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



 
                        DEEPWATER: 120-DAY UPDATE

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

                                (110-50)

                                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

                               __________

                             JUNE 12, 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
ELIJAH E. CUMMINGS, Maryland         JERRY MORAN, Kansas
ELLEN O. TAUSCHER, California        GARY G. MILLER, California
LEONARD L. BOSWELL, Iowa             ROBIN HAYES, North Carolina
TIM HOLDEN, Pennsylvania             HENRY E. BROWN, Jr., South 
BRIAN BAIRD, Washington              Carolina
RICK LARSEN, Washington              TIMOTHY V. JOHNSON, Illinois
MICHAEL E. CAPUANO, Massachusetts    TODD RUSSELL PLATTS, Pennsylvania
JULIA CARSON, Indiana                SAM GRAVES, Missouri
TIMOTHY H. BISHOP, New York          BILL SHUSTER, Pennsylvania
MICHAEL H. MICHAUD, Maine            JOHN BOOZMAN, Arkansas
BRIAN HIGGINS, New York              SHELLEY MOORE CAPITO, West 
RUSS CARNAHAN, Missouri              Virginia
JOHN T. SALAZAR, Colorado            JIM GERLACH, Pennsylvania
GRACE F. NAPOLITANO, California      MARIO DIAZ-BALART, Florida
DANIEL LIPINSKI, Illinois            CHARLES W. DENT, Pennsylvania
DORIS O. MATSUI, California          TED POE, Texas
NICK LAMPSON, Texas                  DAVID G. REICHERT, Washington
ZACHARY T. SPACE, Ohio               CONNIE MACK, Florida
MAZIE K. HIRONO, Hawaii              JOHN R. `RANDY' KUHL, Jr., New 
BRUCE L. BRALEY, Iowa                York
JASON ALTMIRE, Pennsylvania          LYNN A WESTMORELAND, Georgia
TIMOTHY J. WALZ, Minnesota           CHARLES W. BOUSTANY, Jr., 
HEATH SHULER, North Carolina         Louisiana
MICHAEL A. ACURI, New York           JEAN SCHMIDT, Ohio
HARRY E. MITCHELL, Arizona           CANDICE S. MILLER, Michigan
CHRISTOPHER P. CARNEY, Pennsylvania  THELMA D. DRAKE, Virginia
JOHN J. HALL, New York               MARY FALLIN, Oklahoma
STEVE KAGEN, Wisconsin               VERN BUCHANAN, Florida
STEVE COHEN, Tennessee
JERRY McNERNEY, California
VACANCY

                                  (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
BRIAN HIGGINS, New York              WAYNE T. GILCHREST, Maryland
BRIAN BAIRD, Washington              FRANK A. LoBIONDO, New Jersey
TIMOTHY H. BISHOP, New York          TED POE, Texas
VACANCY                              JOHN L. MICA, Florida
JAMES L. OBERSTAR, Minnesota           (Ex Officio)
  (Ex Officio)

                                 (iii)

                                CONTENTS

                                                                   Page

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

                               TESTIMONY

Allen, Admiral Thad W., Commandant, United States Coast Guard....     6
Skinner, Richard L., Inspector General, Department of Homeland 
  Security, accompanied by Rich Johnson, Project Manager, Office 
  of Inspector General, Department of Homeland Security..........     6

          PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS

Cummings, Hon. Elijah E., of Maryland............................    42

               PREPARED STATEMENTS SUBMITTED BY WITNESSES

Allen, Admiral Thad W............................................    44
Skinner, Richard L...............................................    58

                       SUBMISSIONS FOR THE RECORD

Allen, Admiral Thad W., responses to questions from the Committee    55
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                  HEARING ON DEEPWATER: 120 DAY UPDATE

                              ----------                              


                         Tuesday, June 12, 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 11:00 a.m., in 
Room 2167, Rayburn House Office Building, the Honorable Elijah 
E. Cummings [Chairman of the Subcommittee] presiding.
    Mr. Cummings. The Subcommittee will come to order.
    Today, the Subcommittee on Coast Guard and Maritime 
Transportation convenes to receive an update on the steps that 
the Coast Guard has taken over the past 120 days to continue 
strengthening the management of the $24 billion 25 year 
Deepwater procurement program.
    I note the significance of the 120 day time period. It is 
the time that has elapsed since I convened the Committee's 
first oversight hearing on Deepwater in the 110th Congress, and 
it is the time period after which I promised the Subcommittee 
would reconvene to hear again from the Coast Guard's 
Commandant, Admiral Thad Allen.
    This hearing continues our Subcommittee's unwavering 
commitment to require strict accountability from the Coast 
Guard for its implementation of the Deepwater program and the 
expenditures of taxpayers' resources. Since we met in January, 
our Subcommittee has examined the Coast Guard's fiscal year 
2008 budget, and the House is considering the appropriation for 
the Coast Guard on the Floor today.
    The Full Committee on Transportation and Infrastructure has 
also held an investigative hearing to examine the extent to 
which contractors working on the failed 123 foot patrol boat 
program complied with the requirements of the Deepwater 
contract.
    During that 120 day period, the Commandant has also 
announced important changes to the Deepwater program including 
promising the Coast Guard will assume the lead role as systems 
integrator for the program, that the use of third party 
certification will be increased and that the Coast Guard will 
contract directly with vendors when it is in the best interest 
of the service to do so. Further, the Coast Guard will stand up 
a new acquisitions directorate under the command of Rear 
Admiral Gary Blore on July 13.
    The principles and plans the Commandant has announced 
appear likely to set the Deepwater program on a steadier 
course. However, it is important that we understand how these 
principles will be translated into the specific practices that 
will insure the success of the program.
    The failures already registered in Deepwater are simply 
unacceptable. An approximately $100 million effort to lengthen 
8 123 foot patrol boats yielded only 8 buckled hulls. According 
to the Inspector General, the Coast Guard has obligated more 
than 100 million of money allocated to the development of the 
vertical unmanned aerial vehicle through fiscal year 2007, but 
this obligation has yielded little more than a pile of rubble 
and the first effort to design a Fast Response Cutter, which at 
just 120 to 160 feet is the smallest of the new cutters 
expected to be acquired under Deepwater, produced a failed 
design.
    As I have said before, what we expect from Deepwater is 
really quite simple. It is no rocket scientist stuff. We expect 
boats to float. We expect aircraft to fly. Yet, as simple as 
these goals appear to be, too frequently they have not been met 
in the Deepwater program, and this is simply intolerable.
    Unfortunately, there are problems with other ongoing 
procurements, most notably the National Security Cutter, the 
most expensive asset to be acquired under Deepwater. I had the 
opportunity, thanks to Admiral Allen, to visit the NSC last 
week in Pascagoula, Mississippi, and it is indeed, without a 
doubt, an impressive ship. However, like all of my colleagues 
on the Subcommittee, I am deeply concerned by lingering 
questions about the likely fatigue life of hulls 1 and 2.
    I believe that it is imperative and should be among the 
Coast Guard's top priorities at this time to ensure that design 
changes incorporated into hulls 3 through 8 will yield ships 
that will fulfill all of the requirements of the Deepwater 
contract. For that reason, I believe that all proposed designs 
must be closely examined by the Navy's Carderock Division.
    During today's hearing, I also hope to understand the 
specific role that the Integrated Coast Guard Systems Team is 
currently playing in implementing the Deepwater procurements 
and how any future contract extension granted to that team will 
be structured to ensure that performance is based solely on the 
quality of work performed and the effectiveness of assets 
produced.
    In recent years, our great Country has unfortunately 
witnessed the troubled aftermath of incompetence in government, 
and the Congress has been too willing to tolerate mediocrity. 
Ladies and gentlemen, these days are over. We are the United 
States of America. We were not founded on mediocrity. We cannot 
stoop to it now, and we will no longer tolerate failures in the 
Deepwater program.
    Thus, while I continue to have the utmost confidence in 
Admiral Allen, our Subcommittee will also continue to expect 
the Coast Guard to meet the highest standards of performance. 
We look forward to hearing today from Admiral Allen and how he 
will put in place the systems and personnel that will ensure 
these standards are met.
    In addition to hearing from Admiral Allen, we will also 
hear from the Inspector General of the Department of Homeland 
Security, Richard Skinner. Inspector General Skinner has done 
an outstanding job in reporting on emerging problems throughout 
the Deepwater program, and it was his office that identified 
the hull fatigue life problems with the NSC. The Inspector 
General's Office has been a critical partner to our 
Subcommittee as we have conducted our oversight over the Coast 
Guard.
    I look forward to Mr. Skinner's comments today on the steps 
that the Coast Guard still needs to take to prepare to 
implement the reforms that Admiral Allen has announced. I also 
invite him to comment on the steps being taken to mitigate the 
problems with the NSC.
    Again, I want to reiterate my full confidence in Admiral 
Allen. Admiral Allen has earned our trust, not only from a 
standpoint of integrity and the highest integrity but also from 
the standpoint of the highest level of competence.
    And so, with that, I would like to now recognize my 
colleague, the Ranking Member of our Committee, Mr. LaTourette.
    Mr. LaTourette. Thank you very much, Mr. Chairman, for 
yielding and also for conducting this hearing.
    The Subcommittee, as you have indicated, is meeting this 
morning to continue its oversight of the Coast Guard's 
Deepwater program. This Subcommittee has already held three 
oversight hearings to review the setbacks that have been 
encountered by the Deepwater program.
    Since our last hearing, the Coast Guard has proposed 
several modifications to improve its management of the 
acquisition process to address some of the issues that have 
caused previous problems. I know and I hope that Commandant 
Allen today will provide the Subcommittee with an update on the 
progress that has been made since we met in January.
    The Coast Guard has taken several promising steps to 
improve its management and oversight of the Deepwater contract. 
The Coast Guard has started and will continue to enhance its 
acquisition and contracting personnel levels and expertise. The 
service has also reasserted itself as the lead technical 
authority for all designs and design modifications of Deepwater 
assets. Lastly, the Coast Guard has committed to use the 
capabilities of the American Bureau of Shipping and other third 
parties to review and oversee the design and construction of 
Deepwater vessels.
    While I commend the Coast Guard for these actions, I 
continue to have deep reservations about the decision to take 
on the wide-ranging responsibilities of the lead system 
integrator for a project of this size and length. I am 
concerned that the Coast Guard does not have the resources, 
personnel or capabilities to fully take on this task. When the 
concept of Deepwater was first considered, the Coast Guard made 
the decision to utilize a private sector lead system integrator 
because the Coast Guard lacked the in-house administrative, 
technical and contracting expertise to carry out such a large 
multi-year project.
    While the Coast Guard is rapidly increasing its personnel 
and capabilities of the acquisition staff, the service does not 
presently have the necessary personnel or expertise in place. I 
hope to hear and I have confidence that we will hear how the 
Coast Guard plans to build on these capabilities while at the 
same time carrying out all of its other vital missions within 
the service's limited resources.
    The Deepwater program and the assets that will be acquired 
under Deepwater are critical to the Coast Guard future mission 
success. The program remains at a critical junction, but I have 
confidence that under the leadership of Admiral Allen the 
program can be a success. The men and women of the Coast Guard 
carry out brave and selfless service to our Nation each and 
every day, and we all need to make sure that this program is 
delivering the aircraft, vessels and systems that are necessary 
to support their missions.
    I thank the witnesses for appearing and thank the Inspector 
General and his staff for their continued efforts to examine 
and approve this complex, wide-ranging program.
    In closing, the Chairman noted that during the 
consideration of the Homeland Security appropriations bill, 
that the Deepwater program was one of the line items contained 
in that bill. I am disappointed at the level in that bill, and 
I hope that Members of the Subcommittee will join me later 
during debate in expressing disappointment with the decision of 
the Appropriations Committee in that regard.
    I thank you, Mr. Chairman, and yield back my time.
    Mr. Cummings. Before I yield to Mr. Larsen for an opening 
statement, I hope that the Admiral will comment on the level of 
funding in the appropriations bill so we can have some guidance 
from you as to how that fits with your program.
    Mr. Larsen?
    Mr. Larsen. Thank you, Mr. Chairman. I will just try to be 
brief here.
    I think we all share the goal of the Coast Guard's long 
term recapitalization plan, Deepwater, and I think we all share 
the goal that the purpose is critical to the security of the 
United States. We also, though, need to be sure to work with 
the Coast Guard to pull Deepwater out of the critical care that 
it still seems to be in.
    The U.S. Coast Guard will soon activate a directorate that 
will have responsibility for acquisition. This is a major 
positive step, I think. However, according to testimony, the 
Coast Guard currently lacks the number of acquisition 
professional necessary to handle the major acquisitions and has 
requested no funding for this. I would be interested in hearing 
from Admiral Allen how they plan to handle these major 
acquisitions in the short term while they build up for the long 
term.
    Second, numerous reports and testimony indicate problems 
with the testing and certification of the secured communication 
components of Deepwater, but the U.S. Coast Guard doesn't 
address this problem in its testimony except to say it seems 
that it isn't a problem.
    I don't think that we can nor should we accept a he said/
she said debate regarding this important national security 
element of the Deepwater program, and I would like to hear a 
little more detail from Admiral Allen exactly what he believes 
the problems are with the secured communication components and 
what is being done to address the problems in it based on the 
reports that we have heard, not just from individuals but from 
certainly qualified analyses from the IG and others.
    So with that, Mr. Chairman, I will yield back and look 
forward to the testimony.
    Mr. Cummings. Thank you very much.
    Mr. Coble?
    Mr. Coble. Thank you, Mr. Chairman. I will not use the full 
five minutes, but I thank you for having this hearing.
    I want to associate myself with your remarks in commending 
Admiral Allen. I think he has performed superbly. Gentlemen, 
many of these problems that currently plagued the Coast Guard 
are unfamiliar to some of us, but many of those problems were 
inherited by Admiral Allen prior to his appointment as 
Commandant.
    To coin an oft-uttered nautical phrase, they did not happen 
on your watch, Admiral. That doesn't make them disappear. You 
are still stuck with them. But I am looking forward to hearing 
from you, Admiral. I think you are doing a good job.
    I still believe, Mr. Chairman, that the American taxpayer, 
these other problems notwithstanding, get the best bang for the 
buck with the Coast Guard, and I continue to believe that.
    I look forward to hearing from Admiral Allen today, and I 
yield back my time.
    Mr. Cummings. Mr. Coble, as a response to what you just 
said, I agree with you. I think they get the best bang for 
their buck too, and that is why I want to make sure--and I know 
we all want to make sure--that they have the equipment that 
they need so that they can do the job that we have asked them 
to do.
    I want to thank you for your support.
    Are there any opening statements on this side? Mr. Higgins, 
did you?
    Thank you very much.
    We will now go to Mr. LoBiondo.
    Mr. LoBiondo. Thank you very much, Mr. Chairman. I would 
like to commend you for vigorously pursuing the looking into of 
the Deepwater program and for holding this hearing. I really 
think it is imperative that we continue to pursue the 
particulars of the Deepwater program.
    I join with most of my colleagues in expressing my 
disappointment in the missteps and failures of the Deepwater 
program especially prior to the tenure of Admiral Allen. I 
think there are a lot of things we can look at and wish had 
been done differently and wish that we knew about.
    However, I am, like my colleagues, very pleased with the 
direction Admiral Allen has taken to rein in control of the 
program including taking the lead role of systems integrator. 
It is a very serious situation that needs to be fixed, and 
again I have full confidence in Admiral Allen.
    But as Mr. LaTourette mentioned a minute ago, I am 
concerned that the Coast Guard does not currently have the 
proper number of qualified acquisition personnel to properly 
manage the program, and I am also concerned that in the time it 
takes to establish that competency the procurement of 
desperately needed replacement assets may be further delayed.
    Mr. Chairman, I certainly look forward to working with you 
and the Committee to make sure that we move forward with 
reforming Deepwater and seeing that it is positively moving 
forward.
    Finally, I would like to remind my colleagues of what 
really Deepwater is all about, that the safety of the men and 
women of the Coast Guard and success of their mission are 
dependent on a replacement of these rapidly failing obsolete 
assets. We must see this program through, but it must be done 
right.
    Again, Mr. Chairman, thank you very much.
    Mr. Cummings. Thank you very much.
    Admiral Allen, please.

