrol aircraft, HC-130J operations, sustaining the 
        HC-130H, arming two HH-60's and 34 HH-65's at seven Air 
        Stations, and development of shipboard and land-based vertical 
        unmanned aerial vehicle systems.

   Rescue 21: $39.6 million to continue system design (two 
        locations), preparation (four locations) and installation 
        (seven locations). The Rescue 21 project represents a quantum 
        leap in maritime communications technology, enhancing 
        effectiveness across all coastal missions.

   National Capital Region air defense: $62.4 million to 
        establish infrastructure, acquire additional aircraft and fund 
        operations for this newly assigned homeland security mission in 
        the Nation's capital. The Air Defense mission in the National 
        Capital Region rests with the Department of Defense (DOD) under 
        the construct of OPERATION NOBLE EAGLE. Through a Memorandum of 
        Agreement, DOD and the Department of Homeland Security (DHS) 
        have agreed that DHS will continue to conduct essential 
        helicopter operations assisting with air security in the NCR. 
        The Coast Guard has been directed to execute this requirement 
        on behalf of DHS. Requested funding is critical to stand-up 
        this new capability and avoid negative impacts to other Coast 
        Guard mission-programs.

   Response Boat--Medium: $24.8 million to begin low-rate 
        initial production to replace 41-foot utility boats and non-
        standard boats.

   Maritime Security Response Team (MSRT): $4.7 million to 
        provide additional personnel and transform the prototype 
        Enhanced Maritime Safety and Security Team in Chesapeake, VA. 
        into an MSRT, providing on-call maritime counter-terrorism 
        response capacity. This request will also enhance maritime 
        counter-terrorism training facilities at the Coast Guard 
        Special Missions Training Center at Camp Lejeune, N.C.


           Table 1: Summary of the FY 2007 President's Request
------------------------------------------------------------------------
 Preserve Readiness      Maximize Awareness        Enhance Capability
      (Ready) *              (Aware) **             (Responsive) ***
------------------------------------------------------------------------
DW Legacy             MDA--Sector Command       DW Modernization
 Sustainment           Center
SCBA Implementation   NAIS                      R21
HF Recapitalization   DW C4ISR                  RB-M
Financial Management  MAGNET                    NCR Air Defense
DW Logistics          SIPRNET                   MSRT
Shore Infrastructure  Counter-Intel             C-130J
Maintenance                                     Airborne Use of Force
 Inflation                                       operations
Energy Gap                                      MPA follow-on
------------------------------------------------------------------------
* Readiness is the foundation of the Coast Guards ability to prevent and
  respond to incidents. Katrina makes this point clearly. Readiness is
  the key to daily mission performance as well as the capacity to
  respond to national incidents.
** Awareness is the core enabler of effective decisionmaking and
  response. Expanded partnerships and new technology must be employed to
  ensure an integrated and coordinated response to the threats we face
  today.
*** Building on recent investments we must continue to strengthen the
  foundation of CG readiness across each of our core missions while we
  fill remaining capacity and capability gaps in our layered security
  posture.


Conclusion
    I am committed to continuously improving mission execution. To do 
so, we must better integrate with our partners, organize our deployable 
forces, assess our command and control structure and realign our 
mission support systems. I would like to take this opportunity to lead 
the Coast Guard toward these changes, and I request your support as I 
introduce steps that will improve mission execution. One step will 
organize all specialized, deployable forces under a single command 
structure. A second will be to transform the entire logistics systems 
by capturing efficiencies between the Deepwater logistics plan and our 
internal, Coast Guard-wide logistics process. Last, we plan on merging 
our Deepwater and Acquisitions Directorates into one Directorate 
expanding our major acquisition flexibility, coordination and 
effectiveness across all projects. These are all aggressive initial 
steps that will improve mission execution and ensure the Coast Guard is 
ready to respond to all threats . . . all hazards . . . at all times.
    The Coast Guard is a tested and trusted Service ready to answer the 
Nation's call, but future successes are a function of the effective, 
integrated employment of our collective capabilities and competencies 
to reduce risks and mitigate threats to our Homeland. Our challenge is 
to attack each day and each task with a purpose grounded in who we are, 
what we have been and what we must become.
    Thank you for the opportunity to testify before you today. I will 
be happy to answer any questions you may have.

    Senator Snowe. Mr. Caldwell?

       STATEMENT OF STEPHEN L. CALDWELL, ACTING DIRECTOR,

             HOMELAND SECURITY AND JUSTICE ISSUES,

             U.S. GOVERNMENT ACCOUNTABILITY OFFICE

    Mr. Caldwell. I thank you very much. I'm pleased to be here 
today, Madam Chair and Senators Cantwell and Inouye, to discuss 
Coast Guard issues.
    Like my predecessors in GAO before this Subcommittee, we 
view this annual hearing as one of the most important ones for 
us to address the wide-ranging Coast Guard issues that we 
review during the course of the year.
    And I'm also honored to testify alongside the new 
Commandant of the Coast Guard. And, again, Admiral Allen, I 
offer my congratulations on your new leadership role.
    While my complete statement is added for the record, I'd 
like to emphasize three things in my oral comments. And these 
have already been addressed, to some large extent, by you, 
Madam Chair, as well as Senator Cantwell.
    The first issue is the Coast Guard's overall budget and 
performance. The second issue is acquisition management, to 
include Deepwater. And the third issue is the mission 
balancing.
    As appropriate, I may refer to specific pages in my 
statement, when there are some tables or other graphics that 
might be helpful to the Committee.
    Let me start with comments on the overall budget and 
performance.
    As you know, the fiscal realities for the Coast Guard must 
be dealt with in the broader context of our Nation's growing 
long-term fiscal crisis. But getting to the specifics, page 18, 
as well as 30 of my statement, have details on the budget, 
trends, and makeup. And I think we're already aware of these, 
but these are there for your interest.
    Coast Guard's 2007 budget request indicates more moderate 
growth than in previous years. Given the pace of increase over 
the past several years and competing demands for the Federal 
dollar, this more moderate growth is probably to be expected.
    On the flip side, in terms of performance, page 31 of my 
statement has details on the Coast Guard's performance measures 
from 2002 to 2005. Notwithstanding aging assets, destructive 
hurricanes, and expanding homeland security missions, Coast 
Guard's 2005 performance was the highest it has been since 
2005. When the final data are in, the agency will most likely, 
exceed 8 of its 11 mission performance targets.
    As both of you have indicated, Hurricane Katrina is one of 
the most notable aspects of performance of the Coast Guard this 
year. Unlike much of the rest of the Federal Government, the 
Coast Guard was leaning forward, had anticipated many of these 
problems, and acted proactively. Some of the factors 
contributing to the Coast Guard's success here were its 
organizational flexibility and structure, several operational 
principles that emphasize focus, but flexibility, at the same 
time, as well as a general emphasis on planning and 
preparedness. In my statement, we give some more specific 
details on that.
    In terms of acquisition management, I'd like to discuss the 
Deepwater Program and one other program. Both of these have 
been mentioned by you, Madam Chair and Senator Cantwell.
    First, let me just start by saying the Coast Guard is not 
unique in having the kinds of acquisition programs it has for 
major management issues. GAO's high-risk report, issued last 
year, noted DHS-wide challenges, in terms of managing major 
systems procurements.
    My written statement discusses a number of positive steps 
the Coast Guard has taken with respect to managing Deepwater. 
Page 23 of my statement actually has a chart that summarizes 
the recommendations we've made, as far as overall performance, 
as well as the status of implementation by the Coast Guard. Of 
our 11 recommendations, 5 have been implemented, and the other 
5 are being implemented by the Coast Guard.
    Despite the overall progress as noted, not all is well with 
the Deepwater Program. Regarding the Fast Response Cutter, the 
interim solution of extending the 110-foot patrol boats to 123 
boats--I'm sorry--123-feet--has run into structural problems, 
as exhibited, in one case, with the hull buckling on the 
MATAGORDA. And, more recently, design work has been halted on 
the composite hull, as proposed by the contractor.
    Acquisition problems are occurring outside Deepwater as 
well as with the Rescue 21 communications system. Senator 
Cantwell, you went into some of the details there, but the 
bottom line is, the program has grown from $250 million to $710 
million or more, and the implementation schedule has slipped by 
5 years.
    Government Executive magazine recently quoted Admiral Allen 
as saying, ``The Coast Guard will pursue Deepwater with 
ruthless execution.'' The Commandant has said that again here 
today. And, at GAO, we believe Coast Guard must also apply 
ruthless oversight as part of this ruthless execution. 
Obviously, Admiral Allen is already planning ways to do that, 
based on his statement here today.
    In terms of balancing diverse missions, as is well known by 
this Committee in its oversight role for maritime security, 
Coast Guard has a very large portfolio of homeland security 
missions. And this--again, this situation is faced by many 
organizations other than the Coast Guard. As noted in GAO's 
report on 21st century challenges, many Federal agencies--many, 
many--must make the hard choices about homeland security 
priorities, given uncertain risks and limited resources.
    In the Coast Guard's case, it must balance homeland 
security with its more traditional missions--provide safety 
through navigational aids, search-and-rescue, as mentioned, 
responding to maritime pollution incidents, as well as to 
protect important fishing grounds. After 9/11, GAO had noted a 
very large decline in some of these other missions' resource 
hours; however, recent Coast Guard data for performance 
actually shows that the performance in all these other missions 
is improving.
    But the pressure to assume greater homeland security 
responsibilities is still very strong. In addition to the new 
Maritime Security Response Team the Coast Guard is setting up 
and making very robust, in terms of even adding chemical and 
biological capabilities to it, the Coast Guard has also taken 
on the new mission of air defense, as mentioned, which is 
outside its traditional domain. Though not without precedent, 
this is a new mission for the Coast Guard in some ways.
    And, meanwhile, the replacement of some assets outside 
homeland security, such as buoy tenders and aids-to-
navigation--and, sorry, icebreakers--are not funded at all, at 
least the replacement of ships is not funded at all in the 2007 
budget.
    In conclusion, several of the developments I've mentioned 
are good news here today. Despite many demands, Coast Guard 
continues to make progress across the board in terms of all of 
its missions, and its response to Hurricane Katrina is one 
bright aspect in what is otherwise a tale of tragedy and 
failure. Certainly, if one measure of organizational excellence 
is performance under crisis, the Coast Guard has demonstrated 
itself to be a very high-performing organization. But 
excellence must also be demonstrated in the more mundane 
aspects, such as the management of its acquisitions. Here, the 
record, as we've mentioned, is not unblemished. But, overall, 
we work with the Coast Guard on a daily basis, we are impressed 
by their general approach to managing their resources flexibly, 
and their can-do attitude, and our day-to-day work reveals an 
agency that is open to constructive feedback, wants to learn 
from its mistakes, and looks for opportunities to leverage its 
resources.
    Madam Chair and Senator Cantwell, I would be happy to 
respond to any questions at this time.
    Thank you.
    [The prepared statement of Mr. Caldwell follows:]

 Prepared Statement of Stephen L. Caldwell, Acting Director, Homeland 
   Security and Justice Issues, U.S. Government Accountability Office

    Madame Chair and members of the Subcommittee:
    I am pleased to be here today to discuss the President's Fiscal 
Year 2007 budget request for the Coast Guard--funding that the Coast 
Guard believes is critical to improving its performance and reducing 
vulnerabilities within the U.S. maritime domain. As you know, the Coast 
Guard has faced many extraordinary challenges and new responsibilities 
in recent years, including heightened responsibility for protecting 
America's ports, waterways, and waterside facilities from terrorist 
attacks, while maintaining responsibility for many other programs 
important to the Nation's interests, such as helping stem the flow of 
illegal drugs and illegal immigration, protecting important fishing 
grounds, and responding to marine pollution. Overall, the Coast Guard 
has met these heightened responsibilities despite added challenges 
posed by the declining condition of its aging assets and special surge 
operations it has periodically experienced--such as responding to 
Hurricane Katrina.
    My testimony today provides; (1) an overview of the Coast Guard's 
Fiscal Year 2007 budget request and key performance information, (2) a 
discussion of the changes and initiatives the Coast Guard has 
implemented to meet growing responsibilities, (3) a status update on 
some current acquisition efforts, and (4) a look at some future Coast 
Guard challenges as it attempts to balance its various missions. My 
testimony is drawn from a number of reports we have issued on Coast 
Guard operations, as well as from work done specifically for this 
hearing. In some cases our work is still ongoing and fuller results 
will be reported once the engagements are completed. The scope of our 
work did not include evaluating whether the proposed funding levels are 
commensurate with the Coast Guard's stated needs. All of our work has 
been conducted in accordance with generally accepted government 
auditing standards. (See app. I for additional information regarding 
our scope and methodology and see related GAO reports for a listing of 
recent reports.)

Summary
    Although the Coast Guard's budget continues to grow, the Agency's 
Fiscal Year 2007 budget request indicates a more moderate growth than 
that of previous years. Even with the need to sustain new homeland 
security duties, respond to particularly destructive hurricanes, and 
cope with aging assets, the Coast Guard reported that its Fiscal Year 
2005 performance, as self-measured by its ability to meet performance 
targets, was the highest since the terrorist attacks in September 2001. 
The Coast Guard reported that it met or exceeded performance targets 
for 7 of 11 programs, and anticipates meeting the target for 1 
additional program once final results for the year are available. Coast 
Guard officials attributed the missed targets to, among other factors, 
the increased flow of migrants and staffing shortages for certain 
security units within the defense readiness program. In particular, our 
ongoing work found that the Coast Guard's response to Hurricane Katrina 
highlighted three key elements that enabled the Coast Guard to provide 
an unprecedented search-and-rescue response during Hurricane Katrina: a 
priority on training and contingency planning, a flexible 
organizational structure, and the agency's operational principles.
    The Coast Guard has undertaken three organizational changes 
designed to assist it in adjusting to its added responsibilities. 
First, it is completing a realignment of its field structure, an effort 
that, according to the Coast Guard, will allow a field level commanding 
officer to manage operational resources more efficiently. Second, Coast 
Guard officials expect that the development and implementation of a new 
Maritime Security Response Team, modeled after Department of Defense 
(DOD) counter-terrorism teams, will provide increased counterterrorism 
capability to respond to threats in waters under Coast Guard 
jurisdiction. Finally, new and expanded partnerships that cut across 
both government and industry to address maritime security concerns also 
have the potential to improve operational effectiveness and efficiency. 
For instance, under requirements of the Maritime Transportation 
Security Act of 2002 (MTSA), each Coast Guard Captain of the Port is 
required to work in conjunction with a range of local partners to 
develop a security plan for its port area to address security 
vulnerabilities and respond to any incidents.\1\ Another partnership 
that leverages governmental resources is the Coast Guard's relationship 
with the National Oceanic and Atmospheric Administration (NOAA). This 
partnership allows vessel tracking information obtained with NOAA 
technology to be shared with the Coast Guard, thereby assisting the 
Coast Guard with its enforcement of domestic fisheries regulations.
    Our recent reviews indicate that while the Coast Guard has made 
progress in managing Deepwater acquisitions, further actions are needed 
and the lessons learned from this effort have not been applied to other 
ongoing acquisitions. In specific, the Coast Guard has successfully 
implemented most of GAO's recommendations to improve the Integrated 
Deepwater System, the largest, and most significant ongoing Coast Guard 
acquisition initiative. However, further attention and action are 
needed before all of our past recommendations for improving 
accountability and program management can be considered fully 
implemented. Despite these improvements in program management, the 
Deepwater program has continued to encounter difficulties, most 
recently in the acquisition of the Fast Response Cutters which are 
scheduled to replace the Coast Guard's aging patrol boat fleet. 
Meanwhile, the Rescue 21 program--an effort to replace antiquated 
command, control, and communication infrastructure used to monitor 
mariner distress calls and coordinate search-and-rescue operations--
continues to be of concern as the program has been plagued by delays, 
technical problems, and cost escalation. Currently estimated 
implementation costs have escalated from $250 million to more than 
$710.5 million, and GAO's analysis, based on prior trends, indicates 
that Rescue 21 costs could be as high as $872 million. In addition, the 
program's originally proposed schedule for full implementation has 
slipped by 5 years resulting in continuing performance challenges for 
field units, and the potential for additional costs to keep the current 
system functioning until it is replaced. These problems and the causes 
underlying them have much in common with the issues we identified with 
the Deepwater program which has also experienced management and 
contractor oversight problems, schedule delays, and cost escalation. A 
third acquisition effort, designed to provide the Coast Guard with the 
capability to transmit and receive information to and from vessels 
entering and leaving U.S. waters, is still early in its development, 
limiting the Coast Guard's ability to identify and leverage potential 
partners to share costs, according to Coast Guard officials. The Coast 
Guard is taking steps to better manage these programs, but it cannot 
lose sight of the need to address and resolve these ongoing acquisition 
management concerns.
    The Coast Guard also faces two additional challenges in managing 
its assets and balancing its various missions. Our ongoing work for 
this Committee found that some of the Coast Guard's buoy tenders and 
icebreakers are deteriorating and may need additional resources to 
sustain or replace them. Like the Deepwater assets, many of these types 
of assets are approaching or have exceeded their initial design service 
lives, and our preliminary observations indicate that the Coast Guard's 
key measure of their condition shows a decline for some assets of both 
types. Although the Coast Guard has identified the need to sustain or 
replace these assets, no funds have been budgeted to carry out this 
project. A second challenge the Coast Guard faces is the addition of a 
new mission, defending the air space surrounding the Nation's capital, 
which falls outside its traditional focus on the maritime environment 
and therefore represents further growth in its responsibilities. While 
groundwork has been laid through the request of Fiscal Year 2007 funds 
to purchase the equipment necessary to carry out this new 
responsibility, it is likely to require additional personnel and 
training.

Budget Request Reflects Moderate Growth, While Overall Program 
        Performance Improved
    The Coast Guard's Fiscal Year 2007 budget request shows continued 
growth but at a more moderate pace than that of the past 2 years. The 
current budget request reflects a proposed increase of about $328 
million, compared to increases for each of the past 2 budget years that 
exceeded $500 million for each year.\2\ (See Fig. 1.) About $5.5 
billion, or more than 65 percent of the total funding request of $8.4 
billion, is for operating expenditures.\3\ The acquisition, 
construction, and improvements (AC&I) account amounts to another $1.2 
billion, or about 14 percent, and the remainder is primarily for 
retiree pay and healthcare fund contributions. (See app. II for more 
detail on the Coast Guard's Fiscal Years 2002-2007 budget accounts.)
    If the Coast Guard's total budget request is granted, overall 
funding will have increased by more than 50 percent since Fiscal Year 
2002, an increase of $2.82 billion. According to Coast Guard officials, 
much of the additional $328 million in this Fiscal Year's budget 
request, which is about 4 percent over and above the Fiscal Year 2006 
budget of $8.1 billion, covers such things as salary and benefit 
increases and maintenance. In addition, more than $57 million of this 
increase is to establish a permanent National Capital Region Air 
Defense program to enforce the National Capital Region no-fly zone, a 
program previously conducted by U.S. Customs and Border Protection 
(CBP).\4\ By comparison, the increases for the AC&I account for this 
time period have been even greater than the overall funding increase, 
growing by 66 percent since Fiscal Year 2002. However, the Fiscal Year 
2007 AC&I budget request of almost $1.2 billion represents little 
change in funding from the Coast Guard's Fiscal Year 2006 enacted AC&I 
budget.



Coast Guard Reported Progress Made in Meeting Program Performance 
        Targets
    Even with sustained homeland security responsibilities, aging 
assets, and a particularly destructive hurricane season stretching 
resources across the agency, in Fiscal Year 2005 the Coast Guard 
reported that 7 of its 11 programs met or exceeded program performance 
targets.\5\ In addition, the agency reported that it anticipates 
meeting the target for 1 additional program when final results become 
available in July 2006, potentially bringing the total met targets to 8 
out of 11 programs.\6\ According to Coast Guard documents, the agency 
missed targets for three programs--undocumented migrant interdiction, 
defense readiness, and living marine resources--in Fiscal Year 2005, as 
it had in some previous years. Coast Guard officials attributed these 
missed targets to, among other factors, the increased flow of migrants 
and staffing shortages for certain security units within the defense 
readiness program. (See app. III for more detailed information on each 
program.) If the Coast Guard meets 8 performance targets as it 
predicts, the results would represent the greatest number of 
performance targets met in the last 4 years. (See Fig. 2.) The 
preliminary results of our ongoing work reviewing the Coast Guard's six 
non-homeland security performance measures suggests that, for the most 
part, the data used for the measures are reliable and the measures 
themselves are sound. That is, they are objective, measurable, and 
quantifiable as well as cover key program activities. However, given 
the DHS policy of reporting only one main performance measure per 
program and the limits on how comprehensive a single measure is likely 
to be, there may be opportunities to provide additional context and 
information to decisionmakers about Coast Guard performance results. We 
will provide final results on this work in a report to be published 
later this summer.



Overall Progress Came Despite Additional Demands Posed by Hurricane 
        Katrina
    This overall progress came in a year when the Coast Guard faced 
significant additional demands brought on by Hurricane Katrina. As it 
had to do when it implemented MTSA and when it conducted heightened 
port security patrols immediately after the September 2001 terrorist 
attacks, the Coast Guard found itself operating at an increased 
operational tempo for part of Fiscal Year 2005. Although the Hurricane 
Katrina response period was relatively brief for some missions, such as 
search-and-rescue, Coast Guard officials told us that the sheer 
magnitude of the response made it unique, and responding to it tested 
the agency's preparedness and ability to mobilize large numbers of 
personnel and assets within a short time. In this effort, the Coast 
Guard had several responsibilities during and immediately following the 
hurricane: to conduct search-and-rescue; to direct the closing and re-
opening of ports in cooperation with stakeholders, (such as shipping 
companies, harbor police, DHS, CBP, and local fire and police 
departments), to ensure safety and facilitate commerce, thereby 
lessening the economic impact of the storm on the Nation; and to 
monitor pollution clean up of the many oil spills that occurred in the 
wake of the flooding. For the purposes of this testimony, I would like 
to focus on the Coast Guard's search-and-rescue response. We are 
conducting a more complete review of the Coast Guard's role and 
response to Hurricane Katrina across several mission areas under the 
authority of the Comptroller General, and expect to provide additional 
information later this summer. So far, however, this work is showing 
that three factors appear to have been key to the Coast Guard's 
response to Hurricane Katrina:

   The Coast Guard was prepared to respond to search-and-rescue 
        needs. Although the magnitude of Hurricane Katrina required 
        substantial response and relief efforts, the Coast Guard was 
        well prepared to act since it places a priority on training and 
        contingency planning. First and foremost, the missions the 
        Coast Guard performed during Hurricane Katrina were the same 
        missions that the Coast Guard trains for and typically performs 
        on a day-to-day basis. The Coast Guard's mission areas include, 
        among others, search-and-rescue, law enforcement, regulatory 
        functions, and, most recently, homeland security 
        responsibilities, allowing the Coast Guard to respond and act 
        in a myriad of situations. However, with regard to Hurricane 
        Katrina, the magnitude of the Coast Guard's mission activity 
        appears noteworthy. For example, for all of 2004, according to 
        the Coast Guard's Fiscal Year 2005 Report, the Coast Guard 
        responded to more than 32,000 calls for rescue assistance and 
        saved nearly 5,500 lives. By comparison, in 17 days of 
        Hurricane Katrina response, Coast Guard officials reported 
        conducting over 33,500 rescues, including rescuing 24,135 
        people by boat and helicopter and evacuating 9,409 people from 
        hospitals. Coast Guard officials we spoke to underscored the 
        importance of the planning, preparation, and training that they 
        regularly conduct that allowed them to complete the many 
        challenging missions presented by Katrina.

   The Coast Guard's organizational structure and practices 
        facilitated the agency's response. In terms of the Coast 
        Guard's organizational structure, the Coast Guard has personnel 
        and assets throughout the United States, which allows for more 
        flexible response to threats. In terms of Coast Guard 
        practices, according to the hurricane and severe weather plans 
        we reviewed for Coast Guard Districts 7 (Florida region) and 8 
        (Gulf region), and discussions we had in Washington, D.C., 
        Virginia, Florida, Alabama, and Louisiana with Coast Guard 
        officials responsible for implementing those plans, the Coast 
        Guard tracks the likely path of an approaching storm, 
        anticipates the necessary assets to address the storm's impact, 
        and repositions personnel and aircraft out of harm's way, with 
        a focus on reconstituting assets to respond to local needs once 
        it is safe to do so. Given the magnitude of Hurricane Katrina, 
        the Coast Guard took a more centralized approach to prioritize 
        personnel and assets to respond, but the operational command 
        decisions remained at the local level. That is, the Coast 
        Guard's Atlantic Area Command played a key role in identifying 
        additional Coast Guard resources, and worked with District 
        Commands to quickly move those resources to the affected Gulf 
        region, while local operational commanders directed personnel 
        and assets to priority missions based on their on-scene 
        knowledge.

   The Coast Guard's operational principles facilitated the 
        agency's actions. Throughout our field work, Coast Guard 
        officials referred to the principles of Coast Guard operations 
        that guide the agency's actions. Coast Guard officials 
        identified these principles, which ranged from the importance 
        of having clear objectives and flexibility to managing risks 
        and exercising restraint, as instrumental in their preparation 
        for Hurricane Katrina.\7\ The Coast Guard prides itself on 
        these operational principles that collectively form the 
        foundation of Coast Guard culture and actions during 
        operations. These principles set an expectation for individual 
        leadership in crisis, and personnel are trained to take 
        responsibility and action as needed based on relevant 
        authorities and guidance. For example, during the initial 
        response to Hurricane Katrina, a junior-level pilot, who first 
        arrived on-scene in New Orleans with the planned mission of 
        conducting an environmental inspection flight, recognized that 
        search-and-rescue helicopters in the area could not communicate 
        with officials on the ground, including those located at 
        hospitals and at safe landing areas. This pilot took the 
        initiative while on-scene--an operational principle--to 
        redirect her planned mission, changing it from an environmental 
        flight to creating the first airborne communication platform in 
        the area. Doing so helped ensure that critical information was 
        relayed to and from helicopter pilots conducting search-and-
        rescue so that they could more safely and efficiently continue 
        their vital mission. When we consulted her commanding officer 
        about these actions, he supported her decision and actions and 
        noted that Coast Guard personnel generally have the flexibility 
        to divert from their intended mission to accomplish a more 
        important mission, without obtaining advance supervisory 
        approval. He indicated that this was not only common practice, 
        but it was supported by a written directive at his unit.

        While acknowledging the importance of these operational 
        principles, it is equally important to note that the response 
        to Hurricane Katrina also hinged on discipline and adherence to 
        critical plans. For example, multiple aircraft were operating 
        in a confined space with little separation, thus adhering to 
        critical search-and-rescue plans, as well as using experience 
        and judgment, resulted in numerous rescues despite these 
        difficult circumstances. While the Hurricane Katrina search-
        and-rescue effort was unprecedented, sustaining this effort 
        might have been much more difficult if it had gone on for a 
        much longer period. Combining a longer-term catastrophic 
        response with the continuing needs of the agency's day-to-day 
        missions would be more challenging for a small service such as 
        the Coast Guard. Relative to other military services, the Coast 
        Guard is small, and when resources are shifted to any one 
        specific mission area, other mission areas may suffer.\8\ For 
        example, Coast Guard units in Florida sent many air and surface 
        assets to the Gulf region to respond to Hurricane Katrina. 
        While the assets were deployed to the Gulf region, the Coast 
        Guard noticed a spike in the level of illegal migration 
        activity off of the Florida coast. However, once Coast Guard 
        assets returned to the Florida region, the Coast Guard 
        initiated a more intensive air and sea patrol schedule to 
        markedly announce their return to the area, and focus on 
        interdicting illegal migrants.

The Coast Guard Continues with Organizational Changes and Expanded 
        Partnerships to Meet Growing Responsibilities
    Coast Guard organizational changes and expanded partnerships have 
helped to alleviate some resource pressures posed by added 
responsibilities or further deterioration of assets, as well as help 
accomplish its mission responsibilities. I would like to highlight 
three of these efforts: a revised field structure that consolidates 
decisionmaking processes at the operational level into a single 
command, a new resource for confronting and neutralizing terrorist 
activity, and new and stronger partnerships both within and outside 
DHS.

New Field Command Structure Aimed at Improving Operational Efficiency
    In conducting our work for this hearing, we followed up with the 
Coast Guard to obtain an update on the implementation of a new field 
command structure that unifies previously disparate Coast Guard units, 
such as air stations, groups, and marine safety offices into integrated 
commands.\9\ As we reported to you last year, the Coast Guard began 
making this change to improve mission performance through better 
coordination of Coast Guard command authority with operational 
resources such as boats and aircraft.\10\ Under the previous field 
structure, for example, a marine safety officer who had the authority 
to inspect a vessel at sea or needed an aerial view of an oil spill as 
part of an investigation would often have to coordinate a request for a 
boat or an aircraft through a district office, which would obtain the 
resource from a group or air station. Under the realignment, these 
operational resources are to be available under the same commanding 
officer--allowing for more efficient operations. This revised structure 
involves dividing operations into 35 geographic ``sectors.'' Coast 
Guard officials stated that all 35 sectors have been established as of 
May 2006. According to Coast Guard personnel, the realignment is 
particularly important for coordinating with other Federal, State, and 
local agencies, as well as meeting new homeland security 
responsibilities and preparing for the challenge of protecting the 
United States against terrorist attacks.

