[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]


 
                        A REVIEW OF COAST GUARD 
                          ACQUISITION PROGRAMS 
                              AND POLICIES 

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

                                (111-95)

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                COAST GUARD AND MARITIME TRANSPORTATION

                                 OF THE

                              COMMITTEE ON
                   TRANSPORTATION AND INFRASTRUCTURE
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                             March 11, 2010

                               __________


                       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
Vice Chair                           DON YOUNG, Alaska
PETER A. DeFAZIO, Oregon             THOMAS E. PETRI, Wisconsin
JERRY F. COSTELLO, Illinois          HOWARD COBLE, North Carolina
ELEANOR HOLMES NORTON, District of   JOHN J. DUNCAN, Jr., Tennessee
Columbia                             VERNON J. EHLERS, Michigan
JERROLD NADLER, New York             FRANK A. LoBIONDO, New Jersey
CORRINE BROWN, Florida               JERRY MORAN, Kansas
BOB FILNER, California               GARY G. MILLER, California
EDDIE BERNICE JOHNSON, Texas         HENRY E. BROWN, Jr., South 
GENE TAYLOR, Mississippi             Carolina
ELIJAH E. CUMMINGS, Maryland         TIMOTHY V. JOHNSON, Illinois
LEONARD L. BOSWELL, Iowa             TODD RUSSELL PLATTS, Pennsylvania
TIM HOLDEN, Pennsylvania             SAM GRAVES, Missouri
BRIAN BAIRD, Washington              BILL SHUSTER, Pennsylvania
RICK LARSEN, Washington              JOHN BOOZMAN, Arkansas
MICHAEL E. CAPUANO, Massachusetts    SHELLEY MOORE CAPITO, West 
TIMOTHY H. BISHOP, New York          Virginia
MICHAEL H. MICHAUD, Maine            JIM GERLACH, Pennsylvania
RUSS CARNAHAN, Missouri              MARIO DIAZ-BALART, Florida
GRACE F. NAPOLITANO, California      CHARLES W. DENT, Pennsylvania
DANIEL LIPINSKI, Illinois            CONNIE MACK, Florida
MAZIE K. HIRONO, Hawaii              LYNN A WESTMORELAND, Georgia
JASON ALTMIRE, Pennsylvania          JEAN SCHMIDT, Ohio
TIMOTHY J. WALZ, Minnesota           CANDICE S. MILLER, Michigan
HEATH SHULER, North Carolina         MARY FALLIN, Oklahoma
MICHAEL A. ARCURI, New York          VERN BUCHANAN, Florida
HARRY E. MITCHELL, Arizona           ROBERT E. LATTA, Ohio
CHRISTOPHER P. CARNEY, Pennsylvania  BRETT GUTHRIE, Kentucky
JOHN J. HALL, New York               ANH ``JOSEPH'' CAO, Louisiana
STEVE KAGEN, Wisconsin               AARON SCHOCK, Illinois
STEVE COHEN, Tennessee               PETE OLSON, Texas
LAURA A. RICHARDSON, California
ALBIO SIRES, New Jersey
DONNA F. EDWARDS, Maryland
SOLOMON P. ORTIZ, Texas
PHIL HARE, Illinois
JOHN A. BOCCIERI, Ohio
MARK H. SCHAUER, Michigan
BETSY MARKEY, Colorado
MICHAEL E. McMAHON, New York
THOMAS S. P. PERRIELLO, Virginia
DINA TITUS, Nevada
HARRY TEAGUE, New Mexico
JOHN GARAMENDI, California
VACANCY

                                  (ii)

  


        SUBCOMMITTEE ON COAST GUARD AND MARITIME TRANSPORTATION

                 ELIJAH E. CUMMINGS, Maryland, Chairman

CORRINE BROWN, Florida               FRANK A. LoBIONDO, New Jersey
RICK LARSEN, Washington              DON YOUNG, Alaska
GENE TAYLOR, Mississippi             HOWARD COBLE, North Carolina
BRIAN BAIRD, Washington              VERNON J. EHLERS, Michigan
TIMOTHY H. BISHOP, New York          TODD RUSSELL PLATTS, Pennsylvania
STEVE KAGEN, Wisconsin               PETE OLSON, Texas
MICHAEL E. McMAHON, New York, Vice 
Chair
LAURA A. RICHARDSON, California
JAMES L. OBERSTAR, Minnesota
  (Ex Officio)

