[Senate Hearing 115-877]
[From the U.S. Government Publishing Office]
S. Hrg. 115-877
THE FUTURE OF THE FLEETS: COAST GUARD AND NOAA SHIP RECAPITALIZATION
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HEARING
BEFORE THE
SUBCOMMITTEE ON OCEANS, ATMOSPHERE, FISHERIES, AND COAST GUARD
OF THE
COMMITTEE ON COMMERCE,
SCIENCE, AND TRANSPORTATION
UNITED STATES SENATE
ONE HUNDRED FIFTEENTH CONGRESS
SECOND SESSION
__________
OCTOBER 11, 2018
__________
Printed for the use of the Committee on Commerce, Science, and
Transportation
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available online: http://www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
57-575 PDF WASHINGTON : 2024
SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
ONE HUNDRED FIFTEENTH CONGRESS
SECOND SESSION
JOHN THUNE, South Dakota, Chairman
ROGER F. WICKER, Mississippi BILL NELSON, Florida, Ranking
ROY BLUNT, Missouri MARIA CANTWELL, Washington
TED CRUZ, Texas AMY KLOBUCHAR, Minnesota
DEB FISCHER, Nebraska RICHARD BLUMENTHAL, Connecticut
JERRY MORAN, Kansas BRIAN SCHATZ, Hawaii
DAN SULLIVAN, Alaska EDWARD MARKEY, Massachusetts
DEAN HELLER, Nevada TOM UDALL, New Mexico
JAMES INHOFE, Oklahoma GARY PETERS, Michigan
MIKE LEE, Utah TAMMY BALDWIN, Wisconsin
RON JOHNSON, Wisconsin TAMMY DUCKWORTH, Illinois
SHELLEY MOORE CAPITO, West Virginia MAGGIE HASSAN, New Hampshire
CORY GARDNER, Colorado CATHERINE CORTEZ MASTO, Nevada
TODD YOUNG, Indiana JON TESTER, Montana
Nick Rossi, Staff Director
Adrian Arnakis, Deputy Staff Director
Jason Van Beek, General Counsel
Kim Lipsky, Democratic Staff Director
Chris Day, Democratic Deputy Staff Director
Renae Black, Senior Counsel
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SUBCOMMITTEE ON OCEANS, ATMOSPHERE, FISHERIES,
AND COAST GUARD
DAN SULLIVAN, Alaska, Chairman TAMMY BALDWIN, Wisconsin, Ranking
ROGER F. WICKER, Mississippi MARIA CANTWELL, Washington
DEB FISCHER, Nebraska RICHARD BLUMENTHAL, Connecticut
JAMES INHOFE, Oklahoma BRIAN SCHATZ, Hawaii
MIKE LEE, Utah EDWARD MARKEY, Massachusetts
RON JOHNSON, Wisconsin GARY PETERS, Michigan
CORY GARDNER, Colorado
TODD YOUNG, Indiana
C O N T E N T S
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Page
Hearing held on October 11, 2018................................. 1
Statement of Senator Sullivan.................................... 1
Statement of Senator Baldwin..................................... 2
Prepared statement from Deepak Navnith, President, Fairbanks
Morse, LLC................................................. 4
Prepared statement from Laura R. Haas, CEO, American
Shipbuilding Suppliers Association......................... 5
Statement of Senator Wicker...................................... 49
Statement of Senator Blumenthal.................................. 50
Witnesses
Rear Admiral Michael J. Haycock, Assistant Commandant for
Acquisition and Chief Acquisition Officer, U.S. Coast Guard.... 7
Prepared statement........................................... 9
Marie A. Mak, Director, Contracting and National Security
Acquisitions, Government Accountability Office................. 12
Prepared statement........................................... 14
Ronald O'Rourke, Specialist in Naval Affairs, Congressional
Research Service............................................... 22
Prepared statement........................................... 24
Appendix
Rear Admiral Michael J. Silah, NOAA Director, Office of Marine
and Aviation Operations and Director, NOAA Commissioned Officer
Corps, National Oceanic and Atmospheric Administration, U.S.
Department of Commerce, prepared statement..................... 55
Letter dated October 10, 2018 to Hon. Thune, Hon. Nelson, Hon.
Sullivan and Hon. Baldwin from Jacqueline Savitz, Chief Policy
Officer, North America, Oceana................................. 58
Letter dated October 11, 2018 to Hon. Dan Sullivan and Hon. Tammy
Baldwin from Janis Searles Jones, Chief Executive Officer,
Ocean Conservancy.............................................. 59
Letter dated October 24, 2018 to Hon. John Thune and Hon. Bill
Nelson from Matt Tinning, Associate Vice President, Oceans,
Environmental Defense Fund..................................... 60
Response to written questions submitted to RADM Michael J. Silah
by:
Hon. Tammy Baldwin........................................... 61
Hon. Edward Markey........................................... 62
THE FUTURE OF THE FLEETS: COAST GUARD AND NOAA SHIP RECAPITALIZATION
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THURSDAY, OCTOBER 11, 2018
U.S. Senate,
Subcommittee on Oceans, Atmosphere, Fisheries, and
the Coast Guard,
Committee on Commerce, Science, and Transportation,
Washington, DC.
The Subcommittee met, pursuant to notice, at 9:36 a.m. in
room SR-253, Russell Senate Office Building, Hon. Dan Sullivan,
Chairman of the Subcommittee, presiding.
Present: Senators Sullivan [presiding], Baldwin, Wicker,
and Blumenthal.
OPENING STATEMENT OF HON. DAN SULLIVAN,
U.S. SENATOR FROM ALASKA
Senator Sullivan. The Subcommittee on Oceans, Atmosphere,
Fisheries, and Coast Guard will now come to order.
The Subcommittee meeting today is to review the needs and
current state of the fleet capitalization efforts of both the
United States Coast Guard and the National Oceanic and
Atmospheric Administration, NOAA.
The very missions of each agency contribute to the safety,
national security, and economic growth of our nation.
Congress has given the Coast Guard an incredibly wide range
of missions, from search and rescue, ice-breaking, marine
environmental protection, to port security, drug interdiction,
international crisis response, and readiness to support the
Department of Defense operations, which the Coast Guard also
does.
Increasing human activity in the Arctic, violence,
terrorism, and drug trafficking in the Caribbean Basin, Central
America, and Mexico, overseas contingency operations demand an
increased Coast Guard presence at home and increasingly around
the globe. These pressures are pushing the limits of the older
generation cutters in the fleet.
Annually, NOAA, Office of Marine and Aviation Operations,
manages to conduct more than a hundred missions, utilizing a
small fleet of vessels to support the safety, security, and
economic interests of our Nation.
The data and intelligence provided by NOAA safeguards the
flow of cargo through our U.S. ports, monitors our fish stocks,
and helps communities and fishermen plan around severe weather.
However, half of the NOAA fleet that provides these services
are due to retire in the not-too-distant future of 2028.
NOAA estimates that the loss of vessel capability without
recapitalization would directly impact the nation's $4.6
trillion economic activity generated in U.S. seaports; which
rely on accurate nautical charts, the $200 billion-a-year
seafood industry of our nation, and nearly half of the nation's
population that lives in coastal areas, the economic engine of
which often relies on things like tourism, agriculture, and
other important drivers of the U.S. economy.
My state, Alaska, has more than 44,000 miles of shoreline,
which is more than the entire shoreline of the Lower 48 states.
The missions of these agencies are not only vital in Alaska but
throughout the country.
The area of responsibility assigned to the Coast Guard
units within Alaskan waters is the largest in the nation and
encompasses an area over three and a half million square miles.
While far from Alaska, I'd be remiss if I did not mention
the courageous and important work conducted by the men and
women in the Coast Guard and NOAA with responding to hurricanes
this season. In fact, duty has called one of our witnesses
today, Rear Admiral Silah, Director of NOAA's Office of Marine
and Aviation Operations, who will not be participating today as
he is responding to Hurricane Michael.
Each agency's recapitalization efforts is in a much
different stage of the process. NOAA is in the opening stages
of its efforts to produce eight new ships to replace half its
fleet while the Coast Guard is 10 years into a much larger and
very important recapitalization effort that has bipartisan
support in the Congress.
I should also note that we are likely hopeful to take up
the Coast Guard bill next week on the Senate Floor.
This Subcommittee is committed to working to ensure the
success of the missions of these agencies and adequate
resources are needed to ensure that this occurs.
Today, we will be hearing from the Coast Guard on the need
for new ships, recapitalization strategies, and the status of
current acquisition efforts. CRS and GAO experts can also
provide additional viewpoints of best practices and acquisition
strategies for both agencies.
With that, I want to thank our witnesses for being here. I
apologize for us running a little bit late, and I now want to
recognize the Ranking Member, Senator Baldwin, for any opening
statements she may have.
Senator Baldwin.
STATEMENT OF HON. TAMMY BALDWIN,
U.S. SENATOR FROM WISCONSIN
Senator Baldwin. Thank you, Mr. Chairman.
Well, first, I would like to join the Chairman in
recognizing those still experiencing or just starting their
recovery from Hurricane Michael and thank our responders for
all of the hard and brave work that they're doing to assist
those that are affected, and the efforts by the Coast Guard and
NOAA in response to Hurricane Michael once again highlight how
important these agencies are to ensuring the life and safety of
U.S. citizens and the continuation of commerce in our waterways
and ports. So we need to ensure that they have the right assets
to do that.
That's why I'm pleased that we've convened this hearing
today on the Coast Guard and NOAA's plans to recapitalize their
critically important fleets.
The Coast Guard saves about 4,000 lives each year. It
interdicts hundreds of millions of dollars worth of drugs
before they reach the U.S. and it helps ensure our nation's
security by patrolling our waters and high seas.
The Coast Guard also ensures the safety of mariners in the
Great Lakes. During the winter months, it plays a critical role
in ensuring commerce by conducting ice-breaking operations. The
polar icebreakers, cutters, and patrol boats that make up the
Coast Guard's fleet have all reached or will soon reach the end
of their service lives.
NOAA has the largest Federal research fleet in the nation
and its approximately 100 at-sea missions each year contribute
significantly to the U.S. economy, both directly and
indirectly.
The fleet collects data that's critical for making nautical
charts to ensure safe and efficient commerce at our seaports
and waterways. It's responsible for conducting fish stock
assessments that support our nation's $200 billion fisheries.
The fleet collects data for storm surge modeling that aid
in hurricane and other disaster responses, and it collects data
that goes into producing NOAA's weather warnings and forecasts,
but NOAA's ships are aging with ages ranging between five and
50 years old.
I'm proud to say that the newest ship in NOAA's fleet, the
Reuben Lasker, named after a famed fisheries biologist, was
built in Wisconsin by Fincantieri Marinette Marine. That
shipyard, which also built the Coast Guard's Great Lakes
Icebreaker, the Mackinaw, and builds the Littoral combat ship
for the U.S. Navy, is one pillar of Wisconsin's proud
shipbuilding industry.
Another is Fairbanks-Morse, which has supplied the U.S.
Coast Guard and Navy with high-performance engines for over 70
years.
In short, Wisconsin knows how to build ships and knows how
to manufacture the critical components that make those ships
the best in the world, but more needs to be done to support our
domestic shipbuilding industry and to ensure that when it comes
to government procurement, U.S. taxpayer dollars are used to
purchase U.S.-manufactured ships and shipboard components, and
that's why I introduced a bill in April, the Made in America
Shipbuilding Act, or MASA.
MASA would require Federal agencies to purchase vessels
constructed only in the United States using U.S. raw materials
and American-made onboard components, like valves, pumps,
cranes, winches, and engines.
To protect against contract disruption or unintended
consequences, there are waivers for legitimate reasons of cost,
schedule, competition, and national security.
I'd like to hear from our witnesses, especially Admiral
Haycock, about their views on Buy America requirements and the
need to have strong domestic industrial-based partners to
execute their missions.
Finally, I was really hoping we could get some of our
Wisconsin shipbuilding companies here today for this hearing,
but, Mr. Chairman, can we submit a few of their written
statements for the record?
Senator Sullivan. Without objection.
Senator Baldwin. All right. Thank you, Mr. Chairman.
[The information referred to follows:]
Prepared Statement of Deepak Navnith, President, Fairbanks Morse, LLC
Mr. Chairman, thank you for this opportunity to submit a statement
on behalf of Fairbanks Morse, LLC regarding the important topic of
recapitalizing the NOAA and Coast Guard fleets.
Fairbanks Morse has been a key supplier of propulsion engine
systems to the U.S. Government since 1938, when Fairbanks Morse sold
its first engine to the U.S. Navy. As the government ramped up the
industrial base for World War II, the Navy invested $5 million ($100
million in today's dollars) in a new manufacturing site for diesel
engines, enabling Fairbanks Morse to deliver 1,650 engines during the
course of the War at the rate of one engine per day. For this effort,
Fairbanks Morse was honored by the Department of War with two Army-Navy
``E'' awards--an extremely rare distinction honoring the company's
excellence in supporting the war effort.
Fairbanks Morse is very proud of the fact that we currently have
more than 500 US-made engines installed on current ships of the U.S.
Government. We continue to manufacture, assemble and test these
critical products for Navy and Coast Guard ships today, supplying
hundreds of employees with well-paying jobs. Most recently, we were
honored to have been chosen by Eastern Shipbuilding Corporation to
supply main propulsion diesel engines for the Coast Guard's Offshore
Patrol Cutter.
Fairbanks Morse is also currently producing engines for several
Navy combatant, amphibious and auxiliary ships, as well as aircraft
carriers. We additionally have a commercial contract to provide high-
quality emergency power generators for the French nuclear power
company, EDF. This level of manufacturing has allowed us to also make
significant investments in our facilities, training programs for our
highly skilled employees, and expanded field services programs for our
customers.
Fairbanks Morse is currently the only U.S. manufacturer of large,
medium-speed diesel engines. While we are confident that our people,
products, and after-market services are state-of-the-art and second to
none, I want to emphasize that a key contributor toward our ability to
do so has been the U.S. government's policies requiring domestic
manufacturing for critical ship components. These policies are clearly
spelled out in the statutes establishing the National Defense Sealift
Fund (NDSF) in Fiscal Year 1991 and clarified in subsequent National
Defense Authorization Acts and annual Defense Appropriations Acts.
Because of this requirement, Fairbanks Morse has been able to maintain
its position as a critical U.S. supplier and sustainer of main
propulsion engines for the Navy fleet--a particularly important U.S.
defense capability for nuclear Navy NoForn programs.
There have been longstanding requirements that ships for the U.S.
armed forces and for the coastwise commercial shipping trade must be
built in the US. The reasons for this are very clear--we must ensure
the ability of our defense industrial base to manufacture and support
our armed forces, and we must ensure that our fleet of US-owned, US-
built, and US-manned ships are available for supplying us in times of
national emergencies.
However, there is currently no similar requirement that critical
components on these ships must be manufactured in the U.S. When the
funding for auxiliary and sealift ships was moved from the NDSF to the
Navy's SCN (Shipbuilding and Conversion, Navy) account in FY 2015, the
domestic manufacture requirements for critical components no longer
applied. Additionally, there is no requirement for domestic manufacture
of critical components for ships procured by the U.S. Coast Guard,
NOAA, or any other government agency.
I also want to be clear on another critical point: Fairbanks Morse
does not shy away from competition, nor do we simply rely on being
given work by the government. We firmly believe that we have been
competitive in every recent Coast Guard and Navy shipbuilding program.
Where we have lost out, we are confident that it was either a minor
difference on the initial acquisition cost, or that the propulsion
system components were awarded based on a separate business
relationship between the U.S. shipbuilder and the foreign supplier.
Furthermore, we are confident that, had total life-cycle support for
these engines been considered in the initial acquisition, our superior
performance in training and after-market services would eclipse any
difference in initial acquisition cost.
It is also important to understand that our ability to compete is
often driven by differences in overall requirements under which our
foreign competitors operate: important labor and environmental
requirements; cost accounting and transparency; and especially the
rigorous performance specifications demanded by our government
customers that we are driven to meet on a daily basis. Most of our
foreign competitors are global corporations that do not operate in such
a specification-driven business environment, since the vast majority of
their business is the world-wide commercial shipbuilding and power
generation market.
Both the Navy and Coast Guard have experienced challenges in
shipbuilding programs where foreign component suppliers were not
prepared to meet the same qualifications that Fairbanks Morse considers
an essential hallmark of its products. I will emphasize again that we
do not shy away from such competition--we simply request that the
playing field be level.