New Maritime Security Response Team to Provide Additional Security 
        Capability
    Another initiative to protect the United States against terrorist 
attacks is the Coast Guard's development and implementation of a 
Maritime Security Response Team (MSRT)--a prototype team similar to 
DOD's counter-terrorism teams. The Coast Guard, in cooperation with DOD 
and other Federal law enforcement agencies, plans to outfit the MSRT 
with specialized tactical equipment and train the team to conduct high-
risk boardings of vessels and perform other offensive counter-terrorism 
activities within the maritime environment. The Coast Guard's $4.7 
million request for Fiscal Year 2007 would provide the team with 
chemical, biological, radiological, nuclear, and explosive detection 
equipment; improve the Coast Guard's Special Missions Training Center 
facility; and provide additional personnel and operating capacity for a 
third 60-member unit, building the team toward 24/7 response 
capabilities. Coast Guard officials said that once the MSRT is fully 
developed, it will provide active counter-terrorism and advanced 
interdiction operations and address capacity and capability gaps in 
national maritime counter-terrorism response.

New and Evolving Coast Guard Partnerships Designed to Improve 
        Operational 
        Effectiveness and Efficiency
    In addition to partnering efforts associated with the development 
of the first MSRT, the Coast Guard is developing other partnerships, 
both internal and external to DHS, designed in part to improve 
operational effectiveness and efficiency. For example, the Coast Guard 
is currently developing a pilot program to increase operational 
efficiencies between the Coast Guard and CBP aimed at pushing potential 
threats away from U.S. ports. This offshore operation, currently in a 
pilot stage, includes the integration of each agency's vessel targeting 
efforts, unifies their boarding operations, and includes professional 
exchange opportunities. Although this effort is only being tested 
within the Pacific Area Command of the Coast Guard, according to a 
senior Coast Guard official, the Pacific Command intends to send its 
results to Coast Guard headquarters so the agency can determine how to 
best implement the program across the Coast Guard at a later date.
    In addition to partnering with other Federal agencies, the Coast 
Guard has also initiated partnerships with both government and 
industry. Under regulations implementing MTSA, a Coast Guard Captain of 
the Port must develop an Area Maritime Security Plan in consultation 
with an Area Maritime Security Committee. These committees are 
typically composed of members from Federal, local, and state 
governments; law enforcement agencies; maritime industry and labor 
organizations; and other port stakeholders that may be affected by 
security policies. The security plan they develop is intended to 
provide a communication and coordination framework for the port 
stakeholders and law enforcement officials to follow in addressing 
security vulnerabilities and responding to any incidents. Stakeholders 
in two ports we visited identified their Area Maritime Security 
Committees as an invaluable forum for port partners. For example, they 
said meetings of these committees serve as an opportunity for members 
of the port community to network with one another, build relationships, 
address various maritime-related issues, and coordinate security 
planning efforts.
    The Coast Guard has expanded its partnership with NOAA to enforce 
domestic fisheries regulations. NOAA operates a technology-based 
system, called the vessel monitoring system, to track and monitor 
fishing vessels. This system offers real-time data on a ship's course 
and position, where the ship has requested to fish, the type of fishing 
requested, and the number of days the ship has been out of port. The 
Coast Guard uses this information to assist with its enforcement of 
domestic fisheries regulations by identifying vessels that may not be 
in compliance with domestic fisheries regulations. For example, the 
monitoring information will show if fishing vessels are operating 
within a restricted area. According to Coast Guard officials, the 
information shared from this partnership has allowed Coast Guard assets 
to be used more efficiently in checking on potentially noncompliant 
vessels and enforcing fishing laws.

Progress Made with Ongoing Acquisition Efforts, but Continued Attention 
        Is Warranted
    Our recent reviews indicate that while the Coast Guard has made 
progress in managing the Deepwater program, further actions are needed 
and the lessons learned from this effort have not been applied to other 
ongoing acquisitions. For example, even with the Coast Guard's improved 
management and oversight of its Deepwater program, further steps are 
needed before all of our past recommendations for improving 
accountability and program management can be considered fully 
implemented. In addition, the acquisition of Fast Response Cutters has 
recently experienced setbacks. Meanwhile, the Rescue 21 program 
continues to be of concern as the program has been plagued by delays, 
technical problems, and cost escalation--issues that parallel the 
problems encountered in the early years of the Deepwater program. 
Another program, the Nationwide Automatic Identification System, is 
still in early development stages and specific technical system 
requirements remain undefined. As a result, according to Coast Guard 
officials, this has affected the Coast Guard's efforts to respond to 
our recommendation that the agency cultivate potential partnerships in 
order to leverage resources toward implementing the system. Because all 
of these programs are important for the Coast Guard in meeting growing 
operational demands, they bear close monitoring to help ensure they are 
delivered in an efficient and effective manner.

Progress Continues in Making Recommended Improvements to Deepwater 
        Program Management, but Some Recommendations Are Not Yet Fully 
        Implemented
    One of the largest and most significant acquisitions that the Coast 
Guard has undertaken is the upgrade and replacement of its Deepwater 
assets, an acquisition approach that has raised a number of management 
and accountability concerns over the past 8 years.\11\ The Coast Guard 
has devoted considerable attention to concerns that we and others 
raised, in particular to implementing recommendations for improvement. 
Our past concerns about the Deepwater program have been in three main 
areas--ensuring better program management and oversight, ensuring 
greater accountability on the part of the system integrator, and 
creating sufficient competition to help act as a control on costs--and 
to address these concerns, we made a total of 11 recommendations.\12\ 
Table 1 provides an overview of the 11 recommendations, including their 
current status. In short, five recommendations have been fully 
implemented, five have been partially implemented, and one has not been 
implemented.\13\ Three of the five partially implemented 
recommendations appear close to being fully implemented, in that the 
actions taken appear to be sufficient but results are not yet known or 
final procedural steps (such as issuing a policy currently in draft 
form) are not complete. The remaining two partially implemented 
recommendations, both of which deal with effective program management 
and contractor oversight, remain somewhat more problematic, and these 
are discussed further below. In both cases, however, the steps needed 
to fully implement these recommendations are relatively 
straightforward.



Strengthening Integrated Product Teams
    In 2004, we reported that the integrated product teams (IPTs), the 
Coast Guard's primary tool for managing the Deepwater program and 
overseeing contractor activities, were struggling to carry out their 
missions because of four major issues: (1) lack of timely charters to 
provide authority needed for decisionmaking, (2) inadequate 
communication among team members, (3) high staff turnover, and (4) 
insufficient training. Despite progress in addressing these four 
issues, we do not consider this recommendation to be fully implemented. 
There are indications that the IPTs are still not succeeding in 
developing sufficient collaboration among subcontractors. Coast Guard 
officials recently reported that collaboration among the subcontractors 
continues to be problematic and that the system integrator wields 
little influence to compel decisions among them. For example, when 
dealing with proposed design changes for assets under construction, the 
system integrator has submitted the changes as two separate proposals 
from both first-tier subcontractors rather than coordinating the 
separate proposals into one coherent plan. According to Coast Guard 
performance monitors, because the two proposals often carry a number of 
overlapping work items, this approach complicates the Coast Guard's 
review of the needed design change. Several improvements designed to 
address these problems are under way, but it is too early to determine 
if these will effectively eliminate the problems.

Providing Field Personnel with Guidance and Training on Transitioning 
        to New Deepwater Assets
    In 2004, we reported the Coast Guard had not effectively 
communicated decisions on how new Deepwater and existing assets are to 
be integrated during the transition and whether Coast Guard or 
contractor personnel (or a combination of the two) will be responsible 
for maintenance of the Deepwater assets. For example, Coast Guard field 
personnel, including senior-level operators and naval engineering 
support command officials, said they had not received information about 
how they would be able to continue meeting their missions using 
existing assets while also being trained on the new assets. Since that 
time the Coast Guard has placed more emphasis on outreach to field 
personnel, including surveys, face-to-face meetings, and membership in 
IPTs. Despite these efforts, there are indications that the actions are 
not yet sufficient to consider the recommendation to be fully 
implemented. In particular, our review of relevant documents and 
discussions with key personnel make clear that field operators and 
maintenance personnel are still concerned that their views are not 
adequately acknowledged and addressed, and have little information 
about maintenance and logistics plans for the new Deepwater assets. For 
example, though the first National Security Cutter is to be delivered 
in August 2007, field and maintenance officials have yet to receive 
information on plans for crew training, necessary shore facility 
modifications, or how maintenance and logistics responsibilities will 
be divided between the Coast Guard and the system integrator. According 
to Coast Guard officials, many of these decisions need to be made and 
communicated very soon in order to allow for proper planning and 
preparation in advance of the National Security Cutter's delivery.

Design Risks Have Delayed Delivery of the Fast Response Cutter
    Despite improvements in Deepwater program management, the Coast 
Guard has encountered difficulties in the conversion and acquisition of 
one Deepwater asset--its Fast Response Cutter (FRC). Under the original 
2002 Deepwater Implementation Plan, all 49 of the Coast Guard's 110-
foot patrol boats were to be converted into 123-foot patrol boats, with 
increased capabilities, as a bridging strategy until a replacement 
vessel, the 140-foot FRC, came on line beginning in 2018. The Coast 
Guard converted 8 of the 110-foot patrol boats to 123-foot boats, but 
discontinued further conversions because the patrol boats were 
experiencing technical difficulties, such as hull buckling, and were 
not able to meet post-September 11, 2001 mission requirements. This 
prompted the Coast Guard to revise this part of the Deepwater program. 
The 2005 Revised Deepwater Implementation Plan reflected the Coast 
Guard's cancellation of further patrol boat conversions and 
acceleration of the design and delivery of the FRC, which was being 
designed to use composite materials in the hull, decks and 
bulkheads.\14\ Under the 2005 revised plan, the first FRC was scheduled 
to come on line in 2007--11 years earlier than originally planned.
    In late February 2006, the Coast Guard suspended design work on the 
FRC because of risks with the emerging design. In particular, an 
independent design review by third-party consultants preliminarily 
demonstrated, among other things, that the FRC would be far heavier and 
less efficient than a typical patrol boat of similar length. As a 
result, the Coast Guard is now pursuing three strategies for moving 
forward with the FRC acquisition. The first strategy involves 
Integrated Coast Guard Systems, the prime contractor, purchasing design 
plans for and building an ``off-the-shelf'' patrol boat that could be 
adapted for Coast Guard use as a way to increase patrol hours until the 
FRC design could be finalized. The Coast Guard issued a request for 
information in April 2006 to assess the off-the-shelf options. The 
second strategy is to revise the requirements of the FRC in order to 
allow for modifications to the current FRC design. Concurrent with the 
first two strategies, the Coast Guard's third strategy is to have a 
third party reassess the analyses used in the decision to use composite 
materials for the FRC to determine if the use of composite materials 
will, in fact, reduce total ownership costs. The result of the Coast 
Guard pursuing these strategies is that the Coast Guard would end up 
with two classes of FRCs. The first class of FRCs would be based on an 
adapted design from a patrol boat already on the market, to expedite 
delivery, and a follow-on class that would be based on revisions made 
to address the problems identified in the original FRC design plans. 
Pursuant to these three strategies, Coast Guard officials now estimate 
that the first FRC will likely not be delivered until late Fiscal Year 
2009, at the earliest. GAO plans to release a report in late June 2006 
providing updated information on the status of FRC design efforts.

Rescue 21 Continues to Be of Concern as It Enters Implementation Phase
    The Rescue 21 acquisition program--the Coast Guard's effort to 
replace its antiquated command, control and communication 
infrastructure used primarily to monitor mariner distress calls, and 
coordinate search-and-rescue operations--continues to be of concern as 
the program has been plagued by numerous delays, technical problems, 
and cost overruns. GAO's recently released report shows that the 
program is about 5 years behind its originally proposed schedule for 
full implementation in 2006, as a result primarily of delays in 
development and testing of the system.\15\ In addition, these delays 
have raised the Coast Guard's estimated costs for bringing Rescue 21 up 
to full operating capability from $250 million to $710.5 million.\16\ 
Moreover, our analysis of contractor performance trends, including a 
significant number of contract items not completed as planned and 
requiring renegotiation, indicates that total acquisition cost overruns 
will continue, and implementation costs could reach as high as $872 
million.\17\
    These delays, technical problems, and cost overruns are the result 
of deficiencies in Coast Guard acquisition management and contractor 
oversight--deficiencies similar to those that we identified earlier in 
the Deepwater program. Such a pattern is of concern because it suggests 
that the Coast Guard has not translated the lessons learned from 
Deepwater to its overall acquisition management.\18\ In particular, 
deficiencies in the Rescue 21 program include common problems of 
acquisition management and oversight including ineffective project 
monitoring and risk management, poorly defined user requirements, 
unrealistic schedule and cost estimates developed by the contractor, 
and limited executive-level oversight. And although the Coast Guard has 
developed the high-level requirements for Rescue 21, it has relied 
solely on the contractor to manage these requirements.
    As discussed, we found similar problems in the Deepwater program 
with comparable adverse impacts on cost, schedule and results. For 
example, at the start of the program we identified a number of risks 
that would need to be addressed for the program to be successful--
including ensuring that procedures and personnel are in place for 
managing and overseeing the contractor, and taking steps to minimize 
potential problems in developing new technology. Since that time, we 
have made numerous specific recommendations to the Coast Guard based on 
the deficiencies uncovered by our audits.\19\
    The delays in implementing Rescue 21 mean that field units will 
continue to face limitations in their ability to hear boaters in 
distress and the agency will be subject to cost and performance 
challenges to maintain the legacy equipment. For example, as a result 
of Rescue 21's delay, some field units will likely continue to 
experience coverage gaps, limiting their ability to monitor mariners in 
distress and some will continue to be at risk of performing larger and 
potentially more costly searches due to the legacy system's more 
limited capabilities. In addition, because the legacy equipment is over 
30 years old, it is at high risk for failure, a factor which could 
result in costly repairs. Moreover, although the Coast Guard previously 
issued a moratorium on upgrades to the legacy system, delays in the 
Coast Guard's implementation of Rescue 21 may require units to upgrade 
or install new equipment for the legacy system. This would result in 
further costs, and in fact, this has already occurred at some 
units.\20\
    The importance of resolving acquisition management problems is 
underscored by the operational benefits that are expected to be 
realized from system implementation, and some of these benefits have 
already been achieved in a few locations where the Rescue 21 system has 
been used. For example, following Hurricane Katrina, the Coast Guard 
took advantage of Rescue 21's capabilities to address communications 
challenges through an early deployment of a portable antenna to 
Louisiana in September 2005 to provide communications capabilities that 
had been lost due to the storm. In another case, the direction-finding 
capability of the Rescue 21 system helped the Coast Guard to rescue 
some stranded boaters who had inaccurately identified their location to 
the Coast Guard.

Coast Guard in Early Phase of Developing the Nationwide Automatic 
        Identification System
    The Coast Guard is at an early phase in developing the Nationwide 
Automatic Identification System (NAIS)--an important step in the 
overall effort to increase port safety and security by collecting, 
integrating, and analyzing information on vessels operating within or 
bound for U.S. waters--and is pursuing partnership opportunities that 
could potentially accomplish NAIS installation goals more quickly and 
reduce installation costs to the Federal Government. According to the 
Coast Guard, NAIS will allow the Coast Guard to both receive and 
transmit information to vessels entering and leaving U.S. waters, 
supporting both MTSA and the National Plan to Achieve Maritime Domain 
Awareness.\21\ In July 2004, we recommended that the Coast Guard seek 
and take advantage of opportunities to partner with organizations 
willing to develop systems at their own expense as part of the 
acquisition process.\22\ In response, according to Coast Guard 
officials, the agency has begun to develop partnerships. However, 
officials noted that because the project and technology are still in 
the early stages of development, these partnerships remain limited. For 
example, Coast Guard officials said that because the Coast Guard still 
does not know all of the specific technical system requirements, they 
do not yet know of all the potential partners that could enable the 
Coast Guard to leverage resources. In addition, system requirements may 
change as the technology is further developed, and as a result, some 
current partnerships may be short-term.
    The Coast Guard intends to use the Fiscal Year 2007 budget request 
of $11.2 million, along with past unobligated project funding, to award 
a NAIS contract in Fiscal Year 2007 for initial design, logistics, and 
deployment in strategic ports and critical coastal areas of the 
country. According to the Coast Guard, officials are performing market 
research as part of the development phase of the Coast Guard and DHS 
major acquisition processes, and the project office is analyzing this 
information to determine capabilities within the market to satisfy NAIS 
requirements and to establish an optimal acquisition strategy. Coast 
Guard officials we spoke with noted that NAIS is currently in the 
initial stage of a major acquisition project. As such, the acquisition 
project plans for costs, schedule, and performance have not yet been 
established. The Coast Guard expects these project plans to be 
determined later this year and stated that both the baseline costs and 
current completion schedule are early estimates and subject to revision 
as final requirements mature.

Coast Guard Faces Future Challenges as It Balances Missions
    The Coast Guard also faces two additional challenges in managing 
its assets and balancing its various missions. The first challenge is 
to find the resources to replace some additional assets, not included 
in the Deepwater program, for its non-homeland security missions. Our 
ongoing work found that some of the Coast Guard's existing buoy tenders 
and icebreakers are approaching or have exceeded their initial design 
service lives. The second challenge the Coast Guard faces is the 
addition of a new mission, defending the air space surrounding the 
Nation's capital, which falls outside its traditional focus on the 
maritime environment. While groundwork has been laid through the 
request of Fiscal Year 2007 funds to purchase the equipment necessary 
to carry out this new responsibility, it is likely to require 
additional personnel and training.

Some ATON and Icebreaking Assets Show Decline and May Need Additional 
        Resources to Sustain Capabilities
    To facilitate maritime mobility through its aids-to-navigation 
(ATON) and icebreaking missions, the Coast Guard uses a variety of 
assets, such as buoy tenders and icebreakers. Like the Deepwater legacy 
assets, many of these types of assets are approaching or have exceeded 
their initial design service lives. We are currently conducting work 
for this Committee to look at the condition and the Coast Guard's 
actions to upgrade or better manage these assets. While this work is 
still ongoing, our preliminary observations indicate that some of these 
assets are experiencing maintenance issues that may require additional 
resources in order to sustain or replace their capabilities.

Coast Guard's Condition Measures Show Decline in Some ATON and 
        Icebreaking Assets
    From 2000 to 2004, the Coast Guard's key condition measures show a 
decline for some ATON and icebreaking assets.\23\ For ATON and 
icebreaking cutter assets,\24\ the key summary measure of condition--
percent of time free of major casualties \25\--fluctuated but generally 
remained below target levels \26\ for some asset types. According to 
Coast Guard officials, even though it did not have a centralized 
tracking system for the condition of its ATON small boat assets during 
this time period, the Coast Guard's overall assessments of these 
smaller assets indicated that most of the asset types were in fair to 
poor condition. According to Coast Guard officials and documents, the 
reasons for their condition include the fact that many of the asset 
types are beyond their expected service lives and the general workload 
of the assets has increased to carry out other missions, such as 
maritime security after September 11, 2001, or providing disaster 
response after events such as the recent hurricanes on the Gulf Coast.

Increasing Amount of Maintenance on ATON and Domestic Icebreaking 
        Assets Is Being Performed
    Coast Guard personnel reported to us that crew members have had to 
spend increasingly more time and resources to troubleshoot and resolve 
maintenance issues on the older ATON and domestic icebreaking assets. 
The Coast Guard personnel we met with indicated that because the 
systems and parts are outdated compared with the technology and 
equipment available today, it can be challenging and time consuming to 
diagnose a maintenance issue and find parts or determine what 
corrective action to take. For example, the propulsion control system 
on the 140-foot icebreaking tugs uses circuit cards that were state-of-
the-art when the tugs were commissioned in the late 1970s to 1980s but 
are no longer manufactured today and have been superseded by computer 
control systems. According to the Coast Guard personnel we met with, 
the lack of a readily available supply of these parts has forced 
maintenance personnel to order custom made parts or refurbish the 
faulty ones, increasing the time and money it takes to address 
maintenance problems. The personnel also told us that because such 
equipment is outdated, finding knowledgeable individuals to identify 
problems with the equipment is difficult, which further complicates the 
maintenance of the assets. Crews of other assets we visited also 
confirmed the difficulty of diagnosing problems and obtaining 
replacement parts for other critical subsystems such as the main diesel 
engines.
    Aware of such issues, the Coast Guard completed a mission needs 
analysis for ATON and domestic icebreaking assets, and developed an 
approach to renovate or recapitalize these assets. This analysis, which 
was completed in 2002, looked at the condition of the existing assets 
and their ability to support mission needs. The analysis concluded that 
all of the assets suffered in varying degrees with respect to safety, 
supportability, environmental compliance, and habitability, and would 
need replacement or rehabilitation to address these issues. In response 
to this analysis, the Coast Guard developed a plan to systematically 
replace or renovate the assets. Program officials at the Coast Guard 
indicated that current estimates place the total cost to carry out this 
plan at about $550 million. According to a Coast Guard official, 
although resource proposals to carry out this project had been made 
during the budget planning processes for Fiscal Years 2004, 2005, 2006, 
and 2007, those proposals were either deferred or terminated by DHS or 
the Office of Management and Budget from inclusion in the final budget 
requests.

Polar Class Icebreaking Assets Are in Need of Significant Maintenance
    Preliminary observations from our review of the Coast Guard's polar 
icebreaking assets revealed similar challenges for the Coast Guard to 
perform the maintenance needed to sustain the capabilities of these 
assets. As with the other older ATON and domestic icebreaking assets, 
the two Polar Class icebreakers that are used for breaking the channel 
into the Antarctic research station are reaching the end of their 
design service lives of 30 years.\27\ According to Coast Guard 
officials, the icebreakers' age combined with recent harsh ice 
conditions and increased operational tempo have left the Polar Class 
icebreakers unable to continue the mission in the long term without a 
substantial investment in maintenance and equipment renewal. These 
officials also told us that while the hull structures are sound, 
critical systems such as the main gas turbine controls and the 
controllable pitch propeller systems have become unreliable. 
Corroborating this account of the icebreakers' condition, an interim 
report issued in December 2005 by the National Research Council of the 
National Academies also found that the icebreakers have become 
inefficient to operate because substantial and increasing maintenance 
is required to keep them operating and that significant long-term 
maintenance had been deferred over the past several years.\28\
    Given the age and obsolescence of the Polar Class icebreakers, 
funding for maintenance and repair has been and will likely continue to 
be a challenge. Coast Guard officials indicated that the cost of 
maintenance activity for the icebreakers required that additional 
funding be transferred from other Coast Guard asset maintenance 
accounts in previous years in order to carry out this maintenance. For 
Fiscal Years 2005 and 2006, the Coast Guard also obtained additional 
funds for maintenance from the National Science Foundation (NSF).\29\ 
The Coast Guard has considered undertaking a project to extend the 
service lives of the existing assets by refurbishing or replacing those 
systems that have reached the end of their service lives. The Coast 
Guard estimates that this extension project could provide an additional 
25 years of service for the existing assets. The cost to carry out this 
project for both Polar Class icebreakers is estimated between $552 and 
$859 million. Coast Guard capital planning documentation indicates that 
failure to fund this project could leave the Nation without heavy 
icebreaking capability and could jeopardize the investment made in the 
Nation's Antarctic Program. According to Coast Guard officials, the 
agency has identified these needs but has not yet requested funds in 
part, because other agencies have taken financial responsibility for 
funding polar icebreaking assets.\30\

The Coast Guard Is Undertaking New Responsibility Beyond Typical 
        Maritime 
        Missions
    While the Coast Guard continues to face the challenge of performing 
the diverse array of responsibilities associated with its many 
missions, the Fiscal Year 2007 budget request includes initial funding 
for a new Coast Guard responsibility of enforcing a no-fly zone in the 
national capital region. The scope of the mission--intercepting slow 
and low flying aircraft--falls outside of the Coast Guard's typical 
mission of protecting and preserving the Nation's ports and waterways. 
According to Coast Guard officials, DHS agreed to this mission through 
a memorandum of understanding with DOD and subsequently determined that 
the Coast Guard was the best suited agency within DHS to perform the 
mission.\31\ Coast Guard officials also said, the agency will 
officially take over these responsibilities from CBP in late Fiscal 
Year 2006. However, despite previous experience performing air 
intercept activities, according to Coast Guard officials, the new 
homeland security mission has required additional training and 
assets.\32\ The Coast Guard's $57.4 million Fiscal Year 2007 budget 
request, the first year of a planned 2-year project, would provide 
funding to acquire five of the seven HH-65C helicopters needed for the 
mission, and, according to Coast Guard officials, update infrastructure 
at Air Station Atlantic City, as well as upgrade equipment at Reagan 
National Airport. Officials added that efforts to train Coast Guard 
pilots have already been underway. While groundwork has been laid 
through the request of Fiscal Year 2007 funds to purchase the equipment 
necessary to carry out this new responsibility, it is likely to require 
additional personnel and training.

Concluding Observations
    Several of the developments we are reporting on today are good 
news. Despite many demands, the Coast Guard continues to make progress 
in meeting its performance targets, and its successful search-and-
rescue work in responding to Hurricane Katrina is one positive aspect 
of what largely otherwise appears to be an ongoing tragedy. Certainly, 
if one measure of organizational excellence is performance in crisis, 
Hurricane Katrina shows that the Coast Guard is well along on that 
scale. Excellence must also be demonstrated in more mundane ways, 
however, such as how an organization manages its acquisitions. In this 
case, the Coast Guard needs to consistently, and from the beginning, 
employ widely known best practices for its acquisition management 
processes particularly with respect to developing requirements, project 
and risk management, and ensuring proper executive level oversight. 
Although the Coast Guard is to be complimented for its willingness to 
make improvements after our audits have identified problems, such as 
with the Deepwater program, its acquisition management would be better 
if the agency employed the lessons once learned and translated them 
into generally-improved practices. Better overall practices would help 
to ensure that future projects will not repeat past problems and will 
be completed on time and at cost.
    The Coast Guard has clearly been at the vortex of many of the most 
sweeping changes in the Federal Government's priorities over the past 
several years. ``Homeland security'' carries a much different tone, as 
well as budgetary significance, in the national consciousness after 
September 11, 2001. However, dramatic infusions of money are no 
guarantee of success; rather they bring added responsibility to ensure 
that large investments of taxpayer dollars are wisely spent. Our work 
has shown that the Coast Guard continues to face some challenges in 
balancing all of its missions and in keeping a sustained focus on 
managing its significant capital acquisition programs. Continued 
efforts are needed to sustain the progress that has been made thus far.
    Madame Chair and members of the Subcommittee, this completes my 
prepared statement. I would be happy to respond to any questions that 
you or other Members of the Subcommittee may have at this time.

