[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]


 
     UNITED STATES COAST GUARD FISCAL YEAR 2008 BUDGET REQUESTS AND 
                             AUTHORIZATION 

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

                                (110-15)

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                COAST GUARD AND MARITIME TRANSPORTATION

                                 OF THE

                              COMMITTEE ON
                   TRANSPORTATION AND INFRASTRUCTURE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                             March 8, 2007

                               __________


                       Printed for the use of the
             Committee on Transportation and Infrastructure

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             COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

                 JAMES L. OBERSTAR, Minnesota, Chairman

NICK J. RAHALL, II, West Virginia    JOHN L. MICA, Florida
PETER A. DeFAZIO, Oregon             DON YOUNG, Alaska
JERRY F. COSTELLO, Illinois          THOMAS E. PETRI, Wisconsin
ELEANOR HOLMES NORTON, District of   HOWARD COBLE, North Carolina
Columbia                             JOHN J. DUNCAN, Jr., Tennessee
JERROLD NADLER, New York             WAYNE T. GILCHREST, Maryland
CORRINE BROWN, Florida               VERNON J. EHLERS, Michigan
BOB FILNER, California               STEVEN C. LaTOURETTE, Ohio
EDDIE BERNICE JOHNSON, Texas         RICHARD H. BAKER, Louisiana
GENE TAYLOR, Mississippi             FRANK A. LoBIONDO, New Jersey
JUANITA MILLENDER-McDONALD,          JERRY MORAN, Kansas
California                           GARY G. MILLER, California
ELIJAH E. CUMMINGS, Maryland         ROBIN HAYES, North Carolina
ELLEN O. TAUSCHER, California        HENRY E. BROWN, Jr., South 
LEONARD L. BOSWELL, Iowa             Carolina
TIM HOLDEN, Pennsylvania             TIMOTHY V. JOHNSON, Illinois
BRIAN BAIRD, Washington              TODD RUSSELL PLATTS, Pennsylvania
RICK LARSEN, Washington              SAM GRAVES, Missouri
MICHAEL E. CAPUANO, Massachusetts    BILL SHUSTER, Pennsylvania
JULIA CARSON, Indiana                JOHN BOOZMAN, Arkansas
TIMOTHY H. BISHOP, New York          SHELLEY MOORE CAPITO, West 
MICHAEL H. MICHAUD, Maine            Virginia
BRIAN HIGGINS, New York              JIM GERLACH, Pennsylvania
RUSS CARNAHAN, Missouri              MARIO DIAZ-BALART, Florida
JOHN T. SALAZAR, Colorado            CHARLES W. DENT, Pennsylvania
GRACE F. NAPOLITANO, California      TED POE, Texas
DANIEL LIPINSKI, Illinois            DAVID G. REICHERT, Washington
DORIS O. MATSUI, California          CONNIE MACK, Florida
NICK LAMPSON, Texas                  JOHN R. `RANDY' KUHL, Jr., New 
ZACHARY T. SPACE, Ohio               York
MAZIE K. HIRONO, Hawaii              LYNN A WESTMORELAND, Georgia
BRUCE L. BRALEY, Iowa                CHARLES W. BOUSTANY, Jr., 
JASON ALTMIRE, Pennsylvania          Louisiana
TIMOTHY J. WALZ, Minnesota           JEAN SCHMIDT, Ohio
HEATH SHULER, North Carolina         CANDICE S. MILLER, Michigan
MICHAEL A. ACURI, New York           THELMA D. DRAKE, Virginia
HARRY E. MITCHELL, Arizona           MARY FALLIN, Oklahoma
CHRISTOPHER P. CARNEY, Pennsylvania  VERN BUCHANAN, Florida
JOHN J. HALL, New York
STEVE KAGEN, Wisconsin
STEVE COHEN, Tennessee
JERRY McNERNEY, California

                                  (ii)

  


        SUBCOMMITTEE ON COAST GUARD AND MARITIME TRANSPORTATION

                 ELIJAH E. CUMMINGS, Maryland, Chairman

GENE TAYLOR, Mississippi             STEVEN C. LaTOURETTE, Ohio
RICK LARSEN, Washington              DON YOUNG, Alaska
CORRINE BROWN, Florida               HOWARD COBLE, North Carolina
JUANITA MILLENDER-McDONALD,          WAYNE T. GILCHREST, Maryland
California                           FRANK A. LoBIONDO, New Jersey
BRIAN HIGGINS, New York              TED POE, Texas
BRIAN BAIRD, Washington              JOHN L. MICA, Florida
TIMOTHY H. BISHOP, New York            (Ex Officio)
JAMES L. OBERSTAR, Minnesota
  (Ex Officio)

                                 (iii)




































                                CONTENTS

                                                                   Page

Summary of Subject Matter........................................    vi

                               TESTIMONY

Allen, Admiral Thad W., Commandant, United States Coast Guard....     5
Bowen, Charles W., Master Chief Petty Officer, United States 
  Coast Guard....................................................     5
Skinner, Richard L., Inspector General, Department of Homeland 
  Security.......................................................    40
Caldwell, Stephen, Director, Homeland Security and Justice 
  Issues, Government Accountability Office.......................    40

          PREPARED STATEMENT SUBMITTED BY MEMBERS OF CONGRESS

Cummings, Hon. Elijah E., of Maryland............................    58
Mica, Hon. John L., of Florida...................................    65

               PREPARED STATEMENTS SUBMITTED BY WITNESSES

Allen, Admiral Thad W............................................    68
Bowen, Charles W.................................................    82
Caldwell, Stephen L..............................................    88
Skinner, Richard L...............................................   119

                       SUBMISSIONS FOR THE RECORD

Allen, Admiral Thad W., Commandant, United States Coast Guard:

  Coast Guard Mission Support Organization Chart.................    10
  Response to Naval Surface Warfare Service Finite Element 
    Analysis.....................................................    16
  Response to question from Rep. Coble...........................    20
  Response to request from Rep. Cummings.........................    23
  Status Report on Cape Wind at Nantucket Sound, as requested by 
    Rep. Oberstar................................................    33
  Response to question from Rep. Cummings........................    39

                        ADDITIONS TO THE RECORD

Reserve Officers Association of the United States, statement.....   130

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



        HEARING ON BUDGET AND AUTHORIZATION FOR FISCAL YEAR 2008

                              ----------                              


                        Thursday, March 8, 2007,

                   House of Representatives
    Committee on Transportation and Infrastructure,
   Subcommittee on Coast Guard and Maritime Transportation,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 10:00 a.m., in 
Room 2167, Rayburn House Office Building, the Honorable Elijah 
E. Cummings [Chairman of the Subcommittee] presiding.
    Mr. Cummings. The Committee will come to order.
    Today, the Subcommittee on Coast Guard and Maritime 
Transportation convenes to examine the Coast Guard's fiscal 
year 2008 budget.
    The President has requested nearly $5.9 billion to fund the 
coast Guard's operations, an increase of $416 million over 
fiscal year 2007 enacted level of just under $5.5 billion.
    The President's total request for the Coast Guard capital 
budget is nearly $998 million, of which $837 million is for 
Deepwater. This represents a decrease of approximately $250 
million below the amount appropriated for Deepwater in fiscal 
year 2007.
    We will hear today from Admiral Thad Allen, the Commandant 
of the Coast Guard, and Master Chief Petty Officer Charles W. 
Bowen, regarding the President's budget request and how it 
aligns to the Coast Guard's needs as the service continues an 
ambitious transformation effort to balance its many missions 
and to respond to the emerging threats that confront our 
homeland.
    I look forward to hearing from all of the witnesses today 
and hearing their thoughts on the question of whether the Coast 
Guard has adequate resources to perform each of its missions.
    As I have stated since the beginning of my tenure as 
Chairman of this Subcommittee, our Subcommittee will be an 
advocate for the Coast Guard, but we will balance our advocacy 
with a demand for accountability. Further, as we review the 
budget request, our Subcommittee will continually seek new 
opportunities to strengthen the systems and processes that can 
ensure accountability in all aspects of the Coast Guard's 
operating and capital budgets.
    While I am concerned that $837 million may not be adequate 
funding for Deepwater, we have just begun our oversight of this 
program and, before I advocate for an increase in funding, I 
want to know in detail the steps that the Coast Guard is taking 
to correct Deepwater and I want evidence that the steps are 
producing the results that we expect. As I have said over and 
over and over again, I do not expect for the American people to 
continuously pay for errors that are made by others.
    At the same time, the Committee on Transportation and 
Infrastructure is concerned that insufficient capital funding 
is being directed towards the maintenance of on-shore 
facilities. The President's budget of $35 million for this 
purpose, which appears to be far below the amount required to 
meet the maintenance needs of existing infrastructure. Our 
Committee supports the appropriation of $360 million for non-
Deepwater capital expenditures, which is the level of funding 
that was appropriated in fiscal year 2005.
    I am also very concerned about the funding levels for some 
of the Coast Guard's historical programs. Proposed funding 
levels for search and rescue, marine safety, aids-to-
navigation, icebreaking, and the protection of living resources 
are all lower than the amounts that were appropriated for these 
purposes in fiscal year 2007.
    I have hear concerns from throughout the maritime industry 
and labor organizations about the Coast Guard's lack of support 
for traditional maritime safety programs. Some have even 
advocated transferring this mission back to the Department of 
Transportation, where they believe it will receive better 
support.
    Today, we also welcome to the Subcommittee Mr. Richard 
Skinner, the Inspector General of the Department of Homeland 
Security, and Mr. Stephen Caldwell, who represents the 
Government Accountability Office.
    These two experts will discuss the Coast Guard's budget 
needs and the Deepwater procurement, which they both have 
examined in detail.
    Since our last hearing on the Deepwater program, the DHS IG 
has issued a new report on the 123-foot patrol boats. Of 
course, these boats have been pulled from service due to 
problems with their hulls. However, the DHS IG has found that 
aside from the hull problems, the contractors failed to meet 
the requirements of the Deepwater contract by failing to 
install low-smoke cabling and failing to install topside 
equipment that would have been operable in all of the weather 
conditions the patrol boats were expected to face.
    I must tell you that this particular issue is one that 
concerns me greatly. We have just seen, over the past week, 
what happens when our military come back from Iraq and the 
disregard, it seems, in many instances, for their health and 
safety. And here we are in the Coast Guard, a requirement 
having been put in by the Coast Guard and then seeming to have 
been waived that goes to the very safety and health of our 
personnel.
    These findings are particularly disturbing because they 
identify specific instances in which the contractor failed to 
meet the requirements of the Deepwater contract and they 
identify failures that were apparently not immediately 
recognized by the Coast Guard. Further, the use of non-low-
smoke cabling could have needless exposed the crews on these 
boats to safety risks, including excessive toxic smoke in the 
event of an on-board fire.
    I think that it would be almost criminal if this 
Committee--if something were to happen in the future where 
members of the Coast Guard were harmed because we did not make 
sure these specifications were met. And if we did not address 
them, I think that that falls square on our shoulders, and I, 
for one, will not be a part of that. So, therefore, we are 
going to look at that very carefully.
    Such instances of shoddy performance that could endanger 
the safety of the Coast Guard crews are completely 
unacceptable. And let me say to everyone here I hope these are 
the last instances we hear about the Deepwater contract.
    I look forward to the testimony of all our witnesses, and 
now I turn it over to my able and good friend and Ranking 
Member of this Committee, Mr. LaTourette.
    Mr. LaTourette. Thank you very much, Mr. Chairman, and 
thank you very much for this hearing.
    The Subcommittee is meeting this morning to review the 
President's request for Coast Guard activities and personnel 
for fiscal year 2008. With the problems that have recently come 
to light with the vessels that will be acquired under the 
Deepwater program, 2008 is shaping up to be a critical year for 
the future of the Coast Guard.
    The Administration has requested approximately $8.2 billion 
for fiscal year 2008, which is an increase of 2.4 percent over 
last year. While I am pleased that the President has proposed 
this increase for the Coast Guard, I am also concerned by 
several other proposals included in the budget. The President 
has proposed a funding level of approximately $1 billion for 
the Coast Guard's Acquisition and Capital Programs, including 
$837 million for the Deepwater program. The proposed amount for 
the Deepwater program is more than $229 million less than the 
Congress appropriated for the program last year.
    I am concerned about the effects that any reductions in 
funding would have on the cost and the expected delivery of 
assets under Deepwater. I hope that the witnesses will speak on 
how the proposed funding level will affect the overall costs 
and schedule for the Deepwater program, as well as the effects 
on individual acquisitions under the project. The Coast Guard 
is in the process of successfully acquiring new aircraft, small 
boats, and command and communication systems as a part of 
Deepwater, and I believe we must take care that any adjustment 
to the funding levels do not endanger those acquisitions.
    I am also concerned that the President's budget does not 
include funding to support several of the Coast Guard's 
missions. Once again, the President has proposed a transfer of 
funds for operations and personnel of the Coast Guard's three 
polar icebreakers to the National Science Foundation. Last 
year, this Subcommittee received a statutorily mandated report 
from the National Academy of Sciences that recommended that the 
Federal Government and the Coast Guard maintain icebreaking 
capabilities to support economic and national security 
interests in the polar region. I hope that the witnesses will 
also advise the Subcommittee how the Administration plans to 
address these recommendations and how the Coast Guard plans to 
support its current polar icebreakers and related personnel 
without direct budgetary authority over funds for these assets.
    The President has also proposed a transfer of funding and 
statutory responsibilities over the bridge alteration program 
from the Coast Guard to the Department of Transportation. The 
Subcommittee will review this proposal to examine whether these 
functions can be better performed by another Federal agency; 
however, I am extremely concerned by the justification that was 
included for this proposed transfer: that the removal of these 
responsibilities would better focus the Coast Guard on its 
growing homeland security responsibilities.
    If the Coast Guard is unable to carry out all of its 
traditional and homeland security missions with its current 
legal authority, assets, and personnel levels, this 
Subcommittee needs to know and I believe we need to take 
action.
    This hearing is very important because it lays the 
groundwork for the authorization bill that the Subcommittee 
will develop and hopefully enact into law later this year under 
the direction of our Chairman.
    I thank the witnesses for their testimony. And, lastly, I 
want to welcome Master Chief Charles Bowen on his first 
appearance before the Subcommittee in his capacity as the 
Master Chief Petty Officer of the Coast Guard and, Master 
Chief, congratulations on this accomplishment, and we look 
forward to working with you.
    And thank you, Mr. Chairman. I yield back my time.
    Mr. Cummings. Thank you very much, Mr. LaTourette.
    Mr. Coble?
    Mr. Coble. Thank you, Mr. Chairman. I will not take the 
full five minutes.
    I want to welcome our panel here and would like to note for 
the record, Mr. Chairman, that the Administration's fiscal year 
2008 budget includes $13.3 million for construction of a state-
of-the-art pool and training facility for the Rescue Swimmer 
Program located in Elizabeth City, North Carolina. While 
Elizabeth City is not in my district, I do want to acknowledge 
the Coast Guard presence in North Carolina and the contribution 
it makes not only there, but across the Nation.
    And for those who have seen the movie The Guardian, Mr. 
Chairman, which portrays the training and efforts of rescue 
swimmers, you no doubt understand the need for adequate 
training and facilities for rescue swimmers, and all Coast 
Guard programs, for that matter.
    I commend men and women of the Coast Guard, including 
Admiral Allen and Master Chief Bowen, for the good job they do 
each day to protect our Nation, and it is good to have you all 
with us today.
    And I yield back, Mr. Chairman.
    Mr. Cummings. Thank you very much, Mr. Coble.
    Mr. Taylor, you had no opening statement. Thank you very 
much.
    We now will bring forward Admiral Thad Allen and Master 
Chief Bowen.
    Good morning, gentlemen, and thank you for being with us.