Given the Coast Guard's ongoing OPC program, the critical heavy
icebreaker program, the anticipated modernization of the NOAA fleet,
along with the Navy's planned ramp-up in ship and submarine
construction, Fairbanks Morse firmly believes that foreign competitors
for main propulsion engines and other critical shipbuilding components
will see this as an opportunity to invest in U.S. manufacturing
capability: ``If you require it, they will come.''
But they will only do so if it is clear that this is a requirement
in order to compete. There are already several U.S. manufacturers
capable of supplying smaller main propulsion engines. We would welcome
US-based competition for manufacturing large, medium-speed diesel
engines, but it is essential to put in place statutory requirements for
domestic manufacture of critical components for ships procured by the
U.S. government so that the competition is fair and that we can count
on a secure and stable manufacturing industrial base.
That point was emphasized in the recently released report:
``Assessing and Strengthening the Manufacturing and Defense Industrial
Base and Supply Chain Resiliency of the United States'', as directed by
Presidential Executive Order #13806. The shipbuilding industrial base
was identified as being one of the most fragile and threatened:
``Industries involved in the manufacturing of shipbuilding
components were among the hardest hit by the global shift in
the industrial base over the last 20 years. Of the top ten
highest grossing industries in Navy shipbuilding, six are in
the manufacturing sector. Since 2000, these industries
experienced a combined decline of over 20,500 establishments in
the U.S.
``Contraction of the shipbuilding sector limits competition
among U.S. suppliers of Navy components. In many cases,
competition has altogether vanished, forcing the Navy to rely
on single and sole source suppliers for critical components.
These companies struggle to survive and lack the resources
needed to invest in innovative technology. Expanding the number
of companies involved in Navy shipbuilding is important to
maintaining a healthy industrial base that can fulfill the 355-
ship fleet and support the Navy's long-range shipbuilding
plan.''
Among challenges highlighted across the entire defense industrial
base were procurement complexity, lengthy acquisition timelines, unique
accounting standards, and burdensome security clearance requirements.
In addition, the report highlighted cybersecurity gaps across the
supply chain, in part due to the reliance on foreign-supplied
components and materials. While improvements can and should be made in
each of these areas, all of these issues are ones that Fairbanks Morse
and other trusted U.S. manufacturers are accustomed to. We firmly
believe that domestic manufacture requirements for critical components
is an essential part of securing our Nation.
In conclusion, I want to thank the Committee for having this
hearing and for this opportunity to provide our thoughts based on 80
years of partnering with the shipbuilding industry and the U.S.
government. We look forward to working with Congress to develop
policies that will ensure our Nation's ability to meet any national
security challenges we encounter. Thank you, Mr. Chairman.
______
Prepared Statement of Laura R. Haas, CEO,
American Shipbuilding Suppliers Association
The American Shipbuilding Suppliers Association (ASSA) represents
unique companies which manufacture military grade components and
systems relied upon by the Department of Defense's blue and brown
water, subsea, air, and aerospace fleets. Our members supply, among
other things: navigation systems; engines; generators; reduction gears;
air compressors; specialty solenoids; hardened manifolds; valves;
switchboards; power converters; circuit breakers and power cables. When
United States Navy or Coast Guard encounter hostilities while defending
American interests, whether by sea, undersea, air, or space, they do so
on the strength and reliability of mission critical components
designed, developed and produced in America by ASSA members.
The Department of Defense (DOD) has always relied on us because of
our ongoing commitment to reinvest our own assets in the development of
new facilities, technologies and systems, primarily for the benefit of
the military. We employ the best professionals and skilled labor in the
country and produce American products that continue to guarantee the
continuity of the fleet and the availability of good, well-paying jobs.
Of course, our interests are best served by receiving orders from the
DOD sufficient in volume and with adequate frequency and lead-time to
ensure our abilities to maintain continuity in our ongoing product
lines.
The President and Congress are ever engaged in the effort to
balance the costs of constructing and maintaining fleets while ensuring
the quality and continuity requisite to maintaining American security.
As a result, President Trump's Executive Order (EO) 13806 recently
directed the office of the Secretary of Defense (SECDEF) to study the
overall costs of long and short-term DOD procurement and maintenance,
along with positing the economic dynamics affecting those costs, and
suggesting solutions. The SECDEF issued the report, ``Assessing and
Strengthening the Manufacturing and Defense Industrial Base and Supply
Chain Resiliency of the United States.'' The report provides a
comprehensive overview of domestic and international economic and
political forces that have resulted in the degradation of the U.S.
heavy commercial manufacturing base, and corresponding escalation of
the general costs of production. It suggests that the state of that
base is untenable view of, for instance, the Navy and Coast Guard's
current fleet expansion, which is heavily dependent on a healthy,
competitive commercial market. The report provides a comprehensive set
of recommendations across executive departments, including legislation
further stabilizing the U.S. Navy's traditional and necessary, American
production requirements.
As a general matter, the DOD commercial supplier market itself is
divided in two unequal parts: first, and largest, are those facilities
who produce both military and non-military products, such as shipyards.
Second, there are those industries which produce highly specialized,
military grade, mission critical component parts. ASSA represents
companies that fall into the latter category.
The referenced report focuses on forces that are generally adverse
to all DOD contractors: inconsistent funding, loss of manufacturing
facilities, pernicious regulation and procurement issues, unfair
competition and lack of labor force training. These are indeed issues
that should be addressed in a macro analysis. However, ASSA's member
companies provide specialized research, design, manufacturing and
support services that simply can not be accurately measured by mere
market dynamics.
Congress is now considering myriad proposals included in the report
for the funding and stabilization of the market to facilitate fleet
expansion. ASSA represents the American industrial base that supports
the U.S. Navy and U.S. Coast Guard shipbuilding community, we strongly
and heartily endorse the recommendations proposed in this report. In
particular, ASSA urges:
Expanded direct investment in the lower-tier of the
industrial base through the DOD's Defense Product Act Title
III, Manufacturing Technology and Industrial Base Analysis and
Sustainment programs
Modernize the organic industrial base to ensure its
readiness to sustain fleets and meet contingency surge
requirements
Further enhance efforts exploring next generation technology
for future threats
Further of interest to ASSA is Senator Baldwin's bill, ``Made in
America Shipbuilding Act of 2018'' which is strongly supported by ASSA.
The current Buy American rules are insufficient and Senator Baldwin's
bill is needed. ASSA members provide services that simply can not be
replaced in times of crisis. The end result of the economic failure of
any American industry, whether DOD related or not, is damaging to the
country's vital interests. However, the end result of failure by
economic debasement of the DOD suppliers like ASSA members, even if by
misplaced reliance on otherwise deferential market forces, could be
fatal to the country itself, it is truly a matter of national security.
Senator Sullivan. Well, again, I want to thank the
distinguished panel of witnesses today.
Today, we have Rear Admiral Michael Haycock, who is the
Assistant Commandant of the U.S. Coast Guard for Acquisition;
Ms. Marie Mak, who is the Director, Contracting and National
Security Acquisitions from the GAO; and Mr. Ronald O'Rourke,
who is a Specialist in Naval Affairs from the Congressional
Research Service.
Each of you will have 5 minutes to deliver an oral
statement and a longer written statement will be included for
the record.
Admiral Haycock, we'll begin with you, sir.
STATEMENT OF REAR ADMIRAL MICHAEL J. HAYCOCK,
ASSISTANT COMMANDANT FOR ACQUISITION AND CHIEF
ACQUISITION OFFICER, U.S. COAST GUARD
Admiral Haycock. Good morning, Chairman Sullivan, Ranking
Member Baldwin, and Distinguished Members of the Subcommittee.
Thank you for the opportunity to testify today. I
respectfully request that my written testimony be entered in
the record.
Senator Sullivan. Without objection.
Admiral Haycock. As you know, the Coast Guard is
simultaneously a Federal law enforcement agency, a maritime
first responder, a regulatory body, a member of the
intelligence community, a critical part of border security, and
a military police.
To maintain our commitment to executing these statutory
missions, the Coast Guard has made recapitalizing the services
of surface, aviation, and command and control capabilities a
top priority. These investments not only enhance our ability to
execute the mission demands of today but also ensure that we
can meet the mission demands of tomorrow.
The steadfast support of Congress and of this subcommittee
in particular has positioned the Coast Guard for success in
remaining ready, relevant, and responsive to present and future
needs of the United States and on behalf of the service, I
thank you.
As the Coast Guard's chief acquisition officer, I'm excited
to be here today and to testify on vessel acquisitions. One of
the most critical assets of our nation's maritime security is
the offshore patrol cutter, and I'm thrilled to indicate that
last month, the Coast Guard exercised a contract option to
begin the construction of the lead offshore patrol cutter and
to order the long lead materials for the second.
This contract action maintains the schedule to deliver the
first offshore patrol cutter in 2021 and commence the
replacement of our medium endurance cutters, some of which are
over 50 years old, which is twice their planned service life in
some cases.
Until we deliver the offshore patrol cutters, the Coast
Guard needs to keep our aging medium endurance cutter fleet in
fighting shape. To do so, the Coast Guard is in the advance
planning stage to extend their service lives until the offshore
patrol cutters enter operational service.
On the same day that we did the contract and optioned the
OPC, we also executed a contract to bid the long lead time
materials for the 11th national security cutter and early this
summer, we took delivery of our 30th fast response cutter and
exercised an option for production of six more fast response
cutters, bringing our current number of fast response cutters
under contract to 50.
As our recapitalized white hull fleet of national security
cutters and fast response cutters and offshore patrol cutters
continues to come online and take the watch, the Coast Guard is
also making significant strides toward rebuilding or building
our polar security cutter and recapitalizing our fleet of aged
river, construction, and inland buoy tenders with the waterways
commerce cutter.
The United States has not built a heavy polar icebreaker in
40 years and the need for that capability as a strategic
national asset, both in today's maritime environment and in the
future, is more critical today than ever.
To prudently accelerate our polar security cutter
acquisition timeline, the Coast Guard and the Navy formed an
integrated program office. This arrangement enables us to
utilize Navy expertise and their support while leveraging best
practice for both services to maintain an accelerated
acquisition schedule. It's a partnership that's paying
significant dividends for one of the Coast Guard's highest
acquisition priorities.
After significant industry engagement, a request for
proposals was issued in March, nearly a month ahead of
schedule, and we're on track to award a detailed design and
construction contract in Fiscal Year 2019.
We've already received technical proposals from industry
and we're looking forward to receiving cost proposals later on
this fall.
The Coast Guard is also accelerating efforts to acquire a
waterways commerce cutter fleet, another critically needed
asset. Our nation's maritime transportation system contributes
$4.6 trillion annually to the United States gross domestic
product and these cutters play an important role in sustaining
the safety and security of this vital economic resource.
However, the average age of our river construction inland
buoy tenders is over 53 years old and the readiness and
maintainability is continually becoming more challenging.
The Coast Guard is working with the Navy to examine the
past with the best potential to effectively refresh this
important capability.
All this progress toward recapitalization would not be
possible without the hard work of the men and women supporting
these acquisitions. We've got a deep and talented pool of
program management, contracting and support professionals that
keep our 20 major and non-major acquisition programs on
schedule and on budget while ensuring the Coast Guard operators
have the tools and the capabilities that they need to maintain
safety and security of our maritime environment.
Once again, thank you very much for the opportunity to
testify today, and I look forward to your questions.
[The prepared statement of Admiral Haycock follows:]
Prepared Statement of Rear Admiral Michael J. Haycock,
Assistant Commandant for Acquisition and Chief Acquisition Officer,
U.S. Coast Guard
Good morning Chairman Sullivan, Ranking Member Baldwin, and
distinguished members of the subcommittee. I appreciate the opportunity
to testify today and thank you for your enduring support of the United
States Coast Guard.
The Coast Guard offers unique and enduring value to the Nation. A
branch of the Armed Forces at all times, our combination of broad
authorities and complementary capabilities squarely align with the
President's national security and economic prosperity priorities. The
Coast Guard is also a Federal law enforcement agency, a regulatory
body, a first responder, and a member of the U.S. Intelligence
Community, which uniquely position the Service to help secure the
maritime border, combat transnational criminal organizations (TCOs),
facilitate and safeguard commerce on America's waterways, and protect
our national interests in the Polar Regions.
Coast Guard assets and capabilities serve as a force multiplier for
the Department of Defense (DoD) and deploy worldwide to execute
statutory defense operations in support of national security
priorities. On any given day, 11 cutters, two maritime patrol aircraft,
five helicopters, two specialized boarding teams, and an entire Port
Security Unit are supporting DoD Combatant Commanders, as well as U.S.
Cyber Command, on all seven continents. A squadron of six Coast Guard
patrol boats and crews continue to patrol the waters of the Northern
Arabian Gulf in close cooperation with the U.S. Navy, promoting
regional peace and stability. Likewise, as one of the principal Federal
agencies performing detection and monitoring in the southern maritime
transit zone, the Coast Guard provides more than 4,000 hours of
maritime patrol aircraft support and 2,000 major cutter days to U.S.
Southern Command each year.
The Coast Guard is also the Nation's ``maritime first responder.''
Our bias for action and ability to rapidly surge resources in response
to emerging threats, as most recently demonstrated during this year's
devastating hurricane season, are hallmark traits of our Service. Since
the landfall of Hurricane Florence, Coast Guard men and women in
helicopters, boats, cutters, vehicles and on foot have rescued over
1,100 people. This follows on the heels of last year's historic
hurricane season.
Coast Guard mission readiness requires an ability to execute our
full suite of missions in the present while simultaneously making the
investments necessary to meet mission demands in the future.
Prudence demands we continue investing in a modernized Coast Guard.
Recapitalization remains a top priority for the Commandant, and your
support has helped us make tremendous progress.
The Coast Guard is in the midst of recapitalizing the service's
surface, aviation and command and control capabilities through more
than 20 major and non-major acquisition programs. These efforts are
supported by a framework of governance and policies developed by the
Department of Homeland Security and the Coast Guard, are in line with
best practices identified by our Federal partners, including the
Department of Defense and the U.S. Navy, and are constantly evolving
based upon lessons learned.
With the support of the Administration and Congress, we are making
significant progress toward building new Polar Security Cutters. This
past March, we released a request for proposal (RFP) as a full and open
competition, setting the stage for award of a Detail Design and
Construction (DD&C) contract in FY 2019 for the construction of up to
three heavy Polar Security Cutters. We are as close as we have ever
been to recapitalizing our Polar icebreaking fleet; continued
investment now is vital to solidifying our standing as an Arctic nation
and affirms the Coast Guard's role in providing assured access to the
Polar Regions for decades to come.
Last month, the Coast Guard exercised a contract option to begin
production of the lead Offshore Patrol Cutter (OPC) and order long lead
time materials for the second OPC. This marked a critical milestone for
the program and keeps us on schedule to deliver the first OPC in 2021.
The OPC will provide the tools to effectively enforce Federal laws,
secure our maritime borders, disrupt TCOs, and respond to 21st century
threats. Continued progress on this acquisition is absolutely vital to
recapitalizing our aging fleet of Medium Endurance Cutters (MECs), some
of which have already been in service for over a half century.
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We are in advanced planning to extend the service life of a portion
of our MEC fleet as a bridging strategy until OPCs are delivered. In
concert with the extended range and capability of the National Security
Cutter (NSC) and the enhanced coastal patrol capability of the Fast
Response Cutter (FRC), OPCs will be the backbone of the Coast Guard's
strategy to project and maintain offshore presence.
The Service continues efforts to accelerate recapitalization of our
fleet of 35 river, construction, and inland buoy tenders, with an
average age of over 52 years. Replacing this aging fleet with Waterways
Commerce Cutters (WCC), for a modest investment, is critical to
sustaining the overall safety of our Nation's Marine Transportation
System, which contributes $4.6 trillion annually to our Gross Domestic
Product.
While the aforementioned programs are in the relatively early
stages of the acquisition life cycle, the Coast Guard continues to
acquire critical cutters and boats at full rate production levels. The
service recently accepted delivery of the service's seventh NSC (U.S.
Coast Guard Cutter KIMBALL) and issued a contract for long lead time
materials for the eleventh NSC. The NSC is capable of operating
independently in the most challenging environments including the vast
expanses of the Eastern Pacific Ocean where NSCs have led the Coast
Guard's efforts to interdict dangerous narcotics before they can make
it to U.S. shores.
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We continue to deliver the fleet of new FRCs on budget and on
schedule. In August, the Coast Guard exercised the second option under
the Phase II contract to begin production of six more FRCs. With this
action, the Coast Guard has ordered 50 FRCs to date, including two FRCs
to initiate the recapitalization of our six patrol boats supporting
enduring U.S. Central Command missions in southwest Asia.