 TESTIMONY OF ADMIRAL THAD W. ALLEN, COMMANDANT, UNITED STATES 
COAST GUARD; RICHARD L. SKINNER, INSPECTOR GENERAL, DEPARTMENT 
   OF HOMELAND SECURITY ACCOMPANIED BY RICH JOHNSON, PROJECT 
 MANAGER, OFFICE OF INSPECTOR GENERAL, DEPARTMENT OF HOMELAND 
                            SECURITY

    Admiral Allen. Thank you, Mr. Chairman. Chairman Cummings, 
Representative LaTourette, thank you for the opportunity to 
appear before this Committee as well as the other Members.
    Let me first say that the Coast Guard family expresses its 
deepest sympathy and regret at the passing of Representative 
Millender-McDonald. Our thoughts remain with her family, 
friends and loved ones.
    Mr. Chairman, in January, I committed to returning here and 
testify to the progress of the last 120 days in addressing the 
challenges associated with our Deepwater program. As I have 
stated previously, I am personally accountable to make the 
changes needed to move this program forward, and I am prepared 
to report before this Committee in another 120 days or at 
whatever interval is needed to ensure that you and the American 
public have confidence that we are on track.
    I have a brief opening statement. I would ask that my 
written statement be included in its entirety for the record.
    Mr. Cummings. So ordered.
    Admiral Allen. My written statement contains an extensive 
list of actions taken in the last 120 days, but I will focus on 
a few important points, and I will be glad to answer any 
questions.
    Mr. Chairman, last week, you walked the decks of two Coast 
Guard cutters with me.
    The first one was 40 years old, the Cutter Decisive that 
was commissioned the year I entered the Coast Guard Academy, 
1967. You saw the 24 person berthing areas with 3-high bunks 
and a single head. You saw the cramped operations spaces and 
the separation of communication and sensors displays in 
different compartments. You saw the flight deck where Commander 
Walker explained that just a few days earlier held over 200 
migrants.
    Across the channel in Pascagoula, the Cutter Bertholf nears 
completion, and we anticipate in the new calendar year it will 
see successful acceptance trials. The largest berthing module 
in the Bertholf will house only six personnel in two-high 
bunks. Its propulsion and electrical systems are the most 
capable and versatile that have ever been built into a Coast 
Guard cutter. The flight deck is more capable than any Navy or 
Coast Guard vessel of similar size and requires no personnel on 
deck to launch or recover an aircraft.
    Mr. Chairman, you have seen our past and our future. When 
you addressed the crew of the Project Management Resident 
Office in Pascagoula, you gave them a charge. You told them, 
our children are the signals we send to a future we will never 
see.
    Your words were stunning then, and they remain so now.
    The aircraft, sensors and surface craft that Deepwater will 
provide to the Coast Guard are the signals we will send to a 
future Coast Guard that we will never see. For that reason, we 
are building an acquisition organization that can create a 
future for the Coast Guard.
    Rear Admiral Ron Rabago has relieved Rear Admiral Gary 
Blore as Program Executive Officer for Deepwater. Next month, 
we will stand up our new acquisition organization that will 
unify and strengthen program management, contracting and 
workforce development. Within another year, we will create a 
mission support organization that will unify our technical 
authorities with the acquisition organization under a single 
accountable senior flag officer.
    We are nearing completion of negotiations regarding the 
structural changes for the third National Security Cutter. We 
have been engaged in near continual negotiations for the past 
week and are close to an agreement. I hope to be able to report 
to you shortly NSC 3 is under contract. This will establish the 
technical baseline for changes needed to lock in the first two 
cutters and create a design baseline for the remaining hulls.
    This month, we will award the next term contract to 
Integrated Coast Guard Systems under a substantially changed 
structure. We will have the opportunity to award the contract 
for a period of 43 months. We intend to limit any tasking to 18 
months or less so that we can determine whether the level of 
performance justifies further awards. It is important that we 
retain our relationship with ICGS as we transition the Coast 
Guard to a lead role in systems integration and allow for our 
workforce to be brought on board and developed.
    I have met regularly with the CEOs of Lockheed Martin and 
Northrop Grumman, most recently in Pascagoula two weeks ago. 
The focus of that meeting was the need to develop a 
comprehensive, realistic, integrated schedule for the delivery 
of the first National Security Cutter to complete the 
consolidated contract action being negotiated as we speak this 
morning.
    Our next meeting will focus on aviation and logistics 
issues and will be held at our Aviation and Logistics Center in 
Elizabeth City, North Carolina.
    On the 22nd of June, we will issue a request for proposals 
for the Fast Response Cutter based on an existing design. We 
are moving at best speed to bring more patrol boat hours into 
the fleet. This vessel will be ABS classed.
    Every integrated product team in Deepwater is now chaired 
by a Coast Guard military or civilian employee, and the 
remaining accomplishments are listed in my statement for the 
record.
    Mr. Chairman, I would ask two things of you to assist me 
and the Coast Guard in continuing our progress. First, we are 
seeking through our appropriations request the ability to 
manage all Coast Guard personnel within a single funding 
account to create flexibility to respond in gaps and surges and 
needs associated with the Deepwater or other operations. 
Stovepiping personnel costs within appropriation inhibits the 
optimum use of resources.
    Second, I am in the process of adding 50 additional 
personnel to the Deepwater program management organization to 
the current year programmings and the fiscal year 2008 
appropriations request. I have temporarily assigned four 
personnel to assist in meeting congressional reporting 
requirements. I am prepared to work with the Congress to 
consolidate the various information request and status reports 
to effectively and transparently communicate to you and other 
Committees.
    Prior to responding to your questions, I would close by 
assuring the Committee that as the Commandant, I am committed 
to the effective execution of all of our assigned missions. I 
have stated from the outset one year ago that mission execution 
is our first responsibility. That includes all of our missions.
    Security concerns in a post-9/11 environment present 
significant challenges as have the mandates provided by 
Congress. We are also mindful that the Country depends on the 
Coast Guard for safety and stewardship of our maritime 
transportation system and the Earth's last global commons. The 
rapid growth of maritime shipping, the expansion of liquid 
natural gas facility permit requests, and the fragility and 
vulnerability of our ecosystems require a discussion and a 
prioritization of Coast Guard resources against assigned tasks.
    I look forward to the discussion. I would be glad to answer 
questions.
    Mr. Cummings. Admiral, thank you very much.
    I want to go straight to the heart of matters. As you have 
heard the opening statements, there seems to be some concern 
about the systems integrator and the capacity of the Coast 
Guard to take on those responsibilities. So I am going to ask 
you some questions about that because I think we need to get 
that cleared up.
    I know you have carefully looked at your manpower and 
womanpower and tried to figure out exactly your experts in this 
and that and how you are going to run them and all that, but I 
want to make sure the Committee is satisfied but first of all 
understands exactly where you are going with this, and the 
capability questions must be brought up.
    The current award term for the contract for the ICGS 
expires in June, 2007. Can you describe in more detail the 
status of the next award and how it will be structured?
    Admiral Allen. Yes, sir. Based on the evaluation of the 
first award, the base award term, we are allowed to award a 
contract for up to 43 months, a sole source. We are not 
required to nor are we obligated to. There are certain support 
functions and integration functions that ICGS provides to us 
that are separate from the platform acquisitions that we can 
acquire under the contract.
    Our goal is to issue task orders regarding the ongoing 
operations including the operations of the Systems Integration 
Program Office which has the lead systems integration 
responsibility right now for a period not to exceed 18 months 
and to determine the level of performance before we proceed 
after that. So the first thing we are going to do is there will 
be no task order issued under the new contract that is longer 
than 18 months even though we could go 43 months because we 
want to make sure we understand the level of performance.
    That also allows us to maintain a contractual relationship 
with ICGS regarding the systems integration and support 
functions they carry out as we make that transition. It can't 
be an on-off switch where they do it one day and we do it the 
next day, and this will allow for that transition.
    We intend to take the current functions that are being 
carried out at the Systems Integration Program Office and move 
those to Coast Guard Headquarters as part of the larger 
acquisition organization, but that will take over the next six 
to twelve months to accomplish.
    To make sure that this is carried out in a timely fashion 
and we are ramping up with personnel at the same time we are 
slowly lessening our dependence on ICGS, we have, over the 
course of fiscal year 2007 and 2008, added approximately 50 new 
people to the Deepwater organizational structure. To give you 
an idea of the order of magnitude, when the contract was 
awarded in 2002, we had 245 personnel assigned to project 
management. As we sit here this morning, that number is 451 of 
which 50 more will be added. So there have been significant 
resources that have been added to this program.
    In addition, we have strategic agreements with Naval Sea 
Systems Command, Naval Surface Warfare Center at Carderock, 
SPAWAR for things like TEMPEST testing and so we can also 
partner and outsource to bring in some of that technical 
competency. At the same time, we have designated technical 
authorities for hull machinery and equipment associated with 
design, and we have emerging together a technical authority and 
program management that did not exist before.
    The challenge moving forward will be to take that same 
technical authority structure and apply that to the sensor 
systems with our Chief Information Officer, and we are in the 
process of doing that right now.
    Mr. Cummings. How do we make sure?
    One of the things about the Coast Guard and we hear this. I 
have heard this from a number of folks, the heads of ports, and 
I have heard it from various people in the maritime industry. 
One of the things that they are concerned about is that people, 
they do certain things for a certain period of time and then 
they move on. I know that is the nature of the military.
    Admiral, say, for example, we train people to do these 
things that you are talking about. I know what you are trying 
to do is create a mechanism so that when Admiral Allen is 
fixing to retire, that systems are still in place, smooth 
transition is in place, so that we keep the strong expertise 
and personnel that we need, so that we don't have to keep 
reinventing the wheel and keep borrowing from other people.
    Admiral Allen. Yes, sir, excellent point.
    Mr. Cummings. How do you do that? Have you thought about 
it?
    Admiral Allen. Yes, sir. You have to bootstrap it and build 
it from the ground up, and these things don't happen overnight. 
We are looking at some very innovative career entry level 
opportunities where we can engage college students with the 
right technical capabilities while they are still in school--
internships, co-ops, bring them in and stairstep, let us say to 
GS-7, 9, 11, offer them a career progression fairly early on, 
get them into the organization and then create that work 
structure, that pyramid that we had lost over the years.
    A fundamental part of the Blueprint for Acquisition Reform 
in the Coast Guard is the workforce development portion of 
that. We have new direct hiring authorities regarding bringing 
contract specialists on board, and we will continue to partner 
and find other ways to meet those gaps, but we have to grow 
this workforce ourselves and make sure that it can be 
sustained.
    In addition to that, we have to have blue-suiters, active 
duty military folks that go in and out of program management as 
they go back to sea and do the things that they are expected to 
do throughout a career that ultimately culminate in them being 
a project manager and very similar to the operation you saw 
down in Pascagoula. We have extensive experience down there as 
we briefed you on it. We need to create that kind of competency 
throughout the acquisition organization, and you do that with 
human resources first, sir.
    Mr. Cummings. Similarly, let us go back. In April, you 
announced that the Coast Guard will expand the role of the 
American Bureau of Shipping, and I was very excited about that. 
But you went on to say, or other third parties as appropriate 
to increase assurances that Deepwater assets are properly 
designed and constructed in accordance with established 
standards.
    That is what you said.
    Admiral Allen. Yes, sir.
    Mr. Cummings. What exactly does that mean? Just be fair, 
will you now ensure that every cutter you acquire in the future 
will be classed by the ABS or another appropriate third party?
    Admiral Allen. Yes, sir. The issue involving the American 
Bureau of Shipping is they have a series of what they call 
Naval Vessel Rules which are an interpretation of the old 
military specifications to more commercial standards, and they 
are actually rules specifically related to what they call a 
high speed craft which is what the new Fast Response Cutter 
will be.
    We intend to bring ABS as part of the solicitation process, 
part of the proposal review and have them involved throughout 
the construction of the vessel and have the vessel classed by 
the American Bureau of Shipping, sir.
    To the extent we need other technical support, we have the 
Naval Surface Warfare Center at Carderock that can provide us 
engineering support, and we have SPAWAR that can provide us 
support related to TEMPEST inspections. As you saw when you 
were in Pascagoula, about one-third of our inspection force 
down there is people that have 15 to 20 years experience 
working for the Navy Supervisor of Ships in Pascagoula, sir.
    Mr. Cummings. I was very impressed with the folks down 
there.
    Let me go back for just one moment to the ICGS. One of the 
things I think our Committee has been very concerned about--and 
I am sure the American people, when they found out about this, 
are concerned about--is whether we are overspending with regard 
to this project. Let me show you where I am going.
    You just talked about the increase in personnel with regard 
to acquisitions, is that right? The overseeing contracts, is 
that right?
    Admiral Allen. Yes, sir.
    Mr. Cummings. As we increase, is there a decrease on the 