 TESTIMONY OF ADMIRAL THAD W. ALLEN, COMMANDANT, UNITED STATES 
  COAST GUARD; CHARLES W. BOWEN, MASTER CHIEF PETTY OFFICER, 
                   UNITED STATES COAST GUARD

    Admiral Allen. Good morning, Mr. Chairman, Ranking Member 
LaTourette, and Members of the Committee. It is a pleasure to 
be here this morning. I have a statement for the record that I 
would like to submit and a brief oral statement, subject to 
your approval, sir.
    Mr. Cummings. Without objection.
    Admiral Allen. Sir, the previous hearing we had focused a 
good deal on Deepwater, and I am prepared to answer any 
questions you may have for that topic today. I would tell you 
up front that we are proceeding on task per my previous 
testimony. We are in the process of restructuring the contract 
for the next award time, which we will have the opportunity to 
award in June of this year. We are looking at the feedback from 
the Inspector General, Government Accounting Office, this 
Committee and other Committees about establishing performance 
metrics, proper criteria for award fee, off-ramps where we need 
to do that, and more effective ways to hold the contractor 
accountable. We are on time line to return to this Committee 
within 120 days from the hearing on the 30th of January. I look 
forward to testifying at that time and reporting out to you, 
sir.
    In the meantime, yesterday and today the chief of my 
acquisition shop, Admiral Gary Blore and Admiral Dale Gable, 
who is our new, who is our newly designated technical authority 
for Deepwater, are personally down on the National Security 
Cutter looking at the fatigue life issues, modifications that 
need to be made for the purpose of closing the issues on the 
first and second hull, and then being able to make the proper 
design changes for the third hull, so we may proceed this year 
and be in construction on the third hull.
    Prior to any movement forward on any task order related to 
Deepwater or the National Security Cutter, we will full consult 
and advise the Committees and the oversight bodies of our 
intentions to that regard and how we resolve those issues, sir.
    I would like to focus on the budget and the authorization 
bill, the purpose of the hearing this morning, sir. I was 
pleased that you were able to join us at the State of the Coast 
Guard speech several weeks ago. At that point, I made the case 
to the public that was in attendance and the Coast Guard that 
we are in a changing world and that the Coast Guard needs to 
change with it, and we actually started that change last May 
when I assumed command of the Coast Guard.
    We are doing several things simultaneously. We are 
assessing the external environment and what we need to do in 
the future. I believe we need to pay attention--and we are--to 
the current issues that have been raised, and I have said 
repeatedly that Deepwater is my responsibility as the 
Commandant and I will get it right. However, I don't think that 
we should let the tyranny of the present release us from the 
responsibility to focus on the future, and we need to do that 
and we need to think about what the Coast Guard needs to be in 
the 21st century.
    I stated at the State of the Coast Guard speech that we 
released a new Coast Guard strategy for maritime safety, 
security, and stewardship. This document is intended to lay out 
the capstone objectives for my tenure as Commandant and it 
crosses all mission and achieves a balance between safety, 
security, and stewardship, including new emphasis on security 
and our legacy missions, and I would be glad to answer any 
questions about mission balance as we move forward.
    To be able to be effective in the current operating 
environment, we need to be effective as an organization. There 
are three things we are looking at, and they are reflected in 
both the authorization bill and the budget that is before you. 
The first is our forestructure, our people and our platforms, 
to make them as effective as we can. The budget before you 
today includes a base reprogramming that will assist us in 
establishing an employable operations group that will take the 
Coast Guard's deployable specialized forces, place them under a 
single command, and allow us to do adaptive force package 
against problem sets like Katrina, a terrorist attack, or a 
manmade disaster.
    Additionally, we are looking at the command and control 
system in the Coast Guard to make sure it effectively supports 
mission execution.
    Finally, we are looking at mission support. The whole 
process of acquisition reform and our blueprint for acquisition 
reform, together with financial reforms and a new look at our 
logistics and maintenance system are intended to bring the 
Coast Guard into the 21st century on how we conduct business 
practices. As I stated at my State of the Coast Guard speech, 
there are portions of the Coast Guard that have been run like a 
small business, and we need to start acting like a Fortune 500 
company.
    Finally, the end goal is to achieve balance between the 
resources we have and the mission demands placed upon us. Our 
operational commanders continually participate in a risk-based 
decision-making process. We allocate the resources to them on 
scene and empower them to apply them to the highest need. The 
principle of on-scene initiative is what allowed us to respond 
during Hurricane Katrina and save 34,000 lives. That same 
operational guideline and that risk management decision plays 
itself out every day through the decisions of our field 
commanders, and I would be glad to answer any questions you may 
have about how they make those decisions, how that relates to 
mission balance, and how that translates into the budget 
numbers that you spoke about earlier, sir.
    Again, I am delighted to be here today, and I would be glad 
to answer any questions you may have for me, sir.
    Mr. Cummings. Thank you very much, Admiral.
    Master Chief Petty Officer Charles W. Bowen, welcome.
    Chief Bowen. Good morning, Mr. Chairman and distinguished 
Members of the Subcommittee. I have submitted a statement for 
the record and have a brief oral statement this morning.
    It is a privilege to speak to you today about a subject 
that I care very deeply about: the U.S. Coast Guard, our 
missions, and our people. First, I would like to report to you 
that the service that I represent is in very good shape overall 
and well capable of executing our missions. During the past 
nine months, I have visited every Coast Guard district with the 
exception of District 14 in Hawaii, and spoken to or in front 
of at least 9,000 Coast Guardsmen.
    On the West Coast I met a Petty Officer on the Coast Guard 
Cutter Monsoon who led a boarding party and a boarding that 
resulted in the arrest of Javier Arellano-Felix, the violent 
Mexican drug lord and the leader of the Tijuana Cartel.
    Petty Officer Steven Ruh from Station Oswego swam over 100 
years in eight to ten foot seas to rescue a woman who would 
have surely died.
    I saw CWO Jim Mullinax underway on the Coast Guard Cutter 
Baronoff while on patrol near the oil platforms near Um Kassar, 
Iraq. He and his shipmates are working incredible hours in 
extreme conditions, and they are not only keeping the waters 
off Iraq's only port secure, but they are also helping to train 
Iraqi security forces in boarding techniques.
    Whenever I talk to Coast Guard crews about the future of 
our service, I talk in terms of opportunities and challenges. 
Opportunities include expanded roles, new equipment, and 
reorganization efforts that will make us better. Challenges 
include an aging infrastructure, including old owned housing, 
child care, and our health care.
    A very bright spot is recruiting and retention. 2006 was a 
very successful active duty recruiting year. We recruited the 
highest percentage of minorities and the third highest 
percentage of women in history of the Coast Guard. For the 
Coast Guard, diversity is an operational necessity. Our 
retention rates are historic, and 93 percent and 88.5 percent 
respectively for the officer and enlisted workforce.
    Just a quick note about Deepwater. The past several weeks 
there have been several hearings devoted to this subject. I 
won't even try to repeat what has already been said, but I will 
give you my perspective from a deck plate standpoint. I know 
firsthand the importance of being able to project our Coast 
Guard presence. I have been on small cutters that could not 
reach offshore and we needed that aging medium endurance or 
high endurance cutter to reach that person in distress, 
interdict drugs, or protect our natural resources.
    Deepwater is also a quality of life issue. Our crews live 
aboard those cutters over six months of every year. A current 
378-foot cutter built in the 1960s has some berthing areas that 
house 20 to 30 persons at once. In comparison, the largest 
berthing area on the NSC will house six personnel at the most. 
As stated, the art dining facility and an onboard gym will also 
improve livability.
    To correct my written statement, we removed nearly 287,000 
pounds, or 130 metric tons, of cocaine from the transit zone in 
fiscal year 2006, and over 338,000 pounds, or 153 metric tons, 
of cocaine in fiscal year 2005. In comparison, from 1993 to 
2003, the interagency seized an average of 109,474 pounds, or 
about 50 metric tons, per year. To put it more powerfully, in 
the last two years alone, we removed twice as much cocaine as 
we cumulatively seized in all of the years from 1994 to 1998.
    Thank you for the opportunity to appear before you and 
thank you for all that you do for the men and women of the U.S. 
Coast Guard.
    Mr. Cummings. Thank you very much. We appreciate both of 
your testimonies.
    Admiral Allen, I want to also compliment you on your State 
of the Coast Guard speech. I was very glad to be there. I 
thought it was very enlightening and I thought it very 
practical, and you showed a tremendous amount of vision, and we 
want to make sure you help--want to help you get there.
    Over the past seven years, the Coast Guard's operating 
budget has grown substantially, from $2.7 billion to a figure 
that is now approximately $5.5 billion. At the same time, by 
the Coast Guard's count, the total number of full-time 
equivalent positions has grown just 18 percent.
    Admiral, do you believe that you have the right number of 
people to manage the growth in your operations? And do you 
believe you have the expertise?
    Admiral Allen. I believe with the increments that are 
provided each year, as long as the FTE matches the increased 
funding, we are going to be fine, and I am good to go with the 
numbers that are presented in the budget this year. That is not 
to say we don't have challenges moving forward, and I will be 
working with the Department of Homeland Security and OMB to 
fashion a fiscal year 2009 budget that is line with the State 
of the Coast Guard speech that I gave.
    One of the reasons the budget that is presented to you this 
year may seem flat-lined compared to previous years, I believe 
we need a source-to-strategy. I believe you have to have an in-
state of mind when you go up and ask for resources, and in the 
last eight months, in putting together the Coast Guard's 
strategy and focusing on base realignment of the Coast Guard, I 
have tried to position ourselves to move forward to have a 
higher level of credibility and a linkage between what we are 
trying to accomplish out there and buying down risk and the 
resources that I am coming to you and requesting.
    One of the perennial problems in the Coast Guard is we are 
a multi-mission organization. The good news is you can put one 
cutter out there and do five missions, you don't have to have 
five cutters. The downside is you can only do one or two 
missions at a time. So if anybody asks me could I use more 
people, the answer is always yes, because if you give me more, 
I will more effectively apply those than probably any 
organization in Government. But there has to be a balance of 
the infrastructure and the competency and how we apply those 
resources. We know when we grow too fast we have juniority 
problems, where we will have people in grade and time in 
service at a much junior level than we had in the past. So I 
think there is a balance we need to achieve there.
    As we move forward, I will be willing to work with the 
Committee and pass on any recommendations I may have for where 
growth needs to take place in the Coast Guard. But, as I said, 
for fiscal year 2008, coming in as the Commandant, my goal was 
to take, as we would call, a round turn on our base. And if you 
will notice, there is an on-budget base reprogramming forestall 
of $80 million to centralize the personnel account and then 
$132 million to align the funding and the personnel we need to 
establish the deployable operations group.
    So I would categorize this year's budget as a base 
management budget, and I fully expect that, as we go forward, I 
will make my needs known to the Department and the 
Administration as we move forward, sir.
    Mr. Cummings. On that note, on that note, one of your 
requests I think is that you have four vice admirals. Is that 
accurate? Is that right?
    Admiral Allen. Yes, sir. This is the authorization bill 
that we put up, sir. What I am requesting is to establish 
parity with how vice admirals are assigned with DOD. It would 
also allow me the flexibility to achieve some of the 
reorganization goals that I laid forward in the State of the 
Coast Guard speech. Right now, vice admirals in the Coast Guard 
are assigned and confirmed to a position. I would like the 
flexibility, subject to the confirmation of the Senate--which 
they will still have the authority to review--to have more 
flexibility on how we assign vice admirals, and I would like to 
increase the number by one, sir.
    Mr. Cummings. Okay. And so the difference would be between 
now--if you get what you want and what is going on now, what is 
the difference?
    Admiral Allen. The major difference is I am proposing to 
create a mission support organization in the Coast Guard. 
Included in that is the new acquisition organization and the 
new chief sustainment officer and the ability to manage our 
platforms more effectively and efficiently. This will allow me 
to establish a senior technical position at the three star 
level. It will do two things: it will provide higher level 
oversight of mission support in things like the Deepwater 
acquisition; it will also allow a path to promotion for our 
technical people to the three star level, sir.
    Mr. Cummings. Will you provide us with a proposed 
organizational chart showing this, showing what you just------
    Admiral Allen. Would be happy to, sir. Yes, sir.
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    Mr. Cummings. First of all, I don't want something you said 
to go unnoticed, when you talk about how you are presenting 
your budget and basically trying to not ask for things that you 
don't need at this moment. I must tell you that that is 
refreshing and we appreciate that, because we want to make 
sure, as you have heard me say 50 million times, we want to 
make sure that the public's money is spent effectively and 
efficiently. So I really appreciate that.
    Talking about personnel, do you believe that the head of 
the acquisitions functions should be a member of the Coast 
Guard or a civilian?
    Admiral Allen. Actually, I think you would need a mix of 
both skills, sir.
    Mr. Cummings. Say that again?
    Admiral Allen. You need a mix of both skills.
    Mr. Cummings. Okay.
    Admiral Allen. You need the operational experience and the 
technical competency that we embed in our officers as they grow 
up through the Coast Guard, and somebody rising to that level 
has about 30 years experience and would be able to apply that 
to great advantage to the Coast Guard. On the other hand, there 
are issues of continuity, longstanding procurement expertise, 
and so forth. That is the reason what we have tried to do in 
the acquisition organization is have both a military member and 
a deputy as sort of the senior executive service. And, in fact, 
two or three of the last hires that we have made into our 
technical community have been folks that have come from places 
like the Naval Sea System Command, where we are trying to 
acquire civilian competency that provides continuity, and then 
overlay that with military experience, sir.
    Mr. Cummings. And so do you believe that the chief 
financial officer should be a member of the Coast Guard?
    Admiral Allen. Yes, I do, sir, because ultimate 
accountability, chain of command, and the accountability of the 
senior officers to me, the way it is currently constructed is 
the chief of our CG-8 organization is designated as a chief 
financial officer. We are in the process of hiring a deputy CFO 
who will be a civilian senior executive, sir.
    Mr. Cummings. With regard to Deepwater, are we going to be 
able to stay within that $24 billion budget, do you think?
    Admiral Allen. Sir, I am not sure we are going to be able 
to answer that question completely until we get some of these 
first articles out and tested, and then we are going to have to 
make some tradeoffs. If for some reason there is cost growth 
and we intend to stay within that cap, then we may be looking 
at less units or another way to acquire those units. I am ever 
mindful of that. That is the target and I think I need about a 
year under the new regimes we are putting in place and looking 
at the options we have to acquire things, especially after we 
have demonstrated first article performance, whether or not we 
should go bilateral with the contract rather than work through 
ICGS, and use that as a basis for revising our cost estimates 
and whether or not the $24 billion is accurate. But I would 
like to tell you that we need took at different mechanisms by 
which we can drive cost out of the procurement overall, sir.
    Mr. Cummings. All right, now, let's go back for a moment. 
If we were to--you just said something that just kind of rang 
some bells in my head. You said something to the effect that we 
might have to reduce what we want basically. Is that what you 
just said?
    Admiral Allen. Well, sir, if you keep the baseline where it 
is at, at $24 billion, and you have cost growth and you don't 
change the baseline, you are going to buy less.
    Mr. Cummings. Right. I understand that.
    Admiral Allen. Or you have to extend the baseline cost. 
What I am saying is that under the changes we are looking at in 
the contract structure and our options as far as competition 
and all that sort of thing, I think in the next six to twelve 
months I can give you a more accurate assessment of whether or 
not the changes we are making now can actually drive cost out 
of the total top line of the procurement.
    Mr. Cummings. I have got that.
    Admiral Allen. Yes, sir.
    Mr. Cummings. This is where I am going with this. One of 
the things--one of the reasons why we even came up with the 
Deepwater program was so that we could make sure--I know it 
started pre-9/11, but particularly post-9/11 we wanted to make 
sure that our military had the best equipment to do the job 
that they have to do. And this is a theme that is, by the way, 
not only running through the Coast Guard, but all of our 
services. I mean, that is a major concern I think of probably 
every single Member of Congress.
    And so when--if we have to reduce our acquisitions, then 
the question becomes are we--it is logical, I think, that we 
are then reducing our capability of doing the missions that you 
have been mandated to do. So I guess what I am looking at--and 
I understand you need more time to figure out where this is 
going, but I am interested to know how the negotiations are 
going. We are interested to know what is happening without--I 
don't want to interfere with the negotiations, but I am 
interested in knowing how Northrop Grumman and Lockheed Martin, 
are they working with you, trying to deal with the issues that 
we have been talking about for the last few months.
    And I am wondering whether or not there are any concessions 
with regard--I mean, we noted their bonuses have been paid--
were paid a while back. We want to know where all of that is 
because, again, what we are trying to do is take the American 
people's money and protect them with their own money. That is 
what we are trying to do, trying to spend that money 
effectively and efficiently. We simply want what basically is 
standard contract law to happen. We want to make sure that when 
we give money, that we get a product back that works.
    So where are we with your negotiations? Because I think 
that is critical, where those negotiations are, because we 
cannot just keep throwing money and throwing money. The 
American people are not going to stand for it, nor will this 
Congress.
    Admiral Allen. Yes, sir. The process was intended to come 
up with a range of suggestions to both myself and the two CEOs, 
and the culmination of the work that has been going on was the 
trip yesterday to Pascagoula with the chief of Deepwater and 
our technical authority. The specific purpose of that trip was 
to come to closure on the technical solutions for the fatigue 
life issue as part of settling all issues relating to the first 
and the second hull, as a prelude to being able to issue a task 
order for the third NSC hull, sir. So we are almost at closure 
on that. I would be glad to provide you a complete technical 
briefing and where we are at in the negotiations, sir.
    Mr. Cummings. I am going to end my questions because I want 