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In concert with efforts to acquire new assets, we are focused on
maintaining the existing fleet of cutters and aircraft through
sustainment programs. The current work being conducted at the Coast
Guard Yard in Curtis Bay, Maryland, includes a Service Life Extension
Project (SLEP) to enhance mission readiness and extend the service life
of icebreaking tugs by approximately 15 years. We are also continuing
the Midlife Maintenance Availability (MMA) on sea-going buoy tenders to
address obsolescence of critical ship components and engineering
systems. The work on these two platforms is vital to sustaining current
mission performance and essential to maritime commerce.
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Recently, the Coast Guard Yard's experience and expertise was put
to use to complete a dockside renovation of the NOAA ship Ferdinand R.
Hassler on time and under budget. This work was the latest project
conducted under a five-year memorandum of understanding between the
Coast Guard and NOAA that was signed in 2014.
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In addition to vessel acquisition and sustainment projects, work
continues to sustain the mission performance of our rotary and fixed-
wing aviation assets and to address the condition of our aging shore
infrastructure. These efforts are key to the Coast Guard's continued
readiness across all mission areas.
While readiness and modernization investments improve current
mission performance, our Service's greatest strength is undoubtedly our
people. We are incredibly proud of our 48,000 Active Duty and Reserve
members, 8,500 civilians, and over 27,000 volunteer members of the
Coast Guard Auxiliary. Coast Guard operations require a resilient,
capable workforce that draws upon the broad range of skills, talents,
and experiences found in the American population. Together with modern
platforms, our proficient, diverse, and adaptable workforce maximizes
the Coast Guard's capacity to respond effectively to an increasingly
complex operating environment.
History has proven that a ready, relevant, and responsive Coast
Guard is an indispensable instrument of national security. With the
continued support of the Administration and Congress, we will preserve
momentum for our existing acquisition programs and employ risk-based
decisions to balance readiness, modernization, and force structure with
the evolving demands of the 21st century. Thank you for the opportunity
to testify before you today and for all that you do for the men and
women of the Coast Guard. I look forward to your questions.
Senator Sullivan. Thank you, Admiral.
Ms. Mak.
STATEMENT OF MARIE A. MAK, DIRECTOR,
CONTRACTING AND NATIONAL SECURITY ACQUISITIONS,
GOVERNMENT ACCOUNTABILITY OFFICE
Ms. Mak. Good morning, Chairman Sullivan, Ranking Member
Baldwin, and Members of the Subcommittee.
Thank you for inviting me here today to discuss the
critical efforts underway to recapitalize the Coast Guard's and
NOAA's aging legacy assets, vital for protecting national and
economic security.
Although our shipbuilding work has focused on the Coast
Guard and Navy, the key acquisition principles I'll discuss
today apply to any agency's vessel recapitalization effort.
The two areas that I would like to highlight today are,
first, the need to develop a business case for ship programs
that strike an appropriate balance between requirements and
resources, and, second, the importance of having a long-term
strategic plan that lays out acquisition needs and tradeoffs.
Much of our prior shipbuilding work has found that ship
programs routinely exceed cost and schedule targets and do not
meet performance goals. This is because shipbuilding programs
typically start with a weak business case and do not fully
assess risk and have optimistic and at times unrealistic cost
schedule and performance goals.
We have found that a sound business case requires balance
between the concepts selected to satisfy the operator
requirements and the resources, design and technology maturity,
funding, and time needed to build a ship.
At the heart of a business case is a knowledge-based
approach, obtaining critical levels of knowledge at key points
in the shipbuilding process before significant investments are
made.
For instance, in our review this summer, we noted that the
Coast Guard has some weaknesses in its business case for its
new icebreaker. Addressing these concerns is important to
ensure continuity between the legacy asset, the Polar Star, and
the new ones so that any capability gap is minimized.
Having visited the Polar Star this summer, I give much
credit to the Coast Guard crew for doing everything possible to
keep that cutter operational. However, given this effort and
the already existing capability gaps, the Coast Guard must get
the acquisition of this new icebreaker right.
Second, to fully ensure that a business case is strong, a
multiyear strategic look at all anticipated acquisition needs
and resources are important since building ships requires
stable funding over a long period of time to be fully
successful.
A multiyear strategic look documented in a long-term plan
is critical for achieving a balanced mix of executable programs
that meet cost, schedule, and performance expectations.
We have previously reviewed the long-term planning
practices of successful businesses and found that they assess
product investments collectively from an enterprise level
rather than as an independent and unrelated initiative.
In doing so, these companies help ensure that individual
product business cases are affordable, within projected
budgets, and meet the enterprise strategic vision.
An example of this type of strategic plan in government
shipbuilding is the 30-year Naval Vessel Construction Plan,
also known as the Navy's Long-Range Shipbuilding Plan. It
reflects the quantity and categories of assets that the Navy
needs to buy as well as the Navy's budget needs to execute the
plan.
While we have previously noted challenges associated with
the Navy's plan, we have also observed that such a plan is
beneficial in that it lays out the strategic approach for
decisionmaking.
As the Coast Guard is pursuing multiple ship acquisitions,
this type of long-term plan is particularly important to help
ensure that the agency has the assets that it needs to deliver
services when and where needed.
In summary, when it comes to key shipbuilding best
practices, it is important that each ship program has a sound
business case with realistic cost, schedule, and performance
targets, and that the agency's programs collectively be planned
and accomplished within available resources.
By not doing so, gaps may emerge that could result in
agencies being ill-prepared to counter future threats and fall
short in meeting critical missions.
Chairman Sullivan, Ranking Member Baldwin, Members of the
Subcommittee, this completes my prepared statement.
I would be pleased to answer any questions you may have.
Thank you.
[The prepared statement of Ms. Mak follows:]
Prepared Statement of Marie A. Mak, Director, Contracting and National
Security Acquisitions, United States Government Accountability Office
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Chairman Sullivan, Ranking Member Baldwin, and Members of the
Subcommittee:
I am pleased to be here today to discuss key lessons and insights
we have identified from our prior work in Coast Guard and Navy
acquisitions that may be useful in informing the Coast Guard's and the
National Oceanic and Atmospheric Administration's (NOAA) current
efforts to recapitalize their aging fleets of ships. The Coast Guard's
multi-billion dollar ship acquisition portfolio includes the National
Security Cutters, Offshore Patrol Cutters, Fast Response Cutters, and
heavy polar icebreakers, which collectively perform critical missions
such as search and rescue, law enforcement, and icebreaking. NOAA's
research and survey ships comprise the largest fleet of Federal
research ships in the United States. Ensuring that the Coast Guard and
NOAA maintain their ship fleets and address potential capability gaps
is vital for protecting national security and scientific interests.
My statement today provides information on: (1) long-term strategic
planning for acquisitions (2) the need for a sound business case when
acquiring new ships (3) leveraging of the Navy's acquisition expertise
and resources and (4) considerations when selecting contracting
mechanisms. This statement is based on our extensive body of work
examining the Coast Guard's and Navy's acquisition efforts, including
our September 2018 report on the Coast Guard's polar icebreaker
acquisition and July 2018 report on Coast Guard recapitalization.\1\
For the reports cited in this statement, among other methodologies, we
analyzed Coast Guard and Navy guidance, data, and documentation, and
interviewed Coast Guard and Navy officials. Detailed information on our
scope and methodology can be found in the reports cited in this
statement. In addition to our prior work, for this statement we
obtained publicly available information from NOAA regarding its ship
acquisition and recapitalization efforts; we did not assess its
efforts.\2\
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\1\ GAO, Coast Guard Acquisitions: Polar Icebreaker Program Needs
to Address Risks before Committing Resources, GAO-18-600 (Washington,
D.C.: Sept. 4, 2018), Coast Guard Acquisitions: Actions Needed to
Address Longstanding Portfolio Management Challenges, GAO-18-454
(Washington, D.C.: July 24, 2018); Best Practices: High Levels of
Knowledge at Key Points Differentiate Commercial Shipbuilding from Navy
Shipbuilding, GAO-09-322 (Washington, D.C.: May 13, 2009); and Defense
Acquisitions: Realistic Business Cases Needed to Execute Navy
Shipbuilding Programs, GAO-07-943T (Washington, D.C.: July 24, 2007).
\2\ We have prior work on NOAA's efforts to collect hydrographic
data, which includes information on hydrographic survey vessels. See
GAO, Hydrographic Surveying: NOAA Needs Better Cost Data and a Strategy
for Expanding Private Sector Involvement in Data Collection, GAO-17-510
(Washington, D.C.: June 15, 2017).
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We conducted the work on which this statement is based in
accordance with generally accepted government auditing standards. Those
standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe the
evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
Long-Term Strategic Planning in Acquisitions Enables Better Tradeoff
Decisions
Key elements of strategic planning include establishing long-term
goals and strategies for how those goals are to be achieved.\3\
Specifically for managing Coast Guard acquisitions, we have noted that
a long-term plan that includes acquisition implications would enable
tradeoffs to be addressed in advance, which leads to better informed
choices and makes debate possible before irreversible commitments are
made to individual programs.\4\ Without this type of plan, decision
makers do not have the information they need to better understand and
address an agency's long-term outlook. Similarly, according to the
Office of Management and Budget's capital planning guidance referenced
by the Coast Guard's Major Systems Acquisition Manual, each agency is
encouraged to have a plan that justifies its long-term capital asset
decisions. This plan should include, among other things, (1) an
analysis of the portfolio of assets already owned by the agency and in
procurement, (2) the performance gap and capability necessary to bridge
the old and new assets, and (3) justification for new acquisitions
proposed for funding.
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\3\ See GAO, Managing for Results: Critical Issues for Improving
Federal Agencies' Strategic Plans, GAO/GGD-97-180 (Washington, D.C.:
Sept. 16, 1997).
\4\ GAO, Coast Guard Acquisitions: Limited Strategic Planning
Efforts Pose Risk for Future Acquisitions, GAO-17-747T (Washington,
D.C.: July 25, 2017); and Coast Guard Acquisitions: Better Information
on Performance and Funding Needed to Address Shortfalls, GAO-14-450
(Washington, D.C.: June 5, 2014).
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In June 2014, we found that the Coast Guard--a component within the
Department of Homeland Security (DHS)--did not have a long-term fleet
modernization plan that identified all acquisitions needed to meet
mission needs over the next two decades within available resources.\5\
Without such a plan, the Coast Guard repeatedly delayed and reduced its
capabilities through its annual budget process and did not know the
extent to which it could meet mission needs and achieve desired
results. We recommended that the Coast Guard develop a 20-year fleet
modernization plan that identifies all acquisitions needed to maintain
the current level of service and the fiscal resources necessary to
build the identified assets. DHS agreed with our recommendation but it
has not yet approved a 20-year plan.
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\5\ GAO-14-450.
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Further, in July 2018, we found the Coast Guard continues to manage
its acquisitions through its annual budget process and the 5-year
Capital Investment Plan, which is congressionally mandated and
submitted to Congress annually.\6\ Coast Guard officials told us the
Capital Investment Plan reflects the highest priorities of the
department and that trade-off decisions are made as part of the annual
budget process. However, the effects of these trade-off decisions, such
as which acquisitions would take on more risk so others can be
prioritized and adequately funded, are not communicated in the Capital
Investment Plan to key decision makers. Over the years, this approach
has left the Coast Guard with a bow wave of near-term unfunded
acquisitions, negatively affecting recapitalization efforts, and
limiting the effectiveness of long-term planning. As a result of this
planning process, the Coast Guard has continued to defer planned
acquisitions to future years and left a number of operational
capability gaps unaddressed that could affect future operations. We
recommended that the annual Capital Investment Plans reflect
acquisition trade-off decisions and their effects. DHS concurred with
this recommendation and plans to include additional information in
future Capital Investment Plans to address how trade-off decisions
could affect other major acquisition programs. According to Coast Guard
officials, the Coast Guard plans to implement this recommendation by
March 2020.
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\6\ GAO-18-454.
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Examples of other fleet modernization plans include the Navy's
annual naval vessel construction plan (also known as the Navy's long
range shipbuilding plan), which reflects the quantity and categories of
assets that the Navy needs to buy as well as the total number of assets
in operation for each year. While we found in March 2006 that the Navy
faced challenges associated with its long range shipbuilding plan, we
also observed that such a plan is beneficial in that it lays out a
strategic approach for decision making.\7\ In October 2016, NOAA--which
is within the Department of Commerce--approved a fleet plan that is
intended to identify an integrated strategy for long-term
recapitalization, including acquisition of up to eight new ships. In
March 2017, NOAA indicated that long-term recapitalization of the NOAA
fleet requires an annual, stable funding profile on the order of its
Fiscal Year 2016 appropriations--about $80 million. NOAA noted that it
will continue to proceed on schedule, as laid out in its fleet plan, or
make adjustments based on available funding.
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\7\ GAO, Defense Acquisitions: Challenges Associated with the
Navy's Long-Range Shipbuilding Plan, GAO-06-587T (Washington, D.C.:
Mar. 30, 2006).
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Successful Acquisition Programs Begin with Sound Business Cases
Our prior work has repeatedly found that successful acquisition
programs start with solid, executable business cases before setting
program baselines and committing resources.\8\ A sound business case
requires balance between the concept selected to satisfy operator
requirements and the resources--design knowledge, technologies,
funding, and time--needed to transform the concept into a product, such
as a ship. At the heart of a business case is a knowledge-based
approach--we have found that successful shipbuilding programs build on
attaining critical levels of knowledge at key points in the
shipbuilding process before significant investments are made (see
figure 1).
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\8\ GAO, Navy Shipbuilding: Past Performance Provides Valuable
Lessons for Future Investments, GAO-18-238SP (Washington, D.C.: June 6,
2018); Weapon System Requirements: Detailed Systems Engineering Prior
to Product Development Positions Programs for Success, GAO-17-77
(Washington, D.C.: Nov. 17, 2016); GAO-09-322; and GAO-07-943T.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Source: GAO depiction of notional shipbuilding process. / GAO-19-
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147T
We have previously found that key enablers of a good business case
include firm, feasible requirements; plans for a stable design; mature
technologies; reliable cost estimates; and realistic schedule
targets.\9\ Without a sound business case, acquisition programs are at
risk of experiencing cost growth, schedule delays, and reduced
capabilities.
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\9\ GAO-17-77; GAO-07-943T; and Best Practices: Using A Knowledge-
Based Approach To Improve Weapon Acquisition, GAO-04-386SP (Washington,
D.C.: Jan. 1, 2004).
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In September 2018, we found the Coast Guard did not have this type
of sound business case when it established the cost, schedule, and
performance baselines for its polar icebreaker program in March
2018.\10\ This was primarily due to risks in four key areas:
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\10\ GAO-18-600.
Technology. The Coast Guard intends to use proven
technologies for the program, but did not conduct a technology
readiness assessment to determine the maturity of key
technologies--which include the integrated power plant and
azimuthing propulsors--prior to setting baselines.\11\ As a
result, the Coast Guard does not have full insight into whether
these technologies, which we believe are critical technologies
and merit such an assessment, are mature. Without a technology
readiness assessment, the Coast Guard is potentially
underrepresenting technical risk and increasing design risk.
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\11\ A technology readiness assessment is a systematic, evidence-
based process that evaluates the maturity of critical technologies--
hardware and software technologies critical to the fulfillment of the
key objectives of an acquisition program. According to our best
practices, a technology readiness assessment should be conducted prior
to program initiation. For more information, see GAO Technology
Readiness Assessment Guide: Best Practices for Evaluating the Readiness
of Technology for Use in Acquisition Programs and Projects, GAO-16-410G
(Washington, D.C.: Aug. 11, 2016).
Cost. The cost estimate that informed the program's $9.8
billion cost baseline--which includes lifecycle costs for the
acquisition, operations, and maintenance of three polar
icebreakers--substantially met our best practices for being
comprehensive, well-documented, and accurate, but only
partially met best practices for being credible.\12\ The cost
estimate did not quantify the range of possible costs over the
entire life of the program, such as the period of operations
and support. As a result, the cost estimate was not fully
reliable and may underestimate the total funding needed for the
program.
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\12\ The GAO Cost Estimating and Assessment Guide was used as
criteria in this analysis. A cost estimate is considered reliable if
the overall assessment ratings for each of the four characteristics--
comprehensive, accurate, well documented, and credible--are
substantially or fully met. For more information, see GAO Cost
Estimating and Assessment Guide: Best Practices for Developing and
Managing Capital Program Costs, GAO-09-3SP (Washington, D.C.: Mar. 2,
2009).