                                 (iii)


















                                CONTENTS

                                                                   Page

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

                               TESTIMONY

Rabago, Rear Admiral Ronald J., Assistant Commandant for 
  Acquisition & Chief Acquisition Officer, United States Coast 
  Guard..........................................................     3

           PREPARED STATEMENT SUBMITTED BY MEMBER OF CONGRESS

LoBiondo, Hon. Frank A., of New Jersey...........................    12

                PREPARED STATEMENT SUBMITTED BY WITNESS

Rabago, Rear Admiral Ronald J....................................    20

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    HEARING ON A REVIEW OF THE COAST GUARD ACQUISITION PROGRAMS AND 
                                POLICIES

                              ----------                              


                       Thursday, March 11, 2010,

                   House of Representatives
         Subcommittee on Coast Guard, and Maritime 
                                    Transportation,
            Committee on Transportation and Infrastructure,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 10:00 a.m., in 
Room 2167, Rayburn House Office Building, the Honorable Elijah 
E. Cummings [Chairman of the Subcommittee] presiding.
    Mr. Cummings. The Subcommittee will come to order.
    The Subcommittee convenes today to continue what has been 
our ongoing examination of the Coast Guard's acquisition 
programs and policies. As I have repeatedly said during my 
tenure, I believe that one of our central responsibilities as a 
Congress is to conduct effective oversight and effective 
oversight requires diligent and continuing follow-up. This is 
the fourth hearing the Subcommittee has convened on the Coast 
Guard's acquisition efforts during my tenure as Subcommittee 
Chairman, and I feel confident in saying it will not be the 
last.
    The Coast Guard's acquisition programs, particularly its 
Deepwater Program, are procuring the fleet of ships and 
aircraft on which the service will rely on for decades. In 
fact, if history is any guide, the Coast Guard will rely on 
these assets many years after they have reached the end of 
their useful service lives.
    There is absolutely no question that the Coast Guard needs 
new assets. The extent of this need was most recently 
illustrated during the service's response to the earthquake in 
Haiti, when 10 of the Coast Guard's 12 responding ships 
suffered what Admiral Allen termed in his testimony before our 
Subcommittee last month as mission-affecting breakdowns. 
Several had to return to port to undergo emergency repairs.
    To ensure that the Coast Guard has assets that can meet its 
mission needs for the decades during which they will be used, 
and to ensure that the Coast Guard gets the full value for the 
taxpayer funding it expends to purchase these assets, the 
service must manage its ongoing acquisition efforts effectively 
and efficiently. Obviously, in the past, the Coast Guard faced 
significant challenges managing Deepwater.
    However, as the Government Accountability Office stated 
during the budget hearing we convened last month to consider 
the Administration's fiscal year 2011 budget request for the 
Coast Guard, we are now in a far better place, and I commend 
Admiral Allen, Admiral Blore, and now Admiral Rabago, today's 
witness, and their teams for their enormous work in modernizing 
and strengthening the Coast Guard's acquisition and management 
processes.
    Today's hearing will enable us to examine where we are now 
and to assess the Coast Guard's current acquisition management 
challenges. Of particular concern, the Coast Guard has brought 
the lead systems integration function in-house. We want to 
review how the service's assumption of these responsibilities 
is proceeding, including whether the Coast Guard has the 
personnel it needs to effectively and efficiently carry out 
these functions. Further, the Coast Guard is appropriately 
treating the Deepwater procurements on an asset-by-asset basis, 
rather than as a system of systems that the private sector 
contractor team previously serving as the lead systems 
integrator had envisioned.
    The service is now developing individual acquisition 
program baselines for these assets, and while I know that cost 
estimates developed by the ICGS team were likely costs to 
contract rather than true program baselines, nonetheless, the 
costs of the individual assets appear to be rising as the 
baselines are developed. As such, the total cost of the 
acquisitions planned under Deepwater are uncertain, but it is 
unlikely that the costs will fall below earlier projections. In 
fact, it appears that, if implemented as currently planned, the 
Deepwater acquisitions may equal or exceed $27 billion.
    We look forward to a frank discussion of Deepwater's likely 
costs as we seek to understand how cost increases during a time 
of constrained budgets will shape the Coast Guard's acquisition 
plans, including the tradeoffs that are made in the selection 
of technologies for individual assets.
    Before I close, I note that I authored legislation that has 
already passed the House by a vote of 426 to nothing that would 
put new statutory requirements in place to strengthen the Coast 
Guard's acquisition management processes. This legislation 
would require the appointment of a chief acquisition officer 
who could be either a member of the military or civilian member 
of the Senior Executive Service, but who must be a Level 3 
program manager and who must have 10 years of professional 
experience in acquisition management.
    Additionally, the legislation would require that the Coast 
Guard put in place systems to ensure that it effectively 
defines operational requirements before initiating acquisition 
efforts and to ensure all acquired assets undergo thorough 
developmental and operational testing. This legislation would 
also require the service to develop and maintain a career path 
in acquisition management to ensure that it has the acquisition 
professionals it needs to effectively manage its acquisitions.
    This legislation, like so many other bills already passed 
by the House, still awaits consideration in the Senate. I would 
hope that they would move this bill before the end of the 
current session.
    Mr. Cummings. We will recognize Mr. LoBiondo when he 
arrives; he is at a conference right now and he will be coming 
in shortly.
    With that, we will now hear from our first witness. Rear 
Admiral Ronald J. Rabago is the Assistant Commandant for 
Acquisition & Chief Acquisition Officer with the United States 
Coast Guard.
    Rear Admiral, welcome, and we look forward to hearing your 
testimony.