the other Members to have opportunity, but let me tell you 
something. The Homeland Security IG has a major issue with this 
fatigue life situation. He is of the firm belief that we are 
not getting what we contracted for. He has heard your 
explanation; he has read all kinds of material; I guess he has 
talked to a number of people.
    But one of the most disturbing things that he found, he 
felt that--and he believes very strongly--and he will be here--
he will be sitting where you are in a few minutes and I am sure 
he will say this--is that he does not believe, when it comes to 
fatigue life, that we have gotten--we are not getting what we 
bargained for. Of all the points that he was most upset about, 
it is that one, and he feels that, for some reason, we started 
off with a certain fatigue life and then some folks played with 
the words, and the next thing you are know we are not getting 
what we bargained for.
    Would you comment on that? Because I want to make sure 
that, when he comes up here, I can tell him what you said.
    Admiral Allen. Yes, sir. The only issue raised by the 
Inspector General regarding the National Security Cutter has 
been fatigue life. There has been no audit on the capability, 
the quality of life improvements that the Master Chief talked 
about. The single issue with the National Security Cutter and 
the Inspector General is the fatigue life, and I believe you 
are alluding to two issues, and I will take them separately.
    One of them is I think there is an issue on how underway 
days were defined, and I will talk about that.
    The other issue is Northrop Grumman constructed this ship 
through a traditional military combatant process using what 
they call data design sheets. Our engineers felt that that 
basis for construction introduced some risk in terms of hull 
fatigue. They sought a modeling system that had not been 
applied called finite element analysis that replicate the 
action of waves on the hull over the lifetime of the hull. That 
led our engineers to believe that it might not achieve the 
fatigue life expected of the ship. That wasn't to say that you 
would launch it and something would happen immediately; it is 
almost like you ask for--you thought you were getting 80,000 
mile Michelins and you got 60,000 Good Years, and how long 
would it last. And that is where the discussion has come in.
    Northrop Grumman believes that they have met the 
requirement in the ship they have offered us; we don't think 
they have. That is why our chief of Deepwater and our technical 
authority are in Pascagoula. That is a seminal issue that has 
to be resolved, codified, either contract changes made, 
concessions made and completely spelled out about how we are 
going to move forward. It involves strengthening certain parts 
of the ship to make sure that, as the forces are subjected to 
the hull over the lifetime of the ship, that we won't see 
stress cracking and a loss of structural integrity on the ship, 
sir.
    The second issue was something that was not clear in the 
contract but understood by both the Coast Guard and the 
contractor and required clarification for the Inspector 
General, and it is the difference between what is a day away 
from home port and what is a day in the operating area. These 
vessels have been crewed to be able to operate 230 days a year 
away from home port. Our current cutters operate 185 days a 
year away from home port. With transit times, dry dock time, 
port calls for logistics, you do not yield 230 days on station 
from 230 days away from home port, it is closer to about 185 or 
190.
    The contractor that was directed to do the finite element 
analysis was not given any guidance; he therefore took 230 days 
and applied that as if we were on station subject to all the 
wave action, which results in a far greater requirement for 
strengthening the hull over 30 years than you would for 185 
days. Our technical authority--this is not Northrop Grumman or 
the Deepwater Program Office--our technical authority went back 
and corrected that that should be 185 days. We then went back 
and clarified, to the extent there was any misunderstanding by 
the IG or it was vague in the contract, we actually modified 
the contract to make sure everybody knew that we were talking 
about 185 days on station per year.
    Mr. Cummings. Just to leave you with this. When we have the 
IG who says, United States Congress, the people of this 
Country, through the Coast Guard, are not getting what they 
bargained for, that is a problem.
    Admiral Allen. Yes, sir.
    Mr. Cummings. That is a major, major problem. We rely on 
the IG; we trust the IG, I think most of us. They have nothing 
to gain; they are just trying to do their job. So I just--
again, as I said--and I think you------
    Admiral Allen. Sir, we don't argue with the issue of 
fatigue life. It has got to be resolved.
    Mr. Cummings. Okay. All right, so we are trying to be 
consistent with the IG, is that what you are trying to say to 
me?
    Admiral Allen. There was inconsistent interpretation of 
whether the ship should be subjected to wave action for 230 
days or 185 days a year. It was commonly understood between the 
Coast Guard and the contractor that it was 185 days. The IG 
interpreted the contract as saying 230. There is a different--
and it was stated different ways in different parts of the 
contract, and we have clarified that.
    Mr. Cummings. Now, did you all ask the Navy to do the 
analysis on the basis of 230 days?
    Admiral Allen. We submitted a work order to the Naval 
Surface Warfare Service at Carderock and asked them to do a 
finite element analysis. The work order did not specify the 
number of days and they interpreted it to be 230. When we 
received the report, we adjusted it to 185, which this is a 
scaling of the results. And I would be glad to produce a 
detailed answer for the record on that that is certified by my 
technical authority, sir.
    Mr. Cummings. I would like to have that only, like I said, 
because the IG--and I know that he is very, very, very upset 
about this and very concerned.
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    Mr. Cummings. Mr. LaTourette.
    Mr. LaTourette. Thank you, Chairman.
    And welcome again. I want to go over just some parts of the 
President's budget that I think I highlighted in my opening 
remarks, and the first is on the shore-side facility funding.
    Although the request for this year is about $16 million 
higher than last year, in going back over previous periods, 
there was a six year period, from 1995 to fiscal year 2000, the 
Coast Guard requested an annual average of about $73.5 million 
for those facilities, together with navigation facilities. 
During the next six-year period, from 2001 to 2006, the Coast 
Guard sought an average of only $30 million for the same 
programs.
    My question--just three quick questions. What accounts for 
the reduction? Has the Coast Guard dramatically reduced its 
shore-side aid and aids to navigation holdings? And do the 
upgrades made during the more robust period still meet the 
operational needs of the Coast Guard today?
    Admiral Allen. Sir, we took a hit in the early 2000s in the 
shore account. A lot of that had to do with the negotiations 
that were going on regarding the awarding of the Deepwater 
contract against a constrained funding ceiling. In fact, there 
were a couple years there, because of the negotiations moving 
the budget forward, the funding was probably inadequate.
    We have raised that to $37 million this year. In future 
years--I have already talked with the Secretary and the Deputy 
Secretary about this--we need to grow this account, sir. It is 
underfunded and we need to move it up in future years.
    Mr. LaTourette. Thank you.
    The other issue that I mentioned, one of the other issues 
was the polar icebreaking operations. The President's budget 
does not include funding for personnel or operations aboard the 
service's three polar icebreakers for 2007. The President's 
budget also does not include any funding to address 
recommendations to maintain Federal polar icebreaking 
capabilities that were made to Congress in the statutory 
report. There was a report in January of this year to the 
Committee that states that the Coast Guard is working with the 
Administration to review that report.
    One, when will the review of the report be complete? Two, 
how does the transfer of this funding affect the Coast Guard's 
capability to plan and budget for polar icebreaking missions 
aboard Coast Guard vessels? And then, lastly, is the National 
Science Foundation required to provide funding the Coast Guard 
for this service or can it choose to contract out with other 
parties or even foreign nations to engage in this activity?
    Admiral Allen. Yes, sir. First of all, several years ago 
the base funding for the operation of polar icebreakers was 
transferred to the National Science Foundation. That has 
required us, on an annual basis, to justify cost to them and 
negotiate a fund transfer to operate our icebreakers. In 
effect, we own the crews and the cutters, and they own the 
funding on an annual basis to do that.
    My own opinion is that is very dysfunctional, but that is 
what @. It proved itself this year; when appropriations were 
passed for the Department of Defense and Homeland Security, the 
rest of the Government was submitted to a continuing 
resolution, and that would include the National Science 
Foundation. Now, we have adjusted that for this year, but that 
is just one indication about this process and how it is very 
problematic in how to execute.
    Moving forward, I believe if the Coast Guard is going to 
operate polar icebreakers, we should have the funding in our 
base, whether it is adequate or not, and then we will operate. 
I would rather have the flexibility and the money, even if it 
is not enough, then to try and do a cross-agency transfer, 
because it is very problematic.
    In regard to the longer polar icebreaker issues, the 
National Academy of Sciences produced a report last September 
that validated the need for three polar icebreakers which the 
Coast Guard: the Healy, which is basically an Arctic research 
vessel; the Polar Sea; and the Polar Star.
    Moving forward, we believe there is a decision point coming 
down about the recapitalization or the refurbishment of the 
Polar Sea and the Polar Star. It is not a this year budget 
issue, but it is a this year policy issue in how we are going 
to proceed in the future.
    We have been partnering within the interagency, Department 
of State and other entities, to take a look at the current 
policy environment for polar icebreaking, both Arctic and 
Antarctic, especially in view of the shrinking Arctic ice cap, 
access to routes from Russia to Asia over the top of the 
Western Hemisphere rather than through the Panama Canal, and 
the likelihood of increased shipping. We think there are issues 
up there regarding search and rescue, environmental response, 
and even issues of national security. We think this is a policy 
issue that needs to be addressed right now, and we look forward 
to doing that over the next 12 to 18 months, and then following 
a policy discussion with authorization and budget 
recommendations, sir.
    Mr. LaTourette. Okay, thank you. And just sticking with the 
icebreaking theme for a minute, I want to--I will thank you a 
little bit later, but publicly thank you and Admiral Crowley of 
the 9th District and the skipper and the crew of the Neah Bay 
for the relief that they gave my constituents last week, a 
really great effort. I mean, the Neah Bay had to come out three 
times because the ice in the lake was so tough, and it was 
helped by the Ridgely from Canada. So I thank you, and I 
thanked Admiral Crowley yesterday.
    My last question is in your testimony, figure 1 on page 5 
of your testimony includes a list of statutes and acts under 
which the Coast Guard operates. The list is part of the 
explanation of the new Coast Guard strategy for maritime 
safety, security, and stewardship. It is of concern to me that 
none of the provisions in Title 6 dealing with vessel safety 
and documentation or merchant mariner credentialing appears on 
the chart. As you know, the Subcommittee has been long 
concerned with that, and I think my question is, is the failure 
to mention this important provision of Title 46 an oversight or 
should the Subcommittee be concerned that maritime safety is 
suffering at the hands of increased attention to homeland 
security?
    Admiral Allen. Sir, I can guarantee you it was not an act 
of commission. That chart in the--I am assuming you are 
referring to the maritime strategy chart. That was a 
representative example of statutes, and whether you call it 
omission or oversight, there is no intention to walk away from 
those missions, sir.
    Mr. LaTourette. Okay. Thank you very much.
    Thank you, Chairman.
    Mr. Cummings. Mr. Coble?
    Mr. Coble. Thank you, Mr. Chairman.
    Thank you, Admiral and Master Chief. Admiral, let me first 
of all insert my oars into back home waters involving a program 
that was included in the previous authorization bill which 
created a pilot program in Camden County, North Carolina. 
Specifically, Section 401 authorized the creation of a Coast 
Guard junior reserve officer training corps at the Camden 
County High School. To date, that program has received no 
funding. Given inclusion in the authorization, Admiral, what 
level, if any, of involvement has the Coast Guard had with the 
Camden County Board of Education and the Camden County 
commissioners to reach an agreement on how to move the pilot 
program forward? And if an agreement was reached between the 
principals, would you be inclined to recommend funding to 
support the program?
    Admiral Allen. Sir, if it is okay, I will get the latest 
status on that and answer for the record, but I do have a 
couple thoughts to pass, if that is okay.
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    Admiral Allen. We do have, as you know, a very successful 
Junior ROTC program down in Miami, Florida, the Mast Academy; 
it is a magnet school for marine science and technology, and 
that has become a great feeder school for Academy applicants. 
And, in fact, a year or so ago the regimental commander at the 
Academy actually came out of that JROTC program. We know the 
value of those programs.
    With my sabbatical down in New Orleans and Baton Rouge last 
year, I became disassociated from that particular initiative, 
and I would like to get back to you and give you a response to 
your question, sir.
    Mr. Coble. I think the beauty of the Camden County locale 
is the proximity, as you know, of the support center at 
Elizabeth City and the various commanders there.
    Admiral, I think you have touched on this, but give us some 
examples of major decisions that were made regarding Deepwater 
where it has been reported that the Coast Guard did not follow 
Integrated Coast Guard Systems recommendation. First of all, is 
it your belief that you did follow them, that the Coast Guard 
did in fact follow the recommendations?
    Admiral Allen. Thank you for the question, sir. There is a 
lot of coverage in the press and a lot of perceptions out there 
that, generally, terms have been dictated to the Coast Guard in 
this contract. While the IG is correct in that we did not 
adequately document the decision related to the National 
Security Cutter and fatigue life, I can tell you that there are 
numerous instances where we have told the contractor that the 
proposed solution was not acceptable.
    The original helicopter that was offered to the Coast Guard 
was an AB139. We have decided to move forward with the re-
engining of our H-65 helicopters to H-65 Charlies and stay with 
our H-60 helicopters and upgrade them to H-60 Tango versions 
with the new cockpit and new avionics.
    Likewise, the small boat that was offered for both the 123 
and the National Security Cutter, the short-range prosecutor, 
we didn't feel brought us the same performance at value and we 
thought an independent purchase by the Coast Guard of these 
small boats would give us the same performance at a lower cost, 
and we would then provide that as Government-first equipment. 
That would also allow us to have Northrop Grumman design the 
stern launch system for the National Security Cutter, which is 
somewhat of an innovation in a large ship. They would be able 
to design that launch to the ship, the small boat that we were 
going to acquire so that system would work together, 
technically.
    But there are a number of issues where we have said no, 
that is not the right answer, we are going to go another 
direction.
    Another one would be the original fixed-wing maritime 
patrol aircraft that was offered by Integrated Coast Guard 
Systems was an extended range CASA 235 that we thought would 
not give us a technical performance, and we were concerned 
about the amount of power reserve on takeoff and whether or not 
it could accomplish the long-range patrol objections that we 
had. Then we ended up with a hybrid fleet. We moved the CASA 
235 that did not have the modifications that introduced risk 
and we kept a certain portion of our C-130 fleet and the new C-
130Js as part of the mix.
    But I can tell you unequivocally, across the board, terms 
have not been dictated to the Coast Guard. I know there is an 
issue with the National Security Cutter, but that has not been 
the standard practice.
    Mr. Coble. I thank you, Admiral.
    No further questions, Mr. Chairman.
    Mr. Cummings. I want to thank you.
    Before I go to Mr. Taylor, have we seen--first of all, 
Admiral, just following up on what Mr. Coble just asked and 
your response, I think it is great the things you just said, 
because those were the kind of things that we were hoping would 
happen. But have we seen any significant savings, Admiral, on 
those things? I mean, like say, for example, when you can buy 
something direct, as opposed to be going through the team or 
whatever. I mean, have you seen savings?
    Admiral Allen. These weren't decisions that were based on 
savings, they were based on the performance enhancements, sir.
    Mr. Cummings. I understand. But have we seen any? Are you 
following what I am saying?
    Admiral Allen. Yes, sir. There are savings associated with 
the Short Range Prosecutor. And we can give you the exact--
there is a Delta for each hull, and I can give you that for the 
record, sir.
    Mr. Cummings. Yes. Can you give us that information?
    Admiral Allen. Happy to do that, sir.
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    Mr. Cummings. Mr. Taylor?
    Mr. Taylor. Thank you, Mr. Chairman.
    And, Commandant, thank you very much for being here. I will 
start off with the good news. For years I have been concerned 
about the safety of the crew ships as they tied up at the Port 
of New Orleans, particularly around Mardi Gras time; thought it 
would be a great terrorist target. My observation was that you 
had some small boats out there protecting them from the 
waterside, and there is also a Naval vessel there. So we start 
off with the good news. I am glad that you all were doing that. 
It is one less likely target to have been hit.
    The bad news is, Commandant, that I continue to be 
dumbfounded by what happened to the 110s. And it just hit me. 
You are in the business of running marine safety inspections on 
every commercial ship in America. Every tugboat, every offshore 
supply boat has to be hauled periodically. Your crews run the 
safety inspection. Your crews do the calculations. So how in 
the heck do you stretch eight ships and render them useless, 
spend $100 million of the taxpayers' money and nobody in your 
fine organization catches this? Now, if you think about it, if 
a guy shoots down five planes, he is an ace. Somebody took 
eight ships out of your inventory, and nobody is to blame. And, 
again, I am going to ask you this question every time. That is 
not fair to the taxpayers. Somebody wasted eight ships. So the 
question I want to ask in particular is who ran the hogging and 
sagging calculations? Were those numbers entered properly? And 
who is responsible for the loss of eight ships and $100 million 
of taxpayers' money? Because--I am sorry it took so long for me 
to hit me--if you have got the expertise to inspect everybody 
else's vessels, I have got to believe that you had the 
expertise in-house to have caught this.
    Admiral Allen. Yes, sir. I think we are in violent 
agreement on the amount of value that has been rendered to the 
Government and the Coast Guard by this acquisition, and I think 
failure to achieve adequate solution going forward is going to 
result in us having to make sure that the Government's 
interests are protected, and I stated before we are going to do 
that. I have got a team doing basic forensics on the decision-
making process, the reviews that were done on that.
    As we had talked earlier at one point, when they extended 
the ship by 13 feet, they moved the midship's point of the ship 
to aft of the pilot house. When it was on the pilot house, the 
hogging and sagging of the ship subject to the forces of the 
waves was absorbed by what we would call a larger cross-section 
modulus. When they moved the midpoint back, there was a 
narrower part of the ship to absorb the hogging and sagging, as 
you have stated.
    One of the things we are looking at is whether or not the 
computer models that generated the solution on whether or not 
that would be adequate were adequately applied, and we are 
taking a look at that right now. We are going to produce a very 
detailed analysis of all this and we will make it available to 