Schedule. The Coast Guard's planned delivery dates of 2023,
2025, and 2026 for the three ships were not informed by a
realistic assessment of shipbuilding activities, but rather
were primarily driven by the potential gap in icebreaking
capabilities once the Coast Guard's only operating heavy polar
icebreaker--the Polar Star--reaches the end of its service life
(see figure 2).
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
U.S. Coast Guard Cutter Polar Star
Source: U.S. Coast Guard. / GAO-19-147T
The Polar Star's service life is estimated to end between Fiscal
Years 2020 and 2023. This creates a potential heavy polar icebreaker
capability gap of about 3 years, if the Polar Star's service life were
to end in 2020 and the lead polar icebreaker were to be delivered by
the end of Fiscal Year 2023 as planned. If the lead ship is delivered
later than planned in this scenario, the potential gap could be more
than 3 years. The Coast Guard is planning to recapitalize the Polar
Star's key systems starting in 2020 to extend the service life of the
ship until the planned delivery of the second polar icebreaker (see
figure 3).
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Source: GAO analysis of U.S. Coast Guard documents. / GAO-19-147T
Further, our analysis of selected lead ships for other
shipbuilding programs found the icebreaker program's estimated
construction time of 3 years is optimistic. An unrealistic
schedule puts the Coast Guard is at risk of not delivering the
icebreakers when promised and the potential gap in icebreaking
capabilities could widen.
Design. The Coast Guard set program baselines before
conducting a preliminary design review--a systems engineering
event that is intended to verify that the contractor's design
meets the requirement of the ship specifications and is
producible--which puts the program at risk of having an
unstable design, thereby increasing the program's cost and
schedule risks. Although the Coast Guard set the program
baselines prior to gaining knowledge on the feasibility of the
selected shipbuilder's design, it has expressed a commitment to
having a stable design prior to the start of lead ship
construction. This is consistent with shipbuilding best
practices we identified in 2009.\13\
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\13\ GAO-09-322.
To address these four areas and other risks, we made six
recommendations to DHS, Coast Guard, and the Navy in our September 2018
report.\14\ DHS concurred with all six recommendations and identified
actions it planned to take to address them.
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\14\ GAO-18-600.
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In its October 2016 fleet plan, NOAA indicated the need to
construct up to eight new ships by 2028 to maintain its capabilities
for at-sea requirements. Ensuring a sound business case for each
acquisition will be important as NOAA moves forward.
Leveraging Navy's Shipbuilding Experience May Create Efficiencies
Given the Navy's experience in shipbuilding, agencies have
partnered with the Navy to take advantage of its expertise. For
example, in April and September 2018, we found examples of how the
Coast Guard had leveraged the Navy's resources and acquisition
approaches when acquiring the polar icebreakers, including:\15\
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\15\ GAO-18-600; GAO, Coast Guard Acquisitions: Status of Coast
Guard's Heavy Polar Icebreaker Acquisition, GAO-18-385R (Washington,
D.C.: Apr. 13, 2018).
Establishing an integrated program office and potentially
using funding from both organizations. In 2016, in response to
a congressional report, the Navy and the Coast Guard
established an integrated program office to acquire the
icebreakers for Coast Guard operations. This relationship was
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officially memorialized through three memorandums in 2017.
Given potential plans to fund the polar icebreaker program with
both Navy and Coast Guard appropriations, the Navy and the
Coast Guard had a memorandum of agreement with a budgeting and
financial management appendix. In September 2018, however, we
found that the Coast Guard and the Navy interpreted the meaning
of ``cost overruns'' differently in the context of their
agreement.\16\ We also found that the agreement itself did not
address how the Coast Guard and the Navy plan to handle any
cost growth stemming from changes to the scope, terms, and
conditions of the detail design and construction contract. We
recommended that the Coast Guard, in collaboration with the
Navy, revise the agreement to clarify and document how cost
growth in the polar icebreaker program, including changes in
scope, will be addressed between the two organizations. The
Coast Guard concurred with this recommendation and plans to
update the agreement by March 2019.
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\16\ GAO-18-600.
Establishing an integrated ship design team. The ship design
team includes Coast Guard and Navy technical experts who
develop ship specifications based on the polar icebreaker
program's operational requirements document. The ship design
team is under the supervision of a Coast Guard ship design
manager, who provides all technical oversight for development
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of the polar icebreaker's design.
Leveraging Navy cost estimating and contracting functions.
With input from the integrated program office and ship design
team, Navy cost estimators developed the polar icebreaker
program's cost estimate, which informed the program's cost
baselines and affordability constraints. In addition, the Navy
plans to award the polar icebreaker's detail design and
construction contract under the Navy's contracting authority
and use a tailored DHS acquisition process.
Supplementing the DHS acquisition process with the Navy's
gate review process. Coast Guard and Navy agreed to manage the
polar icebreaker program using a tailored acquisition approach
that supplements DHS acquisition decision event reviews with
additional ``gate'' reviews that were adopted from Navy's
acquisition processes.\17\ The gate reviews allow both Coast
Guard and Navy leadership to review and approve key documents
before proceeding to the acquisition decision events. Each
acquisition decision event is also overseen by acquisition
oversight board with members from both the Coast Guard and the
Navy (see figure 4).
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\17\ Acquisition decision events are milestone reviews in which the
Coast Guard and DHS assess and verify an acquisition program's
successful satisfaction of established exit criteria, affordability,
and a readiness to move forward to the next acquisition phase.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
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Source: GAO analysis of Coast Guard data. / GAO-19-147T
By collaborating with the Navy, the Coast Guard is leveraging the
Navy's experience in ship design, cost estimating, contracting, and
other shipbuilding processes. This partnership may allow the Coast
Guard to more efficiently manage the polar icebreaker program.
In March 2017, NOAA indicated that it had partnered with the Navy
through an interagency agreement to leverage the Navy's acquisition
expertise for Auxiliary General Purpose Oceanographic Research Vessels,
which will be the basis for a new class of NOAA ships. In April 2018,
the Navy released the request for proposal for the preliminary contract
design of this new class of ships.
Estimated Savings and Requirements Stability Should be Considered When
Selecting Contracting Mechanisms
When acquiring multiple quantities of a product, agencies generally
have several options for contracting mechanisms. Annual contracting,
which can be considered the typical method, refers to awarding a
contract for one year's worth of requirements. Annual contracting
allows for the use of options for subsequent requirements. Options give
the agency the unilateral right to purchase additional supplies or
services called for by the contract, or to extend the term of the
contract. Besides annual contracting with options, agencies may also be
able to choose among other contracting mechanisms--multiyear
contracting and ``block buy'' contracting, which are discussed in more
detail below.
Multiyear Contracting Requirements and Considerations
Multiyear contracting allows agencies to acquire known requirements
for up to 5 years under a single contract award, even though the total
funds ultimately to be obligated may not be available at the time of
contract award. Before DOD and Coast Guard can enter into a multiyear
contract, certain criteria must be met.\18\ Table 1 provides some of
the multiyear contracting requirements for DOD and the Coast Guard.
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\18\ 10 U.S.C. Sec. 2306b, implemented by Federal Acquisition
Regulation (FAR) 17.105-1(b). NOAA may enter into a multiyear contact
if the head of the contracting activity determines that the need is
reasonably firm and continuing over the life of the contract and the
contract will serve the best interests of the United States by
encouraging full and open competition or promoting economy in
administration, performance, and operation of the agency's programs.
See FAR 17.105-1(a).
Table 1: Key Statutory Requirements for Department of Defense and Coast
Guard Multiyear Procurement Candidates
------------------------------------------------------------------------
Criteria Description
------------------------------------------------------------------------
Substantial savings The head of the agency must find that use of a
multiyear contract will result in significant
savings in the total estimated costs when
compared to the use of a series of annual
contracts for the same procurement.
------------------------------------------------------------------------
Stability of the The head of the agency must find that the
requirement minimum need to be purchased in terms of total
quantity, production rate, and procurement
rate is expected to be substantially unchanged
during the multiyear contract period.
------------------------------------------------------------------------
Stability of funding The head of the agency must find that there is
a reasonable expectation that sufficient
funding will be requested to carry out the
contract and avoid cancellation over the
proposed multiyear contract period.
------------------------------------------------------------------------
Stable design The head of the agency must find that they have
technical risks that are not excessive over
the multiyear period and there is a stable
design.
------------------------------------------------------------------------
Realistic cost The head of the agency must find that estimates
estimates of contract cost and projected multiyear
savings/cost avoidance through the use of a
multiyear contract strategy are realistic.
------------------------------------------------------------------------
National security In the case of a purchase by the Department of
Defense, the head of the agency must find that
the use of a multiyear contracting strategy
will promote the national security interests
of the United States government.
------------------------------------------------------------------------
Source: GAO analysis and 10 U.S.C. Sec. 2306b. / GAO-19-147T
Multiyear contracts are expected to achieve lower unit costs
compared to annual contracts through one or more of the following
sources: (1) purchase of parts and materials in economic order
quantities, (2) improved production processes and efficiencies, (3)
better utilized industrial facilities, (4) limited engineering changes
due to design stability during the multiyear period, and (5) cost
avoidance by reducing the burden of placing and administering annual
contracts.\19\ Multiyear procurement also offers opportunities to
enhance the industrial base by providing contractors a longer and more
stable time horizon for planning and investing in production and by
attracting subcontractors, vendors, and suppliers. However, multiyear
procurement entails certain risks that must be balanced against the
potential benefits, such as the increased costs to the government
should the multiyear contract be changed or canceled and decreased
annual budget flexibility for the program and across an agency's
portfolio of acquisitions.
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\19\ Contracting for economic order quantities or bulk quantities
generally refers to the purchase of parts in larger more economically
efficient quantities to minimize the cost of these items.
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In February 2008, we found that it is difficult to precisely
determine the impact of multiyear contracting on procurement costs.\20\
For example, for three multiyear procurements (Air Force's C-17A
Globemaster transport, the Navy's F/A-18E/F Super Hornet fighter, and
the Army's Apache Longbow helicopter), we identified unit cost growth
ranging from 10 to 30 percent compared to original estimates, due to
changes in labor and material costs, requirements and funding, and
other factors. In some cases, actual costs for the multiyear
procurement were higher than original estimates for annual contracts.
We noted that we could not determine how cost growth affected the level
of savings achieved, if any, because we did not know how an alternative
series of annual contracts would have fared. Although programs using
annual contracts also have unit cost growth, it is arguably more
problematic when using multiyear contracting because of the up-front
investments and the government's exposure to risk over multiple years.
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\20\ GAO, Defense Acquisitions: DOD's Practices and Processes for
Multiyear Procurement Should Be Improved, GAO-08-298 (Washington, D.C.:
Feb. 7, 2008).
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Block Buy Contracting Considerations
Block buy contracting generally refers to special legislative
authority that agencies seek on an acquisition-by-acquisition basis to
purchase more than one year's worth of requirements, such as purchasing
supplies in economic order quantities. Unlike multiyear contracting,
block buy contracting does not have permanent statutory criteria and,
therefore, can be used in different ways.
We have previously analyzed several cases where block buy contracts
were considered or used and have not found evidence of savings. For
example:
In September 2018, we found that for the polar icebreaker
program, the Navy gave offerors an opportunity to provide the
estimated savings that the government could achieve if it were
to take a ``block buy'' approach in purchasing the ships or
purchasing supplies in economic order quantities.\21\ The Navy
told us that they did not receive any formal responses from
industry on potential savings from block buys or economic order
quantities.
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\21\ GAO-18-600.
In April 2017, we found that the Navy's Littoral Combat Ship
contracts' block buy approach could affect Congress's funding
flexibility.\22\ Specifically, the block buy contracts provided
that a failure to fully fund a purchase in a given year would
make the contract subject to renegotiation, which provides a
disincentive to the Navy or Congress to take any action that
might disrupt the program because of the potential for the
government to have to pay more for ships.
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\22\ GAO, Littoral Combat Ship and Frigate: Delaying Planned
Frigate Acquisition Would Enable Better-Informed Decisions, GAO-17-323
(Washington, D.C.: Apr. 18, 2017).
In February 2005, we found that the Navy believed that a
block-buy contract contributed to increased material costs for
the Virginia class submarine.\23\ Under this block-buy
contract, subcontracts for submarine materials were for single
ships spread over several years. According to the Navy, this
type of acquisition approach did not take advantage of bulk-buy
savings and incurred the risk that funding will not be
available in time to order the material when needed.
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\23\ GAO, Defense Acquisitions: Improved Management Practices Could
Help Minimize Cost Growth in Navy Shipbuilding Programs, GAO-05-183
(Washington, D.C.: Feb. 28, 2005).
Based on our prior work, it is important for agencies to consider
multiple factors such as estimated savings, the stability of the
requirements, quantities required, and potential contract terms and
conditions before committing to a contracting mechanism approach.
In conclusion, as the Coast Guard and NOAA continue investing
taxpayer dollars to modernize their fleets, they could benefit from the
lessons learned from prior recapitalization and acquisition efforts. It
is important for agencies to develop strategic and comprehensive
approaches for managing their respective portfolios so that future
requirements and capability gaps can be addressed in a timely manner.
For each acquisition within their portfolios, agencies should ensure
that they have established a sound business case before committing
significant resources. Additionally, leveraging the Navy's resources
and expertise in shipbuilding, such as by establishing integrated
teams, could be beneficial by helping agencies be more efficient.
Finally, when it comes to contracting mechanisms, factors such as
estimated savings and program risks should be assessed before
committing to a particular approach.
Chairman Sullivan, Ranking Member Baldwin, and Members of the
Subcommittee, this concludes my prepared statement. I would be pleased
to respond to any questions.
Senator Sullivan. Thank you, Ms. Mak, for that important
testimony. We really appreciate it and look forward to some
questions on it.
Mr. O'Rourke.
STATEMENT OF RONALD O'ROURKE, SPECIALIST IN NAVAL AFFAIRS,
CONGRESSIONAL RESEARCH SERVICE
Mr. O'Rourke: Chairman Sullivan, Ranking Member Baldwin,
and Distinguished Members of the Subcommittee, thank you for
the opportunity to appear before you today to testify on Coast
Guard and NOAA Fleet Recapitalization.
I've been covering military shipbuilding at CRS for 34
years and as a part of that, I've been covering Coast Guard
shipbuilding for 20 years now.
Here are my main points. First, there has been some
discussion recently of how certain Coast Guard programs would
not be affordable if the Coast Guard procurement account in the
coming years were limited to an average of about $1.1 billion a
year.
The notion that the account will be limited to about $1.1
billion per year, however, is no longer strongly supported by
recent data on funding requests, enacted funding levels, or
projected future funding requests.
More important, in relation to maintaining Congress's
status as a co-equal branch of government, including the
preservation and use of congressional powers and prerogatives,
an analysis that assumes or predicts that future funding levels
will resemble past funding levels can encourage an artificially
narrow view of congressional options regarding future funding
levels which could deprive Congress of agency in the exercise
of its constitutional power to set funding levels and determine
the composition of Federal spending.
The Coast Guard is using a contract with options to build
the first nine OPCs. A contract with options may look like a
form of multiyear contracting but it's not multiyear
contracting. A contract with options operates more like annual
contracting and it cannot achieve the kinds of savings that are
possible under multiyear contracting.
Using true multiyear contracting across the 25 Ship OPC
Program could reduce its costs by as much as $1 billion. That's
enough to pay for an icebreaker or for the entire waterways
commerce cutter program.
This is a once-in-a-generation opportunity to save that
much money on a Coast Guard acquisition program. Right now,
however, because the Coast Guard is not using multiyear
contracting for the OPC Program, we're on the cusp of not
realizing a portion of that possible savings.
There has been interest in the question of whether
something can be done to shorten the gap between the end of the
medium endurance cutter's nominal service lives and their
replacement by new ships.
There is something that could be done and that would be to
increase the annual procurement rate of the replacement ships.
That could be done by increasing the production rate at Eastern
Shipbuilding if Eastern's capacity would permit that, by
building OPCs at additional shipyards, such as Ballinger or
Bath Iron Works, by building additional national security
cutters at Ingalls, or by doing some combination of these
things.
One of the most notable changes in the Polar Icebreaker
Program has been the reduction in their estimated procurement
costs. The costs had earlier been estimated at roughly $1
billion per ship but the Coast Guard and Navy informed CRS and
CBO in March that they now believe the three heavy polar
icebreakers could be acquired for an average of $700 million
per ship. Other information identifies smaller reduction in
procurement costs to something more than $900 million.