     TESTIMONY OF REAR ADMIRAL RONALD J. RABAGO, ASSISTANT 
COMMANDANT FOR ACQUISITION & CHIEF ACQUISITION OFFICER, UNITED 
                       STATES COAST GUARD

    Admiral Rabago. Good morning, Mr. Chairman, distinguished 
Members of the Subcommittee. As the Coast Guard's Assistant 
Commandant for Acquisition, I appreciate the opportunity to 
appear before you today to update you on the Coast Guard's 
acquisition enterprise and our strategy going forward for our 
critically needed recapitalization efforts.
    It has been three years since our Commandant, Admiral Thad 
Allen, outlined the beginnings of a comprehensive acquisition 
reform effort, reforms this Subcommittee helped initiate and 
shape. While there is still work to be done, we have made 
tremendous progress transforming ourselves into an acquisition 
organization that can deliver complex, interoperable, 
multimillion dollar assets to our frontline forces that meet 
clear documented requirements. We have institutionalized 
consistent processes from our Major Systems Acquisition Manual, 
and our multi-year strategic plan, the Blueprint for Continuous 
Improvement, provides a guiding framework of actionable and 
measurable goals.
    The Department of Homeland Security's role in acquisition 
management and oversight has also matured. We now benefit from 
their careful review of all of our highest dollar programs at 
each key decision milestone. The Coast Guard now relies on an 
interactive framework of checks and balances inherent in the 
roles of requirement sponsors and technical authorities. We 
regularly employ mutually beneficial partnerships with third-
party entities such as the U.S. Navy.
    I can definitively state that the Coast Guard is the lead 
system integrator for all of our major acquisition projects. We 
control the requirements, the technical baselines, the 
integration of systems, asset interoperability, and sequence 
delivery of new capability. We are responsibly phasing out our 
existing contractual lead system integrated relationships. For 
example, the current award term contract with integrated Coast 
Guard systems expires in January 2011 and will not be renewed.
    We hired 90 new acquisition professionals in fiscal year 
2009, thereby reducing our civilian vacancy rate from nearly 24 
percent to less than 11 percent. We are grateful to Congress 
for its fiscal year 2010 appropriation that permits us to hire 
100 additional acquisition professionals. We are already 
recruiting to fill those positions. Furthermore, we are 
committed to the quality and retention of our valued 
acquisition workforce through professional development and 
credentialing. We are in full compliance with our Department's 
requirement for Level 3 program manager certification for our 
15 highest dollar programs. Focusing on our people has made us 
a better acquisition organization.
    As we continue to improve, one of the best measures of 
success is timely and cost-effective delivery of critically-
needed assets and systems to the men and women executing Coast 
Guard missions for our Nation. In May of last year, we took 
final acceptance of the first National Security Cutter, 
Bertholf, and she has already conducted successful operational 
patrols while completing her remaining post-delivery work and 
certifications.
    Waesche just arrived to our Alameda, California home port 
and is preparing for her commissioning in May. She enjoyed 
numerous process improvements during construction and testing, 
including receiving the authority to operate her classified 
systems a year faster than Bertholf. Stratton, our third 
National Security Cutter, is 37 percent complete and will be 
launched this summer. We received a production proposal for the 
fourth National Security Cutter that we are evaluating prior to 
entering into formal negotiations with the shipbuilder.
    We successfully completed a critical design review for the 
sentinel class fast response cutters and now have four cutters 
on contract. Construction of the lead ship is underway. We have 
finalized the requirements for the offshore patrol cutter, and 
in the coming year we intend to complete our acquisition 
strategy, initial cost estimates, alternatives analysis, as we 
prepare our request for proposal to industry.
    Since October of last year, the HC-144A Maritime Patrol 
Aircraft has been standing the watch at Mobile, Alabama, and 
most recently performing missions in support of the earthquake 
response over Haiti. Our new maritime distress and response, 
Rescue 21, stands watch over 35,000 miles of our coastline and 
has already saved the lives of numerous mariners.
    As we move forward, some challenges remain. Stable budgets 
and continued strong support by the Administration and Congress 
are key to the Coast Guard's ability to efficiently 