             Appendix I: Objectives, Scope, and Methodology

    To provide a strategic overview of the President's Fiscal Year 2007 
budget request for the Coast Guard, we analyzed the Coast Guard's 
budget justification and other financial documents provided by the 
Coast Guard, focusing on several areas of particular Congressional 
interest. We also interviewed Coast Guard headquarters officials 
familiar with the Coast Guard's budget and acquisition processes.
    To report on the Coast Guard's progress in meeting its performance 
targets, we reviewed Coast Guard data and documentation addressing the 
status of performance targets between Fiscal Years 2002 and 2005. In 
reporting the performance results, we did not assess the reliability of 
the data or the credibility of the performance measures used by the 
Coast Guard. Previous GAO work indicates that the Coast Guard data are 
sufficiently reliable for the purposes of reporting on general 
performance, but we have not examined the external sources of data used 
for these measures. In addition, we are currently involved in ongoing 
work looking at the reliability of the data and credibility of 
performance measures for the Coast Guard's six non-homeland security 
programs.
    To determine the status of key outstanding Coast Guard 
recommendations, we interviewed Coast Guard headquarters officials 
regarding the status of the recommendations--including any progress 
made to implement them. We also obtained and reviewed relevant 
documents from the Coast Guard.
    To discuss the Coast Guard's response to Hurricane Katrina, we 
relied on our ongoing work regarding Hurricane Katrina, with particular 
focus on the Coast Guard's preparation, response, and recovery to 
Katrina with respect to search-and-rescue, pollution response, and 
facilitation of maritime missions. To obtain a more detailed 
understanding of the Coast Guard's response to Hurricane Katrina, we 
interviewed officials, reviewed documents, and conducted site visits at 
two Coast Guard Districts, the Atlantic Command, and Coast Guard 
headquarters. We also interviewed city and state officials in areas 
impacted by Hurricane Katrina and assisted by the Coast Guard.
    To determine the Coast Guard's progress in implementing our prior 
recommendations related to its Deepwater program, we drew from ongoing 
work, which included extensive reviews and analyses of documentation 
provided by the Coast Guard. We supplemented our document reviews and 
analyses with extensive discussions with officials at the Deepwater 
Program Executive Office, as well as with interviews with key Coast 
Guard operations and maintenance officials, contract monitors, and 
representatives of the system integrator.
    To report on the status and cost of Coast Guard's Rescue 21 
program, we drew from our work examining (1) the reasons for 
significant implementation delays and cost overruns against Rescue 21's 
original 2002 proposal; (2) the viability of the Coast Guard's revised 
cost and implementation schedule that is projected to reach full 
operational capability in 2011; and (3) the impact of Rescue 21's 
implementation delay upon the Coast Guard's field units which are 
awaiting modernization of antiquated communications equipment. This 
work has involved reviewing acquisition plans, implementation schedules 
and cost estimates for Rescue 21, as well as documentation regarding 
problems associated with the antiquated communications equipment. We 
also interviewed Coast Guard field personnel at units using the 
antiquated equipment and at the two sites where Rescue 21 has been 
deployed.
    We also drew from our ongoing work to report on Coast Guard's ATON 
and icebreaking assets. Specifically, this work is examining: (1) the 
recent trends in the amount of time ATON and domestic icebreaking 
assets have spent performing various missions and the impact of these 
trends on their primary missions; (2) the condition of the ATON and 
domestic icebreaking assets and the impact of their condition on 
performing their primary missions; and (3) the actions the Coast Guard 
has taken to upgrade or better manage its ATON and domestic icebreaking 
assets or use alternatives to carry out their missions. While 
conducting this work, we have interviewed Coast Guard program and 
maintenance officials at headquarters, area commands, and selected 
districts to obtain information on the missions these assets carry out, 
the condition of the assets, and the past and estimated future costs to 
maintain and deploy them. We also interviewed these officials and 
reviewed documents about the Coast Guard's plans to maintain or replace 
these assets. We also analyzed Coast Guard data from 2000 to 2004 on 
condition tracking measures, resources spent to operate the assets, and 
the number of hours the assets spent on Coast Guard missions. Finally, 
we interviewed crew members of various assets, selected by 
nonprobability sample--to provide diversity among asset types and 
locations--to obtain their views on the condition and maintenance of 
their assets and any impact the assets' condition may have had on their 
ability to carry out their missions.\33\
    This testimony is based on published GAO reports and briefings, as 
well as additional audit work that was conducted in accordance with 
generally accepted government auditing standards. We conducted our work 
for this testimony from July 2005 through May 2006.
  Appendix II: Breakdown of the Coast Guard's Fiscal Year 2007 Request
    Appendix II provides a breakdown of the Coast Guard's Fiscal Year 
2007 budget request. In addition to operating expenses and acquisition, 
construction, and improvements, the remaining Coast Guard budget 
accounts include areas such as environmental compliance and 
restoration, reserve training, and oil spill recovery. (See Table 2.)



 Appendix III: Additional Information on Specific Coast Guard Program 
                                Results

    Appendix III provides a detailed list of Coast Guard performance 
results for the Coast Guard's 11 programs from Fiscal Year 2002 through 
2005. Shaded entries in Table 3 indicate those years that the Coast 
Guard reported meeting its target unshaded entries indicate those years 
that the Coast Guard reported not meeting its target. Each program is 
discussed in more detail below.



    Note: TBD, to be determined; NA, not available.
    a The target for ice operations noted here is for 
domestic icebreaking only, and the target level varies according to the 
index of severity for an entire winter. Thus, for those winters 
designated as severe, the target is 8 or fewer closure days. For 
winters designated as average, the target is 2 or fewer closure days. 
Because 2002 and 2004 were designated as average winters, the 7 and 4 
days of closures did not meet the target.
    b The ports, waterways, and coastal securities program 
did not have a numeric target for the program's performance measure 
because this was the first year this performance measure was used and a 
numeric baseline had not been established. However, according to the 
Coast Guard, in the absence of a numeric target, the program used, and 
met, a target of fully implementing all planned activities geared 
toward lowering the risk due to terrorism in the maritime domain.
    c Complete data are not yet available for the illegal 
drug interdiction program, however, the Coast Guard anticipates meeting 
the performance target for this program based on past performance.
    d The performance measure for the illegal drug 
interdiction program, the percent of cocaine removed, was revised in 
Fiscal Year 2004 from the percent of cocaine seized in order to more 
accurately report the impact Coast Guard counter-drug activities have 
on the illicit drug trade. As a result, the cocaine removal rates for 
Fiscal Years 2002-2003 are not available.
    e The Coast Guard did not have a performance target for 
the marine safety performance measure in Fiscal Year 2002. Therefore, 
we were unable to determine whether marine safety program results met a 
performance target for Fiscal Year 2002.

Programs Meeting Fiscal Year 2005 Performance Targets
    U.S. Exclusive Economic Zone Enforcement.\34\ The Coast Guard 
reported that in Fiscal Year 2005, it met the performance target for 
U.S. Exclusive Economic Zone enforcement--defined as the number of 
foreign vessel incursions into the U.S. Exclusive Economic Zone, by 
detecting 174 foreign vessel incursions, within the performance target 
of 200 or less incursions. This represents a more than 30 percent 
decrease in foreign vessel incursions since Fiscal Year 2004, when the 
Coast Guard detected 247 incursions. Coast Guard officials attributed 
this decrease in incursions to many factors, including the agency's 
efforts in combating incursions, such as an increased number of air and 
water patrols, and the likelihood that some Mexican fleets known to 
cross into U.S. waters were damaged during the 2005 hurricane season.
    Ice operations. To meet this performance target, the Coast Guard's 
ice operations program must keep winter waterway closures to 8 days or 
fewer for severe winters and less than 2 days per year for average 
winters. According to Coast Guard documents, the agency met its target 
for an average winter with 0 days of waterway closures during the 2005 
ice season.
    Search and rescue. The Coast Guard reported that performance in 
this area, as measured by the percentage of mariners' lives saved from 
imminent danger, was 86.1 percent, just above the target of 86 percent 
for Fiscal Year 2005. This result is similar to the Fiscal Year 2004 
result of saving 86.8 percent of lives in imminent danger. The Coast 
Guard identified continuing improvements in response resources and 
improvements made in commercial vessel and recreational boating safety 
as the main reasons for continuing to meet the target.
    Aids to navigation. According to Coast Guard reports, the aids-to-
navigation program performance measure--that is, the 5-year average 
number of collisions, allisions, and groundings--improved in Fiscal 
Year 2005 by dropping to 1,825 incidents from 1,876 incidents in Fiscal 
Year 2004. The Fiscal Year 2005 total was also below the target of 
1,831. The Coast Guard attributes this continued decrease to a 
multifaceted system of prevention activities, including radio aids-to-
navigation, communications, vessel traffic services, dredging, 
charting, regulations, and licensing.
    Ports, waterways, and coastal security. In Fiscal Year 2005, the 
Coast Guard began using a new measure of program performance--the 
percent reduction of terrorism-related risk in the maritime 
environment. According to Coast Guard officials, this measure is based 
on an assessment of the total amount of maritime risk under the Coast 
Guard's authority. At the end of each fiscal year the Coast Guard 
calculates the amount of this total risk that has been reduced by the 
program's activities throughout the fiscal year. Officials added that 
because of the dynamic and changing nature of risk, the total amount of 
maritime risk under the Coast Guard's authority--the baseline level of 
risk--is recalculated annually. Because this was the first year the 
agency used the measure, there was no previous performance baseline to 
establish a numeric annual target. However, according to the Coast 
Guard, in the absence of a numeric target, the program used, and met a 
target of fully implementing all planned activities geared toward 
lowering the risk due to terrorism in the maritime domain.
    Marine environmental protection. The marine environmental 
protection measure of performance is the 5-year average annual number 
of oil and chemical spills greater than 100 gallons per 100 million 
tons shipped. According to Coast Guard reports, since Fiscal Year 2002, 
the reported average number of oil and chemical spills has dropped from 
35.1 to 18.5 in Fiscal Year 2005. The Coast Guard identified its 
prevention, preparedness, and response programs--including industry 
partnerships and incentive programs--as reasons for the drop.
    Marine safety. The marine safety measure--a 5-year average of 
passenger and maritime deaths and injuries--achieved its Fiscal Year 
2005 performance target of 1,317. During Fiscal Year 2005 there were 
1,311 incidents, a slight increase from 1,299 incidents in Fiscal Year 
2004. Beginning in Fiscal Year 2006, the Coast Guard will use a revised 
version of this measure that includes injuries of recreational boaters 
as well, representing a broader and more complete view of marine 
safety.

Program Expected to Meet Fiscal Year 2005 Target
    Illegal drug interdiction. While complete results for the illegal 
drug interdiction performance measure--the rate at which the Coast 
Guard removes cocaine bound for the U.S. via noncommercial maritime 
transport--are not yet available, the Coast Guard anticipates exceeding 
the Fiscal Year 2005 target of removing 19 percent or more of cocaine 
bound for the U.S. According to Coast Guard officials, in Fiscal Year 
2005 the Coast Guard removed a record 137.5 metric tons of cocaine 
bound for the U.S. Coast Guard officials believe that this record 
amount of cocaine removed will result in exceeding the Fiscal Year 2005 
performance target. Final program results are due to be published in 
July 2006.

Programs Not Meeting Targets in Fiscal Year 2005
    Defense Readiness. Defense readiness is measured by the percentage 
of time that units meet combat readiness status at a C-2 level.\35\ The 
Coast Guard reported that the overall level of performance for the 
defense readiness program decreased for the second consecutive year 
from a high of 78 percent in Fiscal Year 2003, to 76 percent in Fiscal 
Year 2004, and 67 percent in Fiscal Year 2005. According to Coast Guard 
officials, this decline in recent years was because of staffing 
shortages for certain security units within the defense readiness 
mission. According to Coast Guard officials, the agency intends to 
solve these staffing problems by offering incentives for participation 
as well as making participation mandatory instead of voluntary, as it 
was previously.
    Living marine resources. The Coast Guard reported that the 
performance measure for living marine resources--defined as the 
percentage of fishermen complying with Federal regulations--was 96.4 
percent, just below the target of 97 percent for Fiscal Year 2005. This 
result is similar to the Fiscal Year 2004 result of 96.3 percent. 
According to Coast Guard officials, the agency missed the Fiscal Year 
2005 target because of a variety of economic conditions and variables 
beyond Coast Guard control, such as hurricane damage, high fuel costs, 
fewer days-at-sea allocations, and lucrative seafood prices in some 
fisheries--which created greater incentives for fishermen to violate 
fishery regulations. The Coast Guard conducted 6,076 fisheries 
boardings in Fiscal Year 2005, an increase of more than 30 percent 
since Fiscal Year 2004. However, it is important to note that the 
compliance rate is a conservative estimate of agency performance 
because the Coast Guard targets vessels for boarding, thereby making it 
more likely that they will find vessels that are not in compliance with 
fishery regulations. According to Coast Guard officials, a key 
contributor to targeting vessels is the vessel monitoring system, which 
has enhanced the agency's ability to target vessels by providing more 
timely information.
    Undocumented migrant interdiction. According to Coast Guard 
reports, in Fiscal Year 2005 the Coast Guard did not meet its 
performance target of interdicting or deterring at least 88 percent of 
undocumented aliens from Cuba, Haiti, the Dominican Republic, and China 
attempting to enter the U.S. through maritime routes. The Coast Guard 
identified 5,830 successful arrivals out of an estimated threat of 
40,500 migrants yielding an interdiction and deterrence rate of 85.5 
percent, a decrease from the Fiscal Year 2004 result of 87.1 percent. 
According to the Coast Guard, program performance decreased because the 
flow of migrants was higher than in previous years, increasing from 
almost 22,000 in Fiscal Year 2002, to more than 40,000 in Fiscal Year 
2005. Coast Guard officials said that the agency is developing a new 
measure to better account for both the Coast Guard's efforts and the 
migrant flow to more accurately report program performance. This new 
measure will include migrants of all nationalities that successfully 
arrive in the U.S. through maritime routes.

Related GAO Products
United States Coast Guard: Improvements Needed in Management and 
            Oversight of Rescue System Acquisition. GAO-06-623. 
            Washington, D.C.: May 31, 2006.
Coast Guard: Changes in Deepwater Acquisition Plan Appear Sound, and 
            Program Management Has Improved, but Continued Monitoring 
            Is Warranted. GAO-06-546. Washington, D.C.: April 28, 2006.
Coast Guard: Progress Being Made on Addressing Deepwater Legacy Asset 
            Condition Issues and Program Management, but Acquisition 
            Challenges Remain. GAO-05-757. Washington, D.C.: July 22, 
            2005.
Coast Guard: Preliminary Observations on the Condition of Deepwater 
            Legacy Assets and Acquisition Management Challenges. GAO-
            05-651T. Washington, D.C.: June 21, 2005.
Maritime Security: Enhancements Made, but Implementation and 
            Sustainability Remain Key Challenges. GAO-05-448T. 
            Washington, D.C.: May 17, 2005.
Coast Guard: Preliminary Observations on the Condition of Deepwater 
            Legacy Assets and Acquisition Management Challenges. GAO-
            05-307T. Washington, D.C.: April 20, 2005.
Coast Guard: Observations on Agency Priorities in Fiscal Year 2006 
            Budget Request. GAO-05-364T. Washington, D.C.: March 17, 
            2005.
Coast Guard: Station Readiness Improving, but Resource Challenges and 
            Management Concerns Remain. GAO-05-161. Washington, D.C.: 
            January 31, 2005.
Maritime Security: Better Planning Needed to Help Ensure an Effective 
            Port Security Assessment Program. GAO-04-1062. Washington, 
            D.C.: September 30, 2004.
Maritime Security: Partnering Could Reduce Federal Costs and Facilitate 
            Implementation of Automatic Vessel Identification System. 
            GAO-04-868. Washington, D.C.: July 23, 2004.
Maritime Security: Substantial Work Remains to Translate New Planning 
            Requirements into Effective Port Security. GAO-04-838. 
            Washington, D.C.: June 30, 2004.
Coast Guard: Deepwater Program Acquisition Schedule Update Needed. GAO-
            04-695. Washington, D.C.: June 14, 2004.
Coast Guard: Station Spending Requirements Met, but Better Processes 
            Needed to Track Designated Funds. GAO-04-704. Washington, 
            D.C.: May 28, 2004.
Coast Guard: Key Management and Budget Challenges for Fiscal Year 2005 
            and Beyond. GAO-04-636T. Washington, D.C.: April 7, 2004.
Coast Guard: Relationship between Resources Used and Results Achieved 
            Needs to Be Clearer. GAO-04-432. Washington, D.C.: March 
            22, 2004.
Contract Management: Coast Guard's Deepwater Program Needs Increased 
            Attention to Management and Contractor Oversight. GAO-04-
            380. Washington, D.C.: March 9, 2004.
Coast Guard: New Communication System to Support Search and Rescue 
            Faces Challenges. GAO-03-1111. Washington, D.C.: September 
            30, 2003.
Maritime Security: Progress Made in Implementing Maritime 
            Transportation Security Act, but Concerns Remain. GAO-03-
            1155T. Washington, D.C.: September 9, 2003.
Coast Guard: Actions Needed to Mitigate Deepwater Project Risks. GAO-
            01-659T. Washington, D.C.: May 3, 2001.
Coast Guard: Progress Being Made on Deepwater Project, but Risks 
            Remain. GAO-01-564. Washington, D.C.: May 2, 2001.
Coast Guard: Strategies for Procuring New Ships, Aircraft, and Other 
            Assets. GAO/T-HEHS-99-116. Washington, D.C.: March 16, 
            1999.
Coast Guard's Acquisition Management: Deepwater Project's Justification 
            and Affordability Need to Be Addressed More Thoroughly. 
            GAO/RCED-99-6. Washington, D.C.: October 26, 1998.

ENDNOTES
    \1\ Pub. L. 107-295, 116 Stat. 2064 (2002).
    \2\ GAO's analysis of the Coast Guard's budget is presented in 
nominal terms throughout this testimony.
    \3\ The $8.4 billion request for the Coast Guard represents about 
20 percent of the Department of Homeland Security's (DHS) budget 
request for Fiscal Year 2007.
    \4\ In addition to the $57.4 million request, the Coast Guard's 
Fiscal Year 2007 budget request includes a $5 million transfer from CBP 
to support the National Capital Regional Air Defense program.
    \5\ These seven programs are ice operations, search-and-rescue, 
marine environmental protection, marine safety, aids-to-navigation, 
U.S. Exclusive Economic Zone enforcement, and ports, waterways, and 
coastal security.
    \6\ The one additional program the Coast Guard anticipates meeting 
the target for is the illegal drug interdiction program.
    \7\ The Coast Guard's seven operational principles include the 
Principle of: (1) Clear Objective, (2) Effective Presence, (3) Unity of 
Effort, (4) On-Scene Initiative, (5) Flexibility, (6) Managed Risk, and 
(7) Restraint. U.S. Department of Transportation, Coast Guard 
Publication 1, U.S. Coast Guard: America's Maritime Guardian, 
(Washington, D.C., 2002).
    \8\ Consisting of approximately 39,000 active duty personnel, the 
Coast Guard is a multi-mission agency with a longstanding Federal 
leadership role in protecting life and property at sea, such as 
directing search-and-rescue operations. Furthermore, the Coast Guard is 
a military service responsible for protecting U.S. ports and waterways. 
Other U.S. military branches include: U.S. Army with approximately 
488,900 active duty personnel; U.S. Navy with approximately 358,700 
active duty personnel; U.S. Air Force with approximately 351,700 active 
duty personnel; and U.S. Marines with approximately 178,700 active duty 
personnel.
    \9\ A Coast Guard group is an operational unit that oversees 
station operations and provides guidance on policy and administrative 
matters.
    \10\ GAO, Coast Guard: Observations on Agency Priorities in Fiscal 
Year 2006 Budget Request, GAO-05-364T (Washington, D.C.: Mar. 17, 
2005).
    \11\ GAO, Contract Management: Coast Guard's Deepwater Program 
Needs Increased Attention to Management and Contractor Oversight, GAO-
04-380 (Washington, D.C.: Mar. 9, 2004).
    \12\ In June 2002, the Coast Guard contracted with Integrated Coast 
Guard Systems to identify and deliver the assets needed to meet a set 
of mission requirements specified by the Coast Guard. Integrated Coast 
Guard Systems is a business entity jointly owned by Lockheed Martin 
Corporation and Northrop Grumman Ship Systems, which act as first-tier 
subcontractors and either provide Deepwater assets or award second-tier 
subcontracts for providing the assets.
    \13\ The Coast Guard disagreed with and declined to implement a 
recommendation that pertained to updating its cost baseline to 
determine whether the Deepwater acquisition approach is costing more 
than a conventional acquisition approach. While we stand behind our 
original recommendation, we decided not to pursue it further because 
the Coast Guard has decided not to take action on this issue.
    \14\ Composite materials, as used in shipbuilding, are typically 
fiber-reinforced plastic laminates consisting of plies of various 
reinforcing fabrics laminated together. Integrated Coast Guard Systems 
decided to use composite materials for the FRC's hull after an analysis 
of alternatives found that the use of such materials instead of steel 
generally offers several advantages, such as lower maintenance and 
life-cycle costs, a longer service life, and reduced weight.
    \15\ GAO, United States Coast Guard: Improvements Needed in 
Management and Oversight of Rescue System Acquisition, GAO-06-623 
(Washington, D.C.: May 31, 2006).
    \16\ In April 2006, the Department of Homeland Security approved a 
new acquisition program baseline for Rescue 21 with a total acquisition 
cost of $730.2 million after decreasing certain functionality.
    \17\ The Coast Guard's Fiscal Year 2007 budget request for Rescue 
21 is $40 million, a slight decrease from the $41 million Congress 
approved for Fiscal Year 2006.
    \18\ Our concerns from past audits of the Deepwater acquisition 
focus on the Coast Guard's overall ability to effectively and 
efficiently manage its major acquisitions, oversee contractors, and 
translate lessons learned from one program to another.
    \19\ GAO-05-757; Coast Guard: Preliminary Observations on the 
Condition of Deepwater Legacy Assets and Acquisition Management 
Challenges, GAO-05-651T (Washington, D.C.: June 21, 2005); Coast Guard: 
Preliminary Observations on the Condition of Deepwater Legacy Assets 
and Acquisition Management Challenges, GAO-05-307T (Washington, D.C.: 
Apr. 20, 2005); GAO-05-364T; Coast Guard: Deepwater Program Acquisition 
Schedule Update Needed, GAO-04-695 (Washington, D.C.: June 14, 2004); 
GAO-04-380; Coast Guard: Actions Needed to Mitigate Deepwater Project 
Risks, GAO-01-659T (Washington, D.C.: May 3, 2001); Coast Guard: 
Progress Being Made on Deepwater Project, but Risks Remain, GAO-01-564 
(Washington, D.C.: May 2, 2001); and Coast Guard: Strategies for 
Procuring New Ships, Aircraft, and Other Assets, GAO/T-RCED-99-116 
(Washington, D.C.: Mar. 16, 1999).
    \20\ Coast Guard officials reported that the agency upgraded a 
console at one unit to mitigate operational challenges and installed a 
new antenna at a second unit to address coverage gaps.
    \21\ The National Plan to Achieve Maritime Domain Awareness was 
developed in October 2005 in support of the National Strategy for 
Maritime Security, as directed by National Security Presidential 
Directive--41/Homeland Security Presidential Directive--13. The plan 
outlines national priorities for achieving maritime domain awareness, 
including near-term and long-term objectives, required program and 
resource implications, and recommendations for organizational or policy 
changes.
    \22\ GAO, Maritime Security: Partnering Could Reduce Federal Costs 
and Facilitate Implementation of Automatic Vessel Identification 
System, GAO-04-868 (Washington, D.C.: July 23, 2004).
    \23\ The assets discussed here vary greatly in terms of their size, 
age, and operating environment. In terms of size they range from a 420-
foot polar icebreaker to a 21-foot trailerable boat to service aids-to-
navigation. In terms of age, the range is 2 years for recently 
commissioned seagoing buoy tenders to more than 60 years for inland 
construction and buoy tenders. ATON assets are located on both East and 
West Coasts, as well as the Gulf Coast and major Inland Rivers such as 
the Mississippi while domestic icebreakers are located on the East 
Coast and Great Lakes. The polar icebreakers operate in both Arctic and 
Antarctic regions.
    \24\ The Coast Guard defines a cutter as any Coast Guard vessel 65 
feet in length or greater, having adequate accommodations for crew to 
live on board. Boats are defined as those vessels under 65 feet in 
length that usually operate near shore and on inland waterways.
    \25\ A casualty is a deficiency in mission essential equipment; a 
major casualty causes the major degradation or loss of at least one 
primary mission.
    \26\ The standard target level for the ``percent of time free of 
major casualties'' is 72 percent, which is a Navy standard that has 
been adopted by the Coast Guard.
    \27\ In addition to the two Polar Class icebreakers, the Coast 
Guard acquired a third icebreaker, the HEALY, in 2000. Unlike the Polar 
Class icebreakers, the HEALY was designed to be an Arctic scientific 
platform and does not have the capabilities to break ice in the 
Antarctic under most conditions. According to Coast Guard officials, 
although the HEALY also has maintenance issues, the condition and 
extent of maintenance needed for the Polar Class icebreakers is more 
severe.
    \28\ National Research Council of the National Academies, Polar 
Icebreaker Roles and U.S. Future Needs: A Preliminary Assessment, 2005. 
The Council has been tasked to conduct an assessment of the current and 
future roles of the Coast Guard's polar icebreakers. A final report is 
expected to be released this summer in which it will provide a more 
detailed analysis and evaluation of the assets and capabilities needed 
to carry out the mission over the longer term.
    \29\ NSF is the lead agency responsible for supporting U.S. polar 
research. As such, it is the primary user of the polar icebreakers to 
provide logistical support and serve as research platforms in the polar 
regions. Coast Guard officials told us that under the terms of a 
memorandum of agreement, entered into in 1986 and updated in 1999, NSF 
and other users of the icebreakers reimbursed the Coast Guard for some 
of the operational costs.
    \30\ For Fiscal Year 2006, responsibility for funding the polar 
icebreaking assets was transferred to NSF, with the Coast Guard 
retaining custody of the assets to operate and maintain them. The 
President's budget request for Fiscal Year 2007 proposes to continue 
this arrangement. With this transfer of budget authority to NSF, Coast 
Guard officials indicated that while the Coast Guard plays an advisory 
role to NSF on the maintenance needs of the icebreakers, NSF is now 
responsible for making funding requests for maintenance projects such 
as the service life extension project.
    \31\ The Coast Guard's primary mission for the National Capital 
Region Air Defense program will be to determine intent of, and compel, 
low and slower moving aircraft to clear National Capital Region 
protected airspace.
    \32\ The Coast Guard's previous experience with air intercept 
activities includes responsibility for air intercept during planned 
national security special events, such as the Democratic and Republican 
national conventions and the Super Bowl, as well as performing some air 
intercept activities as part of its illegal drug interdiction program.
    \33\ Nonprobability sampling is a method of sampling where 
observations are selected in a manner that is not completely random, 
usually using specific characteristics of the population as criteria. 
Results from nonprobability samples cannot be used to make inferences 
about a population because in a nonprobability sample some elements of 
the population being studied have no chance or an unknown chance of 
being selected as part of the sample.
    \34\ The Exclusive Economic Zone is defined as an area within 200 
miles of U.S. shores in which U.S. citizens have primary harvesting 
rights to fish stocks. The Coast Guard also refers to the U.S. 
Exclusive Economic Zone enforcement program as either the foreign fish 
enforcement program or as other law enforcement.
    \35\ According to the Coast Guard, the C-2 combat readiness level 
is defined as the level at which a unit possesses the resources and is 
trained to undertake most of the wartime missions for which it is 
organized or designed.