the Committee, and we have somebody working on it right now. 
There is nobody more concerned about this than I am, sir, and 
it was with very, very careful deliberation that I went down to 
Key West and removed those boats from service, because that is 
the last thing I wanted to do, sir.
    Mr. Taylor. Well, when do you anticipate a decision on 
this? Because, Commandant, every time I see you I am going to 
ask you the same question.
    Admiral Allen. Yes, sir. We------
    Mr. Taylor. Because I don't think the taxpayers ought to 
get stuck with this bill.
    Admiral Allen. Agreed, sir.
    Mr. Taylor. To what extent--I am pleased to hear that you 
have been talking with Admiral Mullen to the greatest extent 
possible, coordinating your acquisition efforts with theirs. 
And, again, you have expertise; they have expertise. Years 
ago--and it may still be going on--the Coast Guard would lend--
I am sorry, the Navy would lend gunnery officers to the Coast 
Guard. I am sure there was some sort of exchange of Coast Guard 
officers to Navy vessels. I was just curious, have you now, or 
have you ever looked into the possibility of trading off some 
officers with NAVSEA? It doesn't strike me that you need a huge 
acquisition shop, but to have some people who have got at least 
that in their background, and knowing the people who to call at 
NAVSEA I have got to believe would be of tremendous value to 
the Coast Guard so that something like this doesn't happen in 
the future. Having someone whose experience David Taylor for 
the David Taylor Research Lab and at least knows who to call 
there I would think would be of some value.
    Admiral Allen. Yes, sir, you are absolutely right. In fact, 
we are using those resources right now. The finite element 
analysis that we talked about earlier that was conducted for 
the National Security Cutter was conducted at the Naval Surface 
Warfare Center at Carderock. We use the Navy for operational 
test and evaluation, and we consult with them regularly where 
they have expertise that we can use. And, in fact, I will 
shamelessly state that we have stolen I think either two or 
three senior executives right out of NAVSEA that are working in 
the Deepwater project right now. And Admiral Mullen and 
Secretary Winter have offered whatever resources we need moving 
ahead.
    I am traveling, as I told you earlier, on Friday down to 
the shipyards of the Gulf Coast with Secretary Winter. That 
will be followed by discussions with Admiral Mullen and Deputy 
Secretary Jackson about how we might move forward to take 
advantage of some of the issues you raise yourself, sir.
    Mr. Taylor. Mr. Chairman, my last question is I have 
forgotten the name of the deputy commandant who actually called 
into question the National Security Cutter, and particularly 
what he saw as the overly stress problems down in the bilges of 
the ship. I have been told I think by you that he is now 
retired and teaching at the Academy. My question is in your 
conversations with Northrop and others, has he been included in 
that? I would think--the reason I say this is I read what he 
had to say. I mentioned his concerns to the president of 
Northrop Grumman Shipbuilding; he says that is not the case. I 
would think there would be some value to getting that retired 
admiral and the engineers from Northrop in the same room at the 
same table and see if this can't be resolved.
    Admiral Allen. Yes, sir. You are talking about Admiral 
Errol Brown. He is not teaching at the Academy. We recently 
brought him on for special duty with us to oversee the top-to-
bottom review at the Coast Guard Academy, which has just been 
completed and we are reviewing that. And he has done great 
service and he is a terrific officer; I have known him for well 
over 35 years; highly respected for his integrity.
    I will tell you this. I am not sure we need to bring him 
back to have the discussion, because my current technical 
authority in the Coast Guard, Rear Admiral Dale Gable and Errol 
Brown, there is absolutely no daylight between them in how they 
see this issue, sir. I think we have got it covered. It is a 
matter of sitting down with Northrop Grumman and resolving how 
they view the fatigue life of the ship and how we review it, 
and what we think needs to be done to move forward; and that is 
exactly what we are doing, and I owe the Chairman and all of 
you a report, sir.
    Mr. Taylor. All right, thank you, Commandant.
    Thank you, Mr. Chairman.
    Mr. Cummings. And you are saying, then, that we will figure 
out who is responsible for this problem and--I guess what I am 
trying to get to is we can--and I know this is not--I mean, I 
just--one of the things that the IG talked about was how--I am 
going to be right with you, Mr. LoBiondo, but I have got to get 
this straight--he talks about how, in the military, in the 
Coast Guard, a lot of people like the certain folks like, say, 
the Northrop Grummans and the Lockheed Martins, they almost 
depend upon personnel to change, and they know that personnel 
is going to change and they just have to wait it out a little 
bit. So the problem here, going back to what Mr. Taylor was 
talking about, is that it seems like, in Congress, it seems 
like we are almost set not to get things done. In other words, 
it is hard to get the accountability. And what he is aiming at 
is what I am aiming at, the same thing------
    Admiral Allen. Yes, sir.
    Mr. Cummings.--we need times, dates. And if we have to have 
a hearing every other day, we are going to do it. That is why 
we asked you all to come back in 120 days.
    Admiral Allen. Yes, sir.
    Mr. Cummings. And so when you ask a question like the one 
he asked, I would like to know when are we going to have that 
information. Somebody is responsible. Somebody made some major 
mistakes.
    Admiral Allen. Yes, sir. Let me------
    Mr. Cummings. Just pardon me just one more second. And 
everywhere else in this Country, probably in the world, if 
somebody messes up, they pay. So, some kind of way, we have got 
to get to that bottom line and figure out where we go from 
there. And I don't think that that is asking something 
unreasonable, and I would just like to know when will we know.
    Admiral Allen. Yes, sir. Let me just elaborate a little bit 
more so I can make it clear. We are going to order 
modifications to the National Security Cutter to ensure it 
achieves its fatigue life. Now, the issue of whether or not the 
contractor provided adequate services under the specification 
provided to him or we ordered additional work will have to be 
adjudicated, but, one way or the other, we have to have the 
modifications because we can't issue the task order for the 
third cutter unless that is done.
    Mr. Cummings. Right.
    Admiral Allen. Then the second step is who is accountable. 
And I am more than happy to discuss that. We have got to 
quantify exactly what has to be done. There has to be agreement 
on the technical solution, and that is what we are coming to 
right now. And I want that as quickly as you do, sir, and as 
soon as I have got it, I will come to see you, sir.
    Mr. Cummings. Thank you.
    Admiral Allen. We are talking weeks, we are not talking 
months, sir.
    Mr. Cummings. Very well. So if we are talking weeks, that 
means we are talking about within a month.
    Admiral Allen. Yes, sir. And as I stated earlier------
    Mr. Cummings. Because I want to hold you to that. So we are 
talking about within a month?
    Admiral Allen. Yes, sir, I will brief you within a month.
    Mr. Cummings. Very well.
    Mr. LoBiondo.
    Mr. Oberstar. Would the Chairman yield?
    Mr. Cummings. Yes.
    Mr. Oberstar. I just want to reinforce what the Chairman 
has said just a moment ago about the seriousness of keeping the 
Coast Guard accountable. I have every confidence in your 
leadership, Admiral Allen, but the Coast Guard has, as the 
Deepwater program demonstrated, failed significantly, in a 
matter that I have seen previously with the FAA, when they were 
not able to manage large contracts and got in over their head. 
And we in the Congress didn't stop them soon enough from making 
those mistakes, and I accepted that responsibility at the time, 
but we did get in and severed the relationship between IBM and 
the FAA. You could not tell where FAA left off and IBM began, 
nor vice versa. And we don't want to let a situation like that 
develop between the Coast Guard and its contractors. You have a 
responsibility of oversight, and vigorous oversight, over the 
contractors, and you cannot allow them, in effect, to self-
certify. And as the Chairman has said, we are going to stay 
close on top of this.
    Mr. Cummings. Thank you very much, Mr. Chairman.
    Mr. LoBiondo?
    Mr. LoBiondo. Thank you, Mr. Chairman.
    Admiral, you recently provided Congress with a report on 
the condition of the infrastructure with the boat station at 
Cape May, and in the report--by the way, that boat station was, 
I think, a laundromat in the 1940s--that it is obsolete and in 
need of replacement to ensure the mission, the success of the 
mission. I am very pleased that the survey and design funding 
for the facility is in the 2008 budget, but can you give me 
some assurance or commitment that this project is going to 
continue to move forward and in the next couple years will be 
completed?
    Admiral Allen. We will seek funding in 2009 for 
construction, when the survey and design is done, sir. Just as 
a footnote to that, when I was the Fifth District Commander, we 
actually had to condemn the roof of that building for a while 
until we could make emergency repairs. I am personally 
familiar, as a former district commander, what needs to be done 
with, and we will take care of it, sir.
    Mr. LoBiondo. Thank you. I also understand your housing 
authorities authorization expires at the end of this fiscal 
year, and I believe it is imperative that the Coast Guard 
authorization bill carry renewal of these authorities so that 
the service can enter into the public-private ventures to 
repair and replace some of the very, I think, just decrepit 
conditions for member housing. And some of that is at the Cape 
May Training Center. For my colleagues who may not remember, 
that is the only recruit training center in the Nation.
    I also understand now that you have an issue with OMB that 
is throwing up a roadblock for the use of this authority with 
the Coast Guard and other services. Can you explain to us the 
issue that OMB has raised and what impact it will have on the 
service's ability to recapitalize their housing and how you 
intend to resolve the situation?
    Admiral Allen. Yes, sir, I can explain the situation. I am 
not sure I would attribute it to OMB; I think it is a matter of 
appropriations law, but I would seek certainly your counsel on 
this. The issue is, on a public-private venture, there is a 
certain amount of seed money that is provided and there is an 
anticipated revenue stream. Let's say for a housing development 
that would come through the developer through the housing 
allowance that would normally pay to the members; that would be 
the income stream to the developer. The problem is this is very 
much like a capital lease, where, when you go in and request 
the money up front, you have to request the money for the 
entire project, as you would for a capital lease scored the 
first year. So it is a significant impact on our budget to be 
able to hold one of these projects together absent some other 
interpretation of the law, sir. That is the problem.
    Mr. LoBiondo. Thank you.
    Mr. Chairman, I would like to echo what you have said to 
the Commandant, Mr. Oberstar, and Mr. Taylor and Commandant 
about this whole situation with Deepwater. As you know, we put 
a lot of time and energy over the last number of years into 
trying to keep this program up and running to try to run 
through this mine field that we were in, and this is a very 
serious situation that these answers are critical for.
    Many of us have been willing to take a step back to let 
your investigation go on to be able to come up with these 
answers, but somebody has to be held accountable. We can't walk 
away from eight ships; we can't walk away from miscalculations. 
There has to be something that we can definitively point to to 
bring this to conclusion so that we can move on. Unless we 
definitively bring it to conclusion with something that is 
reasonable, I think we have got a big problem on our hands.
    Thank you, Mr. Chairman.
    Mr. Cummings. Thank you very much.
    Mr. Gilchrest?
    Mr. Gilchrest. Thank you, Mr. Chairman.
    Admiral Allen, do you get out on boats much?
    Admiral Allen. Whenever I can. Two weeks ago I was on our 
patrol boats in the Persian Gulf and in the Port of Um Kassar, 
sir. It was terrific.
    Mr. Gilchrest. That is good. I was just--I had some fear 
that you were stuck in the office a lot with all these issues.
    Admiral Allen. I am a movable beast, sir.
    Mr. Gilchrest. Good. Good. That is good.
    Because of the issues that have been raised here this 
morning, and everybody is under a budget crunch, a lot of 
people, certainly including the Coast Guard, your boats and 
Coastees are spread in a lot of different places around the 
world as things keep unfolding, so as a result of this, 
conditions in the world, the Persian Gulf, what is happening in 
the Caribbean and other places, it seems like there is a pretty 
good strain on the Coast Guard's budget, so I wanted to ask you 
about four specific areas. The President's request doesn't 
include anything for icebreakers I believe in the Antarctic and 
the Arctic, so I was wondering how that program was going to be 
funded. Is that program being cut back? Is the National Science 
Foundation a part of appropriating funds? Is the international 
community going to be asked to appropriate funds to take 
advantage of some of the icebreaking activities down there?
    The second thing, I noticed that there is either a cut or 
an elimination of cold weather training for the Coast Guard, 
especially up in Alaska. What is the status of that?
    Number three, long-range vessel tracking issue. Apparently, 
the standards have been passed by the International Maritime 
Organization. This is, I think, a key component for a lot of 
different activities, certainly port security, even vessel 
monitoring with our fisheries and the international fishing 
community.
    And the last thing, about 10 years ago we really made an 
effort to interdict drugs in the Caribbean, a lot more money, 
different policies, and I wonder how that was going, especially 
in light of what is perceived to be a pretty significant trans-
shipment point in Haiti.
    So where is the Coast Guard on those four areas?
    Admiral Allen. Thank you for the question, sir, and thank 
you for your continuing support over the years.
    In response to an earlier question, I will summarize. There 
are two issues with icebreakers: ongoing operations money and 
then the need to ultimately look at recapitalizing the Polar 
Sea and the Polar Star. We have got ourselves into a position 
over the last several years where the Coast Guard owns the 
people and the hulls, and the National Science Foundation owns 
the bulk of the money to operate them, and that requires a 
reimbursement negotiation every year. I have stated earlier 
that is not the optimal way to run this. I would rather have 
the money in our base, even if it is not adequate, and be able 
to manage it without trying to move it across two agencies. We 
had some dysfunctionality this year when NSF was forced to 
operate under a continuing resolution until emergency funding 
was provided because it capped them and then ultimately 
impacted us. So we need to get that straightened out going 
forward, sir.
    National Academy of Science produced a report last fall 
that validated the need for three polar icebreakers: the Healy, 
the Polar Star, and the Polar Sea. We are working with the 
interagency right now hopefully to get a policy determination 
that can be the basis for new authorizing and appropriating 
requests going forward in the future fiscal years. I would call 
this the policy development year, and in 2009 and 2010 to start 
looking a what we need to do to have a permanent solution, sir.
    Cold weather training, in the past years there were funds 
earmarked in our budget for cold weather training. We intend to 
go ahead and pursue that this year. One of the things we are 
going to try and do, though, is openly compete the contract. 
There is no intent to stop the training, but we would like to 
go to an openly competed source for that training, sir.
    Long-range tracking, we are in violent agreement there, 
sir. That was a great agreement that we negotiated at IMO. As 
you know, AIS is a line-of-sight collision avoidance system. 
Under long-range tracking agreement, if you are a coastal 
State, you are going to have visibility of vessels operating 
within 1,000 miles. And if you declare advanced notice of 
arrival, it will have to be out to 2,000 miles. There is an 
issue of coming to technical standards and then having that 
actually go into force. But we are very buoyed by the fact that 
we were able to get this agreement made at IMO. We are fully 
supportive of moving forward on that, sir.
    Regarding drugs, I am pleased to tell you that the first 
quarter of fiscal year 2007 was the record year for drug 
seizures in Coast Guard history: 97,000 pounds. Nearly 50 tons 
of cocaine was taken off the waters of the Caribbean in the 
first quarter of this fiscal year. It exceeded our previous 
record year two years ago, in 2005, in which we seized 150 
tons. That is the result of several factors. Number one is 
better intelligence, taking the search out of search and 
seizure. But, number two, I cannot overstate the value of armed 
helicopters for warning shots and disabling fire. That reduces 
our end-game success down--up to almost 100 percent. I think 
the only time we haven't been able to do an end-game where we 
have used warning shots and disabling fire is by the time our 
surface folks got on scene, they were able to repair the boat 
and get underway, and we had to leave scene with the fuel 
endurance of our helicopter. But this is nearly 100 percent and 
just a wonderful, wonderful tool for us, and we are in the 
process of converting every helicopter in the Coast Guard 
inventory to be capable of using warning shots and disabling 
fire, sir.
    Mr. Gilchrest. Thank you very much, Admiral.
    Thank you, Mr. Chairman.
    Mr. Cummings. Thank you very much.
    Chairman Oberstar.
    Mr. Oberstar. Thank you, Chairman Cummings. You are doing a 
great job as our Chairman of the Coast Guard Subcommittee. You 
have learned the subject matter, mastered it well, and plunged 
into the challenge of working on this extraordinary service to 
the United States, the Coast Guard, whose origins go back to 
the very first Congress, very beginnings of our Nation as the 
Revenue Cutter Service, and from whose personnel I think this 
Nation gets the best value for its dollar.
    But, unfortunately, the Coast Guard is being asked to wear 
more hats than ever before, and a divided personality, so to 
speak, in the Department of Homeland Security. That is not a 
choice the Coast Guard made, it was one that was foisted upon 
it by this Administration and by the Congress, ultimately, in 
approving and creating the Department of Homeland Security.
    I will place a demurral on the record here: I did not vote 
for it, I said it was a bad idea. If we are going to create 
this thing, you should not put the Coast Guard in it, you 
should not put FEMA in it; resources will be diverted, and that 
is in fact what has happened.
    The Coast Guard has not had an increase in personnel to 
accomplish the new responsibilities that it is being asked to 
shoulder in the homeland security era. And over the years that 
I have served in Congress, my first term in 1975-1976, we have 
added, we, the Congress, has voted 27 new functions for the 
Coast Guard to carry out--and you are well aware of those, 
Admiral--but we have not given the Coast Guard the personnel 
nor the full funding it needs to carry out those 
responsibilities. Somehow, the Coast Guard does it, though. And 
we expect, I guess, my colleagues in the Congress expect the 
Coast Guard to salute, yes, sir, go forward and do the job, and 
work overtime at doing it. We need to increase the personnel 
and the funding for the personnel. We need to provide adequate 
funding for the equipment the Coast Guard needs for its variety 
of missions, and this authorization bill is a start on that.
    Chairman Cummings has moved out quickly, the Committee is 
moving out quickly; Mr. LaTourette is committed to this 
process, I know. It is a new responsibility for him; he has 
seized upon it. But I fear that, as I reviewed last night I 
went through the budget request and your statement, putting on 
a brave face, but I think that the funding is inadequate and 
the personnel numbers are inadequate, and we are going to make 
an effort to raise those sufficiently give the Coast Guard what 
it needs to carry out its responsibilities.
    I had a chance conversation yesterday morning at a meeting 
of the Great Lakes Commission with Admiral Crowley about live 
firing on the Great Lakes, and I won't repeat because it was a 
private conversation, but it appears that the process of review 
of live firing is moving ahead and will soon come to a 
resolution of a decision to be made. Could you comment on that 
at this point?
    Admiral Allen. Yes, sir. And as you know, we have discussed 