recapitalize our aging assets and systems. Accurate cost 
estimates, stable requirements, and timely delivery of 
capability to the field all depend on predicable funding 
streams.
    Our trained and experienced acquisition workforce is 
central to our future success, and the Coast Guard must compete 
on a level playing field with hour military counterparts for 
acquisition talent here in Washington, D.C. and throughout the 
Nation. Parity in hiring and compensation authorities will 
enable us to compete fairly, especially as other agencies 
increase the size of their acquisition workforce.
    The Coast Guard's Acquisition Directorate's job is to 
recapitalize the Coast guard, and I am committed to continue to 
improve our processes and to always be a good steward of the 
taxpayers' dollar. The Coast Guard men and women who serve our 
Nation and the American public deserve nothing less.
    Mr. Chairman, I would like to request that my full written 
statement be submitted for the record. Thank you again for the 
opportunity to come before you today to discuss Coast Guard 
acquisition, and I look forward to your questions.
    Mr. Cummings. Without objection, your full statement will 
become a part of the record. I want to thank you for your 
testimony.
    I was just looking at your testimony and was listening to 
you, and you were saying that in fiscal year 2010 the 
appropriation allowed you to hire 100 additional acquisition 
professionals. In fiscal year 2009 you say we hired 90 new 
acquisition professionals, reducing our civilian vacancy rate 
from nearly 24 percent at the end of fiscal year 2008 to less 
than 10 percent by the end of 2009.
    The new budget, the one the President proposes, 2011, does 
that affect you in any way?
    Admiral Rabago. Yes, it does. It does----
    Mr. Cummings. I mean as laid out right now. We have made it 
clear in this Subcommittee that we are going to fight to 
restore funding so we can get our personnel level up and do all 
the things that the Coast Guard needs to do. But assuming it 
stays as it is, how would that affect your acquisition efforts?
    Admiral Rabago. Sir, our acquisition program baselines you 
spoke of earlier, sir, or our plans for executing our 
acquisition projects efficiently, effectively, and laying out a 
plan for the contracts that do that work, they are based on 
funding budgets that are laid out, and the fiscal year 2011 
budget is a change from what we saw previously, so what we have 
to do is take a look at our acquisition program baselines, 
update those based on the funding that we see in fiscal year 
2011 plus what is in our capital investment plan for the out-
years all the way through to fiscal year 2015, and we are in 
the process of doing that, sir.
    Mr. Cummings. Has it been difficult to find the civilians 
to go into those positions? It seems like you made some 
significant hires. And where do you find these folks; who are 
they?
    Admiral Rabago. The first part of your question, sir, it is 
difficult, but we have a very good human resource team and they 
are able to bring in some tremendously qualified and very 
capable people into our organization. That includes not only 
our civilian professionals that we are hiring, but also our 
military professionals that we bring in which round out our 
acquisition organization.
    The military, of course, we bring in from our technical 
authorities, our sponsor, our field offices that have 
experience operating and working in the Coast Guard; and, of 
course, our civilian counterparts, they come from a variety of 
places, they come from other agencies, they come sometimes from 
the private sector. All of those, though, rounded out together, 
have given us a really high quality acquisition workforce.
    Mr. Cummings. And what about training? You know, one of the 
things that we were concerned about is that we grow and train 
people inside the military, the Coast Guard, and a concern, 
too, was that because of the rotational requirements or rules, 
that a lot of times people are not able to stay long enough to 
be seasoned, and then they move on to something else. How do 
you deal with that?
    Admiral Rabago. That is an area that we have really tackled 
very aggressively. In the last five years we have increased the 
number of certified acquisition professionals from around 30 up 
to 630. Many of those individuals are not directly in the 
Acquisition Directorate; they reside in our technical authority 
areas, they work in our sponsor shop, they work in a resource 
shop, they work in a variety of places in the Coast Guard.
    And that really represents the future of bringing in and 
rotating military personnel that have acquisition experience 
into the Acquisition Directorate and then back out again into 
the technical authorities. So that really becomes our center of 