    Senator Snowe. Thank you, Mr. Caldwell. I appreciate your 
testimony, as well, and the recommendations and in-depth 
evaluation of the overall performance of the Coast Guard and 
all of its programs. And we're at a critical moment for the 
Coast Guard.
    Let me start with you, Admiral Allen, with the Deepwater 
Program, because it's an ongoing concern of mine, and I know it 
is of yours and the Coast Guard's. And, obviously, the GAO has 
done extensive review and analysis. In one of the last hearings 
that we held on this question, we were informed that we can 
decrease the number of assets, the number of cutters and 
planes, and increase the capabilities. One, I have a concern 
about that, because there's no substitute for having a presence 
with either of our cutters or our planes. The second ongoing 
problem is whether or not we're going to be able to accomplish 
this goal while making the investments in the recapitalization 
of our assets over a 20- to 25-year period. This timeline has 
already been extended by 5 years, and we're trying to 
accomplish this goal at a time in which you're facing some very 
aging equipment. So, is that the right solution? Because the 
longer it goes, I think you're going to have extensive 
problems. Obviously there are cost overruns that are associated 
with the program. We've already identified, an increase from 
$17 to $24 billion. And then, of course, we had the experience 
with the Fast Response Cutter, that you now have to go back to 
the drawing board because of the conceptual designs of that 
program. And I gather there were problems with the trials of 
the original design.
    So what's the future for Deepwater, as you see it, given 
the urgency to get some of these assets online sooner rather 
than later? A 20- to 25-year timetable is about a quarter of a 
century. With the first National Security Cutter scheduled to 
come online in August 2007, how do you see this timeline 
working? Is this realistic? I proposed, as you know, an 
accelerated timeframe for Deepwater that would have actually 
saved money for the taxpayers, but we couldn't get the 
Administration's support for that program. I think it puts men 
and women in jeopardy, given where we are today and what's at 
stake. And the fact is that it is an open invitation for 
further delays, when you're talking about 20 to 25 years.
    Admiral Allen. Thank you for the question, Madam Chairman. 
And, in fact, for the last 2 to 3 months, as I've gone through 
the confirmation process, I've spent a lot of time thinking 
about it. If I could just give you a couple of general 
thoughts.
    First of all, the overall system. I think we've got that 
right. In other words, this interlocking, integrated system of 
cutters, aircraft, and sensors that can talk to each other and 
pass information. I think the basic rationale is sound, and 
remains sound. I, like you, look at the prospect of, at the end 
of this acquisition, out 25 years, something which I may never 
see, and wonder what the executability is.
    But when I look at the problems that we have before us 
today related to the operational mix we're involved in, how 
these assets need to be employed for the mission set that we've 
got, I think, in the near term, I have to take a more immediate 
context of the gaps that we have in maritime patrol aircraft 
hours and patrol boat hours, as far as meeting the requirements 
the country has levied on us today, and then generalize that to 
a larger context. If you could accelerate or you could move 
something forward, how should you do that?
    And I think there are a couple of basic elements related to 
that. One is filling immediate gaps. And the gaps that we've 
established are maritime patrol, patrol boat hour gaps. The 
second one is, get these articles to where they can be 
produced, and produce them as rapidly as you can. The National 
Security Cutter is poised to be put in the water and be 
delivered next year. I went to Pascagoula last week, on one of 
my first trips, and I actually walked through the entire ship, 
looked at it, looked at the progress. I think we're making real 
progress there. I think the ship is going to be an extensive 
improvement over the current fleet and our capability out 
there, and we look forward to getting that there.
    The patrol boat fleet, we've been bookended by performance 
on both ends. The interim solution, to extend the 110-foot 
fleet to 123 feet, has produced structural problems with the 
extension. We terminated that at eight, and then decided to 
accelerate the development of the Fast Response Cutter. There 
are design issues associated with that composite hull that 
needed to be worked out. But, in between those two performance 
bookends is a patrol boat gap that I have to fill. For that 
reason, we're going to focus on some type of an off-the-shelf 
what we call a paracraft, or replacement patrol boat design. It 
gives us an immediate filler for those hours that we need. 
We're not walking away from the composite structure, because we 
think there are definite advantages over the life cycle 
regarding maintenance costs, but until that's proven to be 
effective and producible, we need to fill those patrol boat-gap 
hours.
    So, when I look at the overall acquisition, I look at, what 
do I need, today, to be most effective for the country? How 
does that fit into the overall 25-year timeline? And if there 
is an opportunity to move that up, or funds are made available, 
I would focus on those near-term gaps first, ma'am.
    Senator Snowe. How bad is the gap, in terms of the hours, 
for the patrol boats?
    Admiral Allen. I can give you a statement for the record, 
and I can expand on it for the record, but I believe we're 
talking about 20,000 hours in patrol boats. And I'd have to get 
back to you on the aircraft hours, but we can submit that for 
the record.
    Senator Snowe. And so, how soon could you get off-the-shelf 
patrol boats online?
    Admiral Allen. We've got a request for information out to 
industry right now. We're planning on reviewing that. And I 
would think to awarding a contract in the next 6 to 12 months 
is doable.
    Senator Snowe. I guess that sort of illustrates my 
concerns, when I look at the magnitude of this recapitalization 
project and the age of many of the cutters and the aircraft. 
It's troubling, because it just seems to me that the program is 
going to be much more vulnerable to deferrals, postponements, 
or cost overruns, over such a long period of time, particularly 
when there's such a necessity, right now, to get new equipment.
    Admiral Allen. I agree----
    Senator Snowe. Do you----
    Admiral Allen. I agree----
    Senator Snowe.--think it's realistic to have a 20- to 25-
year timeframe?
    Admiral Allen. Well, what I would rather propose is, I 
provide you information on how we close those gaps, and how we 
do it as quickly as possible, because I think that's the better 
measure of what we need to have right now. And it may be less 
than 25, but what we really need is those capability gaps 
closed.
    Senator Snowe. Were you surprised by the setback on the 
Fast Response Cutter?
    Admiral Allen. Well, it was--it had to do with the 
feasibility of the design, vis-a-vis the requirements we 
provided to them. I think there was a little bit of surprise, 
but we also know there's value to this composite hull, if it 
can be done, and we're not trying to jeopardize that, at this 
point. But the real issue right now is getting patrol boats out 
there in the Straits of Florida and wherever else we need them.
    Senator Snowe. What do you see the implications being, Mr. 
Caldwell, of this question, on the Deepwater Program?
    Mr. Caldwell. Senator Snowe, I know that last year you 
raised the issue about whether we should accelerate this 
program, and there are two points I'd like to make. The first 
is, on some of these programs, we're at a very critical stage, 
still in the design and the early part of the production. So, 
because of some of the problems that have arisen, in terms of 
both cost and schedule and other problems, as we have talked 
about, we would not be supporting acceleration, at this time. 
Once you have a proven design, and proven beyond just the 
design, but building and actually field them, then acceleration 
is a much more reasonable approach, as opposed to 20 years.
    Senator Snowe. In other words, you're suggesting that 
because this is still all in the design stage, and because the 
new capabilities are going to be incorporated into these 
cutters, that it's not feasible to accelerate the program until 
they get the first one online?
    Mr. Caldwell. Well, until you have a proven design, we 
would not be in favor of acceleration of the program.
    Senator Snowe. I understand what you're saying, obviously, 
given the experience with the Fast Response Cutter, but it just 
suggests to me that it's going to lead to a perpetual series of 
delays and deferrals. The Deepwater Program's already been 
extended by almost 5 years, and an additional $7 billion, in 
terms of cost. I hesitate to think about what that means for 
the long term. Will it be extended for another 5 years, and 
another? That's the concern. I don't know what can be done 
about it, but I think that when you have this extensive 
timetable of 25 years there are just an infinite number of 
possibilities for things to go wrong, and it prevents us from 
focusing on getting things done. Obviously we want to get it 
done right, but the question is whether or not you can 
accelerate that timetable in a way that gets everybody focused 
on the ultimate goal. I just don't see the 25-year timetable. 
It seems unrealistic, given the need that is abundantly 
apparent with the current assets being as old as they are.
    Admiral Allen?
    Admiral Allen. I think Mr. Caldwell said something that was 
fairly germane. I think, in lieu of looking at an acceleration 
of a 25-year program--and maybe I wasn't clear in my previous 
comments, and I'd like to add onto his--if you take what your 
urgent gaps are, and you address those, and you take what units 
are designed and producible, where you can accelerate them, 
because you have a proven design, and you can do something with 
it, certain elements of the acquisition might be accelerated or 
brought forward. But to take the entire system and say you're 
going to move it to the left is a little more difficult. That's 
the reason I'm focusing on near-term requirements, what we have 
that can be produced and be brought in quickly, because that's 
a meeting of the most effective, efficient way to do the 
acquisition against the requirements that I have now.
    Senator Snowe. What about the current status of your fleet? 
Can it be sustained for the long term, given this prolonged 
schedule, over 20 to 25 years?
    Admiral Allen. Well, specifically looking at the 110-foot 
patrol boat fleet, the 210-foot medium endurance cutter fleet, 
and the 270-foot medium endurance cutter fleet, the mission 
effectiveness programs we have right now, we believe, are 
viable bridging strategies that will give us those cutter 
hours, pending the construction of the National Security Cutter 
in the fall on OPC. We think that is stabilized. The problem 
right now is that patrol boat filler for that--the gap in those 
hours.
    Senator Snowe. Thank you.
    Senator Cantwell?
    Senator Cantwell. Thank you, Madam Chair.
    Admiral Allen, I have a--we don't know each other too well. 
We've had a chance to talk in my office. But I get a sense you 
are a man of few words, but great action. And I, again, 
appreciate your work in response to Katrina and Rita. And, 
certainly, if there was a test run for the complexity and 
challenges of the Deepwater Program, you just had them in 
dealing with that situation.
    I'd like to delve a little further into this issue and get 
your honest response to where you think we should go in looking 
at the program from a comprehensive level of contract and 
contract negotiations. Obviously, my colleague talked about 
some of the challenges from just purely being behind. And Mr. 
Caldwell has documented this in more detail in his report. I 
wonder if you believe, since GAO has long advised us about the 
contract risks and the challenges with lack of oversight by the 
Coast Guard, and particularly this lack of competition by 
subcontractors, whether you would consider renegotiating the 
contract to ensure that the contractor really does adhere to 
the challenges of having competition. And what, specifically--
if you were willing to do that, what would you put into that 
kind of change to the contract that would assure that we're 
getting true competition?
    Admiral Allen. That's an excellent question. If I might 
couch it in terms of the award term decision that was just 
made, that might be the best way to explain it.
    The evaluation of the base award term that was just 
completed focused on operational effectiveness, total ownership 
cost, and customer satisfaction as criteria by which we were 
going to judge the performance of integrated Coast Guard 
systems. It was clear to us, as we moved through the first 
award period, that issues like competition--and we also had 
concerns in logistics and management and execution of the 
program, as have been raised here--as part of the award term 
decision process to move forward, we were allowed to award up 
to 60 months in the first award term. We only awarded 43, based 
on the evaluation factors that I just stated. But, as we move 
forward, to ensure that we're going to address the issues that 
you've raised, we have changed the criteria set by which we are 
going to evaluate integrated Coast Guard systems. It's going to 
consist of cost control, operational effectiveness, program 
management and execution, logistics, and the fifth one is 
competition, ma'am.
    Senator Cantwell. Does that mean you're going to 
renegotiate that contract, or does that mean you're----
    Admiral Allen. Well, we're going to----
    Senator Cantwell.--just holding them----
    Admiral Allen.--evaluate their performance against whether 
or not they are using competition.
    Senator Cantwell. And what's the time period by which 
you'll judge whether they meet the criteria that you're laying 
out for them?
    Admiral Allen. It could be up to--it could be the 43-month 
award term that was just announced. In other words, this is the 
criterion by which to judge there will be any--how we will 
proceed after the 43-month period, ma'am.
    Senator Cantwell. And now that you've gone through that 
exercise, if you were starting fresh on this, what kind of 
changes would you make to the way that these contracts are 
awarded?
    Admiral Allen. Well, I think the five areas that we've 
noted are the ways we would change them, because that's what we 
have changed. It includes a focus on logistics and a focus on 
competition. And we agree on that.
    Senator Cantwell. Mr. Caldwell, your recommendation is to 
develop a comprehensive plan for holding the system integrator 
accountable?
    Mr. Caldwell. Yes, Senator Cantwell, that was one of our 
recommendations, and we've looked at it in detail. It is 
partially implemented, and some of the things that Admiral 
Allen has just gone over discuss that.
    To get at your larger question, you seem to be asking 
whether the systems acquisition was approached the right way? 
And that's an area where we did have a recommendation to 
capture comprehensive data on what the traditional approach 
would have cost, versus the approach they've taken now. And 
that's one recommendation the Coast Guard has decided not to 
implement. And this is one where, without certain data being 
collected, I'm not sure we'll ever know that.
    Senator Cantwell. We'll ever know what? I mean, just to 
be----
    Mr. Caldwell. Well, I think, from a larger perspective, of 
government acquisition of major systems, it's a very innovative 
approach that they've taken. We've found that some of the risks 
that we've talked about in our earlier reports, going back 
several years, have come to realize, in terms of schedule or 
skippage and things like that----
    Senator Cantwell. Could you elaborate on what you mean by 
``innovative''?
    Mr. Caldwell. Well, they've contracted out the contract 
management, basically, in terms of having very open--instead of 
coming up with very detailed requirements of individual assets 
and systems, the Coast Guard has said--and I think this is 
consistent with some of the guidance Coast Guard got from OMB 
and some other larger trends in government acquisition--to 
focus on capabilities. We don't need a ship that does this, or 
we don't need a helicopter that does this other thing. What we 
need is the capability to do this type of mission. And then, 
let the contractor come up with what the details of that will 
be. And the contractor, then, has a larger role than the 
traditional role, in terms of actually developing the 
requirements, which, in traditional acquisitions, is done 
within the government side.
    Senator Cantwell. I'm not sure I understand what you're 
saying about the feature set that you get from basically hiring 
a contractor to do the subcontracting work, versus a normal 
procurement process. I really want to understand this point, 
because you're saying innovation has brought us a better 
product, but certainly it has brought us big delays, cost 
overruns, and a lack of competition. And, obviously, juxtaposed 
to other procurement programs that we have for the Federal 
Government, it is a very different program. So, I want to 
understand exactly--with these cost overruns and challenges and 
delays, exactly what innovation is getting us.
    Mr. Caldwell. I did not say that innovation brought us a 
better product. What I had said was that the approach the Coast 
Guard took was innovative. And the difference there is, I 
think, partly because of limitations in the acquisition 
capacity that the Coast Guard had when they came up with 
Deepwater, as well as a new approach to define capabilities, 
but not the specific requirements of individual assets, the 
Coast Guard took the approach that they did with the systems-
of-systems integration approach.
    Senator Cantwell. Yes, Admiral Allen, did you want to 
address that?
    Admiral Allen. If I could just add on to what Mr. Caldwell 
said, our thought, at the start of the acquisition, was to take 
an area of operation, in the ocean, the missions that had to be 
performed there, and not assume that we would do a one-for-one 
replacement on either an aircraft or a cutter, and that both 
the cutters and the aircraft that we procured would be 
connected by a network to make them interoperable. And we asked 
industry to propose a solution to us that this would be the 
type of portfolio of assets, and the network that would combine 
them would produce your mission results. That's what they 
provided to us in their offer, and that's what we awarded the 
contract based on in 2002. The assets, as they're being 
delivered, are capable, and they are an improvement over the 
existing assets. The timing, the cost, and the schedule are 
issues that we're dealing with right now. But the innovative 
approach to buy this as a system, we believe, remains sound. I 
walked through the National Security Cutter in Pascagoula last 
week, and it is an extraordinary vessel compared to the 378-
foot cutters that are patrolling in the Bering Sea right now. 
So, it's a matter of delivering the system.
    Senator Cantwell. And you don't think that you would have 
gotten that under a different procurement process?
    Admiral Allen. Well, there would have been a couple of 
challenges. And this is after the fact, but I think these are 
the challenges we would have faced. We would have faced the 
challenge of taking new cutters bought at different periods of 
time, and new aircraft, and integrating them, in terms of 
communications. One of the first things we had to do after we 
bought the H-60 aircraft that we have right now, we found out 
that there was a problem with high-frequency communications due 
to locations of antennas and emitter problems, and we had to go 
back and retrofit. We were trying to do away with those types 
of configuration problems by actually buying a network.
    The other issue with using the systems integrator was that 
the Coast Guard has no equivalent of the Naval Sea Systems 
Command, SPAWARS, or NAVAIR. In other words, we don't have a 
body that just does that full time, because we don't buy these 
types of articles that often, so there is no capacity or 
competency in that area inside the Coast Guard to do that 
integration.
    Senator Cantwell. What if you did have that capacity?
    Admiral Allen. Well, moving forward, that is something we 
need to think about developing inside the Coast Guard.
    And the third area is just the personnel strength to be 
able to execute some of this stuff with the staffing 
limitations that we have.
    I was going to get to it later on, but we are--I am going 
to take a baseline look at our acquisition structure inside the 
Coast Guard within the next 90 days, and make recommendations 
to the Department to align with the new Chief Procurement 
Officer organization and look for some better--organizational 
structure that will produce better performance for the Coast 
Guard.
    Senator Cantwell. I'd be very interested in seeing your 
recommendations on that. I, like Chairwoman Snowe, remain very 
committed to the Deepwater Program. They're resources that we 
surely need and have delayed for a long time. But we also are 
paying a high price for this innovation that you are discussing 
here, and I think my sense of the situation is, we need to go 
beyond what you have implemented for the next 43 months, and be 
aggressive at looking at the structure and the alternatives 
that would help some of that core competency be retained in the 
Coast Guard, because I think not only will we get the product 
that you're actually looking for, we'll actually get it 
cheaper, and probably on schedule, because those outlines of 
core issues in capabilities will be done by the customer, as 
opposed to a contractor--not that there isn't great contract 
experience out there; I'm simply saying I think cutting the 
cost of the Deepwater Program is going to be a big challenge 
for us to move forward on getting the end product that we 
really want and having the faith of our colleagues to actually 
make the appropriation commitment there. And we would hate for 
that appropriation commitment to drag because of concerns about 
cost overruns or delays.
    I know we've been joined by another colleague, Madam Chair, 
but if I could just ask the Admiral about the Oil Spill 
Liability Trust Fund and where he thinks we need to go with 
that trust fund, whether we're going to run out of resources, 
given what we just saw in the Gulf and what we had to do for 
cleanup after Katrina and Rita. What are your thoughts about 
addressing the possibility of that fund's depletion in the 
future?
    Admiral Allen. Well, first of all, let me thank the 
Committee and the Members of Congress, in advance of Katrina, 
for recognizing that we had a problem with the depletion of the 
Oil Spill Liability Trust Fund, when the tax on crude oil had 
lapsed and the ability to replenish that had stopped, and we 
took care of that problem, just to find ourselves in the midst 
of the significant response associated with Katrina.
    And what we found in Katrina, which was quite unprecedented 
in Coast Guard history, was an interaction with the Oil Spill 
Liability Trust Fund as it relates to oil spill and cleanup, 
and the role of the Disaster Relief Fund and mission assignment 
to the Coast Guard under ESF-10, which is the oil and HAZMAT 
response, and how those two interact. And what we have found 
out is, these are two funding mechanisms that have never 
interacted at this level before in the history of those two 
statutory programs, if you will. We are working, right now, on 
ways to make sure that as we work through the mission 
assignment process with FEMA, we haven't done indelible harm to 
the Oil Spill Liability Trust Fund and depleted it where it 
would not allow us to be able to respond to a threat of a spill 
in the future. I think you're going to see us come up with some 
fairly constructive recommendations on how we need to move 
forward, not only with the Oil Spill Liability Trust Fund, but 
how the Coast Guard interacts with FEMA during a Stafford Act 
response, in terms of mission assignment.
    Senator Cantwell. You're going to look at alternative 
approaches to addressing claims and how to make sure that we 
don't have the depletion of the fund, though?
    Admiral Allen. That's correct. There are a lot of competing 
interests here, too. I mean, if there's--one of the basic 
tenets of our oil spill response structure is that there is a 
responsible party. You're not precluded from proceeding to 
cleanup--this happened in the wake of the Exxon Valdez, with 
the Oil Pollution Act of 1990--but there is the notion of a 
responsible party, which you go back and recoup the cost of 
cleanup from, if there is a responsible party to do that. The 
interaction of that role of the responsible party is, you move 
into a Stafford Act response after an emergency. And our 
mission assignment, I think, needs to be clarified. And we'd be 
happy to provide more information to the Committee.
    Senator Cantwell. Thank you, Admiral.
    Thank you, Madam Chair.
    Senator Snowe. Thank you, Senator Cantwell. You make an 
excellent point, as well. I think it is critical that the Coast 
Guard develop an in-house expertise with respect to the 
oversight of Deepwater.
    I think if you're talking about ``ruthless execution,'' and 
``ruthless oversight,'' we should position that accountability 
within the Coast Guard, to ensure that they have the expertise 
to manage and to oversee this program. I just see it being 
unrealistic--sustaining this timeframe of 20 to 25 years. We're 
just beginning the program, and we already have cost overruns, 
extension of the schedule, and design problems. I question 
whether or not the Coast Guard is going to be in the best 
position to meet all these responsibilities. Not even 
anticipating what occurred last fall, think about the demands 
that were placed on the men and women of the Coast Guard, and 
their assets. How do you continue to meet those 
responsibilities, in addition to homeland security, and 
maritime response? It makes a compelling case for figuring out 
how to do this differently while sustaining the appropriations 
for this program. Deepwater is very sensitive to 
appropriations, year to year, and can ill afford any decrease 
because that could affect our ability to maintain the timetable 
of this program on an annual basis.
    Senator Lott?