this several times in the past. It is my intent to take a--and 
we are taking a top-to-bottom review, reassessing the potential 
environmental impacts, looking at alternatives for type of 
ammunition we may use out there where a projectile may be less 
hazardous. We have come up with alternative ways to train our 
people in other areas of the Country.
    Moving forward, when we finally decide what our options 
are, we made the commitment, and I will keep that commitment, 
to be completely open and transparent about what our options 
are and discuss moving ahead. We will do that in full sight of 
the public that uses the Great Lakes up there. And we have 
listened at the town hall meetings that were held, and we will 
forward an open collaboration, sir.
    Mr. Oberstar. It was certainly a very responsible and 
responsive move to direct Admiral Crowley to conduct these 
public forums and, as he said, he has learned a great deal not 
only about the Coast Guard, but about a lot of other things 
that were on citizens' minds, and that is what Members of 
Congress do when they go home and have open forum meetings; we 
learn a lot about what we are doing and what we are not doing, 
and what else is on the public's mind. So that is a good 
experience. But there surely should be some alternatives to 
live ammunition. And I fully concur that you can't have the 
same experience on land as you get on a bobbing vessel in the 
unique waters of the Great Lakes, where the seas are shorter 
and choppier and where the weather can turn violent in a matter 
of hours or even minutes, and I hope you are considering 
alternatives.
    Learn also from the Air Force. When the active Air Force 
had a facility in Northern Minnesota, at Duluth, and the Air 
National Guard as well, and they were doing simulated warfare 
activities and they planned to run one of those strafing 
activities right over Luoma's Chicken Ranch, and I called the 
commandant of the Guard and the commander of the active duty 
Air Force and said how many chickens are you prepared to buy? 
He didn't know what I meant. I said, you are going to scare the 
hell out of those chickens; they are going to die by the 
hundreds. He didn't know they were flying over Luoma's Egg 
Ranch in Carlton County, so they went back and revised their 
plans and sent a copy of it, and I said are you prepared to 
file a proposal for exemption from the airspace limitation over 
the Boundary Waters Canoe Are Wilderness? Oh, they didn't 
realize they were flying over the Wilderness and that it has a 
ceiling limitation and that, in any event, military jets 
shouldn't be flying over a wilderness, nor do they need to.
    So this coordination with civilians and getting public 
input and local government input is vitally important so you 
don't make some of those mistakes or repeat them in the future.
    Can you give me--give the Committee a status report on Cape 
Wind at Nantucket Sound?
    Admiral Allen. Yes, sir. The agreement that I made--and I 
can give you a more extended answer for the record--was that we 
would do a waterways assessment related to that.
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    Admiral Allen. We are developing the criteria by which we 
will do that and do that analysis. The first thing you have to 
do is establish the standards and the criteria you are going to 
apply. And, ultimately, we are probably going to have these 
wind farm projects elsewhere around the Country, so we are 
really starting to create what I would call a national standard 
on where we want to go with that. So the first thing is to 
develop the standards--we are in the process of doing that 
right now--and then applying the standards to that specific 
proposal as it relates to safety and navigation, the movement 
of vessels around there.
    And I would be happy to give you an update for the record, 
but I think we are right about closure and finishing the 
standards, and I have had a recent brief on it and I can pass 
that on to you, sir.
    Mr. Oberstar. Well, you are right to approach this as a 
baseline critical evaluation that will apply, because there are 
many other wind projects that are in the planning stage and a 
good deal of pressure to move ahead with wind power generation. 
The defining issue, though, in this is the interference, 
electromagnetic interference that might be created by wind 
farms with radar. And as I recall, the FAA did a simulation and 
lost an aircraft from their radar screen because of the 
projected electromagnetic interference from the wind farm. That 
is--the view shed issues, those are other matters that best 
left to locals, to the State, but, for our purposes, 
interference with navigation is critical, and I assume that is 
very high on your evaluation list.
    Admiral Allen. Yes, sir. In establishing the criteria to 
figure out what is the--maritime domain--report on potential--
as well. We may need, at some point, to seek some clarification 
about the who owns the mission space, but we are aware off that 
and we are looking at it, sir.
    Mr. Oberstar. Okay. You did give me a call about the Coast 
Guard investigation of the loss of live with the Healy in 
Alaska. Has any further action been taken to deal with the on-
board situation with the personnel who were supposed to 
supervise the divers and assure that they had a weight belt, 
instead of putting weights in their pockets, and that other 
safety measures were appropriately reviewed before they made 
that dive.
    Admiral Allen. Yes, sir. Several things have happened, and 
I am not sure exactly what your last update was, but we 
completed an investigation. I took final action on that 
investigation. We made that public, posted it on our website. 
We held a news conference in Seattle to go over the findings of 
the investigation and later, after that point, at that point, 
Admiral Wooster, who is the Area Commander in Pacific Area, 
actually held admiral's mast on the three senior officers on 
the ship. They were in the chain of accountability and they 
were awarded punishment at mast. The commanding officer is 
retiring and appropriate disciplinary action was taken. We have 
also gone out and done a recertification of all the dive 
programs in the Coast Guard, are in the process of making sure 
that any systemic problems that come out of it, there is a 
safety evaluation that is due to come out in the next couple of 
weeks that follows the investigation we did, very similar to 
like an internal NTSB type, looking at regulators' equipment 
and everything that will give us some more detailed things that 
we might want to look at regarding safety. We would be glad to 
provide that to you when the report is released, sir.
    Mr. Oberstar. I would welcome such a briefing. And the 
recertification process, I think that is the most important 
result.
    Admiral Allen. Yes, sir. One of the problems------
    Mr. Oberstar. Disciplinary action, that is a separate 
matter, but, for the future, lessons learned.
    Admiral Allen. Yes, sir. I have said on a couple of 
occasions I think we may have been the victim of juniority, and 
I mentioned it in one of the earlier questions. We had the dive 
program grow very rapidly. We have actually dive operations 
that are part of our maritime safety and security teams that 
look at piers and hulls of ships, and so forth. With a large 
number of people coming in, what that can result at the 
beginning, that our people, while they have been certified, 
sent to school and are qualified, they may have less time in-
service or less time in that position than they otherwise would 
have been, and we are taking a look at that as we go through 
the certification program as well, sir.
    Mr. Oberstar. Thank you. In another Subcommittee, but maybe 
also as part of this authorization bill, we may deal with 
invasive species and setting up an enforcement program. I have 
had enough of research, of studies, of testing, of declaring 
that these invasive species, whether animals or plants, flora 
or fauna, are in the lakes. We know they are there; we know 
they are destroying the water column; we know they are 
displacing native species. We need an enforcement program, and 
it is going to be the Coast Guard that will have to carry it 
out. Perhaps some participation with EPA and Corps of 
Engineers, I don't know, haven't sorted that out yet, but that 
is going to take additional personnel and we will need to work 
with you to decide what that incremental increase will be so 
that we don't load another responsibility onto the Coast Guard 
without providing personnel and the funding for personnel that 
will be required to carry that function out.
    Admiral Allen. Yes, sir. Just to give you a quick update, 
we are working with Environmental Protection Agency, the Naval 
Research Lab. We are also working with the Animal and Plant 
Health Inspection Service. There recently were some concerns up 
on the Great Lakes about viral hemorrhagic septicemia that 
attacked the fish and whether or not that was related to 
ballast water. We are not sure, from a technical standpoint, 
whether it is or not, but we need to exclude that as a 
possibility. We are also looking, as you know, whether or not 
we can establish a ballast water standard for discharge that 
would replace now the mandatory salt water exchange that they 
do in the ocean before they come in, and the question is how 
far do we want to drive that standard down to zero tolerance 
for any kind of microbe that might be in the ballast there.
    We have got about three different candidate technologies 
that could lead us to that and we look forward to, later on in 
the year, to be able to come to you and tell you that is what 
our recommendation is, sir.
    Mr. Oberstar. I am determined that we move ahead, and I 
thank you for those efforts and that report. I am determined to 
move ahead with an enforcement program. We cannot allow any 
further such species into the water column of the Great Lakes, 
and we need to proceed with an eradication program for those 
that are already there, and I am exploring that option with 
EPA, Corps of Engineers, and State Departments of Natural 
Resources to--we are seeing an extraordinary phenomenon in the 
Harbor of Duluth and Superior where, because of these biotic 
changes in the fauna of the water column, if you will, the 
steal pilings, for the first time, started to rust. Those 
columns have been in the water, some of them, for 50 or 60 
years, and we have never seen this deterioration occur. And 
there is some evidence that it is microbes in the water--now, 
the study is not completed--that are causing this 
deterioration. Well, if that is happening, then there is 
something else happening that will be the next wave. We have to 
attack this issue now; we have had enough and I have had enough 
of studies of it. We need an action program.
    Admiral Allen. Yes, sir.
    Mr. Oberstar. Thank you.
    Mr. Cummings. Let me just--thank you, Mr. Chairman.
    Let me go to you, Master Chief Bowen. Let me just ask you. 
I noted in your report you talked about housing. I want to go 
back to something that Chairman Oberstar was talking about when 
he was saying that he was wondering whether this budget is 
adequate. And you say, on page 3 of your written statement,--
both of your statements were extremely well done and I thank 
you for that, and very detailed, but you say the average age of 
Coast Guard housing is over 40 years and requires significant 
improvement. The Coast Guard faces many challenges to address 
its shore infrastructure, maintenance, and recapitalization 
programs, and you go on to talk about the problems.
    One of the things that we are concerned about is, we are 
concerned about Deepwater, but we are also concerned about the 
life that--the lives that they experience, the members of your 
corps, and I know that is something that you both are very 
concerned about too. Do you have the resources that you need to 
address the problems when you are talking about the average 
housing being over 40 years old? And then I guess what I am 
trying to get to also is I don't want us to be in a situation 
where something is going on with the Coast Guard and we don't 
know about it.
    I sat the other day on another Committee, I am also on 
Armed Services, and sat in Walter Reed the other day and heard 
about all of these horrific stories, and, I tell you, it was 
chilling. Do we have--I know Walter Reed is more or less health 
care, but do we have any situations with regard to structures 
similar to the problems that we talked about at Walter Reed? 
Because, if so, we need to address them with the same kind of 
vigor that the Congress has now come together in a bipartisan 
fashion, by the way, which I am very glad to know we are doing 
it this way, to address those problems. And if it is not in 
this budget, we need to know what we can do to help you, 
because it is one thing if we don't know; it is a whole other 
thing if we do know. So can you help me with that?
    Chief Bowen. Yes, sir, Mr. Chairman. I appreciate the 
question. The first question, do we have resources we need to 
address the housing problems. Right now we probably don't. I 
think that we are moving forward in our shore infrastructure 
needs. I mean, we have $37 million in the 2008 budget and 
Admiral Allen is asking for more money in successive years 
after that, and he has been raising that question with the--or 
that issue with the Administration. So shore infrastructure is 
definitely an issue, and right now we don't have adequate 
resources to address it.
    Now, the question is how bad of an issue is it. As I have 
traveled around, some place things are in very good shape. 
Other places there is a UPH, for example, on Staten Island that 
was in extremely rough shape. In fact, I asked Admiral Allen to 
go up and visit it personally. He did that. Probably, it could 
have been compared to at least what I have seen in the news 
report with that one building on Walter Reed, and we have 
taken--he took immediately steps to find money within the base 
to deal with that. Significant money is being put towards that 
issue now to correct it, but it should have never really gotten 
to that point. Bottom line is we definitely need more money in 
our shore infrastructure, sir.
    Mr. Cummings. Let me--Admiral, did you want to comment on 
that?
    Admiral Allen. I almost passed the Master Chief a note 
saying talk about New York. We had made several trips. New York 
is a very high tempo operation and we have a barracks for our 
enlisted people on Staten Island. They developed a mole problem 
there and, quite frankly, it got behind the building local 
command to deal with and required some senior management 
intervention. I was cued to the problem by the Master Chief's 
visit. I visited myself. We are in the midst of a two-year, 
two-stage process to go in and completely make repairs inside 
the building, most notably, upgrade the HVAC system so we have 
got better air handling and to better address the problem.
    Where we find that, you are duty-bound by leadership to go 
in and fix it.
    Mr. Cummings. But, Admiral, I want to go back to what you 
said a few minutes ago when you said you present your requests 
as you go, and I appreciate that. Remember a few minutes ago, 
hour ago?
    [Laughter.]
    Mr. Cummings. Is this one of those situations where you are 
presenting your needs as you go or are you taking from 
somewhere else to try to remedy this problem? In other words, I 
am trying to figure out do we need more money to try to address 
the things that go to, as Chief Petty Officer Bowen said, he 
says that these kinds of things have a direct impact on the 
health, safety, and morale of our service members. So I just 
want to make sure that we are doing--I think you have heard on 
this side and I think on both sides that we are pretty much 
questioning whether or not this is enough money for you to do 
the things that you need to do. So I don't want to see a 
situation where we are placing on the back burner, if not 
completely off the stove, the things that go to the morale of 
our folks. So I guess maybe that is not--maybe that is a hard 
question to address. I don't know, the Administration may have 
one view, you may have enough, but we are just trying to do 
what is right for our military.
    Admiral Allen. Sir, it is not a hard question to answer at 
all. We need more money in the shore account, and I am going to 
move it up as we go forward. And we may have to make tradeoffs 
on what is more important, but right now this is pretty 
important to us, sir.
    Mr. Cummings. All right.
    One other question, Chief Officer Bowen. You also talked 
about health care, and I am just wondering, you mentioned 
TRICARE, you talked about so many of your folks being in rural 
areas and you talked about a number of issues under health 
care. What would you like to see us do under health care? I 
mean, anything?
    Chief Bowen. I think for the Coast Guard------
    Mr. Cummings. Yes.
    Chief Bowen.--we have unique issues that stem from our 
personnel being in high-cost, remote areas, and they don't have 
access to DoD. I appreciate what has been done with the TRICARE 
Prime Remote system, and that has helped immeasurably. Yet, it 
hasn't really solved all of the problem. There is tremendous 
out-of-pocket expense for our people when they have to leave 
their place of duty and travel a long way to obtain care. I am 
not sure what the answer is, but I do know that the Coast 
Guard, this type of problem, it affects us a lot more than the 
other services.
    Mr. Cummings. Yes, sir.
    Admiral Allen. Thank you, Mr. Chairman, for that question. 
I would invite your attention to Section 303 of the 
authorization act that we put forward to you this year. We are 
seeking an amendment to Title 10, U.S.C. 1074, which is the 
base for reimbursement when our families have to travel for 
health care, and it basically says if you have to travel over 
100 miles to get health care, what you can reasonably do in a 
day, that you should be reimbursed for travel expenses. We have 
a unique situation in the Coast Guard where we have some 
families that are within 100 miles of health care, but they are 
on an island. So, technically, they are within the geographical 
boundaries that wouldn't allow reimbursement, but for them to 
get that care requires them to actually travel. We are asking 
you, through the Coast Guard authorization bill this year, to 
give us that benefit, sir.
    Mr. Cummings. Let me just ask you this last thing, Admiral. 
The Coast Guard Academy, the cheating scandal, how often does 
the board meet, the board of the Coast Guard Academy, do you 
know? The Board of Visitors. Do you know?
    Admiral Allen. Recently, not often enough, sir. That is 
something we are looking at, whether or not we need to 
reinvigorate that. I can give you the details when the last 
visits were made. There are two, I am not sure I would call 
them governing bodies because it is not a traditional 
university. We have an internal flag and NSC Board of Trustees 
and there is a Board of Visitors.
    [Insert follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Admiral Allen. My understanding is that has not been as 
active in the past as it had been a few years ago. One of the 
things we are looking at in our top-to-bottom review of the 
Coast Guard Academy is how we might use the Board of Visitors, 
moving forward, to help illuminate some of the issues there and 
create more transparency on what is going on there.
    Mr. Cummings. I am sure you are aware I sit on the Board of 
Visitors for the United States Naval Academy, and we meet at 
least four times a year, and it is extremely helpful, I think, 
because it just keeps things--the Board is informed; the Board 
is able to have input; and I just think it is a good thing. And 
I would suggest very strongly that the Board meet at least 
those four times a year. And would you keep me abreast of your 
progress with regard to those issues?
    Admiral Allen. Yes, sir. Your question is timely; we have 
been talking about it, and I will definitely get back to you, 
sir.
    Mr. Cummings. Thank you very much.
    We really appreciated your testimony.
    To the other panelists, we have two votes, so it is going 
to be probably about, I guess, at least a half an hour, 
somewhere in the area of a half an hour. We will resume the 
hearing in a half an hour from now.
    Admiral, Chief Petty Officer, thank you very much. We 
really appreciate it. We will have some follow-up questions, 
because there are a lot of things I did not get to, the whole 
issue of folks trying to enter this Country and the changes 
that you want with regard to people coming, the criminal 
action--the standard for criminal activity. I want to get into 
that. We have some specific questions I want to ask about that, 
okay?
    Have you said everything you needed to say?
    Admiral Allen. Well, sir, I would only reiterate my offer. 
I would really like you and any Committee Members that would 
like to travel with me to Pascagoula, it would serve two 
purposes. We could have in-depth discussions on the plane going 
down and we could actually go down and kick the tires on the 
National Security Cutter, and I think we need to do that, sir.
    Mr. Cummings. I am going to strongly--I am going to do 
that, and I am going to strongly suggest that other Members of 
the Committee come with us. We just have to come up with a 
date. But that is a part of our accountability mission, so we 
look forward to doing that.
    Admiral Allen. Thank you, sir.
    Mr. Cummings. Thank you very much.
    We will see you all in a half an hour.
    [Recess.]