gravity in the sense of having professionals not just in 
acquisition, but really throughout the Coast Guard that are 
learning the skills necessary to be successful acquirers.
    Mr. Cummings. Now, is the acquisitions, is that something 
that is attractive to people in the military? In other words, I 
know that there are various fields that people are 
automatically attracted to, but is acquisition something that 
folks seem to be excited about?
    Admiral Rabago. Yes, sir. We find, especially in the last 
two or three years, that we have been able to have a great deal 
of interest in our military professionals wanting to join the 
team and be part of acquisition, not necessarily in the 
Acquisition Directorate, but also in the technical authorities. 
They want to be part of recapitalizing the Coast Guard and they 
are excited about that.
    Mr. Cummings. Now, the Coast Guard has, as you stated in 
your testimony, assumed responsibility for acquisition efforts 
that comprises the Deepwater program. The service is now 
developing individual acquisition program baselines with these 
assets, and while I know that the core system is developed by 
ICGS team or likely cost to contract, rather than true program 
baselines, nonetheless, the cost of individual assets appear to 
be rising as the baselines are developed, such the total cost 
of the acquisitions planned under Deepwater are uncertain. But 
it is unlikely that the costs will go below what was projected 
when we held our last hearing to examine the Deepwater programs 
back in March 2009.
    What do you estimate the cost of the procurements currently 
envisioned under Deepwater to be and will the costs exceed the 
$27 billion?
    Admiral Rabago. Yes, sir. As part of our process, you 
mentioned disaggregating the original integrated Deepwater 
system, APB, which had all of the system-of-systems strategy in 
terms of how the individual assets were to be procured. We have 
moved away from that at direction of GAO, at direction of this 
Subcommittee, as well as our Department, into individual 
acquisition program baselines, which are really a plan that 
talk about cost schedule and performance of the asset. Managing 
them all in a single acquisition program baseline, we could not 
do that effectively, and that is why we are doing them 
individually.
    As we go through and do the individual acquisition program 
baselines, we subject those projects to the full rigor of our 
major systems acquisition manual, all of the requirements that 
are in our Coast Guard policy for acquisition, but also 
concurring with our departmental policy, and make sure that we 
have accurate cost estimates, that we have a plan that is based 
on the budgets that we project, we have contracts in place that 
will deliver the capability to the Coast Guard in a timely and 
effectively fashion.
    And when you put that level of accuracy on there, the 
dollars are going to be different from what was done originally 
by the ICGS contract. These are accurate, much more improved in 
terms of the quality and the fidelity of the information in 
those acquisition program baselines by asset is much better, 
and therefore we are confident that those then represent the 
true cost, true schedule, and true performance characteristics 
of the assets that we are acquiring.
    Mr. Cummings. Mr. Coble.
    Mr. Coble. Thank you, Mr. Chairman. I am sorry I am belated 
today; I am running between different meetings.
    Good to have you with us, Admiral. Admiral, the Coast Guard 
recently completed a fleet mixture analysis to determine the 
number and types of vessel platforms that will be necessary to 
support the Coast Guard missions in the future. Ranking Members 
Mica and LoBiondo requested this report I think last month. 
When can we expect that report to be submitted to the 
Subcommittee, Admiral?
    Admiral Rabago. Sir, our Operational Directorate is 
overseeing that effort; it is in its final review at the Coast 
Guard and is expected to be briefed to the Department shortly 
and then out to the committees after that point, sir.
    Mr. Coble. Does the analysis take into account limitations 
resulting from budget constraints or, rather, does it only make 
recommendations on the capabilities and qualities of assets 
that would compose an optimal fleet mixture?
    Admiral Rabago. It takes into account the missions that the 
Coast Guard assets are to work on, it builds off the 
alternatives analysis that was done with the Deepwater Program, 
and it takes a look at the missions that the Coast Guard is 
executing, again, with those assets; and it is looking across 
the board at all those assets and how the Coast Guard would 
execute with the ships and planes that are there. So it is a 
very comprehensive review and that is why it is taking the time 
for the Coast Guard to complete its final evaluation of it.