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

    Senator Lott. Thank you. Thank you, Madam Chairman, for 
having this hearing and for the leadership you provide in these 
critical areas. And, I must say, I think you're looking 
especially resplendent in your Seersucker outfit today.
    [Laughter.]
    Senator Snowe. See, I called up Trent this morning to see 
what he was wearing.
    [Laughter.]
    Senator Lott. It's a growing trend in Maine, I understand.
    Senator Snowe. Oh, yes.
    [Laughter.]
    Senator Lott. But we're together when it comes to ships, 
so----
    First, Admiral Allen, thank you, again, for your service--
thank you for your service to our country, and particularly to 
the Coast Guard, and your effort to help us to try to bring 
some order out of the chaos that we all had to deal with after 
Hurricane Katrina. We were hit with a devastating blow, more 
than any of us realized in the immediate aftermath. And, as we 
look back on it, I think we still sometimes underestimate, you 
know, the catastrophe that we had there, both the hurricane in 
Mississippi, the flood in Louisiana, and the difficulty in 
dealing with it afterward. I have been particularly critical of 
some Federal response, particularly at FEMA and, to my great 
disappointment, even the U.S. Army Corps of Engineers. But one 
part of the Government that really did a fantastic job, in my 
opinion, was the Coast Guard. I've said it publicly before, and 
I'm going to say it every chance I get, the Coast Guard's 
response before the hurricane, and their rescue efforts in the 
immediate aftermath, the leadership you provided, the fact that 
you were responsive and you did help bring some modicum of 
order out of all that, is greatly appreciated. So, I was 
delighted to see that you were going got be the Commandant. And 
you've got some work to do here, but thank goodness it's a 
good, strong agency, good people, and we appreciate the service 
you provide to our country and to the men and women in this 
country--particularly those of us that live along the 
coastline.
    Now, having said that, I was there when we were talking 
about, you know, creating the Department of Homeland Security, 
this mammoth new department, where we brought in, whatever, 
120-something agencies and bureaus, you know, parts of other 
departments, and brought it in under this new umbrella. I 
remember Senator Ted Stevens was particularly antsy about 
putting Coast Guard in Homeland Security and enveloping it in 
another department. I've always wondered why Coast Guard has 
been bumped around the way you have. You were--you know, I 
guess, at some point, maybe you were affiliated with the 
Pentagon, but then you were at Transportation, and now you're 
at Homeland Security. Where else have you been? Don't answer 
the question, but----
    [Laughter.]
    Senator Lott.--Senator Stevens was right in saying--
questioning that move, but he also insisted that we kind of 
wall you off in your role, in your ability to act as the Coast 
Guard, from, you know, total, you know, control by the 
Department of Homeland Security. Has that been achieved? Has it 
worked? Is it working? Is there a problem with the sort of 
unique role and position you have in the Department of Homeland 
Security?
    Admiral Allen. Senator, I think it has worked. As you know, 
based on the efforts of this Committee and others in the 
Congress when the Coast Guard was shifted over, Sections 888 
and 889 of the Homeland Security Act identified the mission set 
and that would be untouched as we moved over. That allowed us a 
certain amount of stability and maturity, I think, as sustained 
Coast Guard operations, but also allowed us to be a really 
contributing member of the Department as we've gone in.
    And I think we are a better organization for being in the 
Department of Homeland Security, for the following reasons. 
Number one--and I'm pleased to announce--ever since we went 
into the Department of Homeland Security, we've gotten our 
appropriations by 1 October.
    Senator Lott. You did what?
    Admiral Allen. We got our appropriations by 1 October.
    Senator Lott. That's a novel thing.
    [Laughter.]
    Admiral Allen. Second--I'll take the case of FEMA, because 
you're well aware of the response down in the----
    Senator Lott. Sure.
    Admiral Allen.--Gulf. Our interaction with FEMA has 
increased dramatically since we went into the Department, not 
just associated with the Katrina response. We are a better 
organization for having FEMA in the Department working with us, 
and we think FEMA is a much better organization for being in 
the Department with the Coast Guard and working together. We 
have predesignated Federal officials for this hurricane season 
from the Coast Guard, working with FEMA Federal coordinating 
officials in advance, looking at evacuation plans, trying to 
address problems, so we won't have to revisit what happened 
last year.
    Senator Lott. You sort of came to the defense of FEMA. And 
I think that's unfortunate. But I'm glad to hear you're working 
together. They have not functioned well. They have not--the 
chain of command is convoluted and chaotic. You know, when you 
try to get money from here to there, I mean, it goes from--
what? It has to be approved by OMB. Treasury has to release the 
money, I guess. It goes to FEMA. It goes to MEMA. It goes to 
the Army Corps of Engineers. It goes to some contractor. It's 
endless.
    One of the reasons why I think you were effective in rescue 
and in the aftermath of the hurricane, including, you know, 
clearing out obstacles out of navigable channels that we needed 
cleared quickly, was because you weren't dealing with a 
tremendous chain of command. You didn't have to check with the 
Secretary of Homeland Security to do your job. I think that's 
part of FEMA's problem. Now, I do like the idea of 
coordination, cooperation, planning in advance, but they have a 
huge problem with chain of command.
    Now, why were you able to do such a better job in your role 
at Coast Guard than anybody else at Homeland Security?
    Admiral Allen. Well, under Homeland Security Presidential 
Directive 5 in the Homeland Security Act, the Secretary is the 
National Incident Manager for non-Title X operations. And I 
felt completely empowered, as a principal Federal official, to 
do what needed to be done down there. And I was acting at one 
level above the FEMA Federal coordinating official. And, at one 
point, I was designated as the FEMA Federal coordinating 
official, which was somewhat unprecedented.
    Senator Lott. And things got better almost immediately.
    Admiral Allen. Well, I felt I was empowered to act, sir.
    Senator Lott. Well, that's the key. But--well, I appreciate 
your time and your comments on that, and what you do. I know my 
time is out. But if you would bear with me just a minute more.
    On the Deepwater Program, this is critical for the future 
of the Coast Guard. I mean, I'm very familiar with the Coast 
Guard, particularly in the Gulf and the--you know, the tin cans 
you're still, you know, having to use down there, and doing the 
best you can with that, but you need a different kind--you need 
modern crafts, you need a--you know, a fleet that's different 
from what you've had in the past. I know there have been 
questions--and I don't want to ask you to repeat it--but, you 
know, overall, how do you feel? I mean, there have been some 
kinks, there have been some problems. You--you're having to 
deal with that. It was a new thing for Coast Guard, and it was 
going to have to naturally be evolutionary, in a way. But, how 
do you see it right now? Just a generic answer, if you would.
    Admiral Allen. Well, as I stated earlier, I think the 
systems approach, where we're looking at how the cutter, 
aircraft, and sensors all interact is a very sound decision. 
Different pieces of that have evolved differently. I think we 
have to lock down requirements. We have to get producible 
designs. And we have to get to ruthless execution and produce 
these things. We have some--certain platforms that are 
problematic right now. One is the patrol boat. But I can tell 
you, a week ago today I was in Pascagoula. I took the Master 
Chief of the Coast Guard, and we walked from the stem to the 
stern, and down to the lower decks of the new National Security 
Cutter. That's going to be an outstanding operating platform 
for the Coast Guard. So, we need to get by the design issues, 
get these things into production, and then I'll be in a 
position to advise you all on acceleration and what the art of 
the possible is in getting these tools to our people as fast as 
we can.
    Senator Lott. Yes. Well, I think it's critical for the 
future of the Coast Guard. We want it done right. We don't want 
to waste money. So, I know you're going to give it your utmost 
attention, and I hope you will. And we'll do our part. And, 
Pascagoula, you said the magic word.
    [Laughter.]
    Senator Lott. Thank you, Madam Chairman.
    And thank you, Admiral Allen.
    Admiral Allen. Thank you.
    Senator Snowe. Thank you. Thank you, Senator Lott.
    Admiral Allen, obviously you're the head of America's lead 
agency for maritime security. One topic you and I discussed on 
the phone was that of port security, which obviously is a vital 
issue. One aspect of that emerged recently and publicly. I sent 
a letter to your predecessor about it, and I received a 
response last night. I appreciate that, and I'd like to have 
you discuss it this morning. I think it is crucial for us to 
understand exactly how the Coast Guard approaches the boarding 
of commercial ships entering the United States. In your letter, 
you said that you use a risk-based approach. Now, there are 
public reports indicating that the Coast Guard was giving 
advance notification about potential boardings to commercial 
ships before they enter the United States. I'd like to have you 
clarify for this Committee what exactly is the policy of the 
Coast Guard, regarding the boarding of ships. What is a risk-
based approach? Can we feel confident in that approach to 
identify any security threats? Do you give advance 
notification?
    Finally, I want to point out the fact that only 2 percent 
of the containers are inspected that enter the United States. 
As you know, Dr. Stephen Flynn, from Council of Foreign 
Relations, who has testified on numerous occasions, has 
indicated that we should have 100 percent inspection of the 
containers entering the United States. And yet, we only have 2 
percent, at this point. So, can you give us your perspective on 
this question? This is one of the foremost concerns in the 
Congress about our ability to address the vulnerability within 
our port security system. I don't think there's any question 
that this is truly a major vulnerability.
    And so, I'd like to have you address the question of 
advance notification of boardings, and then the issue of 
container inspection.
    Admiral Allen. Yes, Madam Chairman, I'd be happy to.
    First of all, if I could take you back to the several days 
following 9/11. The Coast Guard instituted an emergency rule 
that required a 96-hour advance notice of arrival for 
commercial shipping approaching the United States. That was 
done to allow us to vet crew lists, cargo, and the background 
of the vessel, and see whether or not it posed a risk to the 
United States. If it did, the vessel was denied entry until we 
could do an offshore boarding, most of the time with an armed 
boarding party. If we thought there were controls that needed 
to put be on the ship to bring it safely into port, we 
instituted them, at that point.
    Since 9/11, with the passage of the Maritime Transportation 
Security Act that has laid out other requirements for vessel 
security plans and facility security plans, we have a tiered 
approach to dealing with vessels as they come in. And let me 
start with the most high-risk to the lowest risk. And we do use 
a risk-based method in conducting our boardings.
    The first level is, if there was specific intelligence that 
would cue us to understand there's a problem onboard that 
needed to be dealt with. If we believe there is a dangerous 
situation on a vessel, we don't want to deal with it in a port. 
If you deal with a weapon of mass destruction on a vessel at 
the sea buoy, you're dealing with consequence management, at 
that point. We have protocols in place within the interagency 
to do coordination with either DOD, the FBI, and other folks, 
that allow us to do boardings far out at sea. And those are no-
notice boardings. The cutter comes over the horizon with a 
boarding team. Sometime they can be vertically inserted with a 
helicopter. And we would board those ships to address the 
threat as far offshore as we can.
    The second area would be as part of a normal screening 
process. And this would be the same as if you were arriving on 
a commercial airline and you had to clear Customs, and somebody 
ran your name, and there was a hit. When you arrived in port, 
you would be sent to secondary, and there would be a screening 
done. The second level of inspection would be if we have reason 
to believe that a ship needs to be inspected before it enters 
port. We would then direct it to an anchorage, or we would meet 
it offshore with a boarding party and make sure that the 
paperwork was checked, at which point we could ascertain that 
the information provided with the advance notice of arrival was 
correct.
    The third category would be a normal port call of a ship 
that has been inspected before. It's been ascertained that it 
did not pose a threat. They would come into the dock, do their 
normal Customs clearance, Immigration clearance, and be allowed 
to go ahead and proceed with their cargo operations. We may do 
spotchecks at that point to make sure they're in compliance 
with the International Ship and Port Security Code.
    But generally it's those three areas that we operate in, 
and our Captains of the Ports use risk-based decisionmaking 
models, and we have a matrix that assigns points on the flag of 
the ship, past performance, that would lead us to believe 
whether or not there's a problem on the vessel.
    Senator Snowe. But isn't it still a problem that we only 
inspect 2 percent of the containers? That really does pose a 
significant vulnerability, frankly. When you think about the 
fact that we have 6 million containers coming into the country 
every year and 7,500 commercial vessels, they present infinite 
possibilities for disaster because we don't inspect enough 
containers.
    Admiral Allen. Yes, ma'am, it's a good point. What I tend 
to look at when I think of port security and the maritime 
security regime for this Nation, I think of the totality of the 
threats and the vulnerabilities we may have to deal with. And, 
you're right, containers do present a vulnerability. Since the 
events of 9/11, we have conducted both threat and vulnerability 
assessments for the top 55 ports in the United States to let us 
know what is vulnerable and what kind of threat would be 
effective against those facilities or those vessels. In some 
cases, containers constitute a vulnerability. In other cases, 
as in Miami, it might be cruise ships. And then you have the 
threat that might be successful against it.
    I believe--and this is my opinion--that over the next 
couple of years, we will solve the container problem with 
technology. There are nonintrusive technologies that are being 
developed that will allow us to, in a useful amount of time, be 
able to check what is in those containers, especially high 
density materials, based on things like advanced spectroscopic 
portals and things like that. It needs to be done. I think the 
bar has been set on where the Department needs to go. Customs 
and Border Protection and the Domestic Nuclear Detection Office 
are working on the technical fix for that, and I think we need 
to be moving ahead rapidly, because there's an issue of public 
perception on the safety of containers.
    I would tell you, from the Coast Guard side, we also need 
to be concerned about the threat from vessel-borne improvised 
explosive devices, just from a vulnerability standpoint. In my 
view, that is a serious issue that probably needs to be 
addressed more than it has been in the past.
    Senator Snowe. And you only have 20 inspectors, as I 
understand it, with worldwide compliance. Is that true?
    Admiral Allen. Yes, ma'am. There are two pieces of 
frameworks that were established after 9/11. One is the 
Maritime Transportation Security Act, that lays out the 
procedures and rulemaking inside the United States for security 
plans for facilities and vessels. The International Ship and 
Port Security Code, which was negotiated in IMO at the same 
time with the MTSA passage, calls for international inspections 
of ports. That's where we have the 20 people--it is the foreign 
ports--and certifying that they are in compliance.
    Senator Snowe. Do you think that's sufficient?
    Admiral Allen. We could use more.
    Senator Snowe. How many would you----
    Admiral Allen. We anticipate, if we could increase the 
number of personnel assigned to that by 20 or 30, we could drop 
a cycle, which is currently between 4 and 5 years, down to 2, 
which we think is more acceptable.
    Senator Snowe. OK. And you've requested $2 billion for 
ports, waterways, and coastal security. That's 24 percent of 
the entire budget. Is that sufficient?
    Admiral Allen. Madam Chairman, we're kind of talking apples 
and oranges here. We have almost shifted to the mission-mix 
issue. Could I answer that question, if that's all right?
    Senator Snowe. Yes. OK.
    As part of our budget submission in the Coast Guard, we 
take the mission employment hours, and we load those with costs 
due to an--what we call a mission cost model. It's an 
algorithm. And we're able to say, based on the number of hours 
that we operated last year, in taking the entire budget of the 
Coast Guard, we can establish a pie chart on how much each 
program costs.
    If you move forward, and you try to use that for predictive 
purposes and budgeting, you run a real risk that it won't match 
the reality of that particular year. And I think the--
especially in non-homeland security mission areas, in search-
and-rescue and others, that may not be an accurate prediction 
of what we're actually going to do.
    The fact of the matter is, SAR comes first. You can say 
you're going to do so much SAR, but the fact of the matter is, 
you're going to do what SAR you have to do. It's a demand 
function, and we will do that.
    I would submit to you that the pie charts we provide you 
are a construct to better understand how we allocate cost to 
employment hours, but don't necessarily predict how we're 
actually going to execute the mission out there. We will do 
what needs to be done, based on risk assessment in the areas of 
responsibility we've given to our commanders, and SAR will 
always come first.
    Senator Snowe. No, I understand exactly what you're saying. 
And you're absolutely right.
    And on the question of inspectors, I think we ought to work 
further on that issue alone, because that obviously is an area 
that we obviously have to improve.
    Admiral Allen. Happy to do that, ma'am.
    Senator Snowe. OK.
    Senator Cantwell?
    Senator Cantwell. Thank you, Madam Chair.
    I'm going to continue with questions about port security, 
because I think it is one of the important issues. And I don't 
know if people understand that the Coast Guard has been given 
responsibility to actually look at the security system of 
foreign ports. I'm a very big supporter of any program that is 
point-of-origin, whether it's people or cargo. If we think 
we're going to wait until they get to the Port of Seattle or 
Port of Tacoma, it's a little late, when it comes to these 
weapons of mass destruction. What we want to do is make sure--
as you said, use technology, but make sure that the security 
starts at the point of origin.
    That is the Coast Guard's responsibility, I believe. And I 
don't know what you believe about the budget request and 
operational ability for you to carry out that mission, if you 
think that you have the resources there. And what do we need to 
do to get the International Maritime Organization to adopt 
protocols on security standards that would have us operating on 
a similar basis on an international scale, instead of just 
having the United States try to implement regimes here in the 
United States, at a point of time when it's probably a little 
late, once that cargo or personnel actually reach the shores of 
our country?
    Admiral Allen. I'm in complete agreement with you, Senator. 
First of all, there's a combination programmatic responsibility 
here between the Coast Guard and Customs and Border Protection 
Container Security Initiative and their C-TPAT program. Our 
piece of this relates to the international ship and port 
security protocols that were negotiated in IMO regarding the 
certification of the foreign ports. We have that piece. The 
issue related to advanced screening of containers is the 
Container Security Initiative, and we work very closely with 
Customs on that. So, they're handling, actually, the throughput 
of the containers and how they are screened in the ports; we're 
actually handling how the port is complying with the physical 
security standards for facilities and vessels that were 
negotiated in IMO. It is a shared responsibility, and we work 
closely with Customs and Border Protection.
    Following the passage of the Maritime Transportation 
Security Act we established, with the resources available, a 
certain inspections cycle that would allow us to complete the 
inspection of those ports on a 5-year cycle. As we move 
forward, if policy dictates it, that cycle will be shortened. 
It's going to require more people. And we would support that.
    Senator Cantwell. So, has funding been a primary issue on 
limiting the Coast Guard?
    Admiral Allen. I don't think it's been an issue. We just 
assumed a certain level of service. And if that certain level 
of service is not what we want, we need to change it, we need 
to add some more people to it. I don't think the decision was 
made with prejudice on what the level of funding will be. We 
just established the 5 years as a standard. And if that's not 
the standard we want, then we just need to source to the new 
standard.
    Senator Cantwell. But you're saying we haven't inspected 
all the ports yet, correct?
    Admiral Allen. We haven't finished the 5-year cycle, that's 
correct.
    Senator Cantwell. It's not as if we have the initial plan, 
correct? It's not as if we have these international protocols 
agreed to, and then you're going to investigate to see if 
they're being carried out.
    Admiral Allen. The protocols have been ratified by the 
signatories of the Safety of Life at Sea Treaty via IMO.
    Senator Cantwell. TWIC?
    Admiral Allen. Excuse me?
    Senator Cantwell. TWIC? You know, personnel security 
measures and a standard by which all port employees will be----
    Admiral Allen. Well, the Transportation Worker 
Identification Card is a domestic requirement related to the 
Maritime Transportation Security Act. There has not been an 
equivalent protocol----
    Senator Cantwell. Do you think we need one?
    Admiral Allen. Well, there is one working right now to--at 
least in the maritime area. It's a seafarers' identification 
card. We're working with the International Labor Organization.
    Senator Cantwell. Do you think that we need----
    Admiral Allen. I think the notion of enrollment, with 
biometric data, an ability to verify, through a card, who holds 
the card and whether or not the person holding that card 
matches the biometrics on that card, is suitable for anything 
worldwide transportation. There ought to be international 
standard. And I don't think anybody that I know would disagree 
with that. That ought to be the goal for all transportation 
systems in the world.
    Senator Cantwell. But we don't have that yet in place.
    Admiral Allen. Well, we can control, domestically, what we 
do through legislation and how we regulate the United States as 
a coastal state. And then we can negotiate, through IMO, 
international protocols, which, again, requires international 
consensus. It's a question of unilateral versus multilateral 
solutions.
    Senator Cantwell. I understand, but I'm saying, if you're 
going to investigate ports, and we're on a 5-year time--at 
least this Senator believes that a 5-year horizon without 
implementing those international protocols leaves us still with 
a great deal of vulnerability. And we've tried to put more 
resources into the budget--in fact, the Senate passed that, and 
then it was stripped out in conference--the resources that 
would have helped us pay for more of these international 
operations.
    Again, with so many cargo containers coming through 5 or 6 
different ports in the State of Washington, this is a very big 
issue for our State, and for many parts of the East and West 
Coast in making sure that we're getting international 
cooperation. So, I guess--just as when the Dubai issue came up, 
I think the Coast Guard responded within the framework of the 
questions being asked, but, at some point in time, I would like 
an assessment from the Coast Guard, from the bottom up--not, 
``Here's what we did with the resources and the decisions that 
you all have made,'' but, ``Starting from the bottom up, here's 
what the Coast Guard believes would be the international 
security regime that would help us.''
    Yes, I get that State and various other people then have to 
carry that out, but I think that we're in this Catch 22 every 
year, Madam Chairman, where, you know, the Coast Guard is 
dealing with the resources that it's been given, and saying, 
``This is what we can get done.'' And yet, we still believe 
that there are aspects of that mission that should be expedited 
or prioritized. And yet, then it comes to giving the Coast 
Guard the resources to do that, and we think that we do, at 
least from the Senate side, only to find out, then, that the 
resources are stripped out in conference. So, it's a continuing 
cycle, and I think the public wants to know that we take this 
port security issue seriously, particularly from the 
international regime perspective. Again, with situations in the 
Northwest, with the Ressam case coming through Port Angeles 
with explosives, and the amount of cargo container traffic, and 
the targeting of various transportation vessels off the coast 
of any of our States; these represent threats that we'd like to 
see a better regime on.
    Yes, Admiral, go ahead.
    Admiral Allen. If I could make one comment. Senator, I 
think you're right on target here. I think trying to look at 
what I would call the maritime security regime for a coastal 
nation-state in current global environment, you need to look at 
that as an entire system. And we tend to incrementally make 
changes since 9/11, and some of them were necessary right away, 
like the 96-hour advance notice of arrival, the extraordinary 
work done by this Committee on the Maritime Transportation 
Security Act. But, as I've been thinking about my transition 
into this job, I've also been thinking about, what is the end 
state? Where is it we want to be as a coastal nation-state 
managing the last global commons? What is the acceptable mix of 
both controls, freedom of navigation, freedom of access to the 
waters? And where does this end-state need to be, not only in 
terms of containers, but, ultimately, how we do manage 
shipping? What does this portend for recreational boating and 
the entire population that operates on the water out there?
    One of my goals is to come up with a Coast Guard strategy 
that can support my 4-year tenure that kind of lays out not 
only a legislative, but a regulatory and a budgetary, agenda 
about how you put this thing together in a meaningful system. 
And I would love to continue this discussion.
    Senator Cantwell. Well, I'd love to see those 
recommendations, because I think the United States has a lot of 
leverage here. But we need to give you the resources and hear 
those recommendations so that we use that leverage and get this 
implemented on an international basis. I think for us to 
continue this debate and think that, you know, just issuing 
TWIC cards, you know, for longshoremen here in the United 
States, is, you know, going to be the solution, or inspecting 
cargo right when it gets to our ports, I think, is missing the 
point. We have to make sure, as you said, using technology from 
the point of origin, that that cargo and product is secure 
before it even leaves those foreign ports. And if we can get 
that international cooperation, then we're certainly going to 
give U.S. citizens more security in this very, very busy area 
of traffic and movement of product.
    So, I will look forward to your thinking about this, and 
your legislative proposals.
    Admiral Allen. I would just make a quick note. Just 2 and a 
half weeks ago, we successfully culminated an agreement at IMO 
on long-range vessel tracking, which is a significant step 
forward. If you're going to be approaching a coastal State, and 
you've declared advance notice of arrival, it will be a 
requirement to be able to track that vessel out to 2,000 miles. 
If you're transiting near a coastal State, it'll be 1,000 
miles. I think this--in my view, this is a significant 
breakthrough. But that is where we need to go.
    Senator Cantwell. I agree. Thank you.
    Senator Snowe. Admiral Allen, to follow up on this whole 
port security question--I was mentioning Dr. Flynn. He 
testified recently before a House Committee, and he indicated 
that both Customs and Coast Guard are grossly underfunded, 
given the major new missions for both of your agencies that 
have been added since 9/11. Would you agree?
    Admiral Allen. Well, I think it becomes an issue of, how 
often do you want us to check what's going on in the ports? 
There are standards that have been established for both 
facility and vessel security plans, which is our piece of the 
port. The container screening is largely a Customs issue, with 
radiation portal monitors, and so forth. Again, it gets back to 
the response I gave to Senator Cantwell. The original 
implementation of the Maritime Transportation Security Act 
presupposed a certain level of service, if you will, to support 
that Act. If, from a policy standpoint, we want more frequent 
inspections of facilities or vessels, or random spotchecks, 
that will require more people to do that. And the question is, 
what is the threshold, in terms of risk, that we're willing to 
tolerate in the management of those facilities and vessels that 
are coming into the country?
    Senator Snowe. Yes. But, as Dr. Flynn indicated it's also a 
question not only of who's moving containers, but what is being 
moved in those containers. And I think that's what becomes a 
significant risk. So the question is, how are we going to 
tackle these problems? It's been 5 years since 9/11, and we're 
still grappling with this issue. And I guess it is a matter of 
technology. It is a matter of more resources. But is there 
something that you could recommend to this Committee in terms 
of where you think we could go to make some progress on this 
question?
    Admiral Allen. I think there is. And I'm probably moving 
away from my Coast Guard hat, and I'm probably speaking as a 
former Chairman of the Joint Requirements Council for the 
Department, having done the reviews of the Domestic Nuclear 
Detection Office and their work out at the Nevada test facility 
on the advanced spectroscopic portal that will allow us to do 
nonintrusive inspections, look for dense materials in 
containers, and allow us to proactively find out if there are 
any weapons of mass destruction in these containers. So, if 
you're asking my opinion from that standpoint, I support what 
Vayl Oxford and the folks over there are doing. And I think the 
quicker we can put that technology out there in the ports, we 
will do better, more efficient, and quicker cargo screening.
    Senator Snowe. OK. Well, I appreciate that. And I would 
appreciate any input that you could provide the Committee on 
that, because it's obviously a constant source of concern. I 
think that we have to make the commitment. We have held 
numerous hearings on this subject, and we're making very little 
progress, in finding something that we can do now to make these 
investments and certainly show and demonstrate our ability to 
get the job done. Inspecting 2 percent of the containers is not 
sufficient. The other issue, is making sure foreign countries 
are helping with compliance. There are two sides to every 
shipment. We must also account for those countries who are 
willing to cooperate with us in that regard, before these 
containers ever leave their shores to come to the United 
States. How many countries would you think are cooperating, in 
that respect?
    Admiral Allen. If you don't mind, I would answer for the 
record.
    It depends on what country, where they're at. There are 
countries we are concerned about. There are two issues. One of 
them is compliance with the International Ship and Port 
Security Code. Are they managing the port in compliance with 
international standards? The other one is, what kind of 
technology are they using to screen containers? How robust is 
that? What is the level of detection, the level of--and you 
kind of need to put the two together, ma'am.
    Senator Snowe. Yes. And I think that's another dimension to 
the whole Dubai controversy. I think that, frankly we, in 
Congress, and we as Americans, don't feel comfortable where we 
are today on the question of port security. We really have not 
appropriately addressed this issue that really does reflect a 
priority. So, I think, from that standpoint, we really have to 
do far more than we've done today. Obviously, that's on our 
end, as well. I think we have to make great strides on this 
question.
    One other issue, since you don't already have enough to do, 
you've now been given the additional responsibility of managing 
the airspace around the Nation's capital. I gather you're 
taking on this responsibility from the Customs and Border 
Protection agency. I also understand that Customs only 
transferred $5 million; whereas, you're requesting an 
additional $57 million to assume this new responsibility. Can 
you tell us how you plan to go about it?
    Admiral Allen. Yes, ma'am. We intend, somewhere around the 
September-October timeframe--we're working against that right 
now--to add five additional aircraft at Air Station Atlantic 
City, just to the north of us, as an operating base. We will 
deploy aircraft from there, down to the local area, at National 
Airport. There will be two aircraft that will be on strip alert 
to ensure that we can get one airborne. The difference in our 
response package and what we're doing, versus what Customs and 
Border Protection did, was, Customs and Border Protection was 
brought in to support the inauguration, following 9/11, and 
basically temporarily deployed people to provide air intercept 
support to take a look at general aviation aircraft that might 
come into the Capital airspace. They've been supporting that in 
a temporary basis now for many years. We are going to 
permanently put capability in to support that. And the FY07 
request is for the five aircrafts, the personnel to support 
them, the operating expenses, and the facility cost. And the 
amount that was reprogrammed within the Department to support 
that was not $5 million, it was $4 million.
    Senator Snowe. Well what was the problem with Customs and 
Border Protection? Why weren't they able to perform this 
mission?
    Admiral Allen. They were operating in a domestic law 
enforcement capacity in response to incursions into the flight-
restricted zone around the Capital. The Coast Guard operational 
model will be different than that. Because of our ability to 
operate with the Department of Defense under Title X, when 
these Coast Guard aircraft lift off, they'll be under the 
tactical control of NORAD, and it will be part of the air 
defense mission, as opposed to a law enforcement mission that 
Customs and Border Protection was carrying out.
    Senator Snowe. Mr. Caldwell, how do you view this new 
mission, in terms of the impact on the Coast Guard's overall 
budget, as well as additional responsibilities outside the 
traditional areas?
    Mr. Caldwell. In producing this testimony, we actually did 
some preliminary data-gathering from the Coast Guard, so we 
know a little bit about the impetus as to why the program was 
set up, but we haven't done a detailed review of it.
    You know, the Coast Guard already has a fleet of 
helicopters. They're using helicopters that are consistent with 
the rest of their fleet, so there will certainly be some 
impact, but it's--you know, the Coast Guard does have that 
unique role of being both a military service and a law 
enforcement organization. We understand, also, the Coast Guard 
has had this mission before, at least on a temporary basis, for 
certain national security special events, like, I think, the 
Super Bowl down in Jacksonville and for a couple of other 
activities.
    Senator Snowe. Will you be doing any further evaluation on 
this issue?
    Mr. Caldwell. We have no plans to at this point.
    Senator Snowe. All right.
    Any other questions?
    Senator Cantwell. Thank you, Madam Chair.
    If I could, just on a couple of other budget priority 
issues that are of concern that are not reflected in the budget 
request. One is the icebreaker fleet and previous analysis of 
the need to replace and upgrade that, and if you could comment 
on that not being part of the priority request. And then, the 
Vessel Traffic System for collision prevention issues, also not 
being a priority as it relates to funding in this budget 
request.
    Admiral Allen. I'd be happy to do that.
    There is a report due this fall from the National Academy 
of Sciences that's going to try and re-baseline what the 
Nation's requirements are for polar icebreaking. There have 
been significant changes in both the Antarctic and the Arctic 
regions in recent years that I believe make this the right time 
to talk about that. The research that goes on in the South Pole 
Station is supported by McMurdo Base, which is where we break 
ice to allow that to be resupplied annually. It's extremely 
important, for a variety of reasons, to the country, from 
environmental to national security and so forth. And I think on 
the other side, in the North Pole, we have a shrinking polar 
icecap that's going to allow access to oilfields and economic 
exploitation, both in Russia, Greenland, United States, and off 
the coast of Norway, that's going to create more interests up 
there that need to be accounted for.
    Some of these things weren't that visible a few years ago, 
when we established a baseline for the icebreaking fleet in 
1990 by Presidential directive. It is my hope to establish a 
policy debate in the next 6 to 12 months that can lead us to a 
new established baseline on what kind of icebreaking capability 
this country needs to support what are now new evolved 
requirements in both the Antarctic and the Arctic.
    We have decisions to make on our two polar icebreakers 
regarding maintenance and replacement. We have one research 
vessel, as you know, the HEALY, which is being employed in the 
Arctic area. And we need to decide, as a Nation, is that the 
right amount of icebreaking capability? And if it is not, what 
do we need to do with the current fleet, and how are we to move 
forward? And that's the reason I think that report this fall is 
going to be specifically important.
    One of the first things I did after assuming this job was 
reach out----
    Senator Cantwell. So, there's not----
    Admiral Allen. I'm sorry.
    Senator Cantwell. If I could just interrupt. So, you're not 
saying there's less need. You're saying you're analyzing what 
the change in demand for icebreaking capabilities is.
    Admiral Allen. In the past, we've looked at the research 
requirements at the South Pole Station, the need to break out 
McMurdo. The requirements in Thule, Greenland, which we used to 
break out, were being handled by the Canadians. I think there 
has been a significant change in the potential requirements, 
both from an economic, science, and national security 
standpoint, that it probably is time to have that discussion 
again, that we had in 1999, the baselining requirements.
    Senator Cantwell. And on the vessel----
    Admiral Allen. If I could clarify, are you talking about 
automated identification systems, ma'am?
    Senator Cantwell. The Vessel Traffic System, to make sure 
that you have a system to reduce the risk of vessel 
collisions--part of just having a better communication system 
to avoid vessel collision.
    Admiral Allen. Well, there are two systems right now that 
are interacting. One, we have current vessel traffic systems 
that have been established around the country at certain ports, 
not every port--originally established in the late 1980s and 
early 1990s--to prevent collisions, for the purpose of not 
having oil spills and degradation to the environment. What has 
happened since the passage of the Maritime Transportation 
Security Act are carriage requirements for automated 
identification systems that allow vessels that are within line 
of sight of each other to be aware of their presence, to reduce 
the risk of collision. That also enhances security, at the same 
time.
    It is a requirement where we have vessel traffic service 
systems in ports for vessels to carry those identification 
systems, so we can reduce the risk of a collision, but also 
improve security.
    Senator Cantwell. I think what we're interested in is the 
resources in the budget to make sure, in an area like Puget 
Sound, where you have so much container traffic, so much tanker 
traffic, so much ferry transportation and recreational vehicle 
traffic, that those areas get the upgrades to that system. And 
I don't think that's reflected in the budget.
    Admiral Allen. If you're talking about the specific 
infrastructure to support the VTS operations in Puget Sound, 
I'd be happy to answer that for the record and give you a 
breakdown of where we're at right now and what the plans are 
for upgrades there.
    Senator Cantwell. Thank you.
    Senator Snowe. Thank you, Senator Cantwell.
    One final question, on Rescue 21 system. I know there have 
been cost overruns and problems in the development of that 
system, which is a replacement for the current system on 
national security in response to distress signals. What is the 
plan for that now? And I'd like to have you comment, as well, 
Mr. Caldwell.
    Admiral Allen?
    Admiral Allen. Mr. Caldwell and I talked about this 
yesterday, and I think probably the Coast Guard and GAO are in 
substantial agreement on the challenges that lie ahead in this 
project, and the way to move forward.
    This is an extremely important project, not only to the 
Coast Guard, but the United States. This is the replacement of 
our VHF-FM distress and calling system. This is the 911/mayday 
calling system for the Nation. It was first capitalized in the 
early 1970s. We don't have the ability to direction-find when 
somebody calls in, and keep that information, and go back to be 
able to analyze it. And we had some significant cases in the 
1990s that underscored the fact that this system was failing 
us, it was not supporting our mission or the national 
requirements.
    The Rescue 21 contract being executed by General Dynamics, 
in Scottsdale, Arizona, has provided a system that has 
significantly more capability, but we've encountered a couple 
of problems. One was the actual writing of the software code, 
and then the integration of the system to field it for initial 
operational test and evaluation. That caused schedule delays. 
And the cost of the contract rose dramatically. We have passed 
what we would call ``operational test evaluation'' now. We're 
ready to field the system. But we have residual issues with the 
structure of the contract, the oversight associated with this, 
and cost controls that are embedded in it.
    We are in general agreement with GAO on what needs to be 
done, and it includes more executive involvement. We are 
standing up an executive oversight board. And I, myself, have 
personally called the CEO of General Dynamics, and we intend to 
personally work this as a leadership issue.
    But I would defer the details to Mr. Caldwell.
    Senator Snowe. Thank you.
    Mr. Caldwell?
    Mr. Caldwell. Senator Snowe, the Coast Guard has agreed to 
all of our recommendations, in terms of more executive-level 
oversight and more careful management at specific milestones. 
And I would mention that the problems with this contract, some 
of them were clearly the fault of the contractors, as opposed 
to the Coast Guard. The Coast Guard part was mainly lack of 
oversight--or, when oversight was applied, it was just a little 
late in the cycle and could have been applied earlier when 
problems were known.
    The problem we'll have at the operational level is that 
some of these locations that use these along the coast will 
have to wait longer, obviously, for the enhanced capabilities. 
And, in some cases, they've still got legacy equipment they've 
got to figure out how to maintain. Coast Guard had a moratorium 
on upgrades to the legacy systems, and--I guess I'm not quite 
sure what the status of the moratorium is. I know at least some 
locations we visited have taken some steps to spend some 
resources to keep these older systems running.
    Senator Snowe. Well, it sounds like there are major 
deficiencies in this whole program. Frankly, it's astounding, 
in terms of the cost overruns. I believe the program is from 
$250-$700-plus-million, and 5 years behind schedule? That's a 
horrendous track record. What can we do? How do we make these 
contractors accountable? I, frankly, think it's unacceptable to 
have those kind of cost overruns and be 5 years behind 
schedule. Talking about the Deepwater, and now looking at this 
experience as well, we may have to create some sort of 
standardized in-house expertise within the Coast Guard for 
management and oversight. Maybe there's no other way to get 
that impetus and interest on the part of the contractors to 
remain accountable. I can't understand it. But that really is 
an unacceptable track record, given where we are today, and the 
people and property these shortenings put at risk.
    Admiral Allen. I don't disagree, Madam Chairman. I think 
there are a combination of issues. And you picked up the 
crosscutting team, and that's the structure of the acquisition 
organization in the Coast Guard, and how we might optimize 
that, and also how we might manage these acquisitions in a 
standard process across the entire life cycle of the platform.
    In regards to this particular acquisition, one of the 
original challenges was, the contractor encountered 
significantly greater difficulty in writing the basic software 
code to deal with the digitized signals that were coming in and 
how they would be passed around and displayed, than they 
originally thought. And that drove cost up right at the 
beginning, and then there was a trickle-down effect that kind 
of just went through the contract.
    Another problem we encountered is the locating of the 
towers for these systems. We're actually putting in new 
infrastructure around the country, and each site is different 
and has its own unique characteristics related to environmental 
issues and so forth. And so, those are some of the things that 
I don't think were adequately understood at the outset.
    Senator Snowe. Thank you. I'd like to work with you on this 
question, to determine what we need to do differently, because 
I think that this is something we would want to avoid in the 
future. I would also like to see what we can do to get this 
program back on track in any way feasible at this point.
    Admiral Allen. I would say, where the equipment has been 
installed, it's performing really well. In Atlantic City and at 
Eastern Shore here, we've had a number of cases where it has 
exceeded, as far as distance offshore, our ability to locate a 
distress, and respond to it. And we are happy with it once it 
gets installed.
    Senator Snowe. Thank you very much. And I appreciate your 
testimony here today, and I appreciate your cooperation and 
your recommendations. And, Admiral Allen, I look forward to 
working with you in the future. You provide exemplary 
leadership to our country, and we thank you for taking the 
leadership of the Coast Guard. We truly appreciate it.
    So, thank you very much. This hearing is adjourned.
    [Whereupon, at 12:05 p.m., the hearing was adjourned.]