other end? Do you understand what I am saying?
    Admiral Allen. Yes, sir.
    Mr. Cummings. I would hate to see us increasing our folks 
in the Coast Guard and then the integrated team folks, Lockheed 
Martin, Northrop Grumman are staying a certain level. How does 
that work and how do we make sure we are not increasing our 
costs?
    I mean there may be some costs associated that may have to 
be.
    Admiral Allen. There is some because of the overlap.
    Mr. Cummings. Right, but I just want to make sure that we 
are not increasing our costs overall and then we end up paying 
twice. What are you doing to make sure that we have that one 
goes up and the other one goes down effect?
    Admiral Allen. Yes, sir. That is exactly what is happening, 
and I can give you a three year answer for the record if you 
like on the amount of money that has gone into the ICGS 
contract for program management and systems integration. That 
is tailing off, and ours is being ramped up. We can give you 
those exact numbers.
    Mr. Cummings. Fine. I would appreciate that.
    Admiral Allen. That is exactly what is happening, sir.
    Mr. Cummings. I am going to get ready to go to Mr. 
LaTourette, but I wanted to say that I really do appreciate the 
visit down to Pascagoula and also down to Houston.
    I think that going back to something Mr. Coble said a 
moment ago. I tell you when I stood there and I spoke to two 
groups of our Coast Guard's folks, I could not have been more 
proud of them and to just let them know. Mr. Coble, I made it 
clear to them that we are their number one fans and that we are 
going to do every single thing in our power to help you provide 
them with the very best that our Nation can provide and that 
how we proud we are. I tell you it was just a wonderful 
opportunity to address them.
    To the Committee, I can't tell you how much they were 
appreciative of knowing of our interest and our support of what 
they were doing, and I appreciate the opportunity.
    Mr. LaTourette?
    Mr. LaTourette. Thank you very much, Mr. Chairman.
    Commandant, when you, in your opening remarks, talked about 
the appropriations bill that is on the Floor and you talked 
about stovepiping, I just want to be clear because that bill is 
on the Floor today. Were you referring to the request that you 
made to transfer personnel devoted to overseeing and supporting 
acquisitions to operating expenses, that $82 million? Is that 
what you were talking about?
    Admiral Allen. I was, sir.
    Mr. LaTourette. Can you tell me because the bill that is on 
the Floor today denies that request and says that at least the 
Appropriations Committee feels that it is better if it stays in 
the AC&I account as opposed to going to the ONE account?
    Can you explain the basis of that and why you think that 
money should have been transferred to the ONE account?
    Admiral Allen. I can, sir. For many years, personnel costs 
associated with a particular appropriation, in other words, 
executing those funds was required to be funded out of that 
appropriation.
    In fact back when I was a commander at Coast Guard 
Headquarters, we had a GAO desk audit where they came and they 
said, for an engineer, how much work do you do that utilizes 
operation expense fund and how much of your work is entailed in 
designing capital investment expenditures out of AC&I? 
Actually, we had a couple of anti-deficiency issues arise 
because of that, so everything was stovepiped. So you are 
limited in the amount of personnel you can put toward a problem 
set in a particular appropriation.
    For several years now, we have proposed to take our 
personnel account and put it one particular funding source 
which is not inconsistent with the way the other military 
services do it. That allows you to do a couple of things. If 
you have a surge or a gap, you can readdress within your own 
operating base personnel to cover that.
    It wouldn't be just a problem regarding acquisition. It 
might be an operational situation regarding a mass migration or 
type of a surge operation, long term surge operation following 
a natural disaster. It provides flexibility.
    We are willing to be transparent, provide reports on where 
our personnel are assigned and so forth, but we just think it 
will allow us to be more responsive to the oversight being 
provided by the Congress in how we are applying human resources 
to the acquisition issue.
    Mr. LaTourette. Thank you, Commandant.
    The Chairman, in his opening remarks, referenced a number 
of the hearings, and one of the hearings that we had was an 
oversight hearing, an investigative Subcommittee, I guess, done 
with the Full Committee. I am sorry you couldn't have been with 
us until 11:30 that night. We had a good time.
    But there were some reports that followed that hearing, and 
I think that those reports were at least disturbing to me 
because some of the things that were in those reports were not 
what I came away from at that hearing. The reports suggested 
that secure communications installed aboard the lengthened 123 
foot patrol boats failed the TEMPEST inspections and that the 
use of these vessels could have and some suggested did expose 
national security information to unauthorized persons.
    Were you made aware of those allegations at that hearing 
and what response do you have to that?
    Admiral Allen. I am aware of the allegations, sir.
    To state this very briefly, I know the hearing had 
exhaustive treatment of this issue but to summarize before I 
make a statement. A TEMPEST certification is divided into both 
a visual inspection and a test of emanations that might come 
from the cables. There has been exhaustive information provided 
to the Committee on how that came about, changes that were made 
regarding the equipment, a lack of a waiver procedure for the 
Coast Guard, all of those which have been put into effect since 
the lessons learned from the 123s.
    To my knowledge, and I have talked extensively with my 
staff, we have no indication there were ever any insecure 
emanations made from those vessels while they were operating.
    I would also add that to the extent there are questions, 
and I noted earlier this sometimes becomes a he said-he said-
she said-they said regarding whether or not there is 
compliance. I would submit to the Congress that I would request 
that you call the National Security Agency and have them 
testify, and I think they would be the experts of record 
because they own this program for the Federal Government.
    Mr. LaTourette. Thank you, Commandant.
    Lastly, one of our hearings touched upon the fact that 
there were some rulemaking projects that the Coast Guard was 
undertaking, and staff tells me that that may be 100. Could you 
just give us an update of where you are with these rulemaking 
projects?
    Admiral Allen. Yes, sir. It is of some source of concern to 
me and has been for a while even before I assumed the duties as 
Commandant. To give you an example, I will give you a rough 
order of magnitude, and we will give you an exact answer for 
the record.
    But I believe around 9/11 we had about 50 or 51 rulemaking 
projects that were backlogged that we were working on, anywhere 
from invasive species on the Great Lakes to alternate tonnage, 
a wide variety of issues that impact maritime transportation 
security and safety and, quite frankly, facilitation of 
commerce, if you will. That backlog is over 90 right now. A lot 
of these have been generated by new legislation, the Maritime 
Transportation Security Act, SAFE Port Act and so forth.
    We are working on these now, but basically have roughly, 
with some modest increases, the same workforce that we had 
before 9/11. It is of significant concern to me that I have 
raised it in meetings with Members, and we are looking at a way 
to prioritize these things, come back and communicate to the 
Committee.
    We are going to have to do one of two things. You have to 
prioritize what you can do with the resources you have or you 
have to look at resources.
    One of the things I am concerned about right now is the 
proliferation of requests for permits for liquid natural gas 
facilities that require extensive Coast Guard oversight for 
waterway suitability assessments. Then if there is a 
suitability assessment that says that a plant can be operated 
with certain security or safety safeguards, I am not sure if 
there has been an adequate enough public discussion about who 
should provide those resources.
    Is that something that should be passed on to the consumer 
through the price of goods? Is this a local responsibility, a 
Federal responsibility? I think that needs much, much more 
discussion, sir.
    Mr. LaTourette. Thank you very much, Commandant. I know 
that the Chairman would be happy if maybe you didn't do that 
waterway survey up at Sparrows Point and take care of that.
    Thank you, Mr. Chairman. I yield back my time.
    Mr. Cummings. Thank you very much, Mr. LaTourette.
    Mr. Larsen?
    I am sorry, Mr. Bishop, and then we will come back to you.
    Mr. Bishop. Thank you, mr. Chairman. Thank you very much 
for holding this hearing.
    I want to pick up on where you just left off on the LNG 
issue. There is an LNG platform proposed in my district. The 
captain of the port issued a report, a waterway suitability 
report that said that the facility would be acceptable, would 
not impair the waterway but that the Coast Guard would need 
significant additional resources, and he specifically indicated 
that one of the things that he needed would be a new 110 foot 
cutter.
    Now given the difficulties with the 110 foot cutters that 
we currently have that we all have discussed, the IG's report 
says that the ability of you, of the Coast Guard to close its 
patrol gap is compromised by the shortfall of cutters.
    How do you see the Coast Guard going forward with respect 
to dealing with this issue of securing LNG platforms? There are 
42 some platforms I believe proposed all over the Country.
    So given, if you will, the juxtaposition of Deepwater which 
admittedly has not gone the way any of us would like it to go 
and now a new demand that perhaps was not foreseen at the time 
Deepwater was conceived, how do you see this playing out?
    Admiral Allen. Yes, sir. First of all, I thank you for the 
question.
    When we look at a requirement for security or safety or any 
mission requirement for the Coast Guard, it is always better to 
look at the requirement. In this case, if there is a 
requirement for a certain number of hours for a patrol boat to 
be operating there, that doesn't necessarily presuppose that 
110 foot cutter would be the right cutter. In fact, most of the 
cutters that operate in and around Long Island Sound are 87 
foot cutters, and there is one that is home-ported in New 
London, Connecticut.
    We have, with supplemental money provided by the GWOT 
supplement that was just passed, placed on order with Bollinger 
Shipyard a request for 4 87 foot patrol boats. There are many 
places at the lower end of the operating spectrum of 110 foot 
patrol boats where we can use those patrol boats to do the same 
thing, and the type of patrols in and around an LNG facility 
would be something that would be suitable for an 87 footer.
    So we are able to mitigate the gap that is currently 
existing right now while we bring the new Fast Response Cutter 
online through a number of way crewing 110 foot cutters down 
south. We are buying 4 additional 87 foot patrol boats, and we 
have negotiated with the Navy to retain their 179 foot patrol 
boats they had transferred to us through 2011. Three of those 
will be stationed in Pascagoula.
    But I would separate out the requirement to have a presence 
on sea to meet the conditions of the waterway suitability 
assessment and how that source. I would add, as I stated 
earlier, I think there needs to be a public discussion on 
whether or not that is a Federal role or not.
    Mr. Bishop. Thank you. Thank you for that.
    One more question, if I may, the VUAV acquisitions project, 
and I am going to reference Mr. Skinner's testimony which I 
don't know whether you have seen or not.
    Admiral Allen. I have.
    Mr. Bishop. If I have this correct, we will spend 
approximately $198 million of the $500 million that had been 
originally contemplated for 45 VUAVs. We will spend $198 
million and take ownership of only 2 VUAVs if I understand the 
IG's testimony correctly which would suggest that we will have 
committed 40 percent of the at least expected expenditure for 
this project but only have 5 percent of the assets.
    So my question is, the VUAV program, if we are going to 
carry it forward, are we likely to see significant cost 
overruns or is this a program that may not realize the 
potential that you first? If that is the case, what does that 
do to the NSC capability?
    Admiral Allen. Yes, sir, a fair question as well.
    Just a general statement for all the Committee Members, 
what we are doing right now as part of the Deepwater program is 
take a look at every single platform, going back and revisiting 
the business case, where we are at, is the current solution the 
right solution, is there enough competition, and what is the 
best way forward.
    The solution that was offered for a vertically launched 
UAV, which is part of the larger system for both the National 
Security Cutter and the Offshore Patrol Cutter to increase 
their effectiveness, if you will, to be able to allow us to 
reduce the number of vessels that are operating out there, 
assumed that we would operate with vertically launched UAVs. At 
the time the contract was awarded, there were only two out 
there that might be viable, a helicopter drone and a tilt rotor 
type drone which is what was offered to us by ICGS.
    In the last year since I became Commandant, we have had a 
technical evaluation done that tells us there is risk 
associated with proceeding forward with the vertically launched 
UAV that was offered by Integrated Coast Guard Systems. We have 
stopped at this point and are looking at other alternatives. We 
do not want to proceed forward and make another mistake that 
results in the same type of first article failures we have had 
before, so we are calling an all-stop, assessing where we are 
at and if there are other solutions to providing that type of 
surveillance with the National Security Cutter package.
    We do recognize as the IG has stated, however, that if you 
deploy that vessel without the proper aviation assets with it, 
you will not get the mission effectiveness that was advertised 
in the proposal by Deepwater.
    So I would tell you that we probably in the next three to 
four months owe this Committee a way forward on VUAVs. 
Everything has been kind of queued up with the National 
Security Cutter and the 123s being at the top of the triage 
list, I would say right now. But we do not anticipate any 
further action on the vertically launched UAV task order that 
we have got in place right now until we clarify the way forward 
for the aerial assets to be with the NSC.
    Mr. Cummings. The gentleman's time has expired.
    Mr. Bishop. Thank you.
    Mr. Cummings. Thank you.
    We are very pleased to have the Ranking Member of our Full 
Committee, Mr. Mica.
    Mr. Mica?
    Mr. Mica. Thank you and thank you for conducting this 
important follow-up hearing. I think it is very important that 
we proceed as Mr. Cummings and I worked very closely together 
for a number of years, and I appreciate his thoroughness on 
this important responsibility he had inherited.
    I had some questions. As you know, Admiral Allen, I was a 