    Mr. Coble. I thank you for that. Admiral, does the report 
offer alternatives that the Coast Guard is considering?
    Admiral Rabago. I have not seen that, sir. I will make sure 
I get back to the record for you on that, sir.
    Mr. Coble. If you would do that, I would appreciate it. 
Thank you, Admiral.
    Thank you, Mr. Chairman.
    Mr. Cummings. Thank you, Mr. Coble.
    Let's go back, Admiral, to my question a little earlier. 
And if you can't tell me, tell me that you can't tell me, but, 
again, do you expect the cost of Deepwater to exceed the $27 
billion?
    Admiral Rabago. Sir, with the additional four acquisition 
program baselines that we have done since the hearing in 2009, 
the estimate at this point is approximately $27.4 billion, and 
that is, again, with those four additional baselines that now 
have more fidelity and accuracy in our cost estimating. We 
still have four APBs that we are pouring out of the original 
IDS APB, and once that is done, then we will then have the full 
cost of the Deepwater capability as originally envisioned.
    Mr. Cummings. Now, the budget proposes that the funding for 
the next NSC's combined funding for long-lead materials and 
construction in a single year's appropriation, what is the 
likely impact on production if funding for long-lead materials 
is not available before the production of funding?
    Admiral Rabago. There is an impact. Long-lead materials are 
bought in--what we have previously done--approximately one year 
prior to the award of a production contract. That is because 
the materials and the systems that are purchased with that 
money sometimes have as much as two years from the day of order 
to the day of delivery to the shipyard, so it is important that 
you sequence the arrival of that equipment--like engines and 
other important components of the ship--in time to meet the 
construction schedule for the ship itself. If it is not ordered 
in advance, you have to make adjustments to the way you build 
the ship, which could produce inefficiencies and increase cost.
    Mr. Cummings. I notice that we have some guests in the 
room. Welcome to our hearing. So that you will know what we are 
talking about, this is the Coast Guard Subcommittee of the 
Transportation Committee, and a few years ago some legislation 
was put forth to acquire some $25 billion worth of assets over 
the course of 25 years, and what happened is that the Coast 
Guard, because we needed strong acquisitions personnel and 
because of the way the contract was structured, we literally 
were not getting the products that we needed for our Coast 
Guard.
    So we have now sort of revamped that so that we are more 
effective and efficient in acquiring boats and planes, and the 
Admiral here from the Coast Guard is just telling us what we 
have been able to accomplish with regard to that program and 
revamping it so that we can more effectively and efficiently 
acquire assets for our United States Coast Guard.
    The Coast Guard is approximately 42,000 personnel. It is a 
small agency, but they do a lot of very, very important things.
    So I just wanted you to know what we are doing here today, 
and we thank you and we are glad to have you with us.
    Admiral, when you look at where we are, do you think the--
do you have any comments on the fiscal year 2011 budget? I know 
you are sort in a--you have to go along with what Homeland 
Security is saying, but any comments so that we can--because I 
don't want us to go backwards. We have made a lot of progress. 
I am extremely impressed with what has happened, although the 
Senate has not moved on our legislation. But I am extremely 
impressed with what the Coast Guard has done and I don't want 
to see us go backwards. So do you have anything that you would 
want us to consider as we move forward in trying to make sure 
that the Coast Guard has all the money that it needs to do its 
job?
    Admiral Rabago. Sir, we appreciate the support of the 
Subcommittee and you, sir, as Chairman. Our fiscal year 2011 
budget is--we are in the process now, as I said before, of 
evaluating its impact and also the plan that came with it in 
terms of what the out-year funding is predicted to be, and we 
are adjusting and adapting our projects through a re-look at 
our acquisition program baselines to make sure that we account 
for the planned budget and funding stream.
    Steady budgets for the Coast Guard, steady stream of 
funding is very important in terms of an acquisition program 
baseline. If you are going to be acquiring an asset for many 
years, it is very important that you set forth contracts that 
anticipate funding at certain levels and at certain times. So 
we watch that very closely. We are always appreciative when the 
funding in the budget is stable as we move forward; it allows 