Reductions in the estimated procurement cost strengthen the
business case for the program. A reduction to $700 million
would strengthen it substantially. The icebreaker's cost could
be further reduced by procuring them under a block by contract
and by procuring both heavy and medium polar icebreakers to a
common design as recommended in the National Academy's report.
There's a risk of the first icebreaker being delivered
late. If a late delivery would extend the gap between the
retirement of Polar Star and its replacement by the first new
icebreaker, that could become an argument for starting
construction of the new icebreaker as soon as its design is
brought to a high level of completion and the ship is otherwise
ready to begin construction.
Finally, the NOAA Ship Recapitalization Plan presents some
potential oversight issues for the Committee. One concerns the
lack of visibility in NOAA's budget submission of the ship's
unit procurement costs and the program's total procurement
cost, which could affect the Committee's ability to conduct
oversight of the program.
Another concerns the plan to build the eight new ships to
four designs rather than to a smaller number of designs which
could reduce opportunities for achieving certain economies in
the program.
And the third concerns whether there are ways to use twin
ship buys or multi-year contracting to reduce the cost of the
ships without having to change very much the current plan to
level fund the program at a figure of about $75 million a year.
Mr. Chairman, this concludes my statement. Thank you again
for the opportunity to testify, and I look forward to the
Subcommittee's questions.
[The prepared statement of Mr. O'Rourke follows:]
Prepared Statement of Ronald O'Rourke, Specialist in Naval Affairs,
Congressional Research Service
Chairman Sullivan, Ranking Member Baldwin, distinguished members of
the subcommittee, thank you for the opportunity to appear before you
today to testify on Coast Guard and NOAA fleet recapitalization. Ship
acquisition has been a major focus of my work as a CRS analyst on naval
issues for the past 34 years. I have covered Coast Guard ship
acquisition for Congress for 20 years\1\ and last testified before this
committee on the issue in 2005.\2\ My biography is shown in Appendix A.
---------------------------------------------------------------------------
\1\ See, for example:
CRS Report 98-830 F, Coast Guard Integrated Deepwater
System: Background and Issues for Congress, by Ronald O'Rourke, first
version October 5, 1998, final (i.e., archived) version June 1, 2001;
CRS Report RS21019, Coast Guard Deepwater Program:
Background and Issues for Congress, by Ronald O'Rourke, first version
September 25, 2001, final (i.e., archived) version December 8, 2006;
CRS Report RL33753, Coast Guard Deepwater Acquisition
Programs: Background, Oversight Issues, and Options for Congress, by
Ronald O'Rourke, first version December 18, 2006, final (i.e.,
archived) version January 20, 2012;
CRS Report R42567, Coast Guard Cutter Procurement:
Background and Issues for Congress, by Ronald O'Rourke, first version
June 13, 2012, current version August 3, 2018; and
CRS Report RL34391, Coast Guard Polar Icebreaker
Program: Background and Issues for Congress, by Ronald O'Rourke, first
version February 26, 2008, current version August 3, 2018.
\2\ See Statement of Ronald O'Rourke, Specialist in National
Defense, Congressional Research Service, before the Senate Commerce,
Science, and Transportation Committee, subcommittee on Fisheries and
the Coast Guard, hearing on The Coast Guard's Revised Deepwater
Implementation Plan, June 21, 2005, 15 pp.
---------------------------------------------------------------------------
My CRS reports on Coast Guard cutter procurement and polar
icebreaker procurement provide extensive discussions of the Coast
Guard's National Security Cutter (NSC) program, Offshore Patrol Cutter
(OPC) program, Fast Response Cutter (FRC) program and polar icebreaker
program (recently renamed the Polar Security Cutter, or PSC,
program).\3\ As requested by the subcommittee, this statement provides
some focused observations regarding these programs as well as the Coast
Guard's Waterways Commerce Cutter (WCC) program and NOAA's fleet
recapitalization effort.
---------------------------------------------------------------------------
\3\ See the final two reports cited above in footnote 1.
---------------------------------------------------------------------------
Appendix B to this statement presents a general summary of some
lessons learned in government shipbuilding. Appendix C presents some
considerations relating to the use of warranties in government
shipbuilding. Appendix D presents some considerations relating to
avoiding procurement cost growth vs. minimizing procurement costs in
government shipbuilding.
Coast Guard Fleet Recapitalization
Adequacy of Planned Quantities of NSCs, OPCs, and FRCs
The Coast Guard's 91-ship program of record (POR) for general-
purpose cutters--which dates to 2004 and calls for a force of 8 NSCs,
25 OPCs, and 58 FRCs--will provide substantially more capability than
the force of older-generation cutters it will replace. At the same
time, it can be useful to recall that Coast Guard studies have
concluded that the planned total of 91 NSCs, OPCs, and FRCs would
provide only 61 percent of the NSCs, OPCs, and FRCs that would be
needed to fully perform the service's statutory missions in coming
years, in part because Coast Guard mission demands are expected to be
greater in coming years than they were in the past. As shown in Table
1, the Coast Guard's 2011 Fleet Mix Analysis (FMA) Phase 2--the last
general analysis of future Coast Guard ship force structure
requirements to be publicly released by the Coast Guard--concluded that
fully performing the Coast Guard's statutory missions in coming years
would require a total of 149 NSCs, OPCs, and FRCs.\4\ This point may be
particularly salient right now in connection with the NSC and FRC
programs, procurement of which would end soon under the POR figures.
---------------------------------------------------------------------------
\4\ For additional discussion, see Appendix A of CRS Report R42567,
Coast Guard Cutter Procurement: Background and Issues for Congress, by
Ronald O'Rourke.
Table 1. Program of Record Compared to Fleet Mix Analysis Phase 2 (2011)
----------------------------------------------------------------------------------------------------------------
Refined Objective Mix from Fleet
Ship Type Program of Record Mix Analysis, Phase 2 (2011)
----------------------------------------------------------------------------------------------------------------
NSC 8 9
OPC 25 49
FRC 58 91
Total 91 149
----------------------------------------------------------------------------------------------------------------
Source: Coast Guard Fleet Mix Analysis, Phase 2, 2011, Table ES-2 on p. iv. For additional discussion, see
Appendix A of CRS Report R42567, Coast Guard Cutter Procurement: Background and Issues for Congress, by Ronald
O'Rourke.
PC&I Account Funding Levels
There has been some discussion recently of how certain Coast Guard
procurement programs would not be affordable if the Coast Guard's
Procurement, Construction, and Improvements (PC&I) account in coming
years were limited to an average of about $1.1 billion per year.\5\ An
average PC&I funding level of about $1.1 billion per year would have
that effect. In 2013, then-Coast Guard Commandant Robert Papp testified
that an annual PC&I funding level of about $1 billion per year ``almost
creates a death spiral for the Coast Guard.'' \6\ The notion that the
PC&I funding level will be limited to an average of about $1.1 billion
per year, however, is no longer strongly supported by recent data on
Coast Guard annual funding requests,\7\ annual enacted funding
levels,\8\ or projected future annual funding requests as shown in
Coast Guard five-year Capital Investment Plans (CIPs).\9\
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\5\ See Government Accountability Office, Coast Guard
Acquisitions[:] Actions Needed to Address Longstanding Portfolio
Management Challenges, GAO-18-454, July 2018, Figure 4 on page 22, and
GAO's spoken testimony during the question-and-answer portion of a July
24, 2018, hearing on Coast Guard acquisition programs and mission
balance and effectiveness before the Coast Guard and Maritime
Transportation subcommittee of the House Transportation Committee,
during which Figure 4, which depicts a funding funnel, was shown on the
hearing room's display screens. (The funnel, which compares an annual
PC&I account funding figure of $1.1 billion to a higher figure of $2
billion consistent with the Coast Guard's preferred PC&I account annual
funding level, is not drawn to scale: Although $1.1 billion is 55
percent of $2 billion, the narrower $1.1-billion bottom of the funnel
has an opening with a diameter than is no more than 22 percent as wide
as that of the larger, $2-billion top of the funnel.) In report GAO-18-
454, see also Figure 3 on page 15, which indicates an average requested
funding level of about $1.1 billion per year for the period FY 2014-FY
2018, as well as the discussion on pages 13-14.
\6\ Admiral Papp's spoken testimony during a May 14, 2013, hearing
on the Coast Guard's proposed FY 2014 budget before the Homeland
Security subcommittee of the Senate Appropriations Committee, as
reflected in the transcript for the hearing.
\7\ While the Coast Guard's annual budget submissions for the five-
year period FY 2014 through FY 2018 requested an average of about
$1,065 million per year for the PC&I account, the Coast Guard's most
recent request for the account--the request in its proposed FY 2019
budget--is for $1,886.8 million (a figure that reflects a late addition
of $720 million to the request for the polar icebreaker program), and
the Coast Guard's annual budget submissions for the five-year period FY
2009-FY 2013 requested an average of about $1,322 million for the
account.
\8\ Over the last 10 Fiscal Years (FY 2009-FY 2018), enacted
funding levels for the PC&I account (including rescissions of
unobligated balances) have averaged about $1,560 million per year. Only
once during this period, in FY 2015, was the enacted figure less than
$1,200 million (it was $1,166.6 million that year). In the other nine
years, it was more than $1,200 million, and sometimes substantially
more. The figures for the three most recent Fiscal Years--FY 2016, FY
2017, and FY 2018--were $1,928.4 million, $1,370.0 million, and
$2,282.4 million, respectively.
\9\ Although the projected funding requests in the FY 2014, FY
2015, and FY 2016 CIPs (showing figures for FY 2014-FY 2018, FY 2015-FY
2019, and FY 2016-FY 2020, respectively), averaged about $1,114.8
million per year, the projected funding requests in the FY 2017 CIP
(for the period FY 2017-FY 2021) averaged about $1,427.5 million, and
those in the FY 2018 CIP (for the period FY 2018-FY 2022) averaged
about $1,533.1 million.
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In assessing future funding levels for Executive Branch agencies, a
common practice is to assume or predict that the figure in coming years
will likely be close to where it has been in previous years. While this
method can be of analytical and planning value, for an agency like the
Coast Guard, which goes through periods with less acquisition of major
platforms and periods with more acquisition of major platforms, this
approach might not always be the best approach, at least for the PC&I
account.
More important, in relation to maintaining Congress's status as a
co-equal branch of government, including the preservation and use of
congressional powers and prerogatives, an analysis that assumes or
predicts that future funding levels will resemble past funding levels
can encourage an artificially narrow view of congressional options
regarding future funding levels, which could deprive Congress of agency
in the exercise of its constitutional power to set funding levels and
determine the composition of Federal spending.
As one example of how past funding levels were not the best guide
to future funding levels, and of how Congress has exercised its
constitutional power to set funding levels and determine the
composition of Federal spending, during the period FY 2008-FY 2015,
when the Navy's shipbuilding account averaged about $14.7 billion per
year in then-year dollars, there was recurring discussion about the
challenge of increasing the account to the substantially higher annual
funding levels that would soon be needed to begin implementing the
Navy's 30-year shipbuilding plan. Projections were prepared by CBO
showing the decline in the size of the Navy that would occur over time
if funding levels in the shipbuilding account did not increase
substantially from the average level of about $14.7 billion per year.
Congress, after assessing the situation, increased the shipbuilding
account to $18.7 billion in FY 2016, $21.2 billion in FY 2017, $23.8
billion in FY 2018, and $24.2 billion in FY 2019. These increasing
funding levels occurred even though the Budget Control Act, as amended,
remained in operation during those years. At the most recent figure of
$24.2 billion, the Navy's shipbuilding account is now 74 percent
greater in then-year dollars than it was as recently as FY 2010.
Coast Guard's Non-Use of Multiyear Contracting
In connection with my work on ship acquisition, I maintain the CRS
report on multiyear procurement (MYP) and block buy contracting.\10\ In
both that report and in testimony I have given to other committees in
recent years on Coast Guard ship acquisition,\11\ I have noted the
stark contrast between the Navy--which uses multiyear contracting (in
the form of MYP or block buy contracting) extensively to reduce its
ship-and aircraft-procurement costs by billions of dollars--and the
Coast Guard, which to date has never used multiyear contracting in one
of its ship or aircraft acquisition programs.
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\10\ CRS Report R41909, Multiyear Procurement (MYP) and Block Buy
Contracting in Defense Acquisition: Background and Issues for Congress,
by Ronald O'Rourke and Moshe Schwartz.
\11\ See, for example, CRS Testimony TE10020, Building a 21st
Century Infrastructure for America: Coast Guard Sea, Air, and Land
Capabilities: Part II, by Ronald O'Rourke, and CRS Testimony TE10004,
The Status of Coast Guard Cutter Acquisition Programs, by Ronald
O'Rourke.
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The Navy in recent years, with congressional approval, has used
multiyear contracting for, among other things, all three of its year-
to-year shipbuilding programs--the Virginia-class attack submarine
program, the DDG-51 destroyer program, and the Littoral Combat Ship
(LCS) program.\12\ The Navy has been using multiyear contracting for
the Virginia-class and DDG-51 programs more or less continuously since
the 1990s. Savings from the use of MYP recently have, among other
things, helped Congress and the Navy to convert a nine-ship buy of DDG-
51 class destroyers in FY 2013-FY 2017 into a 10-ship buy, and a nine-
ship buy of Virginia-class attack submarines in FY 2014-FY 2018 into a
10-ship buy. The Navy is also now using block buy contracting in the
John Lewis (TAO-205) class oiler program, and is considering or
anticipating using them for procuring LPD-17 Flight II amphibious
ships, FFG(X) frigates, and Columbia-class ballistic missile
submarines. The Navy's use or prospective use of multiyear contracting
for its year-to-year shipbuilding programs is arguably now almost more
of a rule than an exception in Navy shipbuilding. For Congress,
granting approval for using multiyear contracting involves certain
tradeoffs, particularly in connection with retaining year-to-year
control of funding.\13\ In the case of Navy shipbuilding, Congress has
repeatedly accepted these tradeoffs.
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\12\ The term year-to-year shipbuilding program is used here to
mean a shipbuilding program in which at least one ship of that kind is
procured each year. The Coast Guard plans to execute the OPC program as
a year-to-year shipbuilding program.
\13\ From a congressional perspective, tradeoffs in making greater
use of multiyear contracting include the following: reduced
congressional control over year-to-year spending and tying the hands of
future Congresses; reduced flexibility for making changes in
acquisition programs in response to unforeseen changes in strategic or
budgetary circumstances (which can cause any needed funding reductions
to fall more heavily on acquisition programs not covered by multiyear
contracts); a potential need to shift funding from later Fiscal Years
to earlier Fiscal Years to fund EOQ purchases of components; the risk
of having to make penalty payments to shipbuilders if multiyear
contracts need to be terminated due to unavailability of funds needed
for the continuation of the contracts; and the risk that materials and
components purchased for ships to be procured in future years might go
to waste if those ships are not eventually procured. Congress has
considered these tradeoffs in deciding whether to grant the Navy
authority for using multiyear contracting in the service's shipbuilding
and other acquisition programs.
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In contrast with Navy practice, the Coast Guard often uses
contracts with options in its ship-procurement programs. Contracts with
options can be referred to as multiple-year contracts, but they are not
multiyear contracts. Instead, contracts with options operate more like
annual contracts, and they cannot achieve the kinds of savings that are
possible with multiyear contracts.\14\ Like the other military
services, the Coast Guard has statutory authority to use MYP
contracting and can be granted authority by Congress to use block buy
contracting.
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\14\ For additional discussion, see CRS Report R41909, Multiyear
Procurement (MYP) and Block Buy Contracting in Defense Acquisition:
Background and Issues for Congress, by Ronald O'Rourke and Moshe
Schwartz, particularly the section entitled ``MYP and BBC vs. Contracts
with Options.''
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National Security Cutter (NSC) Program
The NSCs were procured at irregular rather than regular intervals,
and they were procured with annual rather than multiyear contracts.
Both of these aspects of their acquisition made the ships more
expensive. If NSCs had instead been procured at regular intervals under
multiyear contracts that included authority for economic order quantity
(EOQ) purchases (i.e., up-front batch orders of selected components for
some or all of the ships covered under the contract), the reduction in
their combined procurement cost could have been substantial--possibly
enough (or even more than enough) to have paid for one of the 11 NSCs
that have been fully funded through FY 2018.