little bit concerned about sort of the stampeding of the Coast 
Guard into becoming the systems integrator and not having the 
capability to do systems integration in these large projects.
    First of all, I have to say looking at the history of the 
Deepwater problems, you inherited most of this and you have 
done a great job in trying to resolve some of the problems that 
you inherited. Many of these decisions go back long before you 
took your current position.
    I still have some questions, though. Now it is my 
understanding that the contract, the ICGS contract, is going to 
continue with a maximum of 43 months but 18 months, is that 
what you said, for any one assignment?
    Admiral Allen. Yes, sir, that is correct.
    Mr. Mica. Also, you talked about the number of personnel. 
The thing that concerned me about the Coast Guard becoming the 
systems integrator is the ability, one, to attract the 
personnel that you need to do that kind of job.
    I think the mistake they made was not having a third party. 
You have Northrop Grumman and Lockheed, who have formed this 
consortium, are doing the whole enchilada. We should have had 
somebody else. Someone writes the specs. Someone conducts the 
systems, oversees systems integration and some oversight 
responsibility.
    You also said you went from 240 to was it 400 and some?
    Admiral Allen. Four hundred and fifty-one, yes, sir.
    Mr. Mica. How many of those are enlisted Coast Guard 
personnel versus civilian employees?
    Admiral Allen. Right now, I can give you a rough 
approximately. I would be glad to answer for the record.
    Mr. Mica. Of the added personnel.
    Admiral Allen. It is about one-third military, one-third 
civilian and one-third contractor, sir.
    Mr. Mica. With that combination, you feel you can have in-
house the expertise to perform?
    Admiral Allen. I would say to begin the transition, sir. As 
I mentioned earlier, we are going to need to build a larger 
workforce. We have time to do that. In the meantime, we need to 
partner with the Navy and other folks to provide some of this 
expertise and capacity that we need, but we have to build 
ultimately an organization.
    Mr. Mica. Are the contractors an en bloc number that you 
retained someone or you hired them individually?
    Admiral Allen. We retain a third.
    Mr. Mica. You said a third are your personnel.
    Admiral Allen. Yes, sir. We can give you a breakdown on it, 
but it is usually a contractor that we award a contract, and 
they provide the personnel, a support contractor.
    Mr. Mica. See, I don't think you can hire in-house all the 
expertise that you need and retain them. I mean your average 
enlisted person probably is in and out in how many years?
    Admiral Allen. Well, we don't have very many enlisted 
people doing this. If they are, they are usually senior, sir.
    Mr. Mica. I know. I know, but I am just saying your average 
Coast Guard person. Even with a Commandant now you get a four-
year slot.
    Admiral Allen. Yes, sir, I am term-limited.
    Mr. Mica. And you are cleaning up the mess from the last 
one. But these programs do take a long time. This started over 
four years ago.
    Admiral Allen. Yes, sir. This is building for the future.
    Mr. Mica. Exactly. Then a lot of this is contingent on 
Congress providing additional money. What was the figure that 
you need to have the personnel and have the additional physical 
capability of putting in place the component to do this job?
    Admiral Allen. Well, we actually have requested increased 
personnel as part of the fiscal year 2008 request, but the 
other issue was having the ability to have more expanded use of 
all personnel funds in the Coast Guard so you can surge if you 
need to do that.
    Mr. Mica. I think that there were some problems that a 
Member relayed.
    Admiral Allen. Yes, sir.
    Mr. Mica. But did you have a dollar total figure?
    Admiral Allen. The entire amount of personnel applied to 
the acquisition, construction, improvement portion of our 
budget is around $82 million.
    Mr. Mica. Around $82 million.
    Admiral Allen. Eighty-two million, yes, sir.
    Mr. Mica. On an annualized basis.
    Admiral Allen. Yes, sir.
    Mr. Mica. All right, well, again we will watch this. I know 
you are trying to clean it up, and you have done as good a job 
as possible in trying to put in place, something, a mechanism 
and a protocol so that we don't have the same problem.
    Thank you. I yield back.
    Mr. Cummings. Thank you very much.
    Before we go on to Mr. Larsen, let me just follow up one 
real quick question.
    The one-third military, one-third contract and one-third 
civilian, do you anticipate, Admiral, that those percentages 
remain the same or is there an effort to, say, reduce the 
contractors and increase the civilians or increase the military 
and what have you?
    Admiral Allen. I think we need to increase our civilian 
workforce and diminish the number of contractors. I am not sure 
what that right balance is because you always need a margin 
just because of the ebb and flow of work. Civilians provide us 
continuity across changes in military assignments as was 
mentioned earlier.
    But one of the things we are going to have to do is create 
a pyramid so there is career growth. One of the challenges we 
have currently in the Coast Guard is with being largely 
military and only having about 6,000 civilians. In some 
specialties, there is not a broad enough pyramid or base, if 
you will, to be able to support upward mobility, and we need to 
take a look at that. That is the reason the structure of some 
of these ratings is going to be important.
    But we have had success, believe it or not, in wooing some 
of the folks that are working for our contractors to come on 
over once we get those positions established on the civilian 
side. My goal is to diminish somewhat the contracting force but 
not entirely, sir.
    Mr. Cummings. Mr. Larsen?
    Mr. Larsen. Thank you, Mr. Chairman.
    Admiral, regarding the C4ISR issue that I mentioned in my 
opening statement, the OIG reported in their testimony--I think 
you indicated you had read the OIG testimony--on page seven of 
the OIG testimony talked about them reviewing the efforts to 
design and implement C4ISR to support the Deepwater program, 
lack of discipline and changed management processes provided 
little assurance that requirements remain up to date or 
effective and meet program goals. Certification and 
accreditation of C4ISR equipment was difficult to obtain and so 
on.
    Your statement discusses that and your written and oral 
testimony indicates to the best of your knowledge there was no 
compromise of classified information and suggests that we look 
into that, and I am sure we will.
    But I think what I gather from the OIG's comments wasn't so 
much whether classified information was compromised or not but 
that there were problems with certification and accreditation 
regardless of the outcome on the other end.
    So I was wondering if you could address the issue the OIG 
brings up, that is, the challenges of the certification and 
accreditation and then what steps you are taking to address 
those challenges.
    Admiral Allen. I am happy to do that and thank you for the 
question, sir.
    The way the Coast Guard's technical community is structured 
right now is really in two different offices. One, we have the 
CG-4 shop which is a civil engineering, naval engineering and 
aviation engineering and ocean engineering. The electronics 
engineering and censor part of our technical world comes 
underneath the CIO shop in the Coast Guard which is the CG-6 
organization.
    Early on when I became Commandant, it was clear that the 
technical authority vested in CG-4, even if it was not 
explicit, was not good enough to make sure that the contractors 
were adhering to standards. We officially designed the CG-4 
shop as a technical authority for all those engineering 
disciplines that they own.
    We are in the process now of doing exactly the same thing 
for the CG-6 shop, the CIO, and make them the responsible 
technical authority not only for issues like TEMPEST 
certification and dealing with the National Security Agency, 
SPAWAR and so forth but to have the technical authority reside 
in them for certification and accreditation for C4ISR systems, 
sir.
    Mr. Larsen. Well, before that, was the authority to do that 
floating around the Coast Guard?
    Admiral Allen. I am not sure it was floating around, but it 
wasn't explicitly delegated in terms of a written instruction 
to me, saying you are accountable and there is going to be a 
person that is, for instance, for an air search radar. This is 
the one that certifies that the requirements are being met, and 
that is what we are doing, sir.
    Mr. Larsen. Okay, so that is how you are addressing that.
    Admiral Allen. Yes, sir.
    Mr. Larsen. Can I ask a question about helicopters as well?
    In your written testimony, you start off, and I encourage 
everyone to read early on in your testimony, some great stories 
about the results of some of the investments including the 
great story in Washington State of this high altitude rescue--
you call it daring, I think--and the video from this rescue, of 
this high altitude rescue at 7,000 feet in my home State of 
Washington State. It is, in fact, pretty compelling and pretty 
exciting to watch, and that was on a helicopter with new 
engines or re-engined engines, some great stories.
    However, there is always a but in this. Again, the OIG 
indicates that after some recommendations were made, the Coast 
Guard did not concur with any of the agency's 65 
recommendations that it had made. It goes on to say that Coast 
Guard officials said that ICGS minimized operational legal 
costs and contract performance risk associated with re-
engining.
    Can you address the OIG's comments? Those are on page seven 
of the OIG's testimony with regards to helicopter re-engining.
    Admiral Allen. I can, but I would just make a general 
comment.
    There were a number of decisions that were taken over the 
last three or four years in the course of Deepwater that were 
senior management decisions that were not documented to the 
level that there was an audible or traceable record on which 
the IG could determine how the decision was made. For instance, 
we merely issued the DTO for the construction of the NSC 
because it required no more affirmative action than to do that, 
but the lack of a business case on the subject and the basis 
for the decisions brings into question whether or not terms are 
being dictated to the Coast Guard.
    I was present and understood when the decision was being 
made to re-engine the helicopters that it was done to mitigate 
risk. We knew there was a cost premium associated with that. We 
knew that we could have ordered the work directly to our 
logistics center in Elizabeth City, North Carolina, but the 
decision was taken, maybe not documented to an audible trail 
level of specificity, but that was the decision that was taken.
    We could have gone other ways through a sole source 
contract or a sole source award through our own logistics 
function. But we were mitigating risk and, at that point, we 
considered the additional cost associated with going through 
ICGS was worth the value achieved in reducing the risk to the 
acquisition.
    That was the decision that was taken. Whether or not there 
was an adequate business case to support that, that is up to 
question. But I was there. I was privy to it. That was the 
decision taken.
    Mr. Larsen. Thank you.
    Thank you, Mr. Chairman.
    Mr. Cummings. Thank you very much.
    Mr. Coble?
    Mr. Coble. Thank you, Mr. Chairman.
    Admiral, thank you for your testimony today. Let me put a 
two part question to you, Admiral.
    As you know, the problems of Deepwater have been widely 
reported in the media and closely scrutinized by the Congress. 
In fairness to you, I would like for you to tell us some of the 
segments of the program that are succeeding, number one.
    Number two, what, if anything, can be salvaged from 123 
conversion and what can be done to recoup some of the monies 
expended on that project to assure that similar situations do 
not subsequently occur?
    Admiral Allen. Yes, sir. A couple of successes: the 
retrofitting of our Legacy Cutters with new sensor and 
communication equipment has been very successful. We have the 
ability now to come up and classify what we call SIPRNET, 
secure internet protocol router chatrooms. Where we used to 
have to relay requests up the chain of command for permission 
to do something, everybody is on the circuit at once, if you 
will, negotiating how the resources do apply to what the 
problems are that are out there.
    The Coast Guard Cutter Sherman recently set a maritime 
record seizing nearly 20 tons of cocaine off Panama just a 
matter of weeks ago. That whole operation, including the 
pursuit into Panamanian waters under the bilateral agreement 
with Panama, was facilitated through SIPRNET chat that did not 
exist before the Legacy equipment was put on the old cutters. 
So the ability to operate these old cutters with a higher level 
of efficiency is a significant win, and our commanding officers 
out there love this equipment.
    We are happy with where we are going with the Casa 235 
aircraft. We are in the process now of testing the mission 
palate. That is the integration of the sensor suite in the back 
of the aircraft. We have achieved connectivity with that first 
palate in the C4ISR Center of Excellence in Morristown, New 
Jersey.
    We need to finish the tests and evaluation of that to make 
sure that the new palate integrates with the aircraft. We are 
ready and into full production on the airframe itself. Once we 
are sure of the integration on that, then we need to pull that 
forward as fast as we can.
    Where we do achieve success, I think we need to selectively 
accelerate those things and pull them forward. If there is not 
an issue with first article performance, let us buy that out 
and get it off the table because we have other problems we have 
to deal with.
    Regarding the 123s, we have revoked acceptance of those 
cutters. That is the first step in the process of recouping the 
Government's interest in the money that was invested there. 
There is some residual value related to the short range 
prosecutors, the boats that were delivered with the boats, the 
sensor suites that are on the boats and the engines that are in 
the boats.
    Ultimately, we will come up with a fair value that the 
Government should receive in consideration for this, and we 
will take that to ICGS and request that money be returned. At 
that point, we will move on to whatever legal remedies are 
required after that.
    Mr. Coble. You can keep the Committee up to speed on the 
progress to that.
    Admiral Allen. I would be happy to do that, sir.
    Mr. Coble. Thank you, Admiral.
    I yield back, Mr. Chairman.
    Mr. Cummings. Mr. LoBiondo?
    Mr. LoBiondo. Thank you, Mr. Chairman.
    Admiral, you just referenced the drug bust with the 
improved capability for communication. Can you just briefly say 
what implications that would have for homeland security, how 
that would apply?
    You told us how it applied in the drug bust.
    Admiral Allen. Maybe I can give you a better example. There 
are some cases where there is a threat approaching this 
Country, and it could be a migrant or a drug boat but where you 
may have cause to want to use warning shots or disabling fire.
    Traditionally in the Coast Guard, that starts at the unit 
level with the commanding officer, goes up maybe through the 