us to plan better and to be more efficient in delivering the 
capability to the Coast guard.
    Mr. Cummings. Now, tell me what are the main challenges 
that you have encountered in assuming the lead systems 
integration responsibilities, and I guess specific challenges 
you have not yet met in performing those tasks? Because, again, 
going from the lead systems integration, that is quite a shift 
difference that we made, with the two contractors pretty much 
being in charge now the Coast Guard taking on its own 
responsibilities. You can go ahead and answer the question.
    Admiral Rabago. Yes, sir. The task of being a lead system 
integrator is a challenging task; it is one the Coast Guard is 
embracing and we are making great progress with that. We 
understand what it is. We are grateful for the appropriations 
that have provided the additional acquisition professionals to 
our organization; it has enabled us to manage it. And, again, 
not just in our Acquisition Directorate, but with our technical 
authorities, our sponsor, and the other entities in the Coast 
Guard that are required, including our ability to deliver these 
assets and put them out for the Coast Guard to use.
    As the lead system integrator, it is two parts for us. One 
is a transition from the commercial contract that is in place. 
That is progressing well and winnowing down, and, as I said, we 
will not renew that contract when it expires in 2011 for the 
ICGS and the Deepwater contract.
    Mr. Cummings. Now, some--no, you go ahead. I am sorry.
    Admiral Rabago. The other part of it is what we are doing 
within the Coast Guard. One is a human resource issue, which is 
the certification, the qualification and experience of our 
acquisition professionals, again, within the Directorate and 
without; and then also putting the policies, the processes, the 
discipline, the internal controls necessary to manage complex 
acquisition that run over multiple years and also, as a system 
integrator, to make all of those assets and all of those 
projects work together effectively so that we deliver 
capability that is integrated and interoperable for our Coast 
Guard forces.
    Mr. Cummings. Now, one of the things that had come up 
earlier, we had wanted to make sure that we were using the Navy 
because the Navy had such a sophisticated acquisitions body to 
address acquisitions, and we got the impression at one point 
that the Coast Guard had a lot of pride, and we understand 
that, but we also want it to be effective and efficient. So we 
were wondering how has the relationship been with the Navy.
    Admiral Rabago. The relationship with the Navy is 
excellent, sir. We utilize their expertise in a number of 
different areas. We also contribute to their expertise with 
some of the work that we do. We are at the table with them when 
it comes to looking at rates at shipyards where we both have 
Navy work and Coast Guard work going on; we use some of their 
expertise for some of the testing and evaluation and capability 
that they have. We put a Coast Guard flavor on it to make sure, 
though, that the assets being tested are suitable for Coast 
Guard missions.
    And the Navy has worked very well with us to do exactly 
that. So we have literally dozens of connection points to the 
U.S. Navy and other agencies, including within our own 
Department, other components like Customs and Border 
Protection. We look for great partnerships in a multitude of 
areas to make sure that we are informed, because even with our 
growth of acquisition expertise and personnel, we can leverage 
expertise and resources and capacity in the other agencies, and 
we are doing exactly that, sir.
    Mr. Cummings. Now, some cost estimates for the offshore 
patrol cutter seem to indicate that these vessels could cost as 
much as the NSCs. Are the OPCs envisioned to be just slightly 
smaller versions of the NSC? Further, without completion of the 
fleet mix analysis, which will presumably lay out detailed 
mission requirements for the OPC, is the Coast Guard in a 
position to move forward on the design of the OPC?
    Admiral Rabago. Yes, sir. We have just complete the 
requirements. The requirements are at the Department for their 
approval. The OPC, as laid out, is going to be a very capable 
ship. It is not an NSC. It will provide great capability that 
is set forth. We spent a lot of time on the requirements to 
make sure they were right. The sponsor has given me a good set 
of requirements and I, as an acquirer, can use those 
requirements and go off and design and continue to work 
collaboratively with the sponsor and the technical authorities 
to produce a great ship that is going to be able to perform 
Coast Guard missions.
    Mr. Cummings. Now, do you still expect to procure Aden NSCs 
and will the cost come in at or under the $4.7 billion 