TESTIMONY OF RICHARD L. SKINNER, INSPECTOR GENERAL, DEPARTMENT 
  OF HOMELAND SECURITY; STEPHEN CALDWELL, DIRECTOR, HOMELAND 
 SECURITY AND JUSTICE ISSUES, GOVERNMENT ACCOUNTABILITY OFFICE

    Mr. Skinner. Today, I intend to discuss the challenges 
facing the U.S. Coast Guard, in particular its Deepwater 
Program, and the efforts underway to improve the management and 
oversight of this very important and complex acquisition 
initiative. Over the past two and a half years, my office has 
completed four audits involving Deepwater. They involve the 
110/123 Cutter conversion, the National Security Cutter, the 
Command and Control and Information Technology Systems of 
Deepwater, and the re-engineering of the HH-65 helicopter.
    Four common themes have emerged from those audits. First, 
the dominant influence of expediency. That is, scheduled 
concerns trumped performance concerns. This is best illustrated 
by the National Security Cutter procurement. The Coast Guard 
proceeded with the construction of the NSC, knowing well in 
advance that its technical experts and others had engineering 
design and future performance concerns. The design and 
performance concerns still remain outstanding today, as you 
know, and as you heard from the Commandant, and the cost to 
mitigate those concerns has yet to be determined.
    Second, the terms and condition of the contract are flawed. 
The Coast Guard essentially agreed to ride shotgun, turning the 
reins over to the systems integrator, ICGS. Consequently, the 
Coast Guard was reluctant to exercise its authority to 
influence the design and production of its own assets.
    Third, our reviews have raised concerns with the definition 
and clarity of operational and performance requirements. This 
has compromised the Coast Guard's ability to hold the 
contractor accountable. For example, we just recently issued a 
report dealing with the 110/123 Cutter conversion. The 
performance specifications associated with upgrading the 
information systems on the 123 Cutter did not have a clearly 
defined expected level of performance, causing the Coast Guard 
to accept delivery of assets that did not meet its anticipated 
requirements or specifications.
    And, finally, simply put, the Coast Guard does not have the 
right number and the right mix of expertise to manage an 
acquisition as large and as complex as Deepwater. Many of the 
staff who have been assigned to Deepwater have little 
experience or training in performance-based contracting and 
little experience in a systems integrated contract initiative. 
These issues are not new; they were known as early as February 
2003, only eight months after the award of the Deepwater 
contract to ICGS. This lack of a proper foundation remains a 
challenge to this day and, as a result, the Coast Guard has 
encountered a number of implementation problems, which have 
resulted in cost increases, schedule delays, and reduced 
operational performance.
    I believe that it is important to point out that the Coast 
Guard recognizes these challenges, and we heard that from the 
Commandant this morning, and, in fact, is taking some very 
drastic steps to take back the reins and turn this thing 
around. For example, it plans to use independent third-party 
assessments of contractor performance, that is very important. 
It is consolidating its acquisition activities under one 
directorate. Again, that is very important. And it is 
redefining the terms and conditions of the Deepwater contract 
as we speak.
    Furthermore, and most importantly, the Coast Guard is 
increasing the staffing for Deepwater and reinvigorating its 
acquisition training and certification processes to ensure that 
staff have the skills and education needed to manage the 
program. The Coast Guard has also advised us that it is taking 
steps to improve the documentation of key Deepwater decisions. 
This is particularly important to ensure transparency and 
accountability as the program moves forward. These steps should 
significantly improve the level and oversight exercised over 
the program.
    However, many of these corrective measures will take time. 
It will require changing the culture, and it will take 
considerable amount of time to train and obtain the experience 
that is needed to manage a contract of this nature. Until this 
is accomplished, the Coast Guard needs to proceed with caution, 
taking advantage of all the tools at its disposal to mitigate 
risk and avoid future problems.
    I will conclude by saying that my office is highly 
committed to the oversight of this and other major acquisitions 
within the Department. This year, in addition to a series of 
sector-specific audits dealing with Deepwater, we plan to issue 
a first in a series of report cards on the Coast Guard's 
management of its procurement responsibilities under the 
Deepwater program. Specifically, we will be grading the Coast 
Guard's organizational alignment and leadership, policies and 
procedures, acquisition workforce, information management and 
technology, and financial management. This will enable us to 
measure the progress of the Coast Guard in years to come and to 
improve the management and oversight of the Deepwater program.
    Mr. Chairman, that concludes my remarks. I would be happy 
to answer any questions.
    Mr. Cummings. Thank you very much.
    Mr. Caldwell?
    Mr. Caldwell. Chairman Cummings, Mr. LaTourette, thank you 
for inviting GAO here today. And, Mr. Cummings, congratulations 
on becoming Chairman.
    Mr. Cummings. Thank you very much.
    Mr. Caldwell. GAO has provided this Committee with a number 
of reports and testimonies over the years, and we appreciate 
the opportunity to help you with your oversight. Both the scope 
of this hearing as well as my portfolio at GAO covers a wide 
gamut of activities covered in this 2008 budget. My statement 
today focuses primarily on Deepwater.
    As you know, Deepwater is a major part of the budget, 
representing about 88 percent of the AC&I budget and almost 10 
percent of the Coast Guard's budget as a whole.
    From a budgetary perspective, two interesting things stand 
out about the Deepwater program from an overall perspective. 
First, the amount of funding for Deepwater, as you know, has 
gone down 27 percent from the 2007 to 2008 budget. This is a 
substantial decline at a point in the program where plans had 
originally called for ramping up production and delivery.
    Second, and perhaps partly an explanation of the first, is 
that the unobligated balances for Deepwater have become very 
large; they are currently at $1.6 billion. In some cases, these 
unobligated balances are for assets that are behind schedule, 
such as the FRC and the VUAV. And in these two cases the Coast 
Guard is basically taking a ``strategic pause'' to re-evaluate 
its approach to those assets. But in other cases the 
unobligated balances are for assets that, at least according to 
the latest data, are on schedule, such as the NSC.
    In terms of Coast Guard management of the Deepwater 
program, since about 2001 GAO has issued a number of reports 
talking about the risks of the program given the Coast Guard's 
overall approach_which was relying on a single lead integrator, 
developing a system-of-systems, and using a performance-based 
contract. All three parts of this approach, if not done 
correctly and with the appropriate oversight, can have 
substantial risk, and we have seen a lot of that risk played 
out recently.
    My statement also refers to our 2004 report in which we 
made a number of recommendations to the Coast Guard. The Coast 
Guard is acting to follow up on some of these recommendations 
that are still open. We have ongoing work to look at those 
recommendations and we will report back to you once that work 
is done.
    In terms of asset delivery, there actually is some good 
news out there. As noted in Figure 1 of our report, page 20, 
seven of ten key new assets are actually ahead of or on 
schedule for delivery, at least that is true of the first-in-
class assets. However, one of the assets that is on schedule, 
the NSC, as well as two of the assets that are behind schedule, 
the FRC and the VUAV, still face significant structural design 
or developmental problems.
    As some of the earlier assets are actually reaching the 
delivery phase, GAO's work has shifted beyond just reviews of 
the overall contract management to reviews of the individual 
assets. Unfortunately, we found additional problems with those 
areas as well. Our report last spring on the FRC noted problems 
that had ultimately led the Coast Guard to suspend the design 
of the program. And, similarly, the recent reports by the IG on 
the NSC as well as the 123 boats have shown similar problems.
    These asset-specific difficulties have shown that the 
problem has really expanded well beyond the abstract area of 
contract management and acquisition reform to one of 
operational effectiveness. This is best illustrated with the 
current situation of the patrol boats, where you have the FRC 
further delayed by the design problems and you have the eight 
123 boats that are now out of service. This, of course, has a 
key impact on the Coast Guard achieving its missions that we 
know are so important to the Members here on the Committee, 
such as search and rescue, interdiction of migrants, protection 
of fisheries, national defense, and obviously port security 
issues.
    Admiral Allen, in his testimony today before this 
Committee, as well as in some of the other testimonies that he 
has done, has outlined a number of steps that he plans to take, 
and he clearly places a priority on giving the men and women of 
the Coast Guard the best ships and aircraft they can get as 
soon as possible. He has referred to this as the ``Promise of 
Deepwater.'' GAO stands ready to assist Congress, working with 
the Coast Guard, and, of course, applying our due diligence as 
auditors, to try to make that same promise happen.
    Thank you very much. I would be happy to answer any 
questions at this time about Deepwater or any other Coast Guard 
issues where GAO has done work. Thank you.
    Mr. Cummings. Thank you all very much.
    Mr. Skinner, were you in the room when the Admiral 
testified?
    Mr. Skinner. Yes, I was.
    Mr. Cummings. Were you, Mr. Caldwell, were you here?
    Mr. Caldwell. Yes, I was.
    Mr. Cummings. Oh, good. Why don't I start off by asking you 
all what was your--was there anything in particular that 
concerned you about what the--anything that the Admiral said? I 
mean, it is fortunate that you all were here to hear it. I wish 
he could have been here, and I know he--I didn't expect him to 
be here to hear your testimony, but, I mean, is there anything 
that really concerned you? I know that there was great concern, 
and I expressed it, about the fatigue life, and we on this side 
have heard that explanation at least three or four times, I 
guess. But I think it was you, Mr. Skinner, who had much 
concern about that, and I am assuming that I asked the question 
properly when I said that it was your contention that we were 
not getting what we originally bargained to get, no matter--and 
what the confusion may have been. You apparently have a very, 
very clear understanding of what, based upon, I guess, the 
written documents, I guess, and the interviews, I guess------
    Mr. Skinner. Yes.
    Mr. Cummings.--of what we were supposed to be getting. Now, 
what was your reaction to what he had to say?
    Mr. Skinner. This is one area where the Admiral and I have 
agreed to disagree. When we initiated this audit, we actually 
started in 2004, we had to close it down because of cooperation 
issues, which we have since resolved and restarted in------
    Mr. Cummings. By the way, let me, on a separate note, 
before we even move on, have you been getting the cooperation, 
overall, that you need to do what you are responsible for 
accomplishing here?
    Mr. Skinner. Yes. Now we are, yes, we are, especially since 
we have issued our report.
    Mr. Cummings. Good. All right, go ahead.
    Mr. Skinner. The Commandant, Admiral Allen, has been 
cooperating 110 percent and we are getting everything we need 
right now_access to documents and people_to do our job.
    Mr. Cummings. Good. I just wanted to make sure. Sorry to 
interrupt you.
    Mr. Skinner. When we did start this job, we started with 
the contract itself. According to the contract, the Coast Guard 
would build a Cutter that could be 230 days underway. The 
contracting officer, at that point in time, agreed that this 
meant the specs were 230 days underway. The project manager 
also agreed that, yes, the intention was to build a ship that 
could be underway for 230 days. The chief systems engineer also 
advised us, yes, the specs were written to suggest that the 
Coast Guard would build a Cutter that would be underway for 230 
days. We have talked to the two contractors who were brought in 
by Coast Guard to evaluate the design. They both agreed that 
their evaluation was based on a cutter that should be underway 
for 230 days. We talked to Carderock, who also did an 
evaluation of the design, and they too agreed that the contract 
and the specs and the request to re-evaluate the design was 
based on the premise that this Cutter should be underway for 
230 days.
    It was not until the summer of 2006 that we first saw 
correspondence that would suggest that the Cutter was only 
going to be built to meet a spec of 185 days. That 
correspondence was generated by the contractor, ICGS, to the 
Coast Guard, requesting the Coast Guard to change the contract 
language to ensure that there was no misunderstanding that the 
contractor was building a Cutter to be underway for 185 days, 
not 230.
    A new management team has now arrived at the Coast Guard. 
They collectively, and the contractor, ICGS, have agreed that 
the original intent was 185 days, not 230, and that is where we 
are today.
    Mr. Cummings. Let me ask you this. Why is that so 
disturbing to you? First of all, I am assuming it is 
disturbing.
    Mr. Skinner. Yes, it is, or else we would not have reported 
it.
    Mr. Cummings. Okay.
    Mr. Skinner. For several reasons: one deals with 
operational issues. We are building--right now we have 12 
Cutters. We are replacing those Cutters with 8 Cutters. Why? 
Because we are building a Cutter now that has a greater 
operational capability. Secondly,------
    Mr. Cummings. And was that--to your knowledge, was that 
part of a calculation from the beginning?
    Mr. Skinner. Yes.
    Mr. Cummings. Okay, fine. Is that written anywhere?
    Mr. Skinner. That was our understanding.
    Mr. Cummings. That was your understanding?
    Mr. Skinner. Yes.
    Mr. Cummings. From the--is that written anywhere?
    Mr. Skinner. I believe that is, and I could validate that 
through a review of our work papers. It is_I believe Admiral 
Allen has also testified to that effect, the reason we are 
building 8 versus 12, because of the operational efficiencies 
of the new Cutters.
    Mr. Cummings. Okay.
    Mr. Skinner. The second thing that bothers me about this is 
that we are building a Cutter that will be underway for 185 
days, and the operational profile for that Cutter is to have 
the capability to be underway for 185 days, not the 230 days as 
specified in the contract. The Coast Guard's historical 
analysis of how long you can expect these Cutters to be 
underway on any given year is 185 days. The question that we 
are asking is, for example, if you want to build a bridge that 
can maintain a capacity of 500 million tons at any point in 
time, you would not build a bridge that could only maintain a 
capacity of 500 million tons. You have no surge capacity. The 
Cutter does not have the ability to surge, for example, and 
that, again, puts the ship at risk.
    Mr. Cummings. And you are basing that also on the 8 to 12, 
right? In other words, moving from 12 to 8.
    Mr. Skinner. Yes.
    Mr. Cummings. Okay. All right. I get the analogy.
    Mr. Skinner. And the third thing is simply that when your 
contracting officer, who signed the legal document on behalf of 
the Government, when your project manager, systems engineer, 
and those that are reviewing the design, all collectively agree 
that this contract said 230 days, yet they are only delivering 
a product that could only be underway at 185 days, that simply 
raises a red flag to us. Of course, the new contract that is 
being negotiated will say 185 days. That is my understanding.
    Mr. Cummings. Did you want to comment, Mr. Caldwell?
    Mr. Caldwell. We didn't do the work on the NSC, so 
obviously I will defer to Mr. Skinner on that issue. But 
getting to your bigger question about whether there are any 
areas of concern about things that the Commandant said, there 
are a couple of areas. First, let me start with the good parts, 
which is he clearly recognizes the problem, he is clearly upset 
about it, and he is taking accountability for what the Coast 
Guard has done so far. He is laying out plans to try and get 
the program well.
    But the two areas where there might be a little concern is 
the hope that he can renegotiate with the contractors about 
some of the problems we have had in the past_in some cases the 
contract as it was signed may dictate accountability. So it may 
be fairly hard to pin down accountability in a way that you 
would like, Mr. Chairman. There may have been vague terms in 
the contract because of the way the contract was written, 
because the criteria was loose; which is another thing that Mr. 
Skinner has talked about. Just to reiterate that first point, 
it is not clear to me how much the Coast Guard can renegotiate 
accountability for some of these past problems that have 
happened. Going forward, of course, you have negotiation 
leverage, but on some of the past problems, probably not.
    The second thing------
    Mr. Cummings. Could you hold that note? Hold that one right 
there.
    How do we--I mean, basically you are saying that we are 
bleeding money. And I am trying to figure out--I mean, you are 
right, there are some things that has got to be within the four 
corners of the contract. But then I am wondering is there 