                            A P P E N D I X

  Response to Written Questions Submitted by Hon. Daniel K. Inouye to 
                          Stephen L. Caldwell

    Question 1. I am extremely concerned by reports from the Coast 
Guard and the Government Accountability Office (GAO) that the Rescue 21 
program is behind schedule, has significant cost overruns, and may not 
deliver the functionality originally promised. What are the GAO's 
recommendations for this project?
    Answer. As we reported in May 2006, we found that a number of key 
factors contributed to Rescue 21 cost overruns and schedule delays. 
These factors include inadequacies in requirements management, project 
monitoring, risk management, contractor cost and schedule estimation 
and delivery, and executive-level oversight. For example, the 
contractor created a schedule that underestimated the time required to 
complete key tasks, and development took longer than planned, which led 
to delays in testing. Also, the Coast Guard stated that it had an 
executive-level oversight process that included semiannual and key 
decision point reviews. However, there is no evidence that these Rescue 
21 reviews occurred prior to 2005. Consequently, according to the Coast 
Guard, the total acquisition cost for Rescue 21 has increased from $250 
million in 1999 to $710.5 million in 2005, and the timeline for 
achieving full operating capability has been delayed from 2006 to 2011.
    However, our analysis of contractor performance trends indicated 
that the Coast Guard's current acquisition cost estimate of $710.5 
million is not viable. Our analysis showed that additional overruns 
will likely bring the total cost to $872 million unless critical 
changes are made. This includes a significant number of contract items 
that have not been completed as planned and must be renegotiated, which 
has caused uncertainty in the project's schedule. Meanwhile, Coast 
Guard units operating without Rescue 21 face a high risk of failure 
with legacy equipment which could result in costly repairs. Also, until 
Rescue 21 is deployed, field units will likely continue to experience 
communication coverage gaps, which limit their ability to hear boaters 
in distress. To improve current cost and schedule estimates, the Coast 
Guard intends to conduct an integrated baseline review after contract 
items are renegotiated and expects to complete this review for 11 of 
the 46 Rescue 21 regions in the first quarter of Fiscal Year 2007.
    To more effectively manage the remaining development and deployment 
of Rescue 21, we recommended that the Commandant of the Coast Guard 
ensure that Coast Guard executive-level upper management implement the 
following recommendations:

   Oversee the project's progress toward cost and schedule 
        milestones and management of risks.

   Establish a milestone to complete Rescue 21's integrated 
        baseline review, to include all renegotiated contract items.

   Use the results of this baseline review to complete a 
        revised cost and schedule estimate.

    Question 2. While maritime security is a top priority, we continue 
to rely on the Coast Guard for other missions, such as search-and-
rescue, maritime safety, maintaining aids-to-navigation, and protecting 
our natural marine resources. In the aftermath of Hurricane Katrina, 
the entire Nation is now well aware of the life and death importance of 
these critical missions. Yet the Coast Guard's Fiscal Year (FY) 2007 
budget would decrease funding for all six of its ``non-security'' 
missions. The Coast Guard has said that despite these cuts, they are 
meeting all of their performance goals for these missions. Is that 
true?
    Answer. Despite reductions in funding for non-homeland security 
missions, the Coast Guard met performance goals for 5 of its 6 non-
homeland security programs for Fiscal Year 2005. According to Coast 
Guard documents, the agency missed targets for this program--living 
marine resources--in part, because of factors outside the agency's 
control, such as hurricane damage, high fuel costs, and lucrative 
seafood prices--which created greater incentives for fishermen to 
violate fishing regulations. The number of non-homeland security 
performance goals met in Fiscal Year 2005 is similar to the number of 
goals met over the last 3 years. For example, in Fiscal Year 2004, the 
Coast Guard met performance goals for 4 of the 6 programs, missing 
targets for the ice operations and living marine resources programs; in 
Fiscal Year 2003, the agency met performance goals for all 6 non-
homeland security programs; and in Fiscal Year 2002, it met performance 
goals for 4 of the six programs, missing targets for the ice operations 
and search-and-rescue programs.
    In August 2006, we are reporting on the soundness of the 
performance measures used to track whether the agency meets its six 
non-homeland security performance goals, and the reliability of the 
data used in these measures. Specifically, we found that these 
performance measures are generally sound and the data used to calculate 
them are generally reliable, though some weaknesses exist. All six 
measures cover key program activities and are objective, measurable, 
and quantifiable, but three--those used to reflect performance for the 
ice operations, living marine resources, and search-and-rescue 
programs--are not completely clear, that is they do not consistently 
include clear and specific descriptions of the data, events, or 
geographic areas they include. While data used to calculate the 
measures are generally reliable, the Coast Guard does not have policies 
or procedures for reviewing or verifying external data used in the 
measures. As such, it is difficult to determine whether the marine 
environmental protection measure, is reliable as external data is used 
in its calculation and the Coast Guard's review processes for this data 
are insufficient.
    Although the measures for the six non-homeland security are 
generally sound and the data used in their calculation are generally 
reliable, we discovered that two main challenges exist in using these 
measures to link resources to results. The first challenge relates to 
the scope of the measure--while each measure captures a major segment 
of program activity, no one measure reflects all program activities and 
thereby accounts for all program resources. The other challenge 
involves external factors, some of which are outside the Coast Guard's 
control that can affect performance. For example, weather conditions 
can affect the amount of ice that must be broken, the number of 
navigational aids that need repair, and/or the number of mariners that 
require rescuing. As a result of these challenges, linking resources to 
results is difficult. The Coast Guard is aware of such challenges and 
has a range of ongoing initiatives to address them. However, it is 
still too early to determine how successful these initiatives will be 
at better linking resources to results.
                                 ______
                                 
   Response to Written Questions Submitted by Hon. Maria Cantwell to 
                          Stephen L. Caldwell

    Question 1. I understand that Seattle and Port Angeles are among 
the next locations that Rescue 21 is to be implemented. While I'm happy 
to see upgrades to the existing legacy communications equipment in 
these two important cities in my State, I'm troubled by reports from 
GAO that Rescue 21 may not deliver on promised capabilities. Is it true 
that the system as delivered will not provide all of the capabilities 
originally planned? What will be compromised?
    Answer. It is true that under the current plans, Rescue 21 will not 
provide all of the capabilities that were envisioned earlier for the 
system. The Coast Guard originally developed Rescue 21 to include a 
component known as the Vessel Sub-System (VSS), which would allow the 
Coast Guard to track its vessels, specifically the 87-foot patrol 
boats, 47-foot motor life boats and 41-foot utility boats, via a visual 
display on computer monitors. However, VSS capabilities were deferred 
because the contractor could not meet the original contract 
requirements for simultaneous communications. While VSS has worked well 
on larger boats, the Coast Guard has experienced numerous problems with 
VSS on its 41-foot utility boats and 47-foot motor boats. According to 
Coast Guard officials, weather elements have caused problems with the 
computer screens onboard the boats, and there is not enough space 
onboard for personnel to man the equipment. As a result, in January 
2006, the Coast Guard placed a stop work order on VSS. At the time of 
our briefing, in March 2006, the Coast Guard and the Department of 
Homeland Security (DHS) were determining whether Rescue 21 should 
complete the development of VSS, or consider other sources for that 
functionality. In April 2006, the Coast Guard decided to de-scope VSS 
from Rescue 21, and is currently looking to secure VSS-like 
capabilities within the agency. In the interim, the Coast Guard relies 
on its vessels to periodically check-in with its communication centers 
regarding their location.

    Question 2. There have been reports that the area of geographical 
coverage will also be reduced--is that true? What geographical areas 
will not have access to this system?
    Answer. The existing National Distress Response System suffers from 
numerous gaps in communications coverage. For example, in some areas 
the Coast Guard cannot hear calls from mariners in distress or 
communicate with other Coast Guard vessels. Rescue 21 was intended to 
improve these coverage gaps. In a February 2006 hearing before the 
House Appropriations Committee, the Coast Guard presented Rescue 21's 
communication coverage capability as 90-98 percent out to 20 nautical 
miles from the shore, which would limit the communication coverage gaps 
to 10 percent or less in the United States. At the time of our briefing 
in March 2006, Rescue 21 had been implemented at two Coast Guard 
Sectors, Atlantic City, NJ and Eastern Shore, MD. Since then the Coast 
Guard has begun system testing at two additional Sectors in the Gulf 
Coast Region--Mobile, AL and St. Petersburg, FL. The Coast Guard also 
reports that it has begun construction of Rescue 21 in Seattle and Port 
Angeles, WA.
    Since Rescue 21 has not yet been implemented in most Coast Guard 
Sectors, thus, it remains unknown at this time the full extent to which 
they will experience coverage gaps.

    Question 3. GAO has testified that only 5 of 11 specific 
recommendations to improve Coast Guard management of Deepwater--
provided in March, 2004--have been implemented. Why has Coast Guard 
failed to fully implement these recommendations?
    Answer. GAO believes the Coast Guard is in the best position to 
answer why it has not fully implemented these recommendations. However, 
here is a summary of GAO's areas of concern and the status of Coast 
Guard implementation. GAO's past concerns about the Deepwater program 
have been in three main areas--ensuring better program management and 
contractor oversight, ensuring greater accountability on the part of 
the prime contractor (system integrator), and creating sufficient 
competition to help act as a control for costs--and GAO made a total of 
11 recommendations to address these concerns.\1\ In April 2006, GAO 
reported to you on the status of the Coast Guard's management of its 
Deepwater program.\2\ This report was the basis for GAO's comments 
during the testimony on the Coast Guard's actions to implement the 
recommendations. At that time, GAO noted that the Coast Guard had fully 
implemented 5 of the 11 recommendations and had partially implemented 
an additional 5 recommendations. The Coast Guard disagreed with and 
declined to implement the remaining recommendation that pertained to 
updating its cost baseline to determine whether the Deepwater 
acquisition approach is costing more than a conventional acquisition 
approach.
---------------------------------------------------------------------------
    \1\ GAO, Contract Management: Coast Guard's Deepwater Program Needs 
Increased Attention to Management and Contractor Oversight, GAO-04-380 
(Washington, D.C.: Mar. 9, 2004).
    \2\ GAO, Coast Guard: Changes to Deepwater Plan Appear Sound, and 
Program Management Has Improved, but Continued Monitoring is Warranted, 
GAO-06-546 (Washington, D.C.: Apr. 28, 2006).
---------------------------------------------------------------------------
    On October 4, 2006, GAO provided technical comments on a draft 
report by the Coast Guard addressing the status of the GAO 
recommendations, as required by Sec. 408(c) of the Coast Guard and 
Maritime Transportation Act of 2006 (H.R. 889). In commenting on this 
draft report, GAO noted that because it has ongoing work involving the 
status of the recommendations requested by the House Appropriations 
Subcommittee on Homeland Security,\3\ it is not specifically commenting 
on the sufficiency of the Coast Guard's efforts to address the 
recommendations. As a result, the following is a synopsis of the status 
of the 5 partially implemented recommendations as of the date of GAO's 
last report, April 2006.
---------------------------------------------------------------------------
    \3\ GAO anticipates that it will publish a report on its finding 
for this review in late April 2007.
---------------------------------------------------------------------------
    Recommendation 1: Improve integrated product teams (IPT) 
responsible for managing the program by providing better training, 
approved charters, and improving systems for sharing information 
between teams.
    Actions Taken: The Coast Guard has taken some actions, such as 
approving IPT charters, providing IPT training, establishing oversight 
and conflict resolution entities for the IPTs, and improving 
collaboration with the system integrator.
    Status as of April 2006 Report: While the Coast Guard has taken 
some actions, GAO does not consider the actions taken to be sufficient 
to consider the recommendation to be fully implemented because it is 
too soon to tell whether the actions taken are sufficient to 
effectively eliminate the problems.
    Recommendation 2: Provide field personnel with guidance and 
training on transitioning to new Deepwater assets.
    Actions Taken: The Coast Guard has taken some actions, such as 
placing more emphasis on outreach efforts to field personnel and 
including field personnel on IPTs.
    Status as of April 2006 Report: While the Coast Guard has taken 
some actions, GAO does not consider the actions taken to be sufficient 
to consider the recommendation to be fully implemented. In particular, 
our discussions with key personnel make it clear that field staff have 
little information about maintenance and logistics plans for the new 
Deepwater assets. For example, while the first National Security Cutter 
is to be delivered in August 2007, field operators and maintenance 
staff have yet to receive any definitive plans on how responsibilities 
for maintenance and logistics responsibilities will be divided between 
the Coast Guard and the system integrator, Integrated Coast Guard 
System (ICGS). GAO will not be able to determine if this recommendation 
is fully implemented until more Deepwater assets are delivered.
    Recommendation 3: Establish a timeframe for putting steps into 
place to measure the contractor's progress toward improving operational 
effectiveness.
    Actions Taken: The Coast Guard has taken some actions, such as 
developing modeling capabilities to simulate the new assets' 
capabilities to meet Coast Guard missions and using mission performance 
data to measure the contribution of Deepwater assets and systems in key 
mission areas.
    Status as of April 2006 Report: While the Coast Guard has developed 
and is refining models to measure operational effectiveness, there are 
too few Deepwater assets currently in operation to effectively measure 
the system integrator's actual performance in improving operational 
performance. As more Deepwater assets and systems come online, the 
amount of data will increase and the analytical tools will be more 
refined so that the Coast Guard should be in a better position to: (1) 
discern the Deepwater program's contribution to operational 
effectiveness and (2) fully implement this recommendation.
    Recommendation 4: Establish criteria to determine when to adjust 
the project baseline and document the reasons for change.
    Actions Taken: The Coast Guard has taken some actions, such as 
using criteria from its Major Systems Acquisition Manual as the basis 
for adjusting the total ownership cost (TOC) baseline so that 
significant changes in mission requirements, schedule changes, or 
project funding can be reflected in the adjusted TOC baseline. In 
addition, DHS has increased its oversight of baseline changes.
    Status as of April 2006 Report: The Coast Guard's steps, combined 
with DHS's oversight requirements, should be sufficient to resolve this 
issue. DHS's policy directive is only in draft form. GAO will consider 
this recommendation to be fully implemented when the management 
directive is finalized.
    Recommendation 5: Develop a comprehensive plan for holding the 
system integrator responsible for ensuring adequate competition among 
suppliers.
    Actions Taken: To address GAO's concerns about ensuring out-year 
competition among second-tier suppliers, the Coast Guard contracted 
with Acquisitions Solutions, Inc. (ASI) to assess the amount of second-
tier competition conducted by ICGS during 2004. ASI issued a report in 
May 2005 that made nine recommendations aimed at improving competition 
throughout the Deepwater program. According to Deepwater officials, 
ICGS developed a plan to adopt all nine recommendations by March 1, 
2006. Coast Guard officials also stated that competition will be 
assessed as part of the award fee assessment criteria and that the 
Coast Guard 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 during the award term 
decision process.
    Status as of April 2006 Report: While the steps the Coast Guard has 
taken appear to be sufficient to resolve GAO's concerns, GAO cannot 
consider this recommendation as being fully implemented until the Coast 
Guard addresses the ASI recommendations and GAO assesses the criteria 
used in the latest award term decision.
                                 ______
                                 
  Response to Written Questions Submitted by Hon. Daniel K. Inouye to 
                         Admiral Thad W. Allen

    Question 1. Over the past 2 years, the Coast Guard, as the lead 
Federal agency on port security issues, has requested funds to 
establish additional Joint Harbor Operations Command Centers, yet it 
has been unsuccessful to date. Your predecessor, Admiral Collins, 
supported the development of additional Joint Operations Centers and he 
considered them a key element of the Coast Guard's future development. 
Do you agree with his assessment?
    Answer. Coordination and collaboration among partner agencies and 
private interests is vital to maritime commerce and security. 
Currently, all of the Nation's ports, waterways and coastal zones fall 
within one of the 35 established Coast Guard Sectors, which are the 
coordinating force behind Coast Guard, joint and interagency maritime 
operations. Each of these Sectors has a Sector Command Center (SCC) 
that enables command and control, communications and coordination among 
partner agencies to facilitate mission execution.
    The SCC is the primary conduit for daily collaboration and 
coordination between the Coast Guard and its port partner agencies. All 
35 Sector Command Centers currently provide some form of inter-agency 
operational coordination; however, each Command Center is unique in the 
level of coordination based on a variety of factors within the port and 
coastal region. In some cases, port partners are formally imbedded in 
the SCC (e.g., San Diego, Hampton Roads), and in others, there are 
daily coordination meetings between partner agencies.
    Many Coast Guard Command Centers host a variety of agencies, 
however, only the following Command Centers are designated as ``joint 
centers:''

   Charleston, South Carolina (DOJ/CG)
   Hampton Roads, Virginia (CG/Navy)
   San Diego, California (CG/Navy)

    Technically speaking, Joint Harbor Operations Centers (JHOCs) are 
Sector Command Centers where the Coast Guard is partnering with the 
U.S. Navy to provide specialized Anti-Terrorism/Force Protection (AT/
FP) services in areas with high naval fleet concentrations. Plans are 
also being developed for joint Command Centers (e.g., JHOC) at the 
following ports:

   Jacksonville, Florida (CG/Navy)
   Seattle, WA (CG/Navy)

    The Coast Guard is continuing to work with our sister agencies in 
the Department of Homeland Security, other Federal partners, state, 
local and private sector interests to facilitate commerce and protect 
the Nation's interests in the port and coastal regions.

    Question 2. What role do you see the Joint Operations Centers 
playing in our future port security efforts?
    Answer. Sector Command Centers, including the Joint Operations 
Centers, serve as the ``7/24'' command and control node for port 
security operations. Sector Commanders use their Command Centers to 
coordinate among all Federal, state and local port partners who have a 
stake in port security operations. Inter-agency coordination and 
collaboration from these Command Centers assists operational commanders 
in prioritizing activities and maximizing resource allocation among the 
various partner agencies.

    Question 3. The Deepwater Program has been plagued with significant 
problems. For example, the replacement of the Coast Guard's 110, 
cutters with the Fast Response Cutter has now fallen off track. The 
cost of replacing the engines on the HH-65 helicopters has more than 
doubled in cost to $300 million. The Government Accountability Office 
(GAO) also has criticized the contract. Should the Coast Guard award a 
new contract to the lead contractor?
    Answer. Yes the Coast Guard has determined that a new contract 
period award to the lead contractor is warranted. The Coast Guard used 
a disciplined, deliberate, and decisive process in determining whether 
to award additional time to the lead contractor and could have awarded 
anywhere from zero to 60 months based on performance in operational 
effectiveness, total ownership cost, and customer satisfaction. The 
Coast Guard used a balanced decisionmaking approach to evaluate 
performance. The following criteria were evaluated when analyzing the 
Deepwater contract renewal:

        1. Operational Effectiveness (50 percent), measuring the 
        expected impact on operations of the assets under contract 
        during the base evaluation period; and

        2. Total Ownership Cost (TOC) (30 percent), measuring the 
        expected impact on reducing TOC for the assets under contract 
        during the base evaluation period;

        3. Customer Satisfaction (20 percent), measuring the 
        perceptions of Coast Guard on the performance in the various 
        portions of the acquisition during the base evaluation period.

    Based on this review, the Coast Guard deployed a very strict 
``Award Term Determination'' process and awarded 43 months out of a 
possible 60 to the lead contractor. Both the Coast Guard and the lead 
contractor have learned much during the first 4 years of the Deepwater 
Contract. Based on continuous improvement, the Coast Guard will focus 
on changes in the next 43 month award period that will enhance 
government oversight.
    The contract is structured to reflect the updated requirements 
approved in the Deepwater Post 9/11 Mission Needs Statement and the 
Post 9/11 Implementation Plan. Additionally, the government will work 
to negotiate favorable terms and conditions with the Integrated Coast 
Guard System (ICGS) that allow for:

        1. Establishment of meaningful contract measurement criteria 
        (with greater objectivity) that will strongly incentivize cost, 
        schedule, and performance parameters; as well as strengthen 
        ICGS actions as a joint partnership.

        2. A greater focus on cost control by using:

          a. Matching contract type selections with risk
          b. Performance incentives within each Delivery Task Order
          c. Award fees to support the Award Term Criteria.

        3. A realistic pricing philosophy understanding the flexibility 
        required due to appropriation fluctuations.

        4. A greater focus on requirements stability so that management 
        can be more effectively established and better monitored.

        5. Greater ICGS accountability by ensuring that government 
        members of the Integrated Product Teams understand their roles 
        and responsibilities. This will ensure that the Contractor 
        maintains responsibility for decisions it makes.

    These changes will improve the Coast Guard's oversight of the lead 
contractor.

    Question 4. The Deepwater Program has been plagued with significant 
problems. For example, the replacement of the Coast Guard's 110, 
cutters with the Fast Response Cutter has now fallen off track. The 
cost of replacing the engines on the HH-65 helicopters has more than 
doubled in cost to $355 million. In light of such increased costs, is 
the Coast Guard considering the purchase or construction of 
alternatives?
    Answer. Where prudent or cost-effective to do so, the Coast Guard 
would consider the purchase or construction of alternatives for 
specific assets. An example of this involves the Fast Response Cutter 
recent Request for Information (RFI) for an off the shelf patrol boat 
design. In order to assess the world marketplace for patrol boat 
designs that closely approximate operational requirements the Coast 
Guard issued an RFI to address the design and schedule issues. The RFI 
is less time consuming for a contractor to address, is not 
contractually binding, and is submitted at no cost to the government. 
The RFI response period closed on May 7, 2006 with the Coast Guard 
receiving 23 design submittals from 19 vendors. The Deepwater Program 
has chartered an RFI working group of experts that include 
representatives from the Deepwater Program Management Directorate, the 
Office of Response Deepwater Sponsor's Representative, Coast Guard 
Engineering and Logistics, Integrated Coast Guard Systems, and a Naval 
Architecture Engineering firm that specializes in patrol boat design. 
The working group will conduct an in depth review and validation of 
respective design characteristics and expects to complete its review by 
August 2006. A report of their findings is expected in September 2006.
    The HH-65 re-engining project is doing very well as evidenced by 
over 300 people being saved directly by the re-engined HH-65Cs in 
Hurricane Katrina. The Coast Guard anticipates that this project will 
continue as planned. This project remains within the $355M cost 
estimates provided in 2005 and is on schedule to deliver 84 operational 
aircraft by June 2007.

    Question 5. Were you aware of all these problems when the decision 
was made to extend the contract?
    Answer. Yes, the Coast Guard was aware of these issues during the 
Award Term determination period. In fact, the Award Term Determining 
Official (ATDO) determined the customer satisfaction assessment to be 
on the high end of ``Marginal'' based on input factors from multiple 
categories. A balanced input of factors, as discussed in a previous 
response, was evaluated depicting strength in some areas and weakness 
in others. Survey results across a broad base of stakeholders as well 
as program management and the award fee evaluations, were considered. 
These were carefully reviewed by both the Award Term Evaluation Board 
as well as the ATDO. Overall survey results support the marginal rating 
based on the following:

   Field surveys indicate a lack of satisfaction with the 123, 
        Patrol Boat project, but trends were improving.

   Survey results for the HH-65C re-engining project and C4ISR 
        legacy upgrades denote satisfaction and systematic improvement.

   Contractor responsiveness was assessed in relation to 
        customer satisfaction. It was noted that:

          -- ICGS was highly responsive to change, accelerating the HH-
        65C re-engining, Fast Response Cutter, the Offshore Patrol 
        Cutter projects.

          -- Execution of the Helicopter Interdiction Tactical Squadron 
        (HITRON) contract and the C-130J missionization project was 
        noted as positive.

    In the area of Program Management, customer survey responses 
indicated that:

   Systematic improvement in customer satisfaction was 
        reflected in Award Fee determinations. Over the first 4 years 
        of execution, evaluations rose from 87 to 91.5 percent, with 
        attainment of 100 percent of objective factors accomplished in 
        the latest period of evaluation.

   The Government Accountability Office has validated and 
        closed the issue of award fee evaluations, denoting an 
        appropriate objective/subjective framework for analysis.

   Surveys indicate a strong improvement with the Integrated 
        Product Data Environment system, making it far more user 
        friendly.

    Question 6. Are other parts of the Deepwater Program experiencing 
increased costs or unforeseen problems, such as the CASA Maritime 
Patrol Aircraft, the Unmanned Aerial Vehicle, and the National Security 
Cutter?
    Answer. Some assets being constructed or converted in the Deepwater 
Program are projected to have higher cost than reported in the Post-9/
11 Deepwater Implementation Plan of 2005. However, the program is 
committed to delivering the Deepwater functionality within budget. 
There are some common reasons for these projected cost changes which 
are:

   Significant increases in the price of steel and increases in 
        average labor rates.

   Differences between the President's budget and the annual 
        appropriation. This requires additional costs to readjust the 
        Plan to match the appropriation. For those assets that are 
        delayed, there will be a higher cost in the future due to 
        inflation and expiration of certain price agreements from 
        subcontractors.

   Some cost and labor hour estimates were low and cost control 
        measures are being put in place such as design-to-cost to hold 
        the asset as close to the planned amount as reasonable.

    Question 7. What is the Coast Guard doing to improve oversight and 
increase competition of subcontracts to prevent these kinds of problems 
from occurring in the future?
    Answer. The Coast Guard has refined its award term criteria for the 
next Deepwater Award term to encourage and reward competition and more 
objectively measure contractor performance. These new award term 
criteria were recently briefed to your staff and take effect on August 
1, 2006.
    To help measure the effectiveness of competition, the Coast Guard 
commissioned an independent assessment by Acquisition Solutions, Inc. 
(ASI). This study determined that competition was ``adequate at the 
second-tier subcontractor level of the program.'' That is, ICGS and its 
first tier subcontractors Lockheed Martin and Northrop Grumman 
exercised appropriate competitive procedures using their open business 
model for their subcontracts. Further, the Coast Guard has taken steps 
to conform with additional recommendations by the GAO regarding 
competition including a requirement that Integrated Coast Guard Systems 
(ICGS) notify the Coast Guard for any ``make or buy'' decisions greater 
than $5 million.
    According to the ASI Study on Deepwater competition, Lockheed 
Martin and Northrop Grumman had approximately $210 million during the 
period from 1 January 2004 through 31 December 2004 that was available 
to be used for subcontracts. The total amount that was competitively 
awarded, using their Defense Contract Management Agency approved open 
business model, was approximately 50 percent or $107.7 million as shown 
in the below table:



    ASI reported in Fiscal Year 2004 that the Naval Air Systems 
Command, that element of the U.S. Navy with acquisition projects that 
most closely resemble the effort by LM on behalf of the Coast Guard, 
competed 41.6 percent of its awards. For the same period, Naval Sea 
Systems Command, the element in the U.S. Navy concerned with the 
acquisition of ships, awarded 53.6 percent of its contracts on a 
competitive basis. The overall Navy figure for Fiscal Year 2004 was 
56.4 percent. Clearly, differences are substantial between these 
figures and those of LM and NGSS. For one thing, the Navy figures are 
prime contract awards, while the two sets of corporate figures are 
subcontract awards. At the same time, the kinds of awards the Navy 
makes, supporting as they do both ships and aircraft programs, as well 
as electronic and information technology programs, probably are as 
close a comparison as possible to the kinds of awards being made by the 
two first-tier subcontractors in support of the Deepwater program. To 
the extent the numbers are comparable, competition on Deepwater at the 
subcontract level compares favorably in the case of LM, but to a 
somewhat lesser extent in the case of NGSS.
    Some notable subcontractors who were awarded contracts even though 
NGSS and LM are primary producers or co-producers of competing 
products:

   EADS CASA vice a LM Aircraft such as C-27.

   Bell Textron VUAV vice NG FIRESCOUT (Navy's VUAV).

   Telephonics radar on VUAV vice NG or LM radar unit.

   MTU cutter diesel propulsion vice other propulsion producers 
        with work share agreements in place.

   C-130J aircraft missionization where the Deepwater standard 
        electronic systems are being installed instead of LM Aero 
        Division standard C-130J electronics systems.

    Question 8. Why has the Coast Guard failed to fully implement all 
of the Government Accountability Office's (GAO) recommendations for 
improving management of Deepwater?
    Answer. The Coast Guard has devoted considerable attention to 
concerns raised by the GAO audit in 2004 and the 11 recommendations 
that were made to help improve Deepwater Program management and 
oversight as noted in the table below. In short, five recommendations 
have been fully implemented and closed by GAO. An additional five 
recommendations have been implemented by the Coast Guard and GAO is 
periodically monitoring the Coast Guard approach. Until the GAO 
monitoring is complete, GAO's description of this situation is that the 
recommendation has been implemented. The Coast Guard and GAO are in 
agreement that the Coast Guard has taken positive action for these five 
recommendations. The final remaining recommendation will not be 
implemented, as the Coast Guard disagrees with a recommendation to 
update its cost baseline to determine whether the Deepwater Acquisition 
approach is costing more than a conventional acquisition approach. The 
GAO has indicated that it does not intend to pursue this recommendation 
further.