local sector to the district command centers, sometimes to 
headquarters for interagency consultation regarding the country 
that is involved and the particular situation where we are 
trying to negotiate what we call a Maritime Operational Threat 
Response.
    To be able to do that in parallel at the same time and not 
sequentially reduces a process that could be a half hour to an 
hour to hours. In some cases, we have been able to reduce that 
down to 15 minutes or less, that allows the commanding officer 
on the scene to be able to react to the threat, in some cases 
before they might enter the territorial sea or actually get 
involved in an illegal operation because we had not gotten the 
permission to use warning shots or disabling fire.
    Mr. LoBiondo. So pretty invaluable.
    Admiral Allen. It is.
    Mr. LoBiondo. Admiral, your statement indicated that you 
will be releasing a request for proposals to build the interim 
Fast Response Cutter B in the next couple of weeks. The cutter 
will replace the rapidly failing 110 patrol boats and the 
failed 123s. My concern and I think a concern of the Committee 
is the time it will take to field the Fast Response Cutter B. I 
understand the first one will not be in the water until 2010, 
is that correct?
    Admiral Allen. The proposal has that right now. I have been 
working hard with our folks to try and incentivize us to make 
it sooner than that, sir. We can't get these boats soon enough 
and if I can get them before 2010, I will, sir.
    Mr. LoBiondo. There is still a delay here. Meanwhile, the 
readiness gap, I think, is at about 25,000 hours--if my 
information is correct--25,000 hours annually and will be 
expanding. How do you plan to make up the gap?
    Admiral Allen. Yes, sir, I will give you a qualitative 
breakdown of where that is at, and we can give you an answer 
for the record as to actually the hours we are accumulating 
right now.
    About half of those hours have been recouped by taking the 
eight crews and the maintenance money associated with the 123s 
that were taken out of service and double-crewing 8 boats, 4 in 
Miami and 4 in St. Pete. So we are basically recouping close to 
50 percent of those hours by just using the crews on other 
vessels and operating the vessels at a higher tempo. We are 
taking the maintenance money associated with the 123s and 
supporting those higher maintenance costs with that.
    This is not unlike the operations we are running in the 
Persian Gulf with the six patrol boats over there that have 
been serving in superb fashion for a number of years now 
because we have the right maintenance processes in place. That 
is one.
    Two, we are making better use of maritime patrol aircraft 
down there as far as taking the search out of search and 
seizure or search and rescue. We are also using multi-mission 
hours that are available to us through our buoy tender fleet or 
the cutter fleets to fill in those other hours, and we can give 
you a detailed breakdown of where those hours are coming from, 
sir.
    Mr. LoBiondo. Thank you.
    One more question, Admiral, can you explain if there will 
be any impact on the schedule for the replacement of the Legacy 
assets from the service's efforts to build an acquisition staff 
and assume the role of systems integrator and what steps are 
you taking to mitigate that potential?
    Admiral Allen. Well, I think we have to almost on a yearly 
basis, and I think we need to be up here talking with you folks 
about how the organization is being stood up.
    We are going to be making one by one decisions on every one 
of these platforms. In other words, how are we going to 
continue with the Casa 235? Where are we going to go with the 
FRC, the NSC, the Offshore Patrol Cutter? Each time we make a 
decision to bring a new platform on, we are going to have to 
balance that with the capacity, capability and competency 
needed to execute that in a lead systems integrator role.
    There have been a lot of requests for status from a number 
of Committees this year. I think we need, on an annual basis, 
to say, here is the plan. Here are the platforms that are 
coming on board. Here is the human resource plan that supports 
that, the workforce development plan that support it. Where 
there is a gap, it will be filled by ABS certification, 
agreements with the Naval Sea Systems Command, putting 
supervisor ship inspectors into our Project Management Resident 
Offices, and that plan needs to be transparent to you, sir.
    Mr. LoBiondo. Thank you. I will just close, Admiral, by 
saying thank you for your outstanding leadership at this very 
critical time.
    Thank you, Mr. Chairman.
    Mr. Cummings. Thank you.
    Let me just ask a few wrap-up questions because the IG is 
going to come up and I want to make sure that I address some of 
the things that the IG may be addressing so that you will have 
an opportunity to do that. Not all of these things but I am 
going to try to go through a little list of things that I am 
concerned about.
    The 123 program, first of all, I was very pleased and I am 
sure all of us were pleased that you rescinded the delivery of 
the 123s. It just made sense.
    But there is a piece of that that really interested me, and 
I have expressed these concerns to at least Lockheed Martin. I 
want the American people to get every dime, not every dime, 
every penny of the money that they are due as a result of not 
getting what they were supposed to get, and I want to know 
where are we on that piece. It is one thing to rescind. It is 
another thing to make sure that the American people get their 
money.
    I just want to know. What is the status of that? As a 
lawyer, I know that you are not necessarily going to get every 
penny, but I just want to know where that stands.
    Admiral Allen. The next step is for the Coast Guard to 
issue a letter to ICGS, saying, here is the dollar amount, we 
would like it back.
    Mr. Cummings. You have already done that?
    Admiral Allen. We are in the process of finalizing that 
number, yes, sir.
    Mr. Cummings. And so, you are going to ask for a certain 
amount of money. Can you share that with us later if you can? 
We don't want to interfere with your negotiations.
    Admiral Allen. Yes, sir. I would have to check with my 
contracting officers and my attorney if it is allowable.
    Mr. Cummings. Fine. I understand. I understand.
    We just want to make sure that the American people get 
their due. I just don't think that you can have a situation 
like this, Admiral. It sends a bad message to a whole lot of 
people.
    Admiral Allen. Sir, it sends a bad message for the Coast 
Guard.
    Mr. Cummings. Yes, but what I am saying is that we teach 
our kids that you keep a commitment. You deliver what you say 
you are going to deliver. Then we see a situation, as I have 
used the example, where you go and buy, for example, a $375 
lawnmower that doesn't cut a blade of grass, and then the 
United States of America's taxpayers' dollars are being spent 
on that. We can't have that.
    A lesson must be sent. I mean the word must go out that 
when you do that to the American people, the American people 
want their money back. It is just simple, basic accountability.
    But I want you, if you can, to just keep us apprized of 
that. We know that you are working with your lawyers and 
everything. I am just glad that it was a two part statement.
    Admiral Allen. Yes, sir.
    Mr. Cummings. We rescind. We want money back.
    Admiral Allen. Yes, sir.
    Mr. Cummings. Now let me go to some of the things that the 
IG may be concerned about. First of all, when do you anticipate 
taking delivery of NSC 1?
    Admiral Allen. My best guess, this is caught up in the 
current negotiations because one of the things is we can't 
close on the current contracting arrangements right now until 
we both agree on how many hours it will take to finish NSC 1 
and then establish the cost to be able to settle all the claims 
associated with that, and that is where we are about now.
    I would tell you that the hull and machinery portion, the 
stuff that you saw below decks, will probably be ready sometime 
before the end of the calendar year. The sensor suite, while it 
may be there, it may be after the end of the calendar year. So 
I would err on the side of conservatism and tell you that 
acceptance trials probably after the first of the year, sir.
    Mr. Cummings. What, if any, are the systems that will not 
be fully operational and mission-ready when you accept delivery 
of the ship? Do you anticipate such?
    Admiral Allen. That is another great question.
    Since we are going to retrofit certain portions of that 
ship, we have to agree on what is the NSC that will be 
delivered because, as we know, once we issue the construction 
order for NSC 3, we will establish a technical baseline that we 
have to go back and change 2 and 1. Knowing that will happen at 
a later date than acceptance, we have to define what is 
acceptance and what is that hull at acceptance, and that is the 
basis for the current contract negotiations that we are about 
to close, sir.
    Mr. Cummings. Do you anticipate the ship will be TEMPEST 
certifiable when delivery of the ship is made?
    Admiral Allen. Yes, sir. We spoke when you were down there. 
We showed you the cabinets and the cables, sir.
    Mr. Cummings. If you recall, when I was down there, there 
was that issue of nine feet.
    Admiral Allen. Nine feet versus twelve feet, yes, sir.
    Mr. Cummings. So you all anticipate you will be able to 
address that.
    Admiral Allen. Yes, sir, as you remember, the 12 feet was a 
standard that was developed many, many years ago that was based 
on the fact that there would be physical separation of visual 
inspection and then an emanation inspection. We are waiting for 
the results of the test, and we will provide that to you as 
soon as we have it, sir.
    Mr. Cummings. Now let me just ask you a few more questions 
about the life, fatigue life of NSCs 3 through 8.
    Admiral Allen. Yes, sir.
    Mr. Cummings. Before you begin construction on NSC 3, will 
you have implemented a new design to strengthen the hull 
fatigue life and, if so, can you describe that design?
    Admiral Allen. Yes, sir. In fact, the basis for the entire 
what we call a consolidated contracting action is to decide 
what the baseline is moving forward from NSC number 3. Once you 
do that, then you know what you have to change in 1 and 2. So 
the very first decision that is being negotiated right now is 
the changes related to the NSC 3 design and what are we going 
to do.
    My statement for the record has a schematic, and we can 
answer in a lot of detail. But as we explained when we were 
down in Pascagoula the other day, the biggest change will be to 
make a separation between the two superstructures so that 
stresses associated with the ship when it is hogging and 
sagging can't be transmitted back and forth through the ship 
and create a way to absorb the stresses. There are some other 
areas regarding transitions between certain areas of the 
structure that will be strengthened and reinforced.
    These are based on an agreement between our technical 
authority that has now been designated for hull and machinery 
and the program manager, that that is the fix that will 
guarantee the service life of the ship that is being designed 
as NSC 3, sir.
    Mr. Cummings. What you just told me, has the Navy Surface 
Warfare Center at Carderock gone over that, what you just said?
    Admiral Allen. The changes that were recommended by our 
technical authority were based on a finite element analysis 
conducted by Carderock Surface Warfare Center that were subject 
to previous hearings, sir.
    Mr. Cummings. Perfect, perfect. I want to make sure we are 
learning from our mistakes.
    Admiral Allen. Yes, sir. In fact, before Carderock did the 
finite element analysis, this was just a supposition on the 
part of our engineers based on their experience that there 
might be problems just based on their knowledge of how 
structures work. The Carderock finite element analysis 
basically corroborated what our engineers believed to be the 
case on fatigue life, sir.
    Mr. Cummings. Do we have any idea about how much that 
design will cost?
    In other words, we are making some changes. We had 
anticipated a certain amount the NSC 3 costing.
    Admiral Allen. Yes, sir. In a matter of days, as soon as 
that NSC 3 task order is awarded, we will be able to tell you 
the costs for NSC 3 and the following hulls, sir.
    Mr. Cummings. Are you confident that the new design will 
enable NSC 3 through 8 to be underway for 185 days per year in 
the general Atlantic and north Pacific sea states without 
experiencing hull buckling or cracking?
    Admiral Allen. Yes, sir. It will allow them to be away from 
home port 230 days and approximately 180, 185 days in the 
operational environments that were exposed under the finite 
element analysis that Carderock conducted, sir.
    Mr. Cummings. To what extent does the ICGS team or Northrop 
Grumman now believe that there is a problem with the fatigue 
life on the NSC and to what extent will Northrop Grumman assume 
responsibility for the cost of strengthening hulls 1 and 2, if 
you know?
    Admiral Allen. Sir, the difference between Northrop Grumman 
and the Coast Guard on this issue is as follows and, not being 
a naval engineer, I will extend revised comments if I could for 
the record.
    Mr. Cummings. Yes, you may.
    Admiral Allen. To the best of my knowledge, the 
construction standards used by Northrop Grumman to develop the 
design of the National Security Cutter were based on something 
called design data sheets and general specifications that are 
used to build military vessels. That is a different type of a 
design approach than our engineers used to assess the fatigue 
life.
    In other words, we accepted the design offered by Northrop 
Grumman for the National Security Cutter based on the 
technology they had at the time, military specifications. We 
are applying a different standard to assess fatigue life.
    Northrop Grumman feels they have met the requirements of 
the contract with the technical basis for their designs. We 
believe they have not. Therefore, it is a Government-requested 
change, sir.
    Mr. Cummings. I see. And so, you feel confident that your 
recommendations are better than Northrop Grumman's. In other 
words, it will serve our purpose better.
    Admiral Allen. I think that is a better way to say it.
    Mr. Cummings. The purpose of the Coast Guard.
    Admiral Allen. Yes, sir.
    Mr. Cummings. I am not trying to get you to beat up on 
Northrop Grumman.
    Admiral Allen. No. I talked to them.
    Mr. Cummings. Again, I am trying to make sure that we are 
clear as to what we are bargaining for, and I want us to be 
clear as to what performance is, and I want to be clear as to 
making sure that we have the kinds of equipment, i.e., ships to 
do the job that the American people expect us to do.
    Admiral Allen. Yes, sir. We are in violent agreement, sir.
    Mr. Cummings. Let me ask you this, and this will be my last 
question. When you look, I just want you to do a little crystal 
ball thing for me and try to tell us.
    You have what, about a year and a half left, two years 
left?
    Admiral Allen. In my term, sir?
    Mr. Cummings. Yes.
    Admiral Allen. Three.
    Mr. Cummings. Three years?
    Admiral Allen. About three years.
    Mr. Cummings. What do you want to see?
    Everybody up here just about has expressed tremendous 
confidence in you, and it is not too much that we all agree on. 
I can tell you. But that says a lot. So I want to know.