anything that we can do now to make sure that we at least stop 
the bleeding that we can stop, assuming that there is some 
bleeding? Are you following my------
    Mr. Caldwell. Yes.
    Mr. Cummings. Some things we may not be able to do anything 
about.
    Mr. Caldwell. Yes. I think that the biggest problem is not 
with the NSC; though that has problems and the IG here has 
noted those. But there will be a solution, and I think the 
solution will cost money, but there will be a solution to the 
NSC problem. The biggest concern of mine, as it was obviously 
to Rep. Taylor here, is the 123 conversions. That is going to 
be the hardest one for the Coast Guard, with its forensic team, 
to actually show that there was some kind of accountability 
that the contractor has to take. The contractor could 
successfully say the Coast Guard also has to take some 
accountability. There may be some issues where the Coast Guard, 
either because of its criteria that was loose or some other 
things that were going on, would allow the contractor to escape 
financial accountability.
    Mr. Cummings. Do you know whether the contractor has 
acknowledged the problem?
    Mr. Caldwell. I have been to a couple of hearings where the 
contractor has testified and I have not heard that.
    Mr. Skinner. To our knowledge, the contractor has not 
acknowledged the problem.
    Mr. Cummings. I am sorry, I didn't hear you.
    Mr. Skinner. To my knowledge, the contractor has not 
acknowledged the problem.
    Mr. Cummings. That is incredible.
    Mr. Caldwell. Just on the 123 boats. The one observation I 
made is that one of the contractors testified that the hulls on 
the 110s were in worse shape than expected when they got them. 
They thought that was part of the problem, as opposed to them 
having done something wrong.
    Mr. Cummings. And you had two points.
    Mr. Caldwell. Yes. And my other point on the Commandants' 
testimony has to do, with the time frames for fixing the 
problem. The Commandant is obviously very committed to taking 
steps to fix the problems; he has given you a promise that 120 
days after your first hearing, he wants to clearly lay out the 
plans he can put into place. But I think both the work of the 
IG and GAO has shown that the Coast Guard just don't have that 
acquisition oversight structure in place yet. It does not 
happen overnight and it does not happen within a period of 
weeks or months. They need to get more people there, they need 
to get the right skills; they need to catch up just on the 
backlog of things. There are still a lot of undefined tasking 
orders and things like that that need to be clarified, so------
    Mr. Cummings. Well, one of the things I am going to do----
--
    Mr. Caldwell. While I appreciate the Commandant's optimism, 
this is a situation where his own people will try his patience, 
because there is a lot to do.
    Mr. Cummings. His own people will what?
    Mr. Caldwell. His own people will try his patience. The 
Commandant wants things to happen very quickly here, and I am 
sure his people will try to do that. But it will take time to 
get this new acquisition structure in place, and to get the 
additional people there.
    Mr. Cummings. So I guess you all can kind of understand Mr. 
Taylor's frustration and other Members' frustration, because 
you are basically stating exactly why we are frustrated.
    This $24 billion, do you see any way that we can stay 
within the boundaries of the $24 billion at the rate we are 
going, Mr. Skinner?
    Mr. Skinner. No, I don't. And when you asked me are there 
statements that the Commandant made that would give me pause, 
first, I would like to reiterate that there were a lot of 
things that Admiral Allen is doing. He is doing the right thing 
through the reorganization, redefining the contract, giving 
technical authority to his chief engineers, and re-energizing 
his staff, trying to get the right people in there, but that is 
going to take time.
    But what concerns me right now is_this June we will be 
redefining, rewriting,and renewing the contract, and this will 
be a great opportunity to sit back and to redefine what the 
budget and program baseline is going to be now and for the out-
years, because there has been a lot of setbacks. They were 
costly setbacks, and that, in effect, has to have a major 
impact on the original estimate of what the total costs were 
going to be. So, if we are rewriting the contract, then we need 
to also step back and rewrite the budget and program baseline.
    And this is also a great opportunity to rewrite our 
performance requirements, that is, what we expect at the end of 
2007 and how much is it going to cost; what do we expect at the 
end of 2008 and what it is going to cost, and through the out-
years so that each year the Coast Guard and the Congress can 
manage or provide oversight of where it is going. Any time you 
have a cost overrun, something else is going to suffer. We 
issued a report last year dealing with command, control, 
communications, computers, and intelligence, reconnaissance, 
and surveillance. One of the things that is being shortchanged 
is that particular aspect of the Deepwater program. As they 
have cost overruns in one area, other areas are going to 
suffer. As a result, total costs are going to go up. This is a 
great opportunity now, this summer, to define exactly what it 
is going to cost under this new contract.
    Mr. Cummings. Let me just ask Mr. LaTourette to go forward 
with just one question and then I am going to come back.
    At the rate we are going, if we don't do something like 
what you just said, I guess this contract could go on forever, 
we not get what we bargained for, and we are paying. And we can 
be paying big bucks for a long time, probably beyond our 
lifetimes.
    Mr. Skinner. That is correct. And this is Acquisitions 101. 
It is impossible to be transparent if you don't know what you 
are buying and what your estimates are and what your plans are. 
This is a long-term project, and we need to sit down and really 
think it through. We can't do it all in one year, five year, 
ten years, fifteen years; this is a 20, 25 year effort. But we 
need to, to the best of our ability, define our goals, and each 
year we need to be making adjustments as we learn more and as 
we move forward.
    Mr. Cummings. Well, one of the things that we are going to 
do, since the Admiral isn't here, if there are things that you 
all are recommending, we are going to get a letter to him. I 
mean, I know a lot of this is in your testimony and whatever, 
but other things we want to get that to him, because--and by 
the way, Mr. Caldwell, it was our suggestion, not the 
Admiral's, that he come back in 120 days. We just felt that he 
needed to come back and give us--but, one of the things that I 
wanted to do is ask him to give us like a 60-day between the--
in other words, before the 120 days, 60 days before that give 
me something in writing telling me where you are, what you are 
doing, and we are going to make that, some of the suggestions 
that you are making, a part of that letter. But understand all 
we are trying to do up here is get efficiency and 
effectiveness, and this seems--I am telling you, I have never 
seen a contract like this. It seems like it is indefinite and 
it certainly, it seems a bit ambiguous and it is indefinite 
with regard to quality, quantity and cost. Boy, that is a hell 
of a contract.
    Mr. Skinner. As written, Mr. Chairman, I think this is one 
of a kind, so I would be surprised if you said you saw 
something like this before, because I don't think there is 
anything like this.
    Mr. Cummings. Is that right?
    Mr. Skinner. Not to my knowledge.
    Mr. Cummings. How about you, Mr. Caldwell?
    Mr. Skinner. We have system-of-systems contracts, we have 
performance-based contracts. That is fine, and I think this is 
the way to go, and I do support the Coast Guard's decision to 
go this way, to partner with the private sector, because you 
need to bring that innovation to the table. We in the 
Government do not have that. But we need to be a little bit 
more definitive--not a little bit, we need to be definitive in 
how we write what our roles are and what the contractor's role 
is. There has to be a balance. Right now there is an imbalance 
and it is leaning toward the contractor.
    Mr. Cummings. Mr. Caldwell?
    Mr. Caldwell. Three comments, one to follow up on your 
comment on the 120 days. I think it is a great idea to have 
that hearing in 120 days because I think that Admiral Allen is 
still in the process of getting his structure in place and his 
policies in place, and he will have done so in 120 days. I 
guess what I was trying to say is that the implementation is 
what takes a while.
    The other issue you raised, in terms of the $24 billion, I 
think there are maybe three areas of uncertainty that could 
lead to higher costs overall. One is the uncertainty about the 
cost of the individual assets. There has been cost growth in 
some of the assets as they come closer to delivery. The NSC is 
one example of that. There is also some uncertainty as to 
exactly how the integrated logistics and maintenance package is 
going to work. You haven't had a lot of assets delivered, 
actually turned over to the Coast Guard where they have had to 
maintain them. And so I think there is some uncertainty of the 
role the contractor will have versus what role the Coast Guard 
will have. And you don't want to have a situation where they 
are duplicating each other's capabilities just to make sure 
that these things are operating.
    I think the third area of uncertainty is perhaps one of the 
vaguest parts of the whole contract_the ultimate goal is a 
system-of-systems. Each asset is interdependent on the others 
to get to that ultimate goal. One of the issues you have now is 
the NSC will be deploying without the VUAV. One of the issues 
with going from 12 legacy Cutters down to 8 National Security 
Cutters is that you have the VUAV, which would provide much 
greater coverage to the NSC in terms of area. Now I think there 
is a six-year delay in the VUAV. So you get to the point where 
you have got some of your assets and you realize you still 
don't have your system-of-systems yet in terms of capability. 
There are maybe two things to do, first there may be quick 
fixes to C4ISR or something like that to expand the 
capabilities relatively cheaply, or you may need to buy more of 
the assets in the end.
    Mr. Cummings. All right, thank you.
    Mr. Caldwell. And just one last thing. There are some other 
contracts that look something like Deepwater in the Government. 
One is the SBInet program, which is also managed by the 
Department of Homeland Security. GAO is doing some work on that 
one. That one has some similarities to Deepwater. I think that 
with appropriate oversight they will make sure that doesn't 
turn into where we are with Deepwater now. And the other 
contract is one that I am not that familiar with, but it is the 
Army's Future Combat System contract.
    Mr. Cummings. All right.
    Mr. LaTourette.
    Mr. LaTourette. Thank you, Mr. Chairman.
    And thank both of you for your testimony today. I want to 
focus on the contract for a minute because we did have a 
hearing and the contractor was here, and I don't know if it is 
a disagreement or not, but they did acknowledge the problem; 
they just didn't acknowledge the responsibility. And I think 
that anybody that works for the contractor that would come 
before a panel of Congress and admit that they owe us $100 
million probably wouldn't be working for the contractor very 
long, so that doesn't surprise me that that happened.
    But on the contract, I mean, I guess I would like to know, 
when you are doing your reviews and making recommendations and 
writing reports, is there sort of a time when everybody sits 
down and there is an instruction on how to write a contract 
that we don't find ourselves in this situation? I mean, it 
does--let's focus on the 110-foot boats, for instance. I mean, 
talking to the Commandant and talking to the contractor, you 
are right, we have now gotten this he said-she said, the hulls 
were bad and we didn't do it and we shouldn't have done this, 
and so forth and so on. And just from the little bit I know 
about it, I think somebody owes the Government some money for 
those conversions.
    Is it your evaluation as a result of reviewing the 
contracts that we may not have recourse?
    Mr. Skinner. That is currently being reviewed by the Coast 
Guard and the General Counsel, and we are also going to be--
although we may not be at the table, we are going to be 
providing oversight of how those negotiations turn out. But, 
yes, there is a possibility that the Government may not have 
to--or has no recourse against the contractor because of the 
way the contract was written, because the specifications were 
so vague_it allowed a lot of discretion for the contractor to 
provide what he thought was the right thing. There is that 
possibility, but I wouldn't want to jump to a conclusion that 
there is no recourse.
    Mr. LaTourette. But when these contracts are written, I 
mean, somebody sits down and actually writes the contract or 
agrees to the contract on behalf of the Government. How do we 
get such a lousy contract? I mean, isn't there sort of a 
Government-wide contract where we protect ourselves?
    Mr. Skinner. I wish there was, but, because everything we 
buy in the Government is going to have a different requirement. 
this is not feasible in this particular case, the best that we 
can determine_and we are going back pre-DHS. We are going back 
to the late 1990s now, and 2000, 2001, 2002 time frame, 
building up to that contract, and one of the things that become 
evident when we look at the history and reconstruct what 
happened, is that the Coast Guard has never ever entered into 
an arrangement like this in their history, and they did not 
have the expertise to be negotiating a contract like this 
unilaterally. And I think they did receive some technical 
advise from the Navy and maybe from others who cautioned them 
to proceed with caution; however, because of the lack of 
expertise, that is how they found themselves in this situation 
we are in today.
    There are other contracts, for example, like SBInet, that 
the Department has entered into, and they have used lessons 
learned from Deepwater to tighten up the controls over that 
contract. For example, instead of a 25-year contract, it is a 
three-year contract. There are exit ramps or exit clauses if we 
don't like what you are giving us. We can get out without 
penalty. We are more heavily involved in SBInet in the 
subcontracting. We can make the decisions of make or buy; 
whereas, under the Deepwater contract, the integrator made 
those decisions. So there are lessons learned in SBInet that 
you won't see in Deepwater.
    Mr. LaTourette. Let me ask you this just from a good 
government standpoint. I mean, it amazes me that we could enter 
into a $24 billion contract with somebody and not be protected, 
and if it is a lack of expertise, what would you think if, 
here, the Congress said, you know what, pick a number, 
anything, anybody that is going to buy anything over a billion 
bucks, we have to have Joe, the contract guy, look at it; I 
mean, it doesn't matter whether you are from the Coast Guard or 
the DoD or the Interior Department. I mean, do we have to do 
something like that or do you think that everybody is competent 
and this one just got screwed up?
    Mr. Skinner. I think it is the latter. And one of the 
things that I am seeing right now with Deepwater is that the 
Department's procurement office, and the Chief Procurement 
Officer, Elaine Duke, with Department of Homeland Security, is 
now more actively engaged in providing technical assistance, 
advice, and oversight as they proceed through this negotiation 
process.
    Mr. LaTourette. And let me ask you this. You seem to 
express some hopeful optimism that when this contract is up in 
June or July, whenever it is, that things are going to get 
better. My understanding of the contract is that it is a five-
year contract and then it has sort of a grade-out, and they 
have just completed that grade-out process, and based upon the 
grades that the integrator got, I guess it is a 43-month 
extension is what they have earned based upon their scores of 
76 and 60 and things like that.
    But based upon both of your reviews of the contract, the 
existing contract, is there a lot, do you think, the Coast 
Guard can do to fix the things that you find problematic in the 
existing contract?
    Mr. Skinner. Yes, and we have made recommendations to that 
effect. And you hit it up on the evaluation as a basis for the 
extension. Actually, I think the final score was somewhere 
between 83 and 87, which gave us grave concern because you had 
the FRC, you had the 110/123 conversion problems, you had the 
NSC problems, you had the unmanned aircraft problems. How could 
you score a B and deserve 43-month extension? And that is 
because_the way the contract was written_again, it was flawed. 
The evaluation was based on final deliverables, so, therefore, 
the 123, the final deliverable had not been made; the NSC, the 
final, all eight, had not been made; the FRC, the finals had 
not been made. So, therefore, they weren't evaluated on their 
failures, they were only evaluated on those final products. I 
understand that is going to be rewritten as well.
    Mr. LaTourette. Good. And let me ask both of you this. I 
heard you and Mr. Caldwell say that three components to this, 
one of the components being the integrated contractor. Just 
your thoughts on--I also heard you say, Mr. Skinner, that you 
think that it is nice that they partnered with the private 
sector. But I have to tell you, from the last hearing that the 
Chairman had where we had the integrator here, I am not so 
crazy about the way that it is set up, and I just want you to--
if you could just give me your thoughts on the structure that 
has Northrop Grumman, Lockheed Martin being the integrator, and 
most of the business is going to them at the end of the day, 