      Implemented (GAO Monitoring) Status Contract Management Audit
------------------------------------------------------------------------
      #             GAO Recommendation                  Status
------------------------------------------------------------------------
1              IPT Effectiveness             USCG: Measures of Success
                                              indicate substantial
                                              performance improvement
                                             GAO: Too early to tell if
                                              steps taken will eliminate
                                              the problems.
------------------------------------------------------------------------
2              Measurable award fee          Implemented (GAO Accepted)
                criteria
------------------------------------------------------------------------
3              Human Capital Plan (HCP)      Implemented (GAO Accepted)
                Policy Implementation
------------------------------------------------------------------------
4              Provide field personnel with  USCG: Established the
                guidance and training on      Transition Communications
                transitioning to new assets   Team
                                             GAO: Considers problematic;
                                              many decisions on
                                              maintenance training need
                                              to be made quickly due to
                                              schedule of asset
                                              delivery.
------------------------------------------------------------------------
5              CG notification of            Implemented (GAO Accepted)
                subcontracts over $5M
                awarded to LM and NG
------------------------------------------------------------------------
6              Better input from USCG        Implemented (GAO Accepted)
                performance monitors
------------------------------------------------------------------------
7              ICGS Accountability for       Implemented (GAO Accepted)
                improved IPT effectiveness
                in future award fee
                determinations
------------------------------------------------------------------------
8              Competition among second-     USCG: Award Term assessment
                tier suppliers                found competition adequate
                                              at the second tier
                                              subcontractor level.
                                              Independent review by
                                              Acquisition Solutions,
                                              Inc. (ASI) found eight of
                                              nine ASI recommendations
                                              fully implemented.
                                             GAO: Fully implemented when
                                              all ASI recommendations
                                              are complete.
------------------------------------------------------------------------
9              Measurement of Contractor's   USCG/GAO: Too few Deepwater
                performance toward            assets currently in
                improving Operational         operation to determine
                Effectiveness                 system integrator's actual
                                              performance.
------------------------------------------------------------------------
10             TOC baseline comparison to    Will not be implemented
                traditional acquisition
------------------------------------------------------------------------
11             Establish criteria to         USCG: DHS policy directive
                determine when to adjust      is in draft form.
                the project baseline and
                document reasons
                                             GAO: Fully implemented when
                                              directive is finalized.
------------------------------------------------------------------------


    Question 9. I am extremely concerned by reports from the Coast 
Guard and the Government Accountability Office (GAO) that the Rescue 21 
program is behind schedule, has significant cost overruns, and may not 
deliver the functionality originally promised. Please explain what 
caused these problems and what you are doing to correct them.
    Answer. Rescue 21's delays can be attributed to problems completing 
software development needed to integrate the multiple commercial items 
into a consolidated control interface and resolving performance issues 
stemming from System Integration Testing (SIT). Those software 
integration and SIT issues have since been resolved and the project is 
currently in Full Rate Production. Subsequently, in April 2006, DHS 
approved Rescue 21's Acquisition Program Baseline (APB) Revision 4, 
which reset the Full Production Completion milestone to 2011 and 
reflects a more realistic schedule based on the lessons learned in 
planning, building, and installing the Initial Operating Capability 
(IOC) and Low Rate Initial Production (LRIP) regions. Additionally, to 
contain cost overruns and stay within the $730M total acquisition cost, 
APB Revision 4 includes performance trade-offs with respect to the 
Vessel Subsystem (VSS) and three Western Rivers regions.
    The Coast Guard has worked extensively with the contractor to 
establish a credible and realistic Rescue 21 project schedule, 
considering timelines for compliance with the National Environmental 
Policy Act, the significant number of outstanding real property 
acquisitions and new tower construction required, and the contractor's 
production capabilities.
    At the same time, to ensure that project completion stays on 
schedule several management and oversight actions have been initiated, 
to include:

   Establishing a Coast Guard Project Resident Office near the 
        contractor's manufacturing facility to increase government 
        oversight, awareness, and involvement.

   Initiating use of the Defense Contract Management Agency and 
        Defense Contract Audit Agency to assist in validating the 
        contractor's technical proposals and cost reasonableness.

   Scheduling a Program-level Integrated Baseline Review (IBR) 
        in 2006 to verify the contractor's proposed cost, schedule, and 
        performance efforts in the first 15 Full Rate Production 
        regions. Subsequent IBRs will be conducted for the remaining 
        regions.

   Soliciting input from Defense Acquisition University (DAU) 
        professionals to develop a strategic way-forward for the 
        program to maintain schedule and stay within cost thresholds. 
        DAU staff is partnering with the Coast Guard and General 
        Dynamics to help implement practical program management and 
        contract changes to improve program performance.

   Initiating monthly Integrated Project Schedule reviews 
        between the Coast Guard and General Dynamics.

   Conducting quarterly Coast Guard executive-level/General 
        Dynamics Vice President-level program reviews to resolve 
        outstanding issues and increase senior level oversight.

   Conducting monthly Risk Management and Earned Value 
        Management (EVM) cost performance reviews to increase program 
        management oversight for improved risk mitigation and taking 
        actions based on the EVM data.

   Incrementally re-pricing expired Contract Line Items for 
        Full Rate Production regions. Leveraging actual cost data and 
        instilling program-level lessons learned during the IOC 
        regions, resulting in more reasonable cost targets for future 
        work.

    The Coast Guard remains committed to a 2011 program completion 
date. It should be noted that the significant technical challenges of 
initial system design have been met and the program is in Full Rate 
Production (FRP). The remaining regional installation work should be 
more standardized. The contractor is starting to realize production 
efficiencies, by leveraging installation experience and 
institutionalizing lessons learned from each regional deployment.

    Question 10. The Coast Guard told us it will be working this year 
on an updated baseline review for Rescue 21. The GAO recently 
recommended the Coast Guard establish a schedule to complete this 
review and use it to develop a revised cost and schedule estimate to 
more effectively manage the program. Can you tell us when the revised 
baseline review and cost and schedule estimates will be available?
    Answer. The Coast Guard plans to conduct an Integrated Baseline 
Review (IBR) with General Dynamics in 2006 for the applicable contract 
items of the first 15 full rate production regions. To support the 
planned September 2006 IBR, we anticipate completing contract 
negotiations in July 2006.
    Following the September baseline review, the USCG will use IBR 
results to validate the $730M Total Acquisition Cost established in 
Rescue 21's Acquisition Program Baseline (APB) Revision 4 that DHS 
approved in April 2006 and which reset R21's cost and schedule 
baselines.

    Question 11. You know that District 14 is responsible for the 
largest geographical area, yet it receives relatively few Coast Guard 
personnel, cutters, or aircraft. It has the fewest billeted personnel 
and is about tied with District 8 (includes the Gulf and heartland) for 
the fewest cutters and aircraft. During Fiscal Year (FY) 2005, none of 
the nine suspected illegal incursions of foreign fishing vessels within 
the Western/Central Pacific area of the U.S. Exclusive Economic Zone 
(EEZ) were detected by the Coast Guard. The Coast Guard also has 
indicated that it does not have sufficient assets in District 14 to 
implement its own protocols in the event that the maritime security 
level is raised. I agree that improvements in technology and 
intelligence contribute greatly to the effectiveness of the Coast 
Guard, but for certain missions, there is still no replacement for the 
deterrence created by a physical presence. Does the Coast Guard have 
enough assets and personnel to fully implement all of its missions in 
District 14?
    Answer. The Coast Guard distributes available assets and personnel 
to Areas and Districts according to the overall risks and goals across 
all mission programs. The Coast Guard then adjusts those assets and 
personnel, as necessary, through real-time asset tracking and annual 
budget requests. All Coast Guard District Commanders must then 
carefully and judiciously balance available resources against mission 
demands. Generally speaking, they accomplish this by applying their 
resources to best meet our statutory requirements across all eleven 
Coast Guard missions, while concentrating on those missions and 
geographic areas that present the greatest risk. To assist Coast Guard 
Area Commanders in this process, each year Coast Guard Headquarters 
issues Mission Planning Guidance, which facilitates operational 
resource apportionment and allocation decisions to achieve program 
performance goal targets in support of national goals.

    Question 12. Does the Coast Guard have plans to increase the number 
of assets and personnel in District 14 in the future?
    Answer. While there are no immediate plans to increase the number 
of assets or personnel in District 14, the Coast Guard has added 
several important resources to D14 over the past year. Specifically, 
the Coast Guard Cutter AHI, a brand new 87-foot coastal patrol boat, 
was placed in service in Honolulu on April 15, 2006. Additionally, a 
total of three new boats have been added to Coast Guard Stations in the 
Hawaiian Islands including a Response Boat--Small (RB-S), a Motor 
Lifeboat (MLB) and a Utility Boat--Medium (UTM). Finally, this August 
all four HH-65 helicopters based in Hawaii will be re-engined. This 
upgrade will provide improved speed and lifting capacity, as well as 
enhanced flight safety.

    Question 13. While maritime security is a top priority, we continue 
to rely on the Coast Guard for other missions, such as search-and-
rescue, maritime safety, maintaining aids-to-navigation, and protecting 
our natural marine resources. In the aftermath of Hurricane Katrina, 
the entire Nation is now well aware of the life and death importance of 
these critical missions. Yet the Coast Guard's Fiscal Year (FY) 2007 
budget would decrease funding for all six of its ``non-security'' 
missions. Does this mean the Coast Guard had too many resources for 
these missions last year?
    Answer. No, it does not. The Coast Guard is a multi-mission agency, 
whose personnel are trained to be ready for any situation, whether it 
be to interdict drugs or migrants, or prosecute a Search and Rescue 
case, Coast Guard resources are not dedicated to a single mission. As 
such, the Coast Guard does not allocate funding by mission. The Mission 
Cost Model we use is simply a tool used to show how funding has been 
utilized--estimates of how funding is spent via missions is based on a 
multi-year average of resource hours spent on each mission.
    For example, from 1998 to 2004, Search and Rescue (SAR) resource 
hours dropped over 14,000 hours. In 2005, SAR hours increased 11,000 
hours over the past year, mainly due to hurricane rescue operations. If 
that trend continues, then future cost estimates will be adjusted 
accordingly.
    Performance remains our primary concern, and in Fiscal Year 2005, 
the Coast Guard met or exceeded its performance goals in five of the 
six missions mentioned. The one mission that did not meet its goal, 
Living Marine Resources, achieved a 96.4 percent compliance rate 
against the goal of 97 percent. This was attributed to variable 
economic conditions outside Coast Guard control, such as high fuel 
costs and lucrative seafood prices that create greater incentive for 
fishermen to violate the law.

    Question 14. Is the Coast Guard now carrying out its non-security 
missions at a pre-September 11 level of effort or higher?
    Answer. Since 9/11, the Coast Guard has improved its mission 
performance across almost every program. We strive to optimize resource 
allocation based on performance outcomes and the greatest need--as 
dictated by the changing risk picture in the maritime domain. Our 
performance measures focus on outcomes (e.g., mariners saved) and not 
outputs (number of flight hours flown on search-and-rescue).
    Our inherent multi-mission capabilities, coupled with a risk-based 
approach to resource allocation, have allowed for improved efficiencies 
and effectiveness in both our homeland and non-homeland security roles.
    Indeed, in Fiscal Year 2005, we achieved our performance targets 
for seven of eight non-homeland security missions having missed the 
last performance goal by less than 1 percent. The missed performance 
goal for the Living Marine Resources program was mostly due to factors 
outside the Coast Guard's control: changes to fisheries regulations 
following Hurricane Katrina.
                                 ______
                                 
   Response to Written Questions Submitted by Hon. Maria Cantwell to 
                         Admiral Thad W. Allen

    Question 1. The Deepwater program is experiencing major problems 
including cost overruns, faulty designs, and problems after delivery.
    The Fast Response Cutter project--the replacement for the 110-foot 
cutter--has been particularly worrisome, with bad design work and poor 
contract oversight leading to a complete work stoppage and lengthy 
delays. The problems with the Fast Response Cutter signal more 
fundamental issues within Deepwater's contracting approach. Despite 
these problems, the Coast Guard has moved forward with steps that are 
expected to extend the Deepwater contract to the current prime 
contractor. GAO has advised on the risks of this contract, particularly 
with respect to the lack of adequate oversight by Coast Guard and the 
lack of competition for subcontracts.
    Admiral, despite these problems, the Coast Guard has made a 
decision that all but guarantees that the prime contractor will 
continue in its role under this unique and risky contract approach. Has 
the Coast Guard even considered reverting to a more conventional 
procurement approach to avoid the problems that we are seeing with 
Deepwater?
    Answer. The Coast Guard had a study conducted by an independent 
federally funded research and development center, Logistics Management 
Institute (LMI), on pursuing Deepwater as a traditional asset 
replacement acquisition where each asset was acquired by a distinct 
project manager. LMI found there would be at least an estimated 15 
percent cost avoidance by using the Deepwater system of systems 
approach with a lead contractor.

    Question 2. Is the Coast Guard considering renegotiating the 
contract to ensure that the contractor does not merely give lip service 
to competition of subcontracts? What specifically will the Coast Guard 
seek to include in the contract?
    Answer. The Coast Guard has issued award term criteria in the new 
award term period that will hold the contractor more accountable. A 
specific feature of this award term criteria rewards potential future 
award term based upon the amount of competition to subcontractors. 
Additional criteria will include the following:

        1. Establishment of contract measurement criteria (with greater 
        objectivity) that will strongly incentivize cost, schedule, and 
        performance parameters, as well as strengthen ICGS actions as a 
        joint partnership.

        2. A greater focus on cost control by using:

          a. Matching contract type selections with risk
          b. Performance incentives within each Delivery Task Order
          c. Award fees to support the Award Term Criteria

        3. A realistic pricing philosophy, accommodating the 
        flexibility required due to appropriation fluctuations.

        4. A greater focus on requirements stability so that management 
        can be more effectively established and better monitored.

        5. Greater ICGS accountability by ensuring that government 
        members of the integrated product teams better understand their 
        roles and responsibilities. This will ensure that the 
        contractor maintains responsibility for decisions it makes.

    Question 3. GAO has testified today that only 5 of 11 specific 
recommendations to improve Coast Guard management of Deepwater--
provided in March, 2004--have been implemented. Why has Coast Guard 
failed to fully implement these recommendations?
    Answer. The Coast Guard has devoted considerable attention to 
concerns raised by the GAO and the 11 recommendations that were made to 
help improve Deepwater Program management and oversight as noted in the 
table below. In short, five recommendations have been fully implemented 
and closed by GAO. An additional five recommendations have been 
implemented by the Coast Guard and GAO is periodically monitoring the 
Coast Guard approach. Until the GAO monitoring is complete, GAO's 
description of this situation is that the recommendation has been 
implemented. The Coast Guard and GAO are in agreement that the Coast 
Guard has taken positive action for these five recommendations. The 
final remaining recommendation will not be implemented, as the Coast 
Guard disagrees with a recommendation to update its cost baseline to 
determine whether the Deepwater Acquisition approach is costing more 
than a conventional acquisition approach. The GAO has indicated that it 
does not intend to pursue this recommendation further. *
---------------------------------------------------------------------------
    * See table on page 69.

    Question 4. It seems that one obvious problem here is that the 
Coast Guard's Deepwater office has moved ahead with approving designs 
and contracts before it has all of the information it needs to make 
these decisions.
    For example, according to GAO, the Deepwater office moved ahead 
with the Fast Response Cutter even when the Coast Guard's own experts--
the Engineering Logistics Center--raised significant concerns back in 
January 2005. Although the Deepwater office finally asked for an 
independent review and hired an outside company (John J. McMullen & 
Assocs.), the Deepwater office approved the preliminary design and 
authorized ICGS to award the contract for a detailed design in 
September 2005 while this review was still pending. Only after an 
interim report from John J. McMullen in February of this year found 
major problems with the design, the Coast Guard finally suspended the 
design work.
    Would you agree that at least for substantial subcontracts, there 
should be a requirement put into place that no contracts or approvals 
be given to ICGS until there has been an independent review? Or, 
alternatively, that such an independent review be conducted if the 
Coast Guard's own technical experts raise concerns with the direction 
that the Deepwater office is heading with respect to specific 
subcontracts?
    Answer. The Deepwater office has been responsive to the concerns 
raised by the Coast Guard's technical authority, the Assistant 
Commandant for Engineering & Logistics (CG-4); the Engineering 
Logistics Center (ELC) is part of CG-4's organization. There is a 
logical and methodical approach to cutter design that is widely 
accepted in the acquisition discipline. The initial concerns raised by 
the ELC occurred just prior to the Fast Response Cutter (FRC) Systems 
Requirements Review (April 27, 2005). At that point, the program 
expressed those concerns to ICGS and took actions to address them. 
Those actions included the establishment of an asset weight reduction 
working group composed of both ICGS subject matter experts and members 
from the ELC. Anticipating a successful effort, ICGS concurrently 
employed the services of the Maritime Research Institute of the 
Netherlands (MARIN) to initiate numerical optimization of an FRC that 
weighed less than the current FRC. Additionally, the Coast Guard 
requested a more detailed calculation to fully understand the total 
ownership cost associated with a four-engine propulsion plant 
configuration.
    It is relatively common in the ship acquisition industry to have 
unresolved issues at a Preliminary Design Review that must be resolved 
prior to the Critical Design Review, the point in time where a firm 
Functional Baseline is established. Although ICGS met the exit criteria 
for the Preliminary Design Review (September 16, 2005), it was stated 
in the Coast Guard Preliminary Design Review letter (October 6, 2005) 
that there were a number of programmatic and technical areas of concern 
that remained open and must be resolved prior to the Critical Design 
Review.
    As such, it was prudent in September 2005 to award a contract 
design effort that contained firm well-defined entrance criteria for 
the Critical Design Review scheduled for January 13, 2006. During this 
period, the Coast Guard and ICGS focused oversight of the progress 
being made toward addressing the identified technical and programmatic 
issues. As evidenced by the program's suspension of design work in 
February 2006, resolution of these issues was not achieved.
    Consequently, the Coast Guard does not believe the history of the 
FRC project warrants the need to mandate the use of independent design 
reviews for either the award of substantial subcontracts, or to address 
technical issues raised within the Coast Guard. Although independent 
reviews are an excellent tool within the acquisition world, mandating 
their use via a ``one solution fits all'' approach would not be a 
prudent use of taxpayers' money. Independent design reviews should be 
used on a case-by-case basis, dependent upon the magnitude of the issue 
and the potential return on investment.

    Question 5. I understand that the Coast Guard is negotiating new 
award criteria on cost control, operational effectiveness, performance, 
competition and other areas to improve Deepwater. While encouraging, it 
seems that these will only come into play during performance reviews of 
the prime contractor for determining bonuses and future contract 
extensions--far too late to have an impact on each asset subcontract. I 
see these as helpful, but not as a substitute for more direct oversight 
by the Coast Guard and more independent review. Would you like to 
comment on that?
    Answer. In determining how to incentivize future success, the CG 
evaluated lessons learned and consulted experts from industry and 
government to assess evaluation criteria. This resulted in identifying 
five criteria (three objective and two subjective criteria) that will 
be used to determine length of Award Term II (AT II):

   The objective criteria include cost control, Operational 
        Effectiveness (OpEff) performance, and competition.

   The subjective criteria include program management/execution 
        and logistics.

   The CG may unilaterally establish AT II criteria via 
        contract modification if determined before 28 July 06. After 
        this date, the CG must negotiate the criteria with ICGS.

   The CG will use these five criteria to evaluate ICGS 
        performance from the date of contract modification through 
        approximately December 2009 (41 months) or whenever the USCG 
        will begin the process to evaluate the length of AT II.

   AT II begins 25 January 2011 and continues for 0-60 months 
        as determined by the Award Term Determining official.

    To address contractor accountability:

   The CG has refined the format to standardize input and 
        increased the objectivity of the criteria to annually assess 
        ICGS performance.

   For constant contractor oversight, the CG employs a 
        constantly developing ``balanced score card'' and Earned Value 
        Management System that measure contractor performance and 
        customer satisfaction throughout contract execution.

   Use of Award Fee mechanisms and contract incentives.

    Question 6. The Deepwater plan calls for the purchase of Unmanned 
Aerial Vehicles, or UAVs. The aircraft selected by the prime contractor 
is the HV-911 ``Eagle Eye,'' to be produced by Bell Helicopter. Bell 
Helicopter received a contract from Coast Guard for the design phase in 
February 2003. The Coast Guard scaled back the number of UAVs it 
intends to purchase in its revised Deepwater plan from 69 to 45, but 
modified the design to include chemical, biological, radiological, 
nuclear and explosive detection capabilities. The first three UAVs are 
supposed to be delivered in 2007.
    According to news reports, Bell lost its only prototype of this UAV 
in tests earlier this year due to a malfunction that caused the 
aircraft to crash. Is this accurate? And if so, are there delays or 
cost overruns that we can expect to see with respect to this Deepwater 
asset too?
    Answer. The Bell prototype (developed by Bell from its own funds; 
no Coast Guard funding) crashed during flight test on April 5, 2006. 
Official correspondence to date from Bell has indicated the cause of 
the crash was a Flight Termination System (FTS) that errantly shut off 
fuel to the UAV turbine engine. The FTS is a safety device to terminate 
flight if an air vehicle experiences an uncontrolled deviation from its 
pre-programmed flight path and strays outside assigned airspace. The 
Coast Guard VUAV will not have this FTS.
    There are increased costs and schedule delays associated with the 
Deepwater Eagle Eye but they are not associated with the crash of the 
Bell prototype. The cost increases are primarily related to 
requirements changes to include radar sensors onboard the UAV for 
surface and air contact detection and avoidance.

    Question 7. The importance of the Coast Guard in Washington State 
is profound, particularly in the Puget Sound where the Ports of Seattle 
and Tacoma move more than 4 million TEU's annually, representing our 
Nation's third largest load center. Washington State is also home to 
the Washington State Ferry system--our Nation's largest, ferrying more 
than 26 million passengers annually.
    With urban centers surrounding the Puget Sound in close proximity 
to ports and other critical infrastructure, the role of the Coast Guard 
in providing security to this region is of the utmost importance to our 
economy and the safety of our citizens.
    Despite these challenges, in the past, funding levels have been 
inadequate for the Coast Guard to implement the vast array of new and 
vitally important initiatives laid out in the Maritime Transportation 
Security Act of 2002 (MTSA). However, the Administration has requested 
increased funding for the Port and Waterways Security Mission of the 
Coast Guard--an increase of nearly 15 percent from this year.
    One specific area that still needs to be addressed is the lack of 
adequate funding for personnel needed to conduct foreign port 
inspections to validate that mandated international security standards 
are being met.
    What is the current timeframe for completing these inspections?
    Answer. With existing resources, the Coast Guard anticipates 
completing these inspections with our trade partners by the end of 
2008.

    Question 8. Has funding been the primary issue that has limited the 
Coast Guard's ability to complete inspection of foreign ports?
    Answer. No. The ability to conduct foreign port visits is driven 
not only by funding, but the availability of qualified personnel as 
well. Coast Guard officers assigned to performing these visits must 
have certain required skill sets and qualifications and, on average, 
have 12 to 15 years of Coast Guard experience. Hiring contract 
employees for this program has not been an acceptable option.
    Additionally, many foreign governments are generally not open to 
hosting Coast Guard inspection teams comprised of contract employees 
because of the sensitive security information contained in their port 
facility operations. It routinely takes a minimum of several months of 
negotiations before an inspection of a foreign country's port 
infrastructure can be scheduled.

    Question 9. With less than 30 percent of foreign ports that handle 
cargo arriving in the U.S. having been inspected, how much funding do 
you need to complete this important task by 2008? Is this feasible?
    Answer. The Coast Guard anticipates completing this task by 2008 
under existing funding levels. To date, more than 50 countries have 
been visited, which equate to approximately 35 percent of the foreign 
countries the Coast Guard intends to visit. The countries visited so 
far account for over 80 percent of the vessel arrivals to the United 
States.

    Question 10. What other limitations have delayed the inspection of 
these ports?
    Answer. Gaining access to some countries has been a factor in 
delaying some of the visits. Many countries have sovereignty issues and 
concerns regarding the visits, and some countries have been reluctant 
to allow the Coast Guard in to observe the conditions in their ports. 
The Coast Guard must negotiate the timing and scope of the visits. For 
example, entry into European Union countries was preceded by over a 
year of negotiations with the European Commission to develop a working 
document detailing visit procedures.

    Question 11. The Transportation Security Administration (TSA) and 
Coast Guard face an extremely difficult and complex challenge in 
implementing TWIC. It is essential, however that we get a system up and 
running as soon as possible.
    The initial roll-out currently being conducted is a good start, but 
challenges remain in implementing the program in the trucking industry 
and individuals involved with independently contracted services. 
Furthermore, the security of our ports is greatly dependent on 
coordination of security protocols with our trading partners. Lack of 
international standards for background and security checks of workers 
at foreign ports that load cargo and containers that ultimately arrive 
on our docks is troubling.
    Have the types of biometric information that will be collected such 
as fingerprints or iris-retinal scans been established? If not, what 
types of biometric information is currently being considered for 
collection?
    Answer. The Transportation Worker Identification Credential (TWIC) 
will use fingerprints as the biometric identifier. Each TWIC will have 
an individual's name, photograph, TWIC expiration date and a unique 
credential number on the face of the card with the biometric 
information recorded on a chip embedded in the card. That chip will 
hold the finger minutia templates of two fingers, the finger pattern 
templates of two fingers, a personal identification number, and a 
Federal Agency Smart Credential number.

    Question 12. Although the International Ship and Port Facility 
Security Code (ISPS Code) calls for port facilities to monitor and 
control access to secure areas, my understanding is that no such 
requirements exist.
    Answer. There are requirements in the ISPS Code to control access 
to the port facility (Section 14.2.2) and monitor restricted areas to 
ensure that only authorized persons have access (Section 14.2.4); 
however, there are no standards for these requirements. Much like the 
Maritime Transportation Security Act, the ISPS Code is written to be 
performance based, not prescriptive.

    Question 13. Is there any coordinated global effort, perhaps 
through the IMO, to establish standards for screening individuals with 
unescorted access to secure areas within ports?
    Answer. No. Each country signatory to the International Maritime 
Organization's (IMO) International Convention for the Safety of Life at 
Sea (SOLAS) is bound by the International Ship & Port Facility Security 
(ISPS) Code. As such, they must abide by the provisions of the ISPS 
Code for access control. Those provisions do not stipulate background 
screening of persons claiming a need for unescorted access to secure 
areas of ports. Each sovereign authority determines if a background 
check needs to be performed and how thorough it needs to be. This is 
often driven by their perceived need for the check and the limits of 
their data on citizens and resident aliens, as well as their confidence 
in that data. The disparity in policies and capabilities between 
nations would make the establishment of an overarching, international 
standard difficult.

    Question 14. Has the Coast Guard proposed that any such standards 
be promulgated?
    Answer. No, the Coast Guard has not proposed an international 
standard for background screening for individuals seeking unescorted 
access to the secure areas of a port.

    Question 15. How do you recommend we move forward on this front to 
get international participation in a global effort?
    Answer. The Coast Guard will continue to work with our Nation's 
international partners to establish workable vulnerability mitigation 
measures, including background screening where possible. Our 
international inspection effort to ensure compliance with the ISPS Code 
has been successful and provides an avenue for discussion with IMO 
member countries for specific improvements in ports based on the 
available resources, capabilities and policies.

    Question 16. A report issued by the Justice Department's Inspector 
General in March of this year highlights a number of serious 
vulnerabilities in the maritime domain, including ranking the 
Washington State Ferries along with Gulf Coast fuel tankers as the #1 
target for terrorism in the U.S. Regardless of whether this is due in 
part to aggressive reporting of suspicious incidents in the Puget Sound 
region, this is still very concerning.
    The report cites the FBI's National Threat Assessment of 2004 which 
reports that ``. . . vehicle-born improvised explosive devices as the 
type of weapon that al Qaeda will most likely use for a maritime 
attack, and cites maritime infrastructure, merchant vessels, and 
warships as the most likely maritime targets.'' The report goes on to 
state ``. . . the second most likely weapon is a bomb used against a 
cruise ship or ferry.''
    The Washington State Ferry system is our Nation's largest system 
serving more than 26 million passengers and 11 million vehicles 
annually. Washingtonians depend greatly on this mode of transportation 
and a terror incident within our ferry system would have catastrophic 
consequences for our state and economy.
    In light of FBI's findings, what extra measures has the Coast Guard 
taken to address these threats?
    Answer. The Coast Guard recognizes that high capacity vessels such 
as ferries present an attractive target to terrorists. From a larger 
perspective, the Coast Guard has developed a strategic plan for 
combating maritime terrorism which emphasizes identifying and 
intercepting threats well before they reach U.S. shores by conducting 
layered, multi-agency, maritime security operations and by 
strengthening the port security posture of militarily and economically 
strategic ports. This strategic plan prescribes three courses of 
action:

   Achieve Maritime Domain Awareness (MDA).

   Lead and conduct effective maritime security and response 
        operations.

   Create and oversee a Maritime Security Regime.