As discussed below in the section on the OPC program, building
additional NSCs is one option for acquiring replacements for retiring
medium-endurance cutters more quickly than currently planned, so as to
close more quickly any gap in time between retirements of the medium-
endurance cutters and the entry into service of their replacements. The
NSCs are bigger and in some respects more capable than OPCs, and they
would individually be more expensive to procure and to operate and
support than OPCs. The difference in size, capability, and cost between
the NSC and OPC design is not insignificant, but neither is it a night-
and-day difference. With an estimated full-load displacement of 3,500
to 3,730 tons,\15\ for example, OPCs are to be roughly 80 percent as
large as NSCs, which have a full load displacement of about 4,500
tons.\16\ In terms of size, capability, and cost, the OPC is a lot
closer to the NSC than it is to the FRC, which is a large patrol craft
with a full load displacement of 353 tons.
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\15\ As of May 26, 2017, the OPC's light ship displacement (i.e.,
its ``empty'' displacement, without fuel, water, ballast, stores, and
crew) was preliminarily estimated at about 2,640 to 2,800 tons, and its
full load displacement was preliminarily estimated at about 3,500 to
3,730 tons. (Source: Figures provided to CRS by Coast Guard liaison
office, May 26, 2017.)
\16\ Source for figure of 4,500 tons: Coast Guard NSC fact sheet,
accessed October 3, 2018, at: https://www.dcms.uscg.mil/Portals/10/CG-
9/Acquisition%20PDFs/Factsheets/NSC.pdf?ver=2017-04-24-142526-023.
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Procurement of NSCs for replacing retiring Hamilton-class high-
endurance cutters is approaching its end. If additional NSCs were
procured in the near term in parallel with OPC procurement as part of a
strategy for more quickly replacing retiring medium-endurance cutters,
the additional NSCs could be built using the currently open NSC
production line, avoiding a break in that production line and thereby
maximizing production learning curve benefits. The procurement cost of
any additional NSCs might be further reduced by procuring them at
regular intervals and using an MYP contract.
OPC Program
The Coast Guard is using a contract with options to procure the
first nine OPCs. As stated earlier, although a contract with options
might look like a multiyear contract, it is not a form of multiyear
contracting. A contract with options operates more like annual
contracting and cannot achieve the kinds of savings that are possible
with multiyear contracting.\17\
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\17\ For additional discussion, see CRS Report R41909, Multiyear
Procurement (MYP) and Block Buy Contracting in Defense Acquisition:
Background and Issues for Congress, by Ronald O'Rourke and Moshe
Schwartz, particularly the section entitled ``MYP and BBC vs. Contracts
with Options.''
---------------------------------------------------------------------------
Using multiyear contracting in the 25-ship OPC program--
specifically, block buy contracting with EOQ authority for the initial
ships in the program, followed by either block buy contracting with EOQ
authority or MYP contracting for later ships in the program--rather
than annual contracting might reduce the total acquisition cost of the
program by about $1 billion. This potential savings of $1 billion--a
figure equal to or greater than the acquisition cost of either a polar
icebreaker or a 35-ship Waterways Commerce Cutter program--represents a
rare opportunity for using multiyear contracting to reduce the cost of
an individual Coast Guard acquisition program by such an amount.
Acquiring the first nine ships in the OPC program under the current
contract with options could forego roughly $350 million of the $1
billion in potential savings. Much of this $350 million in potential
savings might be recaptured by renegotiating the current contract so as
to convert it, with congressional approval, into a block buy contract
with EOQ authority. If acquisition regulations prohibit such a
renegotiation, the Coast Guard alternatively could choose to not
exercise most of the options in the current contract and hold a new
competition for building the current NSC design under a block buy
contract. The current OPC builder--Eastern Shipbuilding of Panama City,
FL--would be well positioned to win such a competition, since it would
involve building Eastern's own design and Eastern would already have
moved down the initial (i.e., the steepest) part of the learning curve
for building the design.
The current planned procurement profile for the OPC, which reaches
a maximum projected rate of two ships per year, would deliver OPCs many
years after the end of the originally planned service lives of the
medium-endurance cutters that they are to replace. Coast Guard
officials have testified that the service plans to extend the service
lives of the medium-endurance cutters until they are replaced by OPCs.
There will be maintenance and repair expenses associated with extending
the service lives of medium-endurance cutters, and if the Coast Guard
does not also make investments to increase the capabilities of these
ships, the ships may have less capability in certain regards than OPCs.
One possible option for addressing this situation would be to
increase the maximum annual procurement rate of the replacement ships
from the currently planned two ships per year to a higher figure.
Increasing the rate to three or four ships per year, for example, could
result in the 25th ship being delivered about four years or six years
sooner, respectively, than under the currently planned maximum rate.
Increasing the procurement rate would require a substantial increase to
the Coast Guard's AC&I account, which gets back to the issue discussed
earlier of future funding levels for that account and Congress's agency
in setting funding levels and determining the composition of Federal
spending.
From a production point of view, there are at least three options
for increasing the annual procurement rate of replacement ships from
the currently planned two ships per year to a higher rate, so as to
close any gap in time between the retirements of medium-endurance
cutters and the entry into service of their replacements. These options
are as follows:
increasing the annual OPC production rate at Eastern
Shipbuilding, if Eastern's capacity would permit this;
building additional OPCs at one or two additional shipyards,
such as Bollinger Shipyards of Lockport, LA and/or General
Dynamics' Bath Iron Works (GD/BIW) of Bath, ME--the two other
finalists in the OPC competition; and
building additional NSCs at Huntington Ingalls Industries/
Ingalls Shipbuilding (HII/Ingalls).
These three options are not mutually exclusive--they could be
pursued in combination. Additional OPCs built at Bollinger and/or GD/
BIW could be built to the OPC designs that those two shipbuilders
submitted for the OPC competition. (Those designs are presumably
optimized for the production facilities at Bollinger and GD/BIW. The
Coast Guard, moreover, currently does not have data rights for the
complete vessel design for Eastern's OPC design.\18\) Building
additional OPCs at Bollinger and/or GD/BIW to the designs developed by
those two shipbuilders would result in a fleet with two or three
classes of OPCs, a situation that would increase OPC life-cycle
operation and support costs and complicate the training and assignment
of OPC crew members. These additional life-cycle costs and
complications, however, might be deemed acceptable in return for
avoiding the costs and risks of extending the service lives of medium-
endurance cutters and shortening any gap in time between the retirement
of medium-endurance cutters and the entry into service of their
replacements. The Navy decided in 2010 to fill its requirement for LCSs
by building two different LCS designs at the same time, and did so
knowing that this would result in some additional life-cycle operation
and support costs and crewing-related complications compared to the
option of building all LCSs to a single design.\19\ The option of
building additional NSCs as replacements for retiring medium-endurance
cutters was discussed above in the section on the NSC program.
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\18\ Source regarding data rights: E-mail from Coast Guard liaison
office to CRS, September 6, 2017.
\19\ For additional discussion of the LCS program, see CRS Report
RL33741, Navy Littoral Combat Ship (LCS) Program: Background and Issues
for Congress, by Ronald O'Rourke. A total of 35 LCSs have been funded
through FY 2019. Of these 35 ships, 17 will be built to one of the LCS
designs, and 18 will be built to the other.
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FRC Program
With 50 FRCs procured through FY 2018 and four more requested for
FY 2019, the FRC is approaching the 58-ship figure called for in the
Coast Guard's program of record. As shown earlier in Table 1, however,
the Coast Guard's 2011 Fleet Mix Analysis Phase II concluded that a
total of 91 FRCs would be needed as part of an overall force of 149
general-purpose cutters to fully perform the service's statutory
missions in coming years.
Procuring additional FRCs beyond the 58th would require additional
procurement funding, which gets back to the issue discussed earlier of
future funding levels for the PC&I account and Congress's agency in
setting funding levels and determining the composition of Federal
spending. As with the option discussed earlier of procuring additional
NSCs, procuring additional FRCs immediately following the procurement
of the 58th FRC would permit them to be built using the currently open
NSC production line, avoiding a break in that production line and
thereby maximizing production learning curve benefits. And as with the
NSC option discussed earlier, the cost of any such additional FRCs
could be reduced by procuring them under an MYP or block buy contract.
The resulting increase in Coast Guard force structure from 58 FRCs to
some higher number would increase long-term Coast Guard operation and
support costs above currently planned levels.
Polar Security Cutter (PSC) (aka Polar Icebreaker)
Reduction in Estimated Procurement Cost and Business Case
One of the most notable changes in the PSC program over the last
year or two has been the reduction in the estimated unit procurement
cost of the ships. The procurement cost of a new heavy polar icebreaker
had earlier been estimated informally at roughly $1 billion, but the
Coast Guard and Navy informed CRS and CBO in March 2018 that they now
believe that three polar icebreakers could be acquired for a total cost
of about $2.1 billion, or an average of about $700 million per
ship.\20\ (The first ship will cost more than the other two because it
will incorporate design costs for the class and be at the start of the
production learning curve for the class.) Other information identifies
a smaller reduction in procurement cost, to something more than $900
million per ship.\21\ Other things held equal, reductions in the
estimated unit procurement cost of the polar icebreaker strengthen the
business case for the program. A reduction in estimated unit
procurement cost to an average of $700 million per ship would
strengthen it substantially.
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\20\ Source: March 16, 2018, Coast Guard-Navy briefing to CRS and
CBO on the polar icebreaker program. For further discussion, see the
section entitled ``Estimated Acquisition Cost Has Declined
Substantially'' in CRS Report RL34391, Coast Guard Polar Icebreaker
Program: Background and Issues for Congress, by Ronald O'Rourke.
\21\ May 2018 GAO report states that the acquisition program
baseline (APB) approved for the polar icebreaker program in January
2018 estimated the program's acquisition cost at $3.207 million, and
that the ``current estimate'' of the program's acquisition as of
January 2018 was $2,789 million, or an average of about $930 million
per ship. (Government Accountability Office, Homeland Security
Acquisitions[:] Leveraging Programs' Results Could Further DHS's
Progress to Improve Portfolio Management, GAO-18-339SP, May 2018, p.
85.) See also Government Accountability Office, Coast Guard
Acquisitions[:] Actions Needed to Address Longstanding Portfolio
Management Challenges, GAO-18-454, July 2018, which states on page 18
that ``The polar icebreaker program has an estimated total acquisition
cost of more than $3 billion. . ..''
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Option for Block Buy Contract
The baseline plan for the PSC program calls for acquiring the ships
using a contract with options, but Coast Guard and Navy officials are
open to the idea of instead using a block buy contract to acquire at
least some of the ships, and requested information on this possibility
as part of the request for proposals (RFP) for the PSC program that was
released on March 2, 2018. Using the above $2.1 billion estimated cost
for a three-ship procurement of PSCs, and based on savings estimates
provided by the Navy in the past for Navy shipbuilding programs that
were being proposed for multiyear contracting, using a block buy
contract that included EOQ purchases rather than a contract with
options might reduce the combined acquisition cost of three PSCs by
upwards of 7 percent, which could equate to a savings of upwards of
$150 million.
A congressionally mandated July 2017 National Academies of
Sciences, Engineering, and Medicine (NASEM) report on acquisition and
operation of polar icebreakers states (emphasis as in original):
3. Recommendation: USCG should follow an acquisition strategy
that includes block buy contracting with a fixed price
incentive fee contract and take other measures to ensure best
value for investment of public funds.
Icebreaker design and construction costs can be clearly
defined, and a fixed price incentive fee construction contract
is the most reliable mechanism for controlling costs for a
program of this complexity. This technique is widely used by
the U.S. Navy. To help ensure best long-term value, the
criteria for evaluating shipyard proposals should incorporate
explicitly defined lifecycle cost metrics. . . .
A block buy authority for this program will need to contain
specific language for economic order quantity purchases for
materials, advanced design, and construction activities. A
block buy contracting program with economic order quantity
purchases enables series construction, motivates competitive
bidding, and allows for volume purchase and for the timely
acquisition of material with long lead times. It would enable
continuous production, give the program the maximum benefit
from the learning curve, and thus reduce labor hours on
subsequent vessels. . ..
If advantage is taken of learning and quantity discounts
available through the recommended block buy contracting
acquisition strategy, the average cost per heavy icebreaker is
approximately $791 million, on the basis of the acquisition of
four ships.\22\
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\22\ National Academies of Sciences, Engineering, and Medicine,
Division on Earth and Life Studies and Transportation Research Board,
Acquisition and Operation of Polar Icebreakers: Fulfilling the Nation's
Needs, Letter Report, with cover letter dated July 11, 2017, pp. 14,
15.
Although Coast Guard officials have expressed interest in using a
block buy contract for procuring PSCs, they are considering the option
of procuring the first PSC under a single-ship contract and then using
a block buy contract to procure subsequent PSCs. In support of that
option, Coast Guard officials have noted the risks involved in building
a lead ship and the fact that the United States has not built a heavy
polar icebreaker in more than 40 years. Opponents of including the
first PSC in a block buy contract might argue, for example, that
problems with the design of PSC components might be transmitted from
the first PSC to later PSCs by up-front EOQ purchases of those
components made under a block buy contract. They might additionally
argue that excluding the first PSC from a block buy contract preserves
more government flexibility on whether and when to procure a second
PSC, which could be advantageous for responding to potential changes in
operational needs or budgetary circumstances.
Supporters of including the first PSC in a block buy contract could
argue that block buy contracting was invented to a large degree
expressly to permit a lead ship to be included in the contract, that
the Navy has included lead ships in block buy contracts in the
Virginia-class attack submarine program and the TAO-205 class oiler
program, and that the Navy is considering using a block buy contract
that includes the lead ship for procuring the initial ships in the
Columbia-class ballistic missile submarine program. The comparison with
the Navy's plans for the Columbia class, they could argue, is of
particular note, because the United States has not procured the lead
ship of a new class of ballistic missile submarines in more than 40
years, the Columbia-class design is more complex in certain regards
than the PSC design, and the Columbia-class design will incorporate a
new-design electric-drive propulsion plant--something that the United
States has never before done on a series-production nuclear-powered
submarine.
The lead ship in the PSC program will carry a risk of requiring
design changes to fix problems in the design that are only discovered
as a result of building the design. That risk, however, will exist
regardless of whether the lead ship is built under a single-ship
contract of a block buy contract, and it is not clear how much more
chance there would be under a block buy contract of transmitting any
such design problems to the second PSC, because the Coast Guard's
notional schedule for the PSC program calls for procuring the second
ship about 18 months after the first (i.e., while construction of the
first PSC is still in progress). To the extent that there would be a
greater chance of transmitting design problems to the second PSC under
a block buy contract, the question would then become one of weighing
the potential cost of fixing those design problems against the added
economies of including the first PSC in a block buy contract.
Supporters of including the lead ship in a block buy contract could
argue that the risks of encountering a design problem in the first ship
have been mitigated by the industry's shift since the last polar
icebreakers were built from paper designs to computer-aided design, by
the Navy's involvement in the PSC program, and by the PSC program's
strategy of using a parent design (i.e., an existing polar-capable
icebreaker design) as the basis for the PSC design. As shown in
Appendix B, a key lesson-learned in government shipbuilding is to bring
the design of the ship in question to a high level of completion before
beginning construction of the ship, precisely so as to minimize the
risk of design problems. Supporters of including the lead ship in a
block buy contract could argue that if there is a significant risk of
substantial design problems in the lead ship, that is not an argument
against including the lead ship in a block buy contract--it is an
argument against beginning construction of the ship under any form of
contract.
Risk of Delayed Delivery of Lead Ship
GAO has identified a risk of the first PSC being delivered
late.\23\ I agree with that assessment. The Navy's experience in
building lead ships suggests that there is a substantial risk of the
lead PSC being delivered late--perhaps as much as a year or more later
than scheduled. A late delivery could equate to an increase in the cost
of building the ship, because it could reflect having to use more labor
hours to build the ship than had been estimated, and because the ship
will absorb more of the shipyard's overhead costs by remaining in the
shipyard for a longer period of time. The government can insulate
itself against the risk of such cost growth by using a fixed-price
contract to build the ship (which the Coast Guard and Navy plan to do).
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\23\ See GAO's spoken testimony during the question-and-answer
portion of a July 24, 2018, hearing on Coast Guard acquisition programs
and mission balance and effectiveness before the Coast Guard and
Maritime Transportation subcommittee of the House Transportation
Committee, as reflected in the transcript of the hearing.
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The possibility of a late delivery is something the Coast Guard and
Congress may consider preparing for in terms of investments for
maintaining Polar Star as an operational ship and/or seeking a short-
term bridging charter of a foreign polar icebreaker. To the extent that
a delay in delivering the lead ship would extend a gap in time between
the retirement of Polar Star and the entry into service of the first
PSC, that could become an argument for starting construction of the
lead PSC as soon as its design is brought to a high level of completion
and the ship is otherwise ready to begin construction.