    Now, you can't tell me exactly, but every morning when you 
get up, you must say, at the end of my three years, I want to 
have accomplished this.
    I just want to know, what is this? Do you follow what I am 
saying?
    Admiral Allen. Yes, sir. It is an organization that is 
positioned to execute its mission to the standards that the 
American people have come to expect of us especially in a post-
Katrina environment and having the mission execution and 
mission support structure that allows us to do that effectively 
but also allows us to adapt to change and changing external 
environments.
    As I stated in my State of the Coast Guard speech--and you 
were there, sir--we have been acting like a small business when 
we are a Fortune 500 company. We have got to get our business 
processes, command and control, and the organizational 
structure of this Coast Guard to be more flexible, agile and 
adaptable including human resources and technology and 
everything.
    I consider myself a transition commandant trying to 
reposition the service for success far after I am gone, sir.
    Mr. Cummings. I take it that with all that has happened, 
there were plans before and those plans had to be changed to a 
certain degree. Can you give us a new schedule?
    Admiral Allen. Are you talking about the National Security 
Cutter?
    Mr. Cummings. I am talking about now with regard to 
Deepwater, period. In other words, you expect certain things to 
be happening at a certain time.
    Admiral Allen. Yes, sir.
    Mr. Cummings. I am just wondering, can you submit to us?
    I don't want a situation where we have to keep, not have to 
but keep bringing you to the Hill to tell us where things are. 
I think that you realize the reason why we did this, this time, 
is because we were in a critical situation.
    I personally think that this Committee has been very 
helpful in helping you to do the things that you have been 
trying to do. Again, we are your number one fan.
    Admiral Allen. Yes, sir.
    Mr. Cummings. We are just trying to make sure that things 
are the best that they can be. I guess what I am trying to get 
at is exactly because of the problems we experienced, we learn 
from them and we go forward.
    I am just asking, can you get a new schedule as to when you 
see certain things being completed?
    Admiral Allen. Yes, sir. I think on an annual basis because 
there are certain things that impact a schedule: contractor 
performance that you are observing, the level of funding you 
may get year to year that may not be what was anticipated early 
on that impacts the number of units you can produce on any 
particular platform.
    This is almost going to have to be a year to year 
presentation to you across all platforms. We come with a 
budget. Here is what we are requesting this year. Here is what 
we got last year. Here is the progress we have made. Here is 
where I think we are going.
    I would tell you that I haven't compiled them all side by 
side and sat down and looked at them. If you look at all the 
pending provisions that have either been included in the GWOT 
supplemental or are being considered right now, collectively, I 
think give you that information.
    As I mentioned in my opening statement, I would like to 
work with the Congress to create a transparent way to give you 
that information on a real time basis so we hold it, you know 
it and there are no surprises, sir.
    Mr. Cummings. Last but not least, then I will go to Mr. 
LoBiondo if he has anything, and I understand Mr. Larsen has a 
follow-up question, but let me ask you this.
    You mentioned a few moments ago that you said there were 
Government changes, is that right, I think with NSC with regard 
to 3? You said there were Government changes.
    Admiral Allen. Yes, sir.
    Mr. Cummings. Who pays for that?
    Admiral Allen. We do, sir, if we ask them to be done.
    Mr. Cummings. Okay, very well.
    Mr. Larsen?
    Mr. Larsen. Thank you, Mr. Chairman.
    Just a quick couple of questions, regarding the FRC B, the 
off the shelf model, has the initial failure of a composite 
hull model soured the Coast Guard on composite hulls as you 
move forward?
    Admiral Allen. I am not sure we are soured on composite 
hulls, and I think composites have shown themselves to be 
successful in other areas, particularly the superstructures and 
naval vessels and reducing the weight and long term durability 
and lower maintenance cost.
    I think, in our case, applying that technology to a high 
speed craft of that size had not been demonstrated before, and 
we had done two things that weren't done early on when we 
started pursuing a composite variant.
    Number one was just plain business case analysis. How much 
is it going to cost to do this because to achieve a certain 
speed and certain requirements, it requires a certain amount of 
horsepower that drives the parameters of the boat? The second 
one was the technical issues and the risks associated with 
producing the boat. Both of those told us that this was a high 
risk and we needed to take a look at mitigating the risks 
associated with that.
    While all that has been going on, you can't wait for all 
that to be done to fill this patrol boat gap as we talked about 
earlier. So we elected to proceed with the FRC B instead.
    Mr. Larsen. Right. Finally, in your oral testimony and in 
our questions, we have focused on the 50 or so folks that you 
plan to hire for acquisition, but you mentioned 4 people that 
you have assigned specifically to respond to various requests 
probably from us here.
    Admiral Allen. That is correct, sir.
    Mr. Larsen. If those four weren't responding to our 
requests, what would they be doing?
    Admiral Allen. They would be applied somewhere else in the 
organization, working on the problems that have been discussed, 
sir.
    Mr. Larsen. Pardon me?
    Admiral Allen. They would be applied somewhere else in the 
organization, working on the problems that have been discussed, 
sir.
    Mr. Larsen. Thank you.
    Thank you, Mr. Chairman.
    Mr. Cummings. Thank you. As we let you go, the NSC 3, you 
said something that just kind of ricocheted back into my mind. 
Apparently, with the NSC 1 and NSC 2, the Coast Guard was not 
satisfied with the Northrop Grumman design. Is that an accurate 
statement?
    Admiral Allen. Our engineers were not satisfied that the 
design that was offered by Northrop Grumman would meet the 
fatigue life of the vessel, sir, our engineers, and they 
notified senior management in 2004 of their concerns, sir. The 
decision was made to go ahead and proceed with construction 
because of the implications for cost of stopping, redesigning 
and starting again with the knowledge we would have to retrofit 
whatever solution that was developed into hulls 1 and 2.
    Mr. Cummings. Okay, now, let us put a pen in that and 
rewind. What has been done to address those issues that you 
just stated with regard to 1 and 2 because we are going to have 
Coast Guard men and women on those ships? They are going to be 
trying to do the things that you are mandated to do.
    So just tell me what has been done to make sure that those, 
1 and 2, are okay.
    Admiral Allen. It starts with establishing the technical 
baseline for the entire fleet with NSC 3 which will have the 
changes to meet the fatigue life designed in.
    The second step then is to go back and look at 1 and 2. As 
you know, more work will have to be done to institute those 
changes on 1 because it is over 70 percent complete. There may 
be an opportunity to make those changes earlier as they sit in 
the shop and other places with NSC 2 which is somewhere between 
20 and 30 percent done at this time.
    So the type of retrofit for both the first two hulls will 
have to be depending on where those ships were at when the 
baseline was established. That is the reason it is so 
incredibly important to get the baseline established for NSC 3, 
sir.
    Mr. Cummings. So it is possible. It is possible--I didn't 
say probable--possible that we could end up scrapping 1 and 2?
    Admiral Allen. Not in the vaguest realm of my imagination, 
sir.
    Mr. Cummings. You see where I am going with this, right?
    Admiral Allen. Yes, sir. I understand the issue with the 
123s. The issue with fatigue life of the NSCs is different on 
what is going to happen 15, 20 or 30 years from now, not what 
is going to happen tomorrow. In fact, we are offered the 
opportunity to do some forensics on the hull 1 that we have 
never been able to do before, and that is to put strain gauges 
on the ship--it has not been changed yet--and see who is right.
    Mr. Cummings. Okay.
    Admiral Allen. This is not an immediate safety problem, 
sir. I would not put my people to sea in this ship if I thought 
it was.
    Mr. Cummings. Say that one more time.
    Admiral Allen. I would not put my people to sea in this 
ship if it was a safety problem.
    Mr. Cummings. I take it that that was the same thinking, 
what you just said--what you just said--with regard to 123s, in 
other words, the last sentence or two that you just said. You 
said I would not put my people on a ship that whatever you just 
said.
    Admiral Allen. That is the reason I laid them up, sir.
    Mr. Cummings. Right. I just wanted to make sure we were on 
the same page.
    Admiral Allen. In my view, by the time we laid the 123s up, 
it ceased to be a technology issue. It became a leadership 
issue.
    Mr. Cummings. Finally, with regard to that, how do we make 
sure when we know that there is a disagreement?
    We know it because you just said it, that there is a 
disagreement with regard to the design of the NSC 3, the 
proposed design, and what we have done with NSC 1 and 2. Do we 
then put and are we now putting NSC 1 and 2--I guess I am just 
trying to do some prevention stuff here--under a microscope 
where we make sure that every single inch is right?
    I think we are making great progress. I really do. I think 
we are moving forward. The last thing we need is for one of 
these NSCs to get out there and then we discover we have got 
problems.
    Admiral Allen. I don't believe that will happen. The issues 
associated with fatigue life which could produce cracking based 
on the repeated stress of wave action on the hull that is 
repeated over a period of time and doesn't happen immediately 
when the ship is launched.
    Mr. Cummings. Right.
    Admiral Allen. You have got to bend that paper clip quite a 
few times before it finally breaks. We will be able to test the 
strain on the hull with instrumentation at the same time we are 
developing on how to retrofit those hulls. But we are not 
talking about an immediate safety problem, sir.
    Mr. Cummings. I understand, but I am also concerned. You 
used some of my words in your opening. We are talking about a 
future we will never see. You and I, hopefully, will be having 
tea up in heaven, and we want to make sure these ships are 
still doing okay.
    Admiral Allen. Yes, sir. Well, I hope I am there with you.
    [Laughter.]
    Mr. Cummings. I guess I am being kind of presumptuous.
    Admiral Allen. Sir, let me make a comment about Coast Guard 
culture because I think this needs to be said. We rejected 
technical solutions offered by Deepwater in the aviation 
community because the aviation community would not stand for 
it. We originally offered an extended-range Casa 235 and an AB-
139 helicopter, neither of which we are using in the aircraft 
solution for Deepwater.
    I would tell you that the technical competency mind set, 
configuration control union, if you will, of our aviation 
engineers held the line.
    Mr. Cummings. Good.
    Admiral Allen. I think the traditional notion of service 
operators, and I am one. I have got a cutterman's pin. I am I 
have been the commanding officer of a ship. We tend to be more 
independent, less organized. I think there are a lot of issues 
related to the two cultures that played into this, and I think 
we are going to solve some of those by going to a standard 
maintenance concept for the entire service, sir.
    Mr. Cummings. Very well. Could you try to get us just a 
general idea at some point of where you expect to be in the 
next six months? I am not going to bring you back up here, but 
I would like to have that so I can hold you to it.
    Admiral Allen. Sir, I will come back as often as you want. 
I will be glad to communicate. I suggest maybe, if you have 
never seen acceptance trials, you might like to see that ship 
underway, sir.
    Mr. Cummings. I will. I will.
    Any other comments, questions?
    Admiral, we have the full confidence. The things that I 
said down there in Pascagoula and down in Houston, I hope that 
you make sure that your men and women know that we really mean 
that. We are so very, very proud of them, and we want to do 
everything we can to support them.
    Admiral Allen. Yes, sir. Your hope has made it throughout 
the Coast Guard, sir.
    Mr. Cummings. Thank you very much.
    Inspector General Skinner? Mr. Skinner, how are you?
    Mr. Skinner. Fine, thank you.
    Mr. Cummings. Thank you very much for being with us.
    Mr. Skinner. It is my pleasure and thank you and good 
afternoon, Mr. Chairman and Members of the Committee.
    Today, I have with me, Rich Johnson who is our Project 
Manager providing audit oversight for our Coast Guard 
operations, and I am pleased to have Rich next to me to answer 
any technical questions you may have about any of our work.
    When I last appeared before this Subcommittee over three 
months ago, I talked about our acquisition management concerns 
associated with the Deepwater program and how they affected the 
modernization of key Coast Guard assets and systems.
    I would like to take this opportunity today to talk about 
the Coast Guard's ongoing and future challenges in their 
efforts to improve the management of this very important and 
complex acquisition initiative.
    We previously identified several problems in our audits of 
assets and IT systems being acquired under the Deepwater 
contract. These deficiencies contributed to schedule delays, 
cost increases and assets designs that did not meet minimum 
Deepwater performance specifications.
    As you heard today from Admiral Allen, the Coast Guard 
recognizes these challenges and, through its recently published 
Blueprint for Acquisition Reform, is taking aggressive action 
to strengthen program management and oversight. The Blueprint, 
among other things, outlines the Coast Guard's plans for 
reorganizing and rebuilding its acquisition workforce. We are 
encouraged that the Coast Guard recognizes these challenges and 
is beginning to take aggressive action to strengthen its 
acquisition management capabilities.
    However, many of these corrective measures will take time, 
such as building a procurement workforce to manage the broad 
scope and complexity of the program. There is considerable risk 
associated with the Coast Guard assuming the lead systems 
integrator role at this time before having fully implemented 
its Blueprint for Acquisition Reform. If all goes as planned, 
the Coast Guard's Blueprint will not be fully implemented until 
fiscal year 2010.
    In the meantime, this month, the Coast Guard is planning to 
move ahead with the second phase of the Deepwater contract 
which will entail the estimated expenditure of more than $3 
billion over a 43 month period. We believe the Coast Guard 
should exercise caution and take a slower or phased approach to 
assuming the systems integrator role, taking advantage of all 
the tools at its disposal to mitigate risk and to avoid future 
problems.