too.
    Mr. Skinner. It is--after reviewing it very closely, I 
mean, it is difficult for me to comment on whether the 
structure is adequate or not. They went through a very lengthy, 
I think a two-or three-year process, to pick these two 
contractors to work in partnership and to work in partnership 
with the Coast Guard. That, in and of itself, I don't think is 
the problem. I think the problem is, one, is clearly defining 
what your operational requirements are, holding them to those 
requirements, having someone--right now they are self-
certifying--having someone independent------
    Mr. LaTourette. Right.
    Mr. Skinner.--validate what they are delivering to you. 
Also, we need to be more actively involved in the decision-
making process. After all, it is a partnership.
    Mr. LaTourette. Right.
    Mr. Skinner. We turned over the reins to them. That was a 
big mistake. We need to partner with them. When they give us 
design proposals, we should be making the final decision 
whether, one, that design meets our requirements; two, whether 
we want to buy that from you or we want to shop somewhere else 
to buy that requirement.
    So it is the design of the contract, I think, and the 
oversight expertise that needs to be addressed.
    Mr. LaTourette. And I think when I say I am not crazy about 
it, I mean, I think the problem that I have with it is the 
gatekeeper really doesn't have any incentive to keep the gate 
is the problem.
    Mr. Caldwell, do you have a thought on the integrated 
contractor structure?
    Mr. Caldwell. Yes. In some of our past work we found that 
the integrators perhaps weren't integrating as well. Northrop 
Grumman was doing vessel side and Lockheed Martin was doing the 
aircraft side, and in some cases it resulted in separate 
proposals or parallel proposals going to the Coast Guard, as 
opposed to an integrated proposal. The reason the Coast Guard 
went with a system integrator like this is to do that kind of 
integration. So in some cases I think they have been 
disappointed that a higher level of integration hasn't 
happened. We, of course, have found some evidence of that.
    In terms of moving forward, you had asked a question about 
how the Government can reduce risk as we move forward into the 
next cycle, and a couple of the things that we have discussed 
with the Coast Guard is the issues of going forward with a 
contract where there aren't any minimum quantities of assets to 
buy and there aren't any minimum dollar amounts. And then, of 
course, you are giving the contractor a much greater incentive 
to make sure they have a good product you are going to want at 
that price or you are going to shop elsewhere.
    Mr. LaTourette. Right. And then the last question I have is 
for you, Mr. Caldwell. You mentioned unobligated balances of, I 
think you said, $1.6 billion. Because this is a hearing about 
the budget, I am concerned that the President's budget has come 
in, I think, about $823 million for Deepwater and the 
appropriated amounts over $1 billion. Based upon your 
observation and analysis, is the $1.6 billion of unobligated 
balances sufficient to move forward with the schedule of assets 
that are being produced?
    Mr. Caldwell. Well, I think what the Coast Guard owes 
Congress, this Committee as well as others, is a plan of when 
they plan to spend that unobligated money. In one of the 
Committees the Commandant was asked when he could spend a 
certain amount of money, and it was beyond a 24-month window. 
So then why do you need it to carry over from the last budget 
if you are not going to be spending it in 24 months? Of course, 
we all know how the appropriations work, and there are risks at 
every level in terms of whether, if you don't have money in 
this year, whether it will be in there next year. And I think 
it happened at a time where one of the risks we raised early on 
with the Deepwater program is whether the Coast Guard would 
actually have the money in any given year to carry on a program 
this ambitious. And I think the initial planning that went out 
for the initial contract had the contractors looking at a 
window of $500 million a month.
    (After the hearing, Mr. Caldwell edited the previous 
statement to read: "...had the contractors looking at a 
spending cap window of $500 million a year.")
    Just talking to Coast Guard folks, it sounded like the 
Coast Guard was just at a point they thought they were there, 
we were pretty close to $800 million to $1 billion a year of 
funding that Congress was willing to appropriate, but, of 
course, all these problems had not come up yet, and so, because 
of some of these problems, they haven't been able to spend that 
money. But I am not sure that I have done a level of analysis 
that could say how much should or shouldn't be given to the 
Coast Guard or taken away, or something like that, but I think 
the Coast Guard owes Congress that information in terms of here 
is how we plan to spend that money. It is just obviously not 
good financial management to have those kinds of unobligated 
balances.
    Mr. LaTourette. Right. Absolutely. Well, thank you.
    Thank you, Mr. Chairman.
    Mr. Cummings. Thank you very much, Mr. LaTourette.
    Let's go back to the performance assessments. You said, I 
think, there were 83 to 87. In the industry, is that medium, 
high, low?
    Mr. Skinner. I think that would be a B.
    Mr. Cummings. A B?
    Mr. Skinner. If we did an A through F grading.
    Mr. Cummings. You also went to the criteria for the 83 to 
87, is that right?
    Mr. Skinner. I beg your------
    Mr. Cummings. In other words, one of your concerns, I 
guess, was even when you come up with the 83 to 87, is the 
criteria how you got there?
    Mr. Skinner. Yes. We didn't grade everything.
    Mr. Cummings. Yes.
    Mr. Skinner. That was our criticism, and I think the Coast 
Guard and Admiral Allen agreed with that and is amending the 
contract to grade everything, whether it is in progress or 
whether it has already been delivered.
    Mr. Cummings. And I take it that you all had--you may have 
stated this already--had an opinion about the award fees. I 
mean, one of the things that concerned me--and I had an 
opportunity to talk to at least one of the team members, I 
think it was Lockheed Martin folks, and I think what they were 
trying to tell me, that this was not a bonus, that this was an 
award, I guess, more or less for progress, sort of. But I saw 
it as a bonus, and their argument was that they were taking 
somewhat of a risk in doing this contract and so, therefore, 
they just could not see it as, in any way, shape, or form, 
anything that you could even put in the same dictionary as a 
bonus. I mean, do you have an opinion on that?
    Mr. Skinner. We didn't evaluate the basis for the award 
fee, but it does go back to the criteria which we used to 
evaluate their success or failure, their performance. And the 
award fee, I think, is tied into that evaluation. So the higher 
the score, the higher the award fee, which we also were 
questioning the score; we think that it was too high. 
Therefore, we are also suggesting, I guess, that the award 
bonus may have been too high as well. But we did not comment on 
that particular aspect.
    Mr. Cummings. I understand. You also seem to have--I know 
at least you, Mr. Skinner, and, Mr. Caldwell, I am sure you 
have an opinion on this, about the role that civilians should 
play in acquisitions and what have you. I mean, the argument 
was made--I think it was by you, Mr. Skinner--that one of the 
things that folks depend upon, contractors, is that personnel 
will change, I mean, personnel will move from place to place in 
the military, in the Coast Guard, and so they don't have to 
deal with the same folks. The folks that were there two years 
ago, some of them retired, some of them have gone overseas; 
they are not there anymore. Even Admiral Allen has, I think, a 
four-year term. And so this gives us great pause because I 
think that, and I have said it many times, I think every Member 
of this Committee has a tremendous amount of faith in Admiral 
Allen, but I guess what we have got to do is figure out how we 
put into place those things that will last beyond Admiral Allen 
and others that may have great intentions.
    So talk about the role of civilians and how significant 
that is. Yes, Mr. Caldwell, and then we will go to you, Mr. 
Skinner.
    Mr. Caldwell. Let me just make a couple of comments. I 
would agree with Admiral Allen that you need some of the 
military folks in there who know the operational issues. There 
is no doubt you need their expertise involved in that. You even 
want to have maybe some overlaps among those people because, as 
military people, they will rotate out. But, in principle, I 
would agree that you need continuity here in terms of civilians 
to carry on some of these programs.
    I have one other kind of anecdotal observation I would like 
to make. I have been with the GAO for 23 years now. The people 
that we are hiring now, they are not going to stay for 23 
years. I mean, it is a much more mobile workforce than it used 
to be, and I think that will affect the Coast Guard or any 
Government agency to a larger extent. So while the continuity 
is a very valuable thing, it is just a harder thing to get 
today, even in the civilian world.
    Mr. Cummings. Mr. Skinner?
    Mr. Skinner. If you look at best practices for performance-
based contracting or best practices for a system-of-systems 
contract, there is a lot of literature out there. One of the 
most important elements they say to be successful is 
continuity. That is, the people that you put together on a 
project team, an integrated project team, have to be committed 
to the project from beginning to end. And like Mr. Caldwell 
said, even in the civilian sector you are going to have staff 
turnover, but in the military sector you are guaranteed 
turnover, and that creates a problem because you just cannot 
ensure that continuity.
    The second thing that concerns me when you talk about 
putting military in charge_it goes beyond acquisition 
management, it goes into financial management, it goes into 
human resources management, it goes into IT management. These 
are specialties where you need professionals in those fields to 
do this. If you look at the Coast Guard, particularly the Coast 
Guard, any cadet or anyone that is coming out of the Coast 
Guard Academy, I challenge anyone to say that they can look at 
the Coast Guard organizational chart and say I want to be the 
chief acquisition officer. There is no career path in the 
military for those people to aspire to be there and to work and 
train and receive the experience in the training that they need 
to be able to run any type of acquisition program, let alone a 
complex major acquisition program such as Deepwater.
    So it does create a problem when you start relying on your 
military people who do not have the experience, do not have the 
training, and they would rather be somewhere else. They are 
punching their ticket to get through Washington so they can go 
back out to sea.
    Mr. Cummings. One of the things that you talked about, Mr. 
Skinner, in your opening statement, you talked about how 
Admiral Allen was building up his personnel. And you also said 
something that was very interesting, and that was that it is 
going to take a long time. So I guess, I mean, do you see--so 
you are saying that even if he built up his personnel, gave 
them the training that they probably wouldn't be around but so 
long, but you even question whether they can build up that kind 
of training to do all the things that need to be done 
particularly with regard to acquisitions, whether they even--
they are in a position to be able to accomplish that and still 
deal with this contract in a fairly timely fashion?
    Mr. Skinner. In the short term, that is absolutely true. 
That is one of the things we are experiencing not just within 
the Department, but this is a Government-wide issue, is to get 
the right resources in the acquisition management field: 
program managers, acquisition managers, procurement managers. 
It is very difficult, in this day and age, to find those types 
of people out there. There is a lot of competition in the 
private sector right now. The private sector pays a lot more 
than the Government, and that is who we are competing with 
right now. So it is not something that we are going to be able 
to fix just in a few months; this is going to--it is going to 
be very difficult to find the right people and bring them in 
here.
    Mr. Cummings. Of all the things that you heard--and I will 
end on this--what gave you the most hope that we are at least 
partially on the right track here? Assuming that you got that 
feeling.
    Mr. Skinner. Yes, there is hope, and what gives me the most 
hope is the leadership that we now have in the Coast Guard, and 
that is Admiral Allen. He is firmly_he recognizes these 
problems, he admits to these problems. He is very, very focused 
on correcting these problems. He is very hands-on management, 
and he has taken some very drastic steps to turn this thing 
around with a major reorganization of his acquisition program, 
in other areas as well, but we are focusing on acquisition 
management, putting it under one directorate, where it is more 
streamlined and you can go to someone where there is 
accountability, which never existed before. And we learned that 
through the course of our audits, because we just couldn't find 
that one person that we could go to who is accountable for this 
contract? It also has become very clear as to who has technical 
authority over Deepwater. That was not clear before. And when 
you talked about using the integrator project teams and when 
you do experience those problems, well, when you got to the 
end, the contractor was the chair of the team. The Coast Guard 
were technical advisors, they were not technical decision-
makers. That now has changed. He recognizes that the contract 
is flawed, going back to basics. Let's go back to Acquisition 
101 plus what we have learned over the last four and a half 
years from our mistakes, and to address those issues.
    There is a lot that is now being done to turn this around, 
but, again, we are still in the very early stages. Will we be 
successful? Time will tell. But it is going to require 
sustained leadership, it is going to require oversight, not 
only from GAO or OIG, but Congressional oversight. We are going 
to have to be transparent so we make sure that we are doing the 
right thing; and if we are not, we have got to hold people 
accountable.
    Mr. Cummings. Mr. Caldwell?
    Mr. Caldwell. Well, whether it is Admiral Allen or it is 
kind of the lowest person in the chain of the acquisition 
world, they are going to probably move or transition, or there 
will be some lack of continuity. So the kind of things that 
give us hope, looking forward, in terms of fixing the problem 
is really having structures and processes in place that work, 
and then people can come in and out of those. But if you have 
those in place and you have a mechanism to make sure they are 
working, from an auditor's perspective, it is internal controls 
that are important, it is not the people that are in the 
positions. So that is what I would say is most important to us.
    Mr. Cummings. Mr. LaTourette?
    Mr. LaTourette. Nothing further.
    Mr. Cummings. Thank you all very much. We really appreciate 
your. I am sure we will be talking to you all again. What is 
next on you all's agenda? Are you all continuing not follow 
this, is that right?
    Mr. Skinner. Yes. We are embedded in the Coast Guard, into 
the Deepwater program. Our next------
    Mr. Cummings. Whether they like it or not, huh?
    Mr. Skinner. Whether they like it or not. But Thad Allen 
has in fact opened his doors to us and has been very 
cooperative these last few months, and is welcoming our 
suggestions. The next thing you will probably see is a report 
card. This will be the first report card that we have done of 
the Deepwater program. We are going to do it throughout the 
Department and we are going to spread out to all the management 
challenges in the Department. But this will give you a 
baseline, and each year we can show you and the Secretary, and 
the head of the Coast Guard the progress they are making, if 
they are in fact making progress. We are also doing several 
sector reviews of Deepwater activities, the unmanned aircraft, 
for example, their infrastructure, which we talked about 
earlier today and the progress that is being made there and the 
problems that they are experiencing, and how that is going to 
be integrated into the Deepwater program. So there are going to 
be a whole series of audits for the next--Mr. Chairman, long 
after I am gone.
    Mr. Cummings. Mr. Caldwell?
    Mr. Caldwell. We have a couple of things. I guess in the 
long term we have a mandate, a legislative mandate from two 
appropriations Committees, Senate and House, to look at this 
every year, and we negotiate a little bit about what the terms 
of those audits are. But I assure you it is not an indefinite 
quantity, indefinite amount contract.
    Mr. Cummings. Let me say this. I am sure you all don't hear 
this too often, but we really do thank you for what you do. I 
think you all have--you and your staffs have--I am sure you are 
not always--people are not jumping up and down and having 
parties for you when you come in the door and everything, but 
the fact is that you help to keep Government strong and you 
help to make sure that trust, with regard to integrity and 
competence, both, you all are the ones that make sure that we 
keep that in some type of order.
    So I am sure you are well underpaid, but we really do thank 
you for what you do, and I really mean that, and I hope you 
will convey that to your staffs. And we want to thank you for 
the outstanding work that you all have done for us and, on 
behalf of the Congress, we thank you.
    Mr. Skinner. You are welcome. Thank you.
    [Whereupon, at 1:15 p.m., the Subcommittee was adjourned.]

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