    All three courses of action speak directly to our overall efforts 
to reduce risk within the maritime environment, and all three are 
pertinent to the ferry vulnerability.
    MDA: In order to maximize our domain awareness, the USCG has 
established Field Intelligence Support Teams (FISTs), capable of local 
information collection--in order to stay connected to activities in 
marinas, ferry terminals, and other waterside locales. Maritime 
Intelligence Fusion Centers (MIFCs) were established to share, analyze, 
and disseminate intelligence and terrorist threat information with DHS, 
DOJ, DOD and numerous other law enforcement partners. The gathering and 
fusion of this Intel is a key part of our MDA effort along with 
implementation of the Automated Identification Systems (AIS).
    Security and Response Operations: Recognizing the inherent 
vulnerabilities of any ferry system to water-borne, vehicle-borne, and 
personnel-borne Improvised Explosive Device (IED) attacks, the Coast 
Guard has established a robust set of operational activities under 
Operation Neptune Shield. Even when no specific threat is known to 
exist, Coast Guard forces escort ferries, based on risk associated with 
vulnerability and consequence. The Coast Guard also conducts patrols, 
makes periodic visits to maritime critical infrastructure and/or 
enforces security zones near key transportation nodes such as ferry 
terminals. When risk increases, the Coast Guard increases its Maritime 
Security (MARSEC) level and the operational tempo of security 
operations. And, when a specific threat or vulnerability is 
highlighted, the Coast Guard is able to focus its operations on that 
threat/vulnerability. For example, in the wake of the London mass 
transit bombings in July 2005, the Coast Guard increased its MARSEC 
level and focused operations on maritime mass transit (i.e., ferries 
and ferry terminals). In addition to increasing our vessel escorts, 
patrols, and security zone enforcement in general, USCG explosive 
detection canine teams were deployed to help screen passengers and 
vehicles at ferry terminals.
    Maritime Security Regime: A key component of our layered defense is 
the implementation of a Maritime Security regime. The cornerstone of 
the domestic aspect of this regime is the Maritime Transportation 
Security Act (MTSA) of 2002. In response to some of the Act's mandates, 
the Coast Guard promulgated performance-based security regulations for 
vessels, 33 CFR Part 104, and published amplifying guidance (Maritime 
Security Directives 104-1 and 104-5), establishing vehicle, passenger, 
and baggage screening requirements for ferries, cruise ships, excursion 
vessels. Also as directed by MTSA, we oversee and coordinate Area 
Maritime Security Committees which are made up of the key port 
stakeholders.
    The Washington State ferries are required to comply with 33 CFR 104 
regulations; their vessels operate under a Coast Guard approved 
security plan and are required to complete annual security exams by the 
Coast Guard. During these exams, Coast Guard personnel verify that the 
vessel operators have implemented all elements of the approved security 
plan, including implementation of the appropriate Maritime Security 
Directives. Additionally, Coast Guard personnel conduct crew interviews 
and drills on various security scenarios to evaluate their proficiency.

    Question 17. Is additional funding for more resources for the Coast 
Guard to increase its patrols to secure the waters in which the ferries 
operate needed to fully address these threats?
    Answer. The Administration's proposed 2007 budget, which the Coast 
Guard supports, ensures that we are able to maintain effectiveness 
across the wide range of Coast Guard missions. Should more funding 
become available, the Coast Guard would certainly spend it wisely in 
support of the American public.

    Question 18. Does Congress need to provide any additional authority 
to the Coast Guard to enhance its ability to secure the Washington 
State Ferry system?
    Answer. The Coast Guard currently has the necessary legal 
authorities to ensure the security of the Washington State Ferry 
system.

    Question 19. The FBI reports that a bomb would most likely be 
delivered by a vehicle and that ferries and/or cruise ships, which are 
prevalent in the Puget Sound, are likely targets. What measures are the 
Coast Guard taking to address this threat?
    Answer. Following the implementation of the Maritime Transportation 
Security Act (MTSA) in July 2004, several key measures were implemented 
to safeguard ferries from a Vehicle Born Improvised Explosive Device 
(VBIED) attack.
    In accordance with the provisions of MTSA, passenger and vessel 
screening standards have been implemented on all ferries embarking 
passengers in United States ports. MARSEC Directive 104-5 provides 
specific passenger, baggage, and vehicle screening protocols at the 
various MARSEC Levels for ferry vessels meeting the applicability 
requirements of 33 Code of Federal Regulations (CFR) Part 104. As such, 
at various frequencies based on individual operator's Vessel Security 
Plans (VSP) and the Maritime Security (MARSEC) level, passengers, 
vehicles, baggage, and personal effects are screened prior to being 
permitted aboard.
    Several studies completed in Fiscal Year 2005 assessed the 
consequences of VBIED incidents onboard various categories of vehicle 
ferries, as well as screening technology, current screening standard 
effectiveness, and the socioeconomic effect of numerous screening 
strategies. A new deterrence study is underway and will be completed in 
September 2006. This study will provide direction to develop methods to 
quantify the deterrent effects of security policies and practices with 
respect to the Nation's ferry system.
    Current cruise ship and ferry security initiatives are directed 
toward developing industry standards for the use of explosive detecting 
canines and conducting effective passenger and cargo screening. The 
Coast Guard currently employs 18 canine substance detection teams at 
Maritime Safety and Security Teams (MSST) across the country. These 
teams frequently work with Federal, state, and local agencies as needed 
to ensure passenger safety and compliance with the Maritime 
Transportation Security Act of 2004.

    Question 20. There have been reports in the press that the threat 
assessment for Washington State Ferries may be a result of 
``aggressive'' reporting of suspicious incidents? Have you found this 
correlation to be consistent with assessments that have been conducted 
since the issuance of these findings?
    Answer. The FBI's 2005 Washington State Ferry (WSF) Assessment 
update covers the period 11 May 2004 through 31 August 2005 and makes 
several key judgments that are consistent with Coast Guard 
investigations and reporting. In fact, many of the incidents examined 
by the FBI were initially or subsequently reported by Coast Guard 
investigators or field personnel. Although no credible or specific 
threat to the WSF system was identified by the FBI, reporting of 
suspicious incidents increased significantly from the FBI's previous 
WSF assessment covering the period from 12 September 2001 through 10 
May 2004. The noted increase in reporting does not, as the FBI admits, 
necessarily reflect a greater threat and instead may reflect increased 
awareness on the part of the public, WSF personnel, and law enforcement 
personnel. Although reporting may have become more ``aggressive,'' the 
number of suspicious incidents rated as either ``Extremely High'' or 
having ``High'' likelihood of being indicative of pre-operational 
surveillance has actually decreased significantly since the first FBI 
assessment. Of the 247 suspicious incidents reported on for the update, 
none were assessed as being Extremely High in likelihood of pre-
operational planning and only one was rated as High in likelihood of 
pre-operational planning. Contrast to this assessment with seven being 
rated Extremely High and eleven being rated High during the previous 
assessment. The FBI analysis, while based on more reporting, does not 
reflect a corresponding increase in the likelihood of a terrorist 
attack against the WSF.

    Question 21. I am particularly concerned about Washington State 
Ferries coming out of Sydney, B.C. because vehicles are not being 
scanned for explosives until they offload in Anacortes, Washington. An 
amendment to the Transportation Security Improvement bill that I 
introduced calls on Homeland Security and the State Department to work 
with their Canadian counterparts to develop a plan to screen vehicles 
before disembarking for the U.S. In light of the FBI's findings 
regarding the delivery of bombs most likely to be ``vehicle-born,'' 
this is an issue that I believe must be addressed. Although this 
legislation has yet to be considered by Congress as a whole, has the 
Coast Guard identified this screening issue and is anything being done 
at this point to address this vulnerability?
    Answer. In accordance with 33 CFR 104.265 and 33 CFR 104.292, ferry 
vessels, including the Washington State Ferries, are required to 
``deter the unauthorized introduction of dangerous substances and 
devices, including any device intended to damage or destroy persons, 
vessels, facilities, or ports.'' The methods for compliance, however, 
are tailored to individual operators per that operator's Vessel 
Security Plan and vary with the Maritime Security (MARSEC) level in 
place.
    While the provisions of 33 CFR 104.265 require operators to screen 
persons, baggage, and vehicles for dangerous substances and devices, 33 
CFR 104.292 affords passenger vessels and ferry operators some latitude 
regarding screening requirements. Specifically, ``the owner or operator 
of a passenger vessel or ferry may ensure security measures are 
implemented that include searching selected areas prior to embarking 
passengers and prior to sailing and implementing one or more of the 
following:

   performing routine security patrols;

   providing additional closed-circuit television to monitor 
        passenger areas; and

   securing all non-passenger areas.''

    These requirements become more stringent as MARSEC levels are 
elevated.
    Therefore, the Washington State Ferries are in compliance with all 
Federal requirements. However, the one ferry running from Sydney, B.C. 
to Anacortes, WA may not necessarily be complying with the intent of 
the regulations by performing screening operations after vehicles are 
loaded. The Coast Guard welcomes additional legislation that 
facilitates enforcement and fosters consistent screening practices in 
Canada to keep our ferry system as safe as possible.

    Question 22. As we all know, information sharing is critical to the 
challenge of securing our homeland. Securing Washington State Ferries 
requires a concerted effort among the Ferries, FBI, Coast Guard and 
Washington State Patrol. However, the IG notes that there is no FBI 
policy that requires its field offices to provide intelligence 
summaries to Federal, state, and local partners in their territory. Due 
to the overlapping responsibilities of the Coast Guard and FBI in the 
maritime domain, I assume that information sharing between the FBI and 
Coast Guard occurs regularly?
    Answer. Yes, information sharing among the FBI and Coast Guard, as 
well as state and local law enforcement entities including the Port of 
Seattle, Washington State Patrol, Port of Seattle Police, Seattle 
Police, Department of Homeland Security and Washington State Ferry 
Security Officers occurs on a routine basis. Under the Puget Sound Area 
Maritime Security Committee, there is a Subcommittee called the 
Washington State Ferries Working Group which meets on a monthly basis 
and includes all the agencies mentioned.

    Question 23. Does the Coast Guard provide updates to any other 
state and local law enforcement on intelligence relevant to threats and 
security of ports and waterways?
    Answer. The USCG Sector Commander is the Chair of the Area Maritime 
Security Committee. The Sector Seattle Area Maritime Committee holds 
monthly conferences with key port partners, including Federal, state 
and local law enforcement officials, on relevant intelligence topics--
including security of U.S. ports and waterways. The Committee has an 
intelligence subcommittee, often led by the Coast Guard Command 
Intelligence Officer, whose duties include reviewing threat information 
and developing courses of action in response.
    Several states operate intelligence fusion centers, comprised 
mainly of state and regional law enforcement personnel. Coast Guard 
personnel, primarily Field Intelligence Support Team (FIST) members, 
coordinate with these centers regularly and exchange intelligence and 
threat information. Additionally, the Coast Guard ICC conducts port 
threat assessments on every U.S. strategic port. During these 
assessments, ICC members obtain and share intelligence with 
intelligence personnel at the Federal, state and local levels.

    Question 24. Since 9/11, the Coast Guard has been asked to expand 
its port and maritime security roles and take on new and additional 
homeland security responsibilities. In addition to these, we want the 
Coast Guard to continue to fully implement its non-security missions, 
such as protection of the marine environment, search-and-rescue, and 
polar icebreaking. Congress felt so strongly about this that we 
included language in the Homeland Security Act of 2002 that requires 
the Coast Guard to maintain adequate resources for its non-security 
missions.
    Yet the FY 2007 budget request for these missions continues to 
decrease. $3.9 billion is requested for non-homeland security missions, 
a decrease of 6.1 percent below the FY 2006 enacted level. The FY 2007 
budget request would reduce the total funding (operating budget and 
capital investments) for all 6 non-security mission areas. For example, 
the FY 2007 funding request for search-and-rescue activities is 7.8 
percent below the FY 2006 enacted level, for marine safety is 8.5 
percent below the FY 2006 enacted level, and for marine environmental 
protection is 14.3 percent below the FY 2006 enacted level.
    As we heard in Mr. Caldwell's testimony, many non-security assets, 
such as buoy tenders and icebreakers, are reaching the end of their 
service lives and require ever more costly and time consuming 
maintenance to remain functional. As you well know, Admiral, these 
vessels ensure fast and efficient marine commerce on our coastal and 
inland waterways. In a 2002 analysis, the Coast Guard concluded that 
needed replacements or upgrades to the coastal and aid-to-navigation 
(ATON) icebreaker fleet would cost $550 million. This money has yet to 
be included in any budget request since completion of this analysis. Is 
maintaining these vehicles a priority of the Coast Guard, and if so, 
why is this not reflected in your budget request?
    Answer. While no funding has been requested in Fiscal Year 2007, 
the Coast Guard will continue to carefully consider and prioritize 
funding for this important program, along with other vessel replacement 
projects.
    Although no funding has been requested via the annual budget 
submission in recent years, the Coast Guard did request and receive 
supplemental funding in Fiscal Year 2006 which funded production of the 
new Trailerable Aids to Navigation Boat (TANB)--a 26-ft boat--aluminum 
construction and outfitted with twin Honda 150 engines to replace boats 
destroyed by Hurricanes Katrina and Rita. The contract, awarded in 
March 2006, will deliver 80 boats and provide improved aids-to-
navigation mission capability, increased speed/range and state-of-the-
art navigation system and crew safety systems.

    Question 25. I am particularly worried about the decline in 
resources for marine environmental protection, which includes the Coast 
Guard's activities in reducing the risks of oil pollution. This mission 
would be cut by 14.3 percent in this year's budget, the sharpest 
decline of all non-security items in the FY 2007 budget request. Why 
did the Coast Guard choose to weaken this mission, and to such a 
significant degree? What does this mean in terms of specific areas that 
the Coast Guard will cut back on?
    Answer. The Marine Environmental Protection (MEP) has not been cut, 
as the Coast Guard does not allocate funding by mission. The Mission 
Cost Model we use is simply a tool to show how funding has been 
utilized; estimates of how funding is spent on missions is based on a 
multi-year average of resource hours spent on each mission. Recent 
events, such as the SELENDANG AYU incident and the ATHOS 1 spill caused 
for an unusual spike in resource hours expended for this mission--the 
decline in resource hours, as reflected in the Fiscal Year 2007 
request, normalize resource hour trends within the mission. However, if 
the trend of extraordinary events such as these continues, then future 
cost estimates will be adjusted accordingly.
    Performance remains our primary concern, and in Fiscal Year 2005, 
the Coast Guard exceeded its performance goals in MEP--there were only 
18.5 gallons of chemical spills per million short tons shipped--the 
goal was 20 or less.

    Question 26. Last year's ``unfunded budget priorities'' that the 
Coast Guard shared with Congress included funding to complete the 
upgrade to the Vessel Traffic Services (VTS) system in Puget Sound, yet 
the FY 2007 budget request includes no money for this upgrade. A total 
of $12.9 million is needed. The Coast Guard has testified before the 
Subcommittee on the importance of this VTS system in reducing the risk 
of vessel collisions including those that may result in oil spills. Why 
did the Coast Guard change its mind between last year and now as to the 
priority that should be given to this funding need?
    Answer. Due to other funding priorities, the Coast Guard did not 
request additional funding for the Ports and Waterways Safety System 
(PAWSS) for the VTS in Puget Sound in FY 2007. The System Integration 
Contract expired in FY05; Puget Sound and San Francisco received only 
the AIS portion, but were not fully recapitalized.

    Question 27. The Coast Guard's other major acquisition project--
Rescue 21--is also experiencing major problems. This system is needed 
not only for rescue of lives at sea, but was put to the test during 
Hurricane Katrina--when virtually all aspects of the older system that 
Rescue 21 is to replace failed.
    What specifically will you do to ensure that Rescue 21 is back on 
track, and that there will be no further slippage in the final delivery 
date?
    Answer. The Coast Guard has worked extensively with the contractor 
to establish a credible and realistic Rescue 21 project schedule, 
considering timelines for compliance with the National Environmental 
Policy Act, the significant number of outstanding real property 
acquisitions and new tower construction required, and the contractor's 
production capabilities. As such, several management and oversight 
actions have been initiated to ensure project completion stays on 
schedule. These include:

   Establishing a Coast Guard Project Resident Office near the 
        contractor's manufacturing facility to increase government 
        oversight, awareness, and involvement.

   Initiating use of the Defense Contract Management Agency and 
        Defense Contract Audit Agency to assist in validating the 
        contractor's technical proposals and cost reasonableness.

   Scheduling a Program level Integrated Baseline Review (IBR) 
        in 2006 to verify the contractor's proposed cost, schedule, and 
        performance efforts in the first 15 Full Rate Production 
        regions. Subsequent IBRs will be conducted for the remaining 
        regions.

   Soliciting input from Defense Acquisition University (DAU) 
        professionals to develop a strategic way-forward for the 
        program to maintain schedule and stay within cost thresholds. 
        DAU staff is partnering with the Coast Guard and General 
        Dynamics to help implement practical program management and 
        contract changes to improve program performance.

   Establishing monthly Integrated Project Schedule reviews 
        between the Coast Guard and General Dynamics.

   Conducting quarterly Coast Guard executive level/General 
        Dynamics Vice President-level program reviews to resolve 
        outstanding issues and increase senior level oversight.

   Conducting monthly Risk Management and Earned Value 
        Management (EVM) cost performance reviews to increase program 
        management oversight for improved risk mitigation and taking 
        actions based on the EVM data.

   Incrementally re-pricing expired Contract Line Items for 
        Full Rate Production regions. Leveraging actual cost data and 
        instilling program level lessons learned during the Initial 
        Operating Capability regions, resulting in more reasonable cost 
        targets for future work.

    The Coast Guard remains committed to a 2011 program completion 
date. It should be noted that the significant technical challenges of 
initial system design have been met, and the program is in Full Rate 
Production (FRP). All remaining regional installation work is expected 
to be more standardized. The contractor is starting to realize 
production efficiencies by leveraging installation experience and 
institutionalizing lessons learned from each regional deployment.

    Question 28. The Administration is again proposing that 
responsibility for funding the operation and maintenance costs of the 
Coast Guard's three polar icebreakers be shifted to the National 
Science Foundation (NSF). However, the National Academy of Sciences 
issued an interim report on the need for polar icebreakers, and 
concluded that United States should maintain polar icebreaking 
capabilities, and that these operations should be funded through the 
Coast Guard.
    Funding these assets through a separate Federal agency has proven 
problematic, and as a result, I included a provision in the Coast Guard 
bill (that is currently pending for final passage) that calls for the 
Coast Guard to submit a plan to Congress for operation and maintenance 
of these vessels in a manner that does not rely on the transfer of 
funds from another Federal agency.
    Given the difficulties in securing a funding agreement with NSF for 
the operation and maintenance of the polar icebreakers, why is the 
Administration once again requesting funding for these vessels through 
NSF's budget rather than the Coast Guard's?
    Answer. The Administration is requesting funding for the Nation's 
icebreakers through the budget for the National Science Foundations 
(NSF). The Coast Guard will conform its budget requests to policy 
decisions made after the National Research Council's final report, 
which is due in September 2006.

    Question 29. What steps has the Coast Guard taken to assure that 
the funds are in fact transferred in a timely manner for this year's 
operations?
    Answer. In accordance with the Memorandum of Agreement (MOA) 
between the Coast Guard and the National Science Foundation, the Coast 
Guard will prepare and submit a proposed Program Plan, the annual 
budget request that is based on NSF's schedule, with supporting 
documentation to the NSF annually on or before 1 July of each year. The 
Coast Guard is actively negotiating the terms of the FY07 Program Plan 
with NSF.
    NSF approves the Program Plan upon mutual agreement of both parties 
and provides the Coast Guard with a Letter of Intent that states the 
agreed upon level of funding the Coast Guard can expect.
    Subject to the availability of funds, NSF makes obligations 
annually and throughout the year as required per the approved Program 
Plan. Modifications to the approved Program Plan may be made with the 
mutual agreement of both parties and are required in the event of 
unanticipated maintenance, catastrophic damage, or damage incurred 
while operating in severe ice conditions.
    To date, NSF has transferred $51.4M of the $53.9M allotted to the 
Coast Guard for FY06.
    In addition to complying with the formal provisions of the MOA, 
Coast Guard resource staffs proactively engage with counterparts at NSF 
to create and maintain open lines of communications and ensure that our 
collective goals are achieved.

    Question 30. Are the amounts requested through NSF's budget--$57 
million, which is $1 million less than last year's request--sufficient 
for all expected costs?
    Answer. Yes.

    Question 31. What steps is the Coast Guard taking to plan for the 
longer term replacement or recapitalization of these unique assets?
    Answer. The Coast Guard continues to investigate options to replace 
or upgrade the POLAR SEA and POLAR STAR. The Coast Guard has completed 
a Mission Analysis Report and has, at the request of Congress, 
contracted the National Research Council (NRC) to complete an 
assessment of future Coast Guard polar icebreaker needs and 
capabilities.

    Question 32. The Coast Guard recently provided a report to Congress 
on the impact of oil spills from Hurricanes Katrina and Rita on the Oil 
Spill Liability Trust Fund (OSLTF), established under the Oil Pollution 
Act of 1990. According to this report, there were six major, five 
medium and over 5,000 minor oil and hazardous materials spills 
resulting from these two hurricanes. Over nine million gallons of oil 
were released. Informal estimates provided by the Coast Guard suggest 
that at least $800 million in claims for cleanup costs and damages 
could be brought against the OSLTF.
    The OSLTF was originally established with a principal balance of $1 
billion to ensure that adequate funds would be available for oil 
pollution response. At last year's budget hearing, Admiral Collins 
reported to the Commerce Committee that the OSLTF was heading toward 
depletion. To address this concern, a provision, based on a bill that I 
cosponsored with Senators Stevens and Inouye, was included in the 
Energy Policy Act last year that reinstated the fee on oil in order to 
replenish the OSLTF. Under that provision, the per-barrel fee would 
continue until the balance of the OSLTF reaches $2.4 billion.
    However, the Coast Guard has estimated that if Katrina and Rita 
claims amount to $800 million and are paid for out of the OSLTF, the 
OSLTF could be reduced to zero in 2009, and would only reach $80 
million in 2014--when the tax is set to stop. On March 16, I introduced 
the Oil Pollution, Prevention, and Response Act of 2006, which includes 
a provision that protects the OSLTF from claims related to Hurricanes 
Katrina and Rita.
    Does the Coast Guard have a plan for addressing these claims as 
they are made against the OSLTF? Does the Coast Guard have a plan for 
addressing the possible depletion of the Fund?
    Answer. The Coast Guard will address any and all claims as they are 
presented and as resources permit. If for any reason the fund is 
depleted to a point where it is evident that the balance will not be 
sufficient for its various uses, the Coast Guard will consider all 
potential methods for replenishment.

    Question 33. Does the Coast Guard have suggestions for any 
alternative approaches for addressing these claims in a way that does 
not deplete the OSLTF?
    Answer. The Coast Guard has not identified specific alternatives at 
this time.

    Question 34. Or, does the Coast Guard just plan to wait until the 
OSLTF is depleted before providing Congress with a proposal for 
addressing this situation?
    Answer. Well before the OSLTF is depleted, its viability would need 
to be addressed to ensure that all the uses it supports can continue. A 
single catastrophic oil spill could have a significant and immediate 
impact on the OSLTF's viability. Because a catastrophic oil spill could 
happen at any time and is impossible to predict, we will need to 
address the viability of the OSLTF at the moment its viability is 
threatened.
    The Coast Guard will address any and all claims as they are 
presented. Claims that are submitted to the OSLTF can take years to 
process and adjudicate, which will allow for ample time to identify 
potential fund depletion and address alternative funding sources, if 
necessary. If the magnitude of outstanding claims develops to a level 
that is greater than the OSLTF can support, the Coast Guard will notify 
the Administration and Congress and consider alternatives for 
addressing the insufficiency at that time.
                                 ______
                                 
Response to Written Questions Submitted by Hon. Frank R. Lautenberg to 
                         Admiral Thad W. Allen

    Question 1. The President has proposed $3 million to upgrade the 
current facilities at Coast Guard Air Station Atlantic City in order to 
house the new helicopter unit charged with enforcement of the National 
Capital Region no-fly zone. I understand that there are already six 
helicopters there, and the hangar only holds eight. How will this $3 
million be spent to upgrade the current hangar and facilities to 
accommodate the new unit?
    Answer. There is currently sufficient hangar space at Air Station 
Atlantic City, as 3 of the 5 aircraft being used for the NCRAD mission 
will be forward deployed to Reagan National Airport at any given time. 
The $3 million for Air Station Atlantic City facilities will be used to 
expand the office, supply, parking and other facilities needed to 
support the 102 extra personnel and additional equipment associated 
with the NCRAD mission.

    Question 2. The President's FY07 budget proposal included $62 
million for the Coast Guard takeover of duties involved in the 
enforcement of the National Capital Region no-fly zone. If the Coast 
Guard is appropriated only $57 million for the takeover of this new 
function, as proposed by the Senate Appropriations Committee (Senate 
Report 109-273--Department of Homeland Security Appropriations bill, 
2007), how will it affect the ability of the Coast Guard to fully 
takeover this function during FY07?
    Answer. The $62 million included in the President's Fiscal Year 
2007 budget for the Coast Guard to support the National Capital Region 
Air Defense (NCRAD) initiative represents $48.5 million of AC&I and 
$13.9 million of OE funding. These AC&I and OE funds will be used to 
purchase and support additional helicopters and aircrews.
    Any reduction in this funding request would jeopardize the Coast 
Guard's ability to support the National Capital Region Air Defense 
(NCRAD) initiative, and could negatively impact other Coast Guard 
missions by reducing flight hours available for helicopters service-
wide.

    Question 3. The Coast Guard has estimated that at least $800 
million in oil spill clean up claims could be filed for payment out of 
the Oil Spill Liability Trust Fund (OSLTF). How will the OSLTF be 
affected if these claims are allowed to be made?
    Answer. The size and number of potential removal cost and damage 
claims, including natural resource damage (NRD) claims, that could 
impact the Fund are currently difficult to estimate. Because the Coast 
Guard does not have an accurate estimate of the private-sector costs 
incurred during the post-Katrina clean up of oil spills, it is not 
possible to predict future fund liabilities with any reasonable degree 
of certainty at this time.
    Well before the OSLTF is depleted, its viability would need to be 
addressed to ensure that all the uses it supports can continue. A 
single catastrophic oil spill could have a significant and immediate 
impact on the OSLTF's viability. Because a catastrophic oil spill could 
happen at any time and is impossible to predict, we will need to 
address the viability of the OSLTF at the moment its viability is 
threatened.
    The Coast Guard will address any and all claims as they are 
presented. If the magnitude of outstanding claims is greater than the 
OSLTF can support, the Coast Guard will notify the Administration and 
Congress and consider alternatives for addressing the insufficiency at 
that time.

    Question 4. Does the Coast Guard have a method to measure how many 
drug shipments or illegal immigrants or illegal fishing incursions were 
not interdicted? If so, how accurate is it?
    Answer. The Defense Intelligence Agency annually publishes the 
Interagency Assessment of Cocaine Movement (IACM), a report that 
estimates the cocaine flow based on production and consumption 
estimates. The Coast Guard uses this report as the official estimate of 
the noncommercial maritime flow of cocaine to the United States each 
year. The difference between this number and the amount of cocaine 
removed by the Coast Guard (as determined by the Consolidated Counter-
Drug Database) would represent the drug shipments not interdicted. The 
accuracy of this measure is dependent on the accuracy of the IACM 
estimates, which have a broad range due to the difficulty of 
determining actual production.
    Similarly, the Coast Guard's Intelligence Coordination Center 
publishes monthly illegal migrant flow numbers. Their report includes 
the number of migrants not interdicted by the Coast Guard, other 
government agencies or foreign governments. The accuracy of this 
measure varies based on the intelligence available and credibility of 
the various reporting sources, but in general is most accurate for 
Cuban and Haitian migrants.
    The Coast Guard measures how many illegal foreign fishing vessel 
(FFV) incursions were detected and how many of those were interdicted 
each year. The difference between these two numbers provides an 
estimate of the number of incursions not interdicted. This estimate may 
not be very accurate, as the actual number of incursions is likely 
greater than the number detected; however, there is no current method 
of validating that supposition.

    Question 5. What is the Coast Guard's implementation schedule for 
implementation of Section 607 of the Coast Guard and Maritime 
Transportation Act of 2006?
    Answer. The Coast Guard has already begun the process to establish 
the Delaware River and Bay Oil Spill Advisory Committee as required by 
Section 607 of the Coast Guard and Maritime Transportation Act of 2006. 
This work will involve close coordination between Coast Guard 
Headquarters, Area, and District staffs as well as personnel at Coast 
Guard Sector Delaware Bay, and appropriate stakeholders.
    One key step will be publishing a notice in the Federal Register 
announcing the formation of the Committee and soliciting members. We 
expect completion of this step in approximately 6 month's time. Other 
important steps include writing a charter for the Committee, and 
selecting the most appropriate members among the various applicants. We 
are hopeful that this process will be complete by early 2007, allowing 
the Committee to hold its first meeting around April 2007. While there 
may be unexpected delays, the Coast Guard intends to push for as rapid 
an implementation process as is possible, and looks forward to the 
report of the Committee.

                                  
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