    At a minimum, the Coast Guard needs to develop a 
performance baseline, that is, something against which they can 
measure the progress being made to achieve the goals outlined 
in the Blueprint. These include the specific numbers and types 
of acquisition professionals needed, when they are scheduled to 
arrive on board and the financial costs associated with the 
realignment, reorganization, retraining and rebuilding of its 
acquisition workforce.
    We are also concerned that the Coast Guard may have 
difficulty resolving the structural design and performance 
issues associated with National Security Cutters 1 and 2. For 
example, the Coast Guard stated that it plans to go ahead with 
construction of cutter 3 before it determines the actual cost 
of the structural modifications to cutters 1 and 2 as well as 
cutters 3 through 8 and the impact these modifications will 
have on its operational performance requirements.
    Consequently, there is a possibility that the required 
changes to all eight cutters could be cost-prohibitive or 
result in a reduction in operational capability. The cost and 
operational impact of structural modifications to all of the 
cutters should be identified and evaluated fully before the 
Coast Guard authorizes any future construction.
    Finally, we continue to identify other issues that may 
impact Deepwater costs and inhibit the Coast Guard's ability to 
perform its mission. The Coast Guard's acquisition of a 
vertical unmanned aerial vehicle is a case in point. 
Originally, the Coast Guard intended the VUAV to significantly 
increase the aerial surveillance of the National Security 
Cutter from 13,800 square nautical miles to 58,000 square 
nautical miles, a four-fold increase in surveillance 
capability. Acquiring the VUAV was also a major reason why the 
Coast Guard elected to build eight versus twelve cutters.
    To date, the Coast Guard has obligated over $114 million to 
the project with very little to show for it. It is not yet 
clear exactly when the VUAV will come online and how the 
Deepwater system of systems approach to acquisition will make 
up for this lost capability.
    Another concern that we have deals with the needed 
modifications to the HH-65 helicopter fleet to enable the 
helicopters to deploy and be stowed safely on the National 
Security Cutter. The Coast Guard estimates that it could take 
as long as 5 years and an estimated 55 million to install such 
a system on the entire fleet. Again, this is an integral part 
of the cutter's system of systems capability.
    To date, however, no funding has been available for this 
project. Consequently, the Coast Guard will be unable to fully 
test the interoperability of the ship's systems with the HH-65 
when National Security Cutter 1 undergoes builder sea trials 
and operational tests that are scheduled to begin, as you 
heard, early next year.
    In conclusion, the Coast Guard is to be commended for the 
steps it has taken to regain control of the Deepwater program 
and the improvements it is making to its acquisition management 
function. When fully implemented, these actions should mitigate 
many of the cost, schedule and performance risks identified 
with the Deepwater program.
    Nevertheless, we must keep in mind that these changes are 
in their infant stage. A lot can go wrong before they are fully 
implemented. The Deepwater program will continue to require the 
highest levels of planning, coordination and oversight to be 
fully successful.
    Mr. Chairman, Members, this concludes my remarks. I will be 
happy to answer any questions.
    Mr. Cummings. Thank you very much, Mr. Skinner, and I want 
to thank you for your very thorough work. We really appreciate 
it. You have been extremely, extremely helpful.
    Let me ask you this. I think we all know the problem 
generally. On the one hand, you have got the Coast Guard that 
is trying to get this contract complete to get performance. 
They are also coming under a lot of pressure from the Members 
of Congress, and they need this equipment.
    So we have got the ICGS. We see what the problems have been 
with them. I guess what is happening is that the Coast Guard is 
saying, okay, things didn't work out. So now we are going to do 
it.
    I am just trying to figure out, on the one hand, I think 
almost all of us have concerns, the same concerns that you 
have. Are they ready to do this, even in the time period?
    As I listened to the Admiral and I didn't get a chance to 
ask him. I didn't think of it until after he left actually. If 
we are bringing on these military folks in particular and some 
civilians and contractors, but I am more concerned about the 
military and the civilians, to do this oversight of the 
contracts, the question becomes, who are we bringing?
    In other words, are those people going to be really 
qualified to do this job or is there a steep learning curve? 
You may not even have the answers to these questions.
    But then on the other hand, on the other side of it, Mr. 
Skinner, you have a situation where they are saying, well, we 
just can't keep doing what we are doing because what we have 
been doing doesn't work.
    I think that is the problem. They are trying to say get 
away from the ICGS because there has been embarrassment. There 
have been problems and whatever. But then the question is 
becoming, are they moving too fast into taking it over 
themselves?
    Is that a fair statement?
    Mr. Skinner. That is correct. That is one of the concerns, 
and that is one of the issues we have discussed with Admiral 
Allen and his executive team. We agree that a transitional 
period moving from the ICGS to the Coast Guard assuming the 
integrator role is probably a wise decision. However, we need 
to proceed with caution.
    I think we are seeing what the Coast Guard is currently 
doing. They are, in fact, proceeding with caution. For example, 
the Admiral that they are bringing in the Navy to fill in some 
gaps, operational gaps, management gaps.
    They are using the integrator, the ICGS, that is, to 
continue to work on those contracts that are currently in place 
without giving them necessarily new contracts. Instead of 
providing task orders, which they did in the past for five 
years, in this case 43 months, they are providing them task 
orders for 18 months so that they can better manage and control 
how the ICGS continues to do the work that it now has 
responsibility for or any future work that it may have 
responsibility for.
    But it is something that needs to be closely monitored. It 
is something that requires the highest level of management 
attention as we move forward.
    Are we moving too fast, that is, are we tasking our 
contractors to do more work than we are able or faster than our 
ability to manage them? That is something that needs to be 
taken into consideration every time they issue a tasking order 
or a task order.
    Mr. Cummings. Now, considering what you just said, what 
would make you feel more comfortable?
    I understand what you are saying is maybe we need to slow 
down this process a little bit. Maybe we need to be a little 
more careful. Do you see a role, let us say under ideal 
circumstances, while making that transition? Do you see a 
significant role for the ICGS team or would you have something 
else in place to try to make sure that things still flow nicely 
while we are building up within the Coast Guard?
    Mr. Skinner. There is no question there is a continuing 
role for the ICGS.
    Mr. Cummings. What would that be?
    Mr. Skinner. They have contracts, for example, outstanding 
right now. In actually systems integration, for example, there 
are things that they have been heavily involved in, and they 
probably can do a better job at this point in time than anyone 
in Government can do. We don't want to halt that work.
    There are some successes under this Deepwater program. 
Unfortunately, those get overshadowed by all the failures that 
we have had. The systems integration work, for example, is 
something they can continue to do. We just don't want to cut 
them off, and there may be other work that they might be able 
to do. I don't want to speculate what that could be or what 
that would be or what they couldn't do.
    But, nonetheless, each time there is a tasking, I think the 
Coast Guard needs to be more intricately involved in the 
decision-making as to whether we want to go sole source with 
the ICGS or whether we want to look outside ICGS to procure 
those assets, for example, the FRC B. I think they are going 
outside the Deepwater program.
    Mr. Cummings. Yes.
    Mr. Skinner. I think that is probably a wise decision.
    Mr. Cummings. Has the Coast Guard, to your knowledge, 
experienced challenges recruiting and retaining qualified 
acquisitions professionals?
    Mr. Skinner. Like I said, this initiative in acquisition 
management, this program, is in its infant stages. It is too 
early to tell whether they are going to see challenges. If they 
experience anything like what we have experienced in other 
parts of the department, in CBP, for example, or in FEMA as 
another example or, for that matter, Government-wide, they are 
going to experience considerable problems in bringing the right 
mix of expertise to the table that can do these jobs.
    Mr. Cummings. Earlier, I talked about some problems that 
have been experienced by the Coast Guard with regard to 
Deepwater. It seems as if while we know that there have been 
some successes, we also know that there have been a number of 
things that have been touched in this process that simply have 
not worked. I think that we as human beings expect that there 
are going to be failures. That is part of life.
    But when you see them over and over and over again, then 
you have to begin to ask the question, is there something wrong 
with the system or the systems? Is there something wrong with 
the personnel? Is there something wrong with the leadership?
    The question is with the Admiral having done all the things 
that he has stated. I know his intentions are great. We believe 
in him. Do we still have the elements of whatever caused us to 
get to where we are? With the mistakes and the problems, are 
they still present?
    Does that make sense?
    Mr. Skinner. Yes, it does. I think I understand where you 
are going. If we don't continue to focus on the management of 
this program--it is a 24, 25 year program--we can revert back 
and start experiencing the same problems that we experienced in 
the first 5 years.
    A lot of it has to do with leadership and a commitment to 
manage, and Admiral Allen, I believe, has made that commitment. 
But like we all know, that is a four year appointment. That 
commitment needs to be carried forward to ensure that the 
resources are maintained to provide the oversight and the 
management of this initiative or we could revert back to where 
we were.
    We are making progress. We are in an infant stage. There is 
a long way to go before we can say that we have this Deepwater 
program under control.
    Mr. Cummings. You heard my questions of Admiral Allen, as a 
matter of fact, my last set of questions with regard to NSC 1, 
NSC 2 and then NSC 3. I was concerned because it sounds like 
there are some issues with NSC 1 and 2.
    Can you comment on some of the things that he said? I mean 
the things they are doing, for example, to mitigate any 
problems that there might be with NSC 1 and 2.
    Mr. Skinner. Yes.
    Mr. Cummings. And do you have concerns?
    Mr. Skinner. We have concerns. Admiral Allen's comments, I 
believe, were at the 30,000 foot level, and the devil is in the 
details. Our concerns are, one, they say the Coast Guard has an 
engineering solution to mitigate or to fix cutter 1 and cutter 
2. Our concern is what impact is that going to have on your 
operational performance capability and also how much is it 
going to cost?
    When I say operational capability because these ships are 
going to have to be taken offline. They are going to have to be 
taken offline for an extensive period of time somewhere down 
the road, probably within their first four or five years. When 
they start retrofitting these ships, they are not going to be 
in operation.
    We are only going to build eight of these cutters. We are 
taking two offline in the first five years. That leaves us with 
six, and that raises concern.
    Mr. Cummings. Where do you get the five years from? Why do 
you say five years?
    Mr. Skinner. I believe it is our understanding that 
generally a new ship that goes out to sea is usually brought 
back in for maintenance and repairs and just to check to see 
how it is operating at sea, and generally that is done in four 
or five years. That may be a Navy standard.
    Mr. Cummings. I got you.
    Mr. Skinner. Somewhere along the way, someone within the 
Coast Guard in their engineering area has told us that.
    Mr. Cummings. Okay.
    Mr. Skinner. It could be sooner.
    Mr. Cummings. I understand, but you raised a very, very 
significant issue.
    When I was talking to Admiral Allen, as best I can 
remember, he was talking about immediate safety problems, and 
you are talking about not necessarily immediate safety problems 
but definite problems. He, I think, was trying to distinguish 
that with regard to long term fatigue. I think that is what he 
was trying to do.
    Mr. Skinner. Yes.
    Mr. Cummings. So what you are saying, though, is that there 
are concerns because they are going to bring them back in and 
they are going to probably be in some kind of trouble. That is 
going to take them offline, and then we are going to have to 
start over again, at least do some serious work.
    Then we are going to have another bill, by the way. Let us 
not forget the bill where folks are going to make some decent 
money and the American people are going to pay.
    Is there something that you all would recommend different 
than what he said?
    Mr. Skinner. What we are suggesting is that I think the 
Coast Guard needs to step back, analyze what the total costs 
are associated with retrofitting 1 and 2 to ensure that they 
meet the performance specifications and the costs associated 
with the design changes to 3 through 8, plus look at the 
operational limitations these design changes may or may not 
have on their performance capability as well as the impact it 
will have on their operational capabilities when 1 and 2 are 
taken offline for extensive repairs somewhere down the road, 
anywhere from 2 to 4 or 5 years. We have heard different 
figures from different sources.
    Once they are equipped with that knowledge, then they can 
make an informed decision or have a business case as to whether 
they want to proceed with the construction of 3 through 8 or 
look for other alternatives.
    Mr. Cummings. I will have some more questions.
    Mr. LoBiondo?
    Mr. LoBiondo. Thank you, Mr. Chairman.
    Mr. Skinner, thank you for being here.
    You asked some of the questions, Mr. Chairman, that I had 
outlined.
    Mr. Skinner, Admiral Allen has proposed and is in the 
process of implementing significant modifications to the 
Deepwater program which will establish the Coast Guard as the 
lead system integrator and reassert the Coast Guard technical 
authority over Deepwater projects and hopefully enhance the 
Coast Guard's oversight over all facets of the program.
    What, in your mind, are additional steps that the Coast 
Guard can take to further improve its management and oversight 
of the program?
    Mr. Skinner. Incidentally, these things that you just 
referred to are things that we recommended in prior audit 
reports. Thank you for the question.