Option for Using a Common Design for Heavy and Medium PSCs
The Coast Guard envisages procuring up to three new medium
icebreakers after it procures three new heavy polar icebreakers--a plan
known as 3+3. The July 2017 NASEM report concluded that notional
operational requirements for new medium polar icebreakers would result
in ships that would not be too different in size from new heavy polar
icebreakers. (That is not be particularly surprising--the Coast Guard's
current medium polar icebreaker, Healy, is actually somewhat larger
than the Coast Guard's heavy polar icebreaker, Polar Star. Healy has
less icebreaking capability than Polar Star, but more capacity for
supporting onboard science operations.) Given this probable similarity
in size, the NASEM report recommended building a single medium polar
icebreaker to the same common design as the three new heavy polar
icebreakers (i.e., 4+0), and operating these four new ships in
conjunction with Healy to produce a five-ship polar icebreaker fleet.
The 4+0 production strategy, the report concluded, would reduce the
cost of the medium icebreaker by avoiding the cost of developing a
second icebreaker design and making the medium polar icebreaker the
fourth ship on an existing production learning curve rather than the
first ship on a new production learning curve. An abstract from the
NASEM report on this proposal is shown in Appendix E to this statement.
If policymakers decide to procure a second or third new medium
polar icebreaker, the same general approach recommended by the NASEM
report could be followed, leading to a 5+0 or 6+0 acquisition. The
potential percentage savings under a five-or six-ship block buy
contract with EOQ authority could be greater than the figure of upwards
of 7 percent mentioned earlier for a three-ship block buy--they could
be closer to 10 percent. Building a single common icebreaker design
rather than two designs to meet needs for heavy and medium polar
icebreakers might also reduce life-cycle operation and support costs.
An April 12, 2018, press report states:
As the Coast Guard prepares to review industry bids for a new
heavy polar icebreaker, the service is keeping its options open
for the right number and mix of polar icebreakers it will need
in the future, Adm. Paul Zukunft, the [then-]commandant of the
Coast Guard, said on Wednesday [April 11].
The Coast Guard's program of record is for three heavy and
three medium polar icebreakers but Zukunft said the ``jury is
still out'' whether that will remain so. Right now, the service
is aiming toward building three new heavy icebreakers, but it
might make sense just to keep building these ships, he told
reporters at a Defense Writers Group breakfast in Washington,
D.C.
Zukunft said that ``when you start looking at the business case
after you build three, and then you need to look at what is the
economy of scale when you start building heavy icebreakers, and
would it be less expensive to continue to build heavies and not
mediums.'' He added that the heavy icebreakers provide more
capability, and if the price is ``affordable'' and in ``the
same range'' as building medium icebreakers, then ``maybe you
end up with one class of heavy icebreakers.''
Building only one class of ships has a number of advantages in
terms of maintenance, crew familiarity, configuration
management, and more, he said. A decision on what the future
icebreaker fleet will consist of is ``still probably several
years out. . .. but that's one option that we want to keep open
going forward,'' Zukunft said.\24\
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\24\ Calvin Biesecker, ``Coast Guard Leaving Options Open For
Future Polar Icebreaker Fleet Type,'' Defense Daily, April 12, 2018.
Ellipsis as in original.
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WCC Program
The WCC program--the program to replace the Coast Guard's current
35-ship inland waterways fleet--is a smaller program than those
discussed above. With a notional procurement cost of roughly $25
million per cutter, a 35-ship replacement program might have a total
acquisition cost of roughly $900 million.\25\ Although the scale of the
program is more modest than that of the NSC, OPC, and FRC programs, the
WCC program is of importance in terms of its economic benefit to the
Nation (by supporting waterborne commerce) and the bidding opportunity
it will provide to U.S. shipyards that are not capable of building
larger Coast Guard cutters.
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\25\ Source for $25 million figure: Spoken testimony of Coast Guard
Commandant Karl Schultz during the question-and-answer portion of a
September 16, 2018, hearing on Coast Guard modernization and
recapitalization before the Coast Guard and Maritime Transportation
subcommittee of the House transportation and Infrastructure Committee,
as reflected in the transcript of the hearing. The Commandant stated:
``I'm loathed to put a number out, but I think you're talking a $25
million, plus or minus, [cost per] ship.'' The planned number of new
replacement WCCs has not yet been determined and could turn out to be
something other than 35. GAO states that ``according to Coast Guard
officials, the preliminary rough order of magnitude estimate for total
acquisition cost is $1.1 billion.'' Government Accountability Office,
Coast Guard Acquisitions[:] Actions Needed to Address Longstanding
Portfolio Management Challenges, GAO-18-454, July 2018, p. 19.
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As the Coast Guard begins to develop the details of this program,
potential oversight issues for the subcommittee could include, among
other things, the planned number of replacement cutters (which has not
yet been determined and could turn out to be something other than 35),
planned annual procurement quantities and the resulting schedule for
replacing the existing ships, whether to develop a new design or
instead use a parent design, the number of shipyards to be used to
build the ships, and the contracting strategy, including whether to use
multiyear contracting.
NOAA Fleet Recapitalization
NOAA is now in the opening stages of its effort to procure eight
new ships to replace eight aged ships within its 16-ship research
fleet. Current plans call for the eight-ship recapitalization effort to
be level-funded at $75 million per year. Building these ships could
provide work to shipyards that are not capable of building larger Navy
or Coast Guard ships. They could also help a shipyard involved in
building larger Navy or Coast Guard ships to fill in temporary dips in
their Navy or Coast Guard workloads, which might permit the Navy or
Coast Guard ships in question to be built at lower cost. With
procurement of the eight new NOAA ships now beginning, the effort
presents some potential oversight issues for the subcommittee.
Unit Procurement Cost and Total Program Procurement Cost
One of these concerns the visibility of the estimated unit
procurement costs of the new ships and the estimated total procurement
cost of the eight-ship effort. These figures--which are basic points of
information for Congress for supporting potential consideration of
budget tradeoffs and for use as baselines in monitoring program
execution--are not clearly visible in NOAA's FY 2019 budget
justification book. It is difficult, moreover, to calculate what the
unit procurement cost might be using the information in the budget
justification book, since the program is level-funded at $75 million
per year, there is a different combination of activities to be funded
each year under that funding figure, and the individual costs of these
activities are not broken out. One option the subcommittee may wish to
consider would be to request or direct NOAA to include the ships'
estimated unit procurement costs and the program's estimated total
procurement cost in its annual budget justification book.
Number of New Designs
A second potential oversight issue for the subcommittee concerns
the number of new designs that NOAA is planning to use for building for
the eight new ships. NOAA is currently planning to build the new ships
to four designs, meaning an average of two ships per design. Compared
to a strategy of building the eight ships to fewer than four designs,
NOAA's planned approach could increase total design costs, reduce
opportunities for achieving shipyard production learning curve
benefits, and reduce economies of scale in life-cycle operation and
support costs.
In a telephone consultation with CRS, NOAA officials stated that
the option of building the eight ships to a smaller number of designs
was considered for exactly these reasons, but that the decision was to
instead plan for four different designs because of the differing
operational requirements of the eight ships. Building a common design
capable of handling these differing requirements, NOAA stated, would
result in a design that would be bigger--and thus more expensive both
to procure and to operate and support--than would be needed for some of
the eight ships, and these additional procurement and life-cycle
operation and support costs were greater than the potential savings of
building the ships to a smaller number of designs.\26\ That explanation
is quite plausible. One option the subcommittee may wish to consider
would be to request or direct NOAA to provide the details of its
analysis on the comparative design, procurement, and life-cycle
operation and support costs of building four designs vs. a smaller
number of designs, so that the subcommittee, as a matter of due
diligence, can examine the Coast Guard's analysis of this issue.
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\26\ Source: Telephone conversation between CRS and NOAA September
28, 2018.
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Multiple-Ship Buys or Block Buy Contracting
NOAA's current plan is to use a series of contracts with options to
procure the eight new ships.\27\ There could, for example, be four
contracts (one for each design), with each contract being for the
design and construction of one ship, with an option for building a
second. This approach would preserve more government flexibility in
deciding whether to procure a second ship to a given design, provide
multiple bidding opportunities for shipyards interested in building the
ships, and create a potential for building the ships in multiple
shipyards, all of which policymakers may view as benefits. On the other
hand, this approach would forego the potential savings that might be
realized through multiple-ship buys (e.g., procuring two ships of a
given design in a single year) or block buy contacting. One option the
subcommittee may wish to consider would be to request or direct NOAA to
devise and share with the subcommittee options (including estimates of
potential savings) for making use of multiple-ship buys and block buy
contracting while staying, as much as possible, within the level
funding profile of $75 million per year.
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\27\ Source: Telephone conversation between CRS and NOAA September
28, 2018.
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Life-Cycle Support
NOAA has not yet begun to scope out in detail the life-cycle
support plan for the eight new ships--that work, NOAA officials stated,
may start a couple of years from now.\28\ One option the subcommittee
may wish to consider would be to request that NOAA keep the
subcommittee apprised of its efforts to develop a life-cycle support
plan for the ships.
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\28\ Source: Telephone conversation between CRS and NOAA September
28, 2018.
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Chairman Sullivan, this concludes my statement. Thank you again for
the opportunity to testify, and I will be pleased to respond to any
questions the subcommittee may have.
Appendix A. Biography--Ronald O'Rourke
Mr. O'Rourke is a Phi Beta Kappa graduate of the Johns Hopkins
University, from which he received his B.A. in international studies,
and a valedictorian graduate of the University's Paul Nitze School of
Advanced International Studies, where he received his M.A. in the same
field.
Since 1984, Mr. O'Rourke has worked as a naval analyst for CRS. He
has written many reports for Congress on various issues relating to the
Navy, the Coast Guard, defense acquisition, China's naval forces and
maritime territorial disputes, the Arctic, the international security
environment, and the U.S. role in the world. He regularly briefs
Members of Congress and Congressional staffers, and has testified
before Congressional committees on many occasions.
In 1996, he received a Distinguished Service Award from the Library
of Congress for his service to Congress on naval issues.
In 2010, he was honored under the Great Federal Employees
Initiative for his work on naval, strategic, and budgetary issues.
In 2012, he received the CRS Director's Award for his outstanding
contributions in support of the Congress and the mission of CRS.
In 2017, he received the Superior Public Service Award from the
Navy for service in a variety of roles at CRS while providing
invaluable analysis of tremendous benefit to the Navy for a period
spanning decades.
Mr. O'Rourke is the author of several journal articles on naval
issues, and is a past winner of the U.S. Naval Institute's Arleigh
Burke essay contest. He has given presentations on naval, Coast Guard,
and strategy issues to a variety of U.S. and international audiences in
government, industry, and academia.
Appendix B. A Summary of Some Acquisition Lessons Learned for
Government Shipbuilding
This appendix presents a general summary of lessons learned in
government shipbuilding, reflecting comments made repeatedly by various
sources over the years.\29\ These lessons learned include the
following:
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\29\ This appendix is adapted from Appendix J of CRS Report
RL32665, Navy Force Structure and Shipbuilding Plans: Background and
Issues for Congress, by Ronald O'Rourke. See also Government
Accountability Office, Navy Shipbuilding[:] Past Performance Provides
Valuable Lessons for Future Investments, GAO-18-238SP, June 2018, 36
pp.
At the outset, get the operational requirements for the
program right. Properly identify the program's operational
requirements at the outset. Manage risk by not trying to do too
much in terms of the program's operational requirements, and
perhaps seek a so-called 70 percent-to-80 percent solution
(i.e., a design that is intended to provide 70 percent-80
percent of desired or ideal capabilities). Achieve a realistic
balance up front between operational requirements, risks, and
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estimated costs.
Impose cost discipline up front. Use realistic price
estimates, and consider not only development and procurement
costs, but life-cycle operation and support (O&S) costs.
Employ competition where possible in the awarding of design
and construction contracts.
Use a contract type that is appropriate for the amount of
risk involved, and structure its terms to align incentives with
desired outcomes.
Minimize design/construction concurrency by developing the
design to a high level of completion before starting
construction and by resisting changes in requirements (and
consequent design changes) during construction.
Properly supervise construction work. Maintain an adequate
number of properly trained Supervisor of Shipbuilding (SUPSHIP)
personnel.
Provide stability for industry, in part by using, where
possible, multiyear procurement (MYP) or block buy contracting.
Maintain a capable government acquisition workforce that
understands what it is buying, as well as the above points.
Identifying these lessons is arguably not the hard part--most if
not all these points have been cited for years. The hard part,
arguably, is living up to them without letting circumstances lead
program-execution efforts away from these guidelines.
Appendix C. Some Considerations Relating to Warranties in Government
Shipbuilding and Other Government Acquisition
This appendix presents some considerations relating to warranties
in shipbuilding and other defense acquisition.\30\
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\30\ This appendix is adapted from Appendix K of CRS Report
RL32665, Navy Force Structure and Shipbuilding Plans: Background and
Issues for Congress, by Ronald O'Rourke.
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In discussions of government shipbuilding, one question that
sometimes arises is whether including a warranty in a shipbuilding
contract is preferable to not including one. The question can arise,
for example, in connection with a GAO finding that ``the Navy
structures shipbuilding contracts so that it pays shipbuilders to build
ships as part of the construction process and then pays the same
shipbuilders a second time to repair the ship when construction defects
are discovered.'' \31\
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\31\ See Government Accountability Office, Navy Shipbuilding[:]
Past Performance Provides Valuable Lessons for Future Investments, GAO-
18-238SP, June 2018, p. 21. A graphic on page 21 shows a GAO finding
that the government was financially responsible for shipbuilder
deficiencies in 96 percent of the cases examined by GAO, and that the
shipbuilder was financially responsible for shipbuilder deficiencies in
4 percent of the cases.
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Including a warranty in a shipbuilding contract (or a contract for
building some other kind of end item), while potentially valuable,
might not always be preferable to not including one--it depends on the
circumstances of the acquisition, and it is not necessarily a valid
criticism of an acquisition program to state that it is using a
contract that does not include a warranty (or a weaker form of a
warranty rather than a stronger one).
Including a warranty generally shifts to the contractor the risk of
having to pay for fixing problems with earlier work. Although that in
itself could be deemed desirable from the government's standpoint, a
contractor negotiating a contract that will have a warranty will
incorporate that risk into its price, and depending on how much the
contractor might charge for doing that, it is possible that the
government could wind up paying more in total for acquiring the item
(including fixing problems with earlier work on that item) than it
would have under a contract without a warranty.
When a warranty is not included in the contract and the government
pays later on to fix problems with earlier work, those payments can be
very visible, which can invite critical comments from observers. But
that does not mean that including a warranty in the contract somehow
frees the government from paying to fix problems with earlier work. In
a contract that includes a warranty, the government will indeed pay
something to fix problems with earlier work--but it will make the
payment in the less-visible (but still very real) form of the up-front
charge for including the warranty, and that charge might be more than
what it would have cost the government, under a contract without a
warranty, to pay later on for fixing those problems.
From a cost standpoint, including a warranty in the contract might
or might not be preferable, depending on the risk that there will be
problems with earlier work that need fixing, the potential cost of
fixing such problems, and the cost of including the warranty in the
contract. The point is that the goal of avoiding highly visible
payments for fixing problems with earlier work and the goal of
minimizing the cost to the government of fixing problems with earlier
work are separate and different goals, and that pursuing the first goal
can sometimes work against achieving the second goal.\32\
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\32\ It can also be noted that the country's two largest builders
of Navy ships--General Dynamics (GD) and Huntington Ingalls Industries
(HII)--derive about 60 percent and 96 percent, respectively, of their
revenues from U.S. government work. (See General Dynamics, 2016 Annual
Report, page 9 of Form 10-K [PDF page 15 of 88]) and Huntington Ingalls
Industries, 2016 Annual Report, page 5 of Form 10-K [PDF page 19 of
134]). Thus, even if a warranty in a shipbuilding contract with one of
these firms were to somehow mean that the government did not have pay
under the terms of that contract--either up front or later on--for
fixing problems with earlier work done under that contract, there would
still be a question as to whether the government would nevertheless
wind up eventually paying much of that cost as part of the price of one
or more future contracts the government may have that firm.
---------------------------------------------------------------------------
The Department of Defense's guide on the use of warranties states
the following:
Federal Acquisition Regulation (FAR) 46.7 states that ``the use
of warranties is not mandatory.'' However, if the benefits to
be derived from the warranty are commensurate with the cost of
the warranty, the CO [contracting officer] should consider
placing it in the contract. In determining whether a warranty
is appropriate for a specific acquisition, FAR Subpart 46.703
requires the CO to consider the nature and use of the supplies
and services, the cost, the administration and enforcement,
trade practices, and reduced requirements. The rationale for
using a warranty should be documented in the contract file. .