acquisition program baseline currently in place? Further, are 
there differences between the assumptions made in the APB for 
the NSC and the funding assumptions in your long-range capital 
plan? If so, what are they and what will be done to reconcile 
them? One of the things that I noticed with the NSCs is that it 
seems as if the costs were steadily rising, far above what we 
had anticipated, because they were trying to work out the 
little problems and whatever, but those problems seem to be 
quite costly. What do you anticipate with regard to cost 
overruns?
    Admiral Rabago. Yes, sir. We do plan for eight NSCs. That 
is what is in our APB. We will continue with that. We are 
evaluating what the fiscal year 2011 capital investment plan, 
the out-year plan, and how it lays out the funding and the 
funding in fiscal year 2011, how that will affect our APB. It 
is a different funding strategy than what is in our acquisition 
program baseline, so, again, our APB is a plan. We now need to 
go back and take a look at what the realities of the current 
budget is against that plan and come back, and I could then 
tell you what the changes in cost, if any, will be.
    I am sorry, sir.
    Mr. Cummings. No, you go ahead.
    Admiral Rabago. As far as the ships in terms of cost 
management, the Department has been working closely with us. We 
have actually taken a close look at cost. One of the biggest 
drivers for cost is changing requirements. The National 
Security Cutter has very stable requirements. We intend to 
build the same ship all the way through to the eighth ship, and 
we are doing that on the current set of ships, on the ships 
that are under construction right now, and we intend to 
continue to manage the cost.
    There were a number of cost increases due to material 
increases and other things that have been put in. Some of those 
are reflected in our current acquisition program baseline; 
others are inflation and other factors that we will look at 
when we reevaluate what the fiscal year 2011 budget, how it 
affects our acquisition program baseline.
    Mr. Cummings. Do you think we have pretty much perfected 
the NSCs now?
    Admiral Rabago. Yes, sir. We are ready to continue to build 
those ships out. When it comes time to--once you have a stable 
set of requirements, you have your manufacturing processes 
figured out in the shipyard, the most efficient and effective 
thing to do is to build the ships as quickly as you can. The 
costs only rise as you stretch the program.
    Mr. Cummings. Now, the boats that couldn't float, the ones 
that end up in the Coast Guard yard there in Baltimore, I 
understood they took some of the--they were able to use some 
parts of those, is that right?
    Admiral Rabago. Yes, sir. Those are the 123s, sir, and 
those eight vessels are the subject currently of a Department 
of Justice investigation. We are supporting that investigation, 
preserving the evidence, but at the same time we have worked 
closely with them to be able to start to remove critical 
components off of those vessels to support our in-service 110-
foot vessels which are out, of course, executing Coast Guard 
missions.
    We have taken engines and reduction gears off of two 
vessels. We intend to take the same equipment off of three more 
so we can put them into our repairable pipeline and repair 
those engines and get them out in service back for the Coast 
Guard.
    Mr. Cummings. Again, we are going to call the hearing to an 
end, but I want to thank you very much for your--hold on a 
second.
    It is my understanding that Mr. LoBiondo has a statement. 
We will make that statement a part of the record, without 
objection.
    Mr. Cummings. I want to thank you very much, and, again, I 
reiterate what I said a little bit earlier. I was very, very 
pleased--and I think I speak for Mr. LoBiondo also--at the 
progress that we have made with regard to acquisitions. It has 
simply been phenomenal and we are very proud of what you all 
have been able to achieve, and I think that the American 
people, when we compare where Deepwater was a few years ago and 
where it is now, it is light years, and I just want to 
congratulate you and all of those in the Coast Guard who have 
been a part of making that happen.
    The other thing I would say is I want to thank the Coast 
Guard for your response in Haiti. All the reports that have 
come back said that the Coast Guard performed at the top of its 
game, no doubt about it, just as they did in Katrina. And I 
just want to make it clear to all the Coast Guard's men and 
women that we in this Congress are very grateful for all that 
they have done and all they are doing.
    With that, this hearing is at its end.
    Admiral Rabago. Thank you, sir.
    [Whereupon, at 10:40 a.m., the Subcommittee was adjourned.]

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