    It goes beyond more than just reorganizing which is 
something that we think they need to do, reasserting a 
technical authority.
    But there are things like they need to ensure that we have 
third party certification of our designs as we move forward. We 
should not be self-certifying. We should have third party or an 
independent.
    Mr. LoBiondo. Excuse me. What would an example be?
    Mr. Skinner. You can go to Carderock, for example. There is 
the private sector as well that can provide such certification 
but Carderock for dealing with the ships, the national cutters 
and any others that we may be bringing in that are state of the 
art, first line cutters in the out years.
    There is the self-certification, technical authority. The 
acquisition reorganization, of course, is something that we 
talked about.
    There is also the contract itself needs to be rewritten to 
ensure that the Coast Guard. Now I understand these are the 
things that were told, that these are the things that are going 
to be written into the new contract or the Phase 2 contract for 
the 43 month contract that we referenced earlier that will give 
the Coast Guard additional authority, that will clearly define 
what we expect. We can do a better job of defining our 
specifications and ensuring that the contractor in fact meets 
the performance requirements.
    There is a whole series of things that goes along with just 
the reorganization. It is the management of the contracts. It 
is the way the contract is written. It is the definition, the 
specificity that we have in our taskings so that when we to 
back, we can say this is not what we asked for.
    We found ourselves in trouble with the 123 retrofits 
because we were not that specific. When we went back and said 
this is not what we ordered and we looked at the requirements 
of the contract, it was so vague. We couldn't hold the 
contractor accountable.
    Mr. LoBiondo. What do you see as the risks associated for 
the Coast Guard with taking on the role of lead system 
integrator in the middle of the 25 year acquisition process?
    Mr. Skinner. It is highly risky, and that is why we suggest 
that they take a deep breath and they proceed with caution and 
they do it in a very phased approach. This is something that I 
believe Admiral Allen and the Coast Guard recognize that it can 
be very risky if they move too quickly.
    They are now using. They are not just going to eliminate 
the ICGS. They are going to phase them out over time, and in 
the interim they are also going to rely very heavily on 
resources from the Navy, for example, to fill any gaps in 
management or oversight, give them the oversight capability of 
any new taskings that may be coming down the road.
    But if we don't do it in a very phased, cautious manner, we 
could get in trouble. It is too early now to predict whether we 
are moving too fast. Our assessment right now is that we are in 
fact moving in a very cautious manner.
    Mr. LoBiondo. How do you see the potential liability for 
costs associated with delays, modifications and potential asset 
failure to be shared between the parties under the new 
arrangement?
    Mr. Skinner. It is very important that the Government 
clearly defines what it is asking for. If we clearly define 
what we are asking for and before we take delivery of any 
products, we obtain expert certification that this is what we 
were asking for, then I believe that the contractor has 100 
percent responsibility to give us that. If they don't, they 
need to be held liable.
    Our biggest problem now is or has been that we don't 
clearly define what we are asking for, up-front, before we 
issue the tasking or at the time we issue the task order. So, 
therefore, when delivery is made, we are not in a position to 
hold the contractor accountable.
    Mr. LoBiondo. Mr. Chairman, do I have time for a couple 
more questions.
    Mr. Cummings. Please.
    Mr. LoBiondo. Mr. Skinner, the Coast Guard obviously is in 
the process of significantly increasing its acquisition and 
contracting staff to carry out the increased responsibilities 
associated with the assumption of the lead system integrator 
role. What do you think about the Coast Guard having the 
resources necessary to carry out this buildup without 
negatively impacting other acquisitions and operations?
    Mr. Skinner. I don't think it should impact. For one thing, 
under the reorganization, acquisition is going to be under one 
directorate. That is one thing.
    Secondly, this buildup should not have an impact on any 
other of their acquisition functions. If anything, it would 
complement any other acquisition activities they may have 
ongoing outside of Deepwater. But I wouldn't see that having 
any type of negative impact.
    Our concern is you are not going to be able to build up 
that capability easily. It is not just a matter of hiring 
people. It is a matter of hiring the right mix of people, 
getting them, training them and retaining them.
    Mr. LoBiondo. That leads to my next question. What do you 
think about the Coast Guard's ability to attract and retain the 
tremendously qualified acquisition and contracting personnel 
that Deepwater requires?
    Mr. Skinner. It is going to be very, very difficult. We are 
experiencing these problems in other parts of the Department of 
Homeland Security, most notably in CBP, Customs Border and 
Patrol, and within FEMA. It is going to be a difficult task.
    We are competing not only with ourselves in the Department, 
but we are also competing with other Federal agencies which 
also are strapped and are short of acquisitions types, and we 
are also competing with the private sector. It is not going to 
be an easy task.
    Mr. LoBiondo. Having the continuum of information and 
background is going to be critical along with the expertise, 
isn't it?
    Mr. Skinner. Yes. You can bring in contracting officers 
that have contracting experience but not necessarily the type 
of Coast Guard-related experience, but nonetheless that 
expertise is invaluable as well. You need people to come in 
that have not necessarily Coast Guard experience but naval 
military or the type of acquisition experience associated with 
buying, retrofitting or building ships, airplanes, things that 
are necessary to modernize the Coast Guard's fleet.
    The IT area is another area that is going to be very 
challenging as well, there primarily because of the competition 
we have with the private sector, we in the Federal Government, 
that is. You don't necessarily have to come through the ranks 
of the Coast Guard to have an appreciation for systems 
communications and things of that nature. Those things can be 
learned on the job.
    Mr. LoBiondo. Mr. Chairman, it seems to me that is real 
critical point. I am not sure if Admiral Allen addressed that. 
I might respectfully request that you consider asking him about 
not only attracting the top-flight people that are necessary 
but the plan to keep them on board so that while the best laid 
plans are there, if we have gaps in service, we could 
experience further problems.
    Mr. Skinner, thank you very much.
    Mr. Chairman, thank you.
    Mr. Cummings. Thank you. I will do that.
    I am going to go back to what I started with because we 
have got a little bit of a dilemma here, I think, and I want 
some clarity.
    On the one hand, we have a team that has been in place 
doing this, that the results of their efforts have not been 
stellar. Is that a fair statement?
    Mr. Skinner. Yes.
    Mr. Cummings. On the other hand, we are trying to get to a 
place where the Coast Guard can do the work of the integrator 
team. Is that a fair statement?
    Mr. Skinner. Yes.
    Mr. Cummings. This is a piece that I found interesting, and 
I don't know whether you find it interesting or not. We just 
heard the Admiral provide testimony about rescinding the 123s 
and to my knowledge--to my knowledge--nobody has ever told me 
anything different. We scrapped I guess more than about $100 
million worth? How much was that?
    The scrapping process, how much did we scrap? Do you know 
what that was worth?
    Mr. Skinner. No, I don't.
    Mr. Cummings. Okay, well, millions, tens of millions.
    Mr. Skinner. Yes.
    Mr. Cummings. Do you know whether anybody in the present 
team was fired or demoted, the present team?
    Mr. Skinner. Not that I am aware of. We have to understand 
when we talk about the present team and the performance was not 
stellar, we have to understand that oft times their hands were 
tied because of the terms and conditions on the contract under 
which they were operating which left the ICGS, giving them 
ultimate authority to make final decisions as to go, no go.
    Mr. Cummings. I got you.
    Mr. Skinner. And so, it is not the people within the Coast 
Guard per se. Matter of fact, there were some very good people 
who came forward and complained to us about this which brought 
it to our attention, some of the problems.
    Mr. Cummings. Is it a good idea to leave things as they are 
then or as they have been?
    Mr. Skinner. No, no.
    Mr. Cummings. Why do you say that?
    Mr. Skinner. The Coast Guard needs to assume control over 
the program. As I testified, I believe three or four months 
ago, they were content to ride shotgun and turn over the reins 
to the integrator, allowing them to define what your 
requirements are and to deliver, make the ultimate decisions as 
to what we are going to deliver, when we are going to deliver 
it, how much it is going to cost and who is going to deliver it 
to you.
    The Coast Guard just relied too heavily on the integrator 
to make its decisions for them, and that is where we need to 
turn the pendulum. The Coast Guard needs to get more actively 
engaged in making those decisions.
    Mr. Cummings. Right now, because that is what we have got 
to deal with, we are trying to figure out where we are going to 
be, where we are proceeding in the next year. What do you see 
as being the role of the integrator team once again?
    See, it sounds like you are saying on the one hand. I don't 
what to misunderstand you.
    On the one hand, the Coast Guard needs to slow down. On the 
other hand, we have got the integrator team over here saying, 
okay, I am just hypothetically saying, well, things may not 
have gone right, but we will stay in the ball game, coach.
    I am just trying to figure out what role would they be 
playing while we are slowly proceeding and carefully proceeding 
to take over, that is, the Coast Guard take over?
    Mr. Skinner. Yes, and there is where the devil is in the 
details. We have an acquisition blueprint, the Blueprint for 
Acquisition Reform. That is a strategic plan. We need, you need 
detail. The Coast Guard needs detail.
    Now, it is my understanding, and I think Admiral Allen did 
allude to it at the end of his testimony, that they are 
developing an operational performance baseline plan which will 
set forth: these are the things we intend to do. These are the 
people that are going to do it. These are the things that are 
going to remain with ICGS, for example, some of its IT 
capabilities or the NSC capabilities. These are the things that 
we are going to take outside of the Deepwater, and these are 
the things we are going to keep in Deepwater but we are going 
to do ourselves.
    We don't have that right now.
    Mr. Cummings. I guess it sounds like this 18 month proposal 
as opposed to 43 months that the Admiral talked about, is that 
a good idea in that it gives you a shorter assessment time?
    In other words, you see how things go, how we are doing. 
Then you go back and say, okay, this is what we do. Instead of 
waiting 43 months which is about, what, three times the time?
    Mr. Skinner. Yes. The first time I heard about the 18 month 
thing was today, and I think that is an excellent idea because 
that gives the Coast Guard an exit ramp or an exit clause to 
say, we don't like where you are headed here, and so therefore 
we are just going to sever this particular. We are just going 
to take away from you, this particular tasking.
    It is somewhat modeled after what we are doing in the 
SPINET program. Instead of entering into a three to five year 
contract, we are doing this in a very incremental basis and a 
phased approach. And so, at any point in time, in a short 
period of time, if we don't like the progress we are making, 
you can pull out without penalty.
    Mr. Cummings. Based upon what you just said--I guess this 
might be difficult to answer--do you have any idea when the 
Coast Guard might be ready to take over as the full integrator?
    Mr. Skinner. It would only be speculation.
    Mr. Cummings. Yes.
    Mr. Skinner. It is going to some time. I don't think it is 
anything. It is going to happen in the next two to three years 
because they are going through a major reorganization. It is 
also a cultural shock for many people in the Coast Guard.
    It is not the numbers so much that we are concerned about. 
It is the mix of expertise that you have to ensure continuity, 
to ensure continuity on the integrated project teams. You don't 
want people coming in and out every two years. You want people, 
civilians that are in there that can lend continuity to this 
whole thing, and it is going to take time, two to three years 
at a minimum.
    Mr. Cummings. Let me say this, and then I am finished. One 
of the things I think that has concerned me over and over 
again, and I said it in my opening statement, is as far as I am 
concerned this is the greatest country in the world.
    I tell you when I went to see the 123s. I am not a ship 
guy, but when I went to see them and I saw the buckling and 
whatever, I have seen yachts that were bigger. I said to 
myself, how in the world couldn't we get this right? We send 
people to the moon.
    Then today when I listened to the Admiral, I must admit 
that I had some flashbacks because I thought about the NSC 1 
and NSC 2, and really not under our watch do I want to see us 
go backwards. Under our watch, I want to see us go forward.
    That is why your testimony and the work of your staff, and 
I hope you will convey this to them, has been incredible. So 
often, our public servants do not get their due, but I really 
mean it. You all have been working with our staff. You have 
been absolutely great, and I just want you to know.
    Again, I know there are people working behind the scenes 
that we never see. I know that.
    Mr. Skinner. Yes, and one of them is sitting next to me at 
the moment.
    Mr. Cummings. Mr. Johnson, thank you very much and your 
team back there. The reason why I say that is because we 
couldn't have done a number of things that we have been able to 
do without you.
    We are going to stay on top of this, and I am trying to 
stay away from a political thing because I think it is so much 
bigger than that. This is about our national security.
    I am very pleased. Mr. LoBiondo cannot imagine. I know he 
chaired this Committee, and his support and both sides have 
been great because I think we are all looking at the big 
picture, and I think everybody is trying to be fair across the 
board.
    But, in the end, we want to make sure that the Coast Guard 
has what it needs to do the job and that our personnel are safe 
on these vessels and these planes and these helicopters.
    Mr. LoBiondo, did you have anything?
    Mr. LoBiondo. No, thank you, Mr. Chairman.
    Mr. Skinner and Mr. Johnson, thank you.
    Mr. Cummings. Thank you very much. That ends this hearing.
    Mr. Skinner. You are welcome.
    [Whereupon, at 1:14 p.m., the Subcommittee was adjourned.]
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