..
In determining the value of a warranty, a CBA [cost-benefit
analysis] is used to measure the life cycle costs of the system
with and without the warranty. A CBA is required to determine
if the warranty will be cost beneficial. CBA is an economic
analysis, which basically compares the Life Cycle Costs (LCC)
of the system with and without the warranty to determine if
warranty coverage will improve the LCCs. In general, five key
factors will drive the results of the CBA: cost of the warranty
+ cost of warranty administration + compatibility with total
program efforts + cost of overlap with Contractor support +
intangible savings. Effective warranties integrate reliability,
maintainability, supportability, availability, and life-cycle
costs. Decision factors that must be evaluated include the
state of the weapon system technology, the size of the
warranted population, the likelihood that field performance
requirements can be achieved, and the warranty period of
performance.\33\
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\33\ Department of Defense, Department of Defense Warranty Guide,
Version 1.0, September 2009, accessed July 13, 2017, at https://
www.acq.osd.mil/dpap/pdi/uid/docs/departmentof
defensewarrantyguide[1].doc.
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Appendix D. Some Considerations Relating to Avoiding Procurement Cost
Growth vs. Minimizing Procurement Costs
This appendix presents some considerations relating to avoiding
procurement cost growth vs. minimizing procurement costs in
shipbuilding and other government acquisition.\34\
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\34\ This appendix is adapted from Appendix L of CRS Report
RL32665, Navy Force Structure and Shipbuilding Plans: Background and
Issues for Congress, by Ronald O'Rourke.
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The affordability challenge posed by the Navy's shipbuilding plans
can reinforce the strong oversight focus on preventing or minimizing
procurement cost growth in Navy shipbuilding programs, which is one
expression of a strong oversight focus on preventing or minimizing cost
growth in DOD acquisition programs in general. This oversight focus may
reflect in part an assumption that avoiding or minimizing procurement
cost growth is always synonymous with minimizing procurement cost. It
is important to note, however, that as paradoxical as it may seem,
avoiding or minimizing procurement cost growth is not always synonymous
with minimizing procurement cost, and that a sustained, singular focus
on avoiding or minimizing procurement cost growth might sometimes lead
to higher procurement costs for the government.
How could this be? Consider the example of a design for the lead
ship of a new class of Navy ships. The construction cost of this new
design is uncertain, but is estimated to be likely somewhere between
Point A (a minimum possible figure) and Point D (a maximum possible
figure). (Point D, in other words, would represent a cost estimate with
a 100 percent confidence factor, meaning there is a 100 percent chance
that the cost would come in at or below that level.) If the Navy wanted
to avoid cost growth on this ship, it could simply set the ship's
procurement cost at Point D. Industry would likely be happy with this
arrangement, and there likely would be no cost growth on the ship.
The alternative strategy open to the Navy is to set the ship's
target procurement cost at some figure between Points A and D--call it
Point B--and then use that more challenging target cost to place
pressure on industry to sharpen its pencils so as to find ways to
produce the ship at that lower cost. (Navy officials sometimes refer to
this as ``pressurizing'' industry.) In this example, it might turn out
that industry efforts to reduce production costs are not successful
enough to build the ship at the Point B cost. As a result, the ship
experiences one or more rounds of procurement cost growth, and the
ship's procurement cost rises over time from Point B to some higher
figure--call it Point C.
Here is the rub: Point C, in spite of incorporating one or more
rounds of cost growth, might nevertheless turn out to be lower than
Point D, because Point C reflected efforts by the shipbuilder to find
ways to reduce production costs that the shipbuilder might have put
less energy into pursuing if the Navy had simply set the ship's
procurement cost initially at Point D.
Setting the ship's cost at Point D, in other words, may eliminate
the risk of cost growth on the ship, but does so at the expense of
creating a risk of the government paying more for the ship than was
actually necessary. DOD could avoid cost growth on new procurement
programs starting tomorrow by simply setting costs for those programs
at each program's equivalent of Point D. But as a result of this
strategy, DOD could well wind up leaving money on the table in some
instances--of not, in other words, minimizing procurement costs.
DOD does not have to set a cost precisely at Point D to create a
potential risk in this regard. A risk of leaving money on the table,
for example, is a possible downside of requiring DOD to budget for its
acquisition programs at something like an 80 percent confidence
factor--an approach that some observers have recommended--because a
cost at the 80 percent confidence factor is a cost that is likely
fairly close to Point D.
Procurement cost growth is often embarrassing for DOD and industry,
and can damage their credibility in connection with future procurement
efforts. Procurement cost growth can also disrupt congressional
budgeting by requiring additional appropriations to pay for something
Congress thought it had fully funded in a prior year. For this reason,
there is a legitimate public policy value to pursuing a goal of having
less rather than more procurement cost growth.
Procurement cost growth, however, can sometimes be in part the
result of DOD efforts to use lower initial cost targets as a means of
pressuring industry to reduce production costs--efforts that,
notwithstanding the cost growth, might be partially successful. A
sustained, singular focus on avoiding or minimizing cost growth, and of
punishing DOD for all instances of cost growth, could discourage DOD
from using lower initial cost targets as a means of pressurizing
industry, which could deprive DOD of a tool for controlling procurement
costs.
The point here is not to excuse away cost growth, because cost
growth can occur in a program for reasons other than DOD's attempt to
pressurize industry. Nor is the point to abandon the goal of seeking
lower rather than higher procurement cost growth, because, as noted
above, there is a legitimate public policy value in pursuing this goal.
The point, rather, is to recognize that this goal is not always
synonymous with minimizing procurement cost, and that a possibility of
some amount of cost growth might be expected as part of an optimal
government strategy for minimizing procurement cost. Recognizing that
the goals of seeking lower rather than higher cost growth and of
minimizing procurement cost can sometimes be in tension with one
another can lead to an approach that takes both goals into
consideration. In contrast, an approach that is instead characterized
by a sustained, singular focus on avoiding and minimizing cost growth
may appear virtuous, but in the end may wind up costing the government
more.
Appendix E. NASEM Report Recommendation for Building Heavy and Medium
Polar Icebreakers to a Common Design
Regarding its proposal to build heavy and medium polar icebreakers
to a common design, the July 2017 NASEM report stated (emphasis as in
original):
2. Recommendation: The United States Congress should fund the
construction of four polar icebreakers of common design that
would be owned and operated by the United States Coast Guard
(USCG).
The current Department of Homeland Security (DHS) Mission Need
Statement. . . contemplates a combination of medium and heavy
icebreakers. The committee's recommendation is for a single
class of polar icebreaker with heavy icebreaking capability.
Proceeding with a single class means that only one design will
be needed, which will provide cost savings. The committee has
found that the fourth heavy icebreaker could be built for a
lower cost than the lead ship of a medium icebreaker class. . .
.
The DHS Mission Need Statement contemplated a total fleet of
``potentially'' up to six ships of two classes--three heavy and
three medium icebreakers. Details appear in the High Latitude
Mission Analysis Report. The Mission Need Statement indicated
that to fulfill its statutory missions, USCG required three
heavy and three medium icebreakers; each vessel would have a
single crew and would homeport in Seattle. The committee's
analysis indicated that four heavy icebreakers will meet the
statutory mission needs gap identified by DHS for the lowest
cost. . . .
4. Finding: In developing its independent concept designs and
cost estimates, the committee determined that the costs
estimated by USCG for the heavy icebreaker are reasonable.
However, the committee believes that the costs of medium
icebreakers identified in the High Latitude Mission Analysis
Report are significantly underestimated. . . .
Although USCG has not yet developed the operational
requirements document for a medium polar icebreaker, the
committee was able to apply the known principal characteristics
of the USCG Cutter Healy to estimate the scope of work and cost
of a similar medium icebreaker. The committee estimates that a
first-of-class medium icebreaker will cost approximately $786
million. The fourth ship of the heavy icebreaker series is
estimated to cost $692 million. Designing a medium-class polar
icebreaker in a second shipyard would incur the estimated
engineering, design, and planning costs of $126 million and
would forgo learning from the first three ships; the learning
curve would be restarted with the first medium design. Costs of
building the fourth heavy icebreaker would be less than the
costs of designing and building a first-of-class medium
icebreaker. . . .
6. Recommendation: USCG should ensure that the common polar
icebreaker design is science-ready and that one of the ships
has full science capability.
All four proposed ships would be designed as ``science-ready,''
which will be more cost-effective when one of the four ships--
most likely the fourth--is made fully science capable.
Including science readiness in the common polar icebreaker
design is the most cost-effective way of fulfilling both the
USCG's polar missions and the Nation's scientific research
polar icebreaker needs. . . . The incremental costs of a
science-ready design for each of the four ships ($10 million to
$20 million per ship) and of full science capability for one of
the ships at the initial build (an additional $20 million to
$30 million) are less than the independent design and build
cost of a dedicated research medium icebreaker. . . . In
briefings at its first meeting, the committee learned that the
National Science Foundation and other agencies do not have
budgets to support full-time heavy icebreaker access or the
incremental cost of design, even though their science programs
may require this capability. Given the small incremental cost,
the committee believes that the science capability cited above
should be included in the acquisition costs.
Science-ready design includes critical elements that cannot be
retrofitted cost-effectively into an existing ship and that
should be incorporated in the initial design and build. Among
these elements are structural supports, appropriate interior
and exterior spaces, flexible accommodation spaces that can
embark up to 50 science personnel, a hull design that
accommodates multiple transducers and minimizes bubble sweep
while optimizing icebreaking capability, machinery arrangements
and noise dampening to mitigate interference with sonar
transducers, and weight and stability latitudes to allow
installation of scientific equipment. Such a design will enable
any of the ships to be retrofitted for full science capability
in the future, if necessary. . . .
Within the time frame of the recommended build sequence, the
United States will require a science-capable polar icebreaker
to replace the science capabilities of the Healy upon her
retirement. To fulfill this need, one of the heavy polar
icebreakers would be procured at the initial build with full
science capability; the ability to fulfill other USCG missions
would be retained. The ship would be outfitted with
oceanographic overboarding equipment and instrumentation and
facilities comparable with those of modern oceanographic
research vessels. Some basic scientific capability, such as
hydrographic mapping sonar, should be acquired at the time of
the build of each ship so that environmental data that are
essential in fulfilling USCG polar missions can be
collected.\35\
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\35\ National Academies of Sciences, Engineering, and Medicine,
Division on Earth and Life Studies and Transportation Research Board,
Acquisition and Operation of Polar Icebreakers: Fulfilling the Nation's
Needs, Letter Report, with cover letter dated July 11, 2017, pp. 2, 4-
6.
Senator Sullivan. Thank you, Mr. O'Rourke, and I appreciate
you and CRS's serious work and detailed comments and your
continuing involvement and oversight, helping us with
oversight, very, very important. So thank you.
Let me begin the questioning. Admiral, I wanted to talk a
little bit about what seems to be a misalignment of demands and
capabilities.
I think it's pretty safe to say that Coast Guard cutters
fleet, it's smaller, certainly smaller than it was 15 years
ago, but the demands, as I kind of hinted at and so did Senator
Baldwin, of the Coast Guard have only been increasing.
How can the Coast Guard meet modern mission demands that
are going up, I don't think anyone thinks that's not the case,
despite having nearly 14,000 less major cutter operational
hours available? Do you believe there's a gap between mission
demands and what the new recapitalization program is focused
on?
Admiral Haycock. Thank you for the question. Our whole
recapitalization program is all driven by the need to fill
those gaps, the increasing demands in the Coast Guard with our
11 statutory missions. There are lots of demands on our people
and our assets.
We find that the assets that we're procuring, you know, the
national security cutters, fast response cutters and such, are
typically more capable than what they're replacing and so we're
finding that we're able to deploy for longer periods of time,
that they have longer ranges, better speeds. The ships are more
habitable for the crews, so it's less exhausting for the crews
and such. The crews' operational tempo, they can maintain a
higher operational tempo, things of that nature.
In particular, you know, to put some numbers out there, as
you know, in Alaska, we are going to be putting some fast
response cutters up there, replacing the aging 110s. So there
are seven 110s up there. We're going to replace them with six
fast response cutters and it may on the surface look like
there's a mismatch there. Six doesn't equal seven.
As it turns out, the fast response cutters, we can actually
deploy those for about 2,500 hours a year each. The 110-foot
patrol boats can only do about 1,800 hours and so when you kind
of look at just from a number of hours available, you know, six
fast response cutters is about equal to about eight and a third
110-foot patrol boats, right, and we're also putting some 87s
up there, as well. So even the numbers are going to be better.
Senator Sullivan. No, I'm very aware of that, and, you
know, that was a letter from the former Commandant, Admiral
Zukunft, to me on that capitalization program, which I think is
a good beginning. I don't think it clearly answers the
question.
I know that number of 14,000 less cutter operational hours
available was actually from GAO. So I think it's just an issue
we need to continue to look at because, as I've talked to the
leadership in the Coast Guard about it, it's one thing to say
we have a more capable platform, which I don't disagree with,
but you also do lose something with less platforms. There's
just so much in terms of the mission that you can do.
So we're going to continue to focus on that issue and,
again, part of what we want to hear from you is if you think
that gap needs to be filled with additional recapitalization
assets, then let us know because that's the whole point.
Right now, you have a very strong bipartisan approach to
the recapitalization of the Coast Guard fleet. Very few people
argue against that, given how old it is and given how important
and increasing the mission of the Coast Guard is.
So if you think the gap needs to be filled with the
readjustment of the recapitalization program, then, by all
means, let us know.
Let me ask another question. It's really for you, Admiral,
but also, Ms. Mak. You know, Senator Baldwin talked about
shipbuilding in Wisconsin. There's actually, not to the extent
of Wisconsin, but there's actually shipbuilding that goes on in
Alaska in the Ketchikan Shipbuilding Yard and it's actually
quite important.
You know, we had the new Commandant, Admiral Schultz, up in
Alaska a couple times this summer and the ability to do
maintenance, serious maintenance on some of these larger ships
is clearly something that exists in Ketchikan for home-based
ships.
I think the Coast Guard for reasons that relate to some of
the rules around small shipbuilding or small business
activities has looked at that shipyard in a way that doesn't
make sense in terms of being able to utilize that.
I know you were up there this summer, Admiral, and I think,
Ms. Mak, you were, as well. Can you give me a sense of how
you're looking at major overhaul repair work being done to
actually limit costs and make it more efficient for the fleet
in Alaska to utilize that shipyard in Ketchikan?
Unfortunately, that shipyard just recently laid off a
couple dozen people. So this is a really serious and immediate
question that I know you were looking at this summer. I'd like
to get your initial impressions.
Admiral Haycock. We get this question fairly frequently,
and the Federal Acquisition Regulations indicate that if there
are two or more small businesses that can do the work, you have
to set it aside, and I think there are some people who feel
that that is optional, it's a guideline, but it's actually a
regulation that we have to follow. So there are some things you
can do.
Senator Sullivan. Right. But the whole point of that, and
I'm going over my time here, so I apologize to my colleagues,
but the whole point of that is to give small businesses, small
communities, the ability to do that work. Ketchikan, the
shipyard there is for a small community and, you know, we've
had this discussion for a long time. The intent of that
regulation seems to be flipped on its head when you're looking
at the exact point of that regulation is to help small
communities with shipbuilding capacity and yet because that
shipyard is somehow connected to a bigger company several
thousand miles away, you're penalizing a community that just
lost several jobs in that shipyard. It makes no sense.
So I'll let you finish your answer, but I think the
bureaucratic focus on these regs when we all know it's actually
hurting the very people those regs are supposed to help is
starting to become a real problem and I've had the Commandant
give me his commitment to solving this and already we're losing
jobs there, and it would be cost effective for the Coast Guard
as opposed to sending ships all the way down to the Lower 48 to
get retrofitted and maintenance when you can do it right there
in Alaska for the ships that are based in Alaska.
So please finish your answer but that's my view of it and I
hope your answer aligns with my view.
Admiral Haycock. And I understand your frustrations and
concerns and we share those frustrations and concerns.
Senator Sullivan. So how do we solve it?
Admiral Haycock. Maybe the answer is to amend the
regulations to give us the flexibility to do that. That would
be helpful.
We try to balance operational needs with costs and so as
you pointed out, it costs money and it consumes time to take a
cutter out of its general operating area near its home port and
send it some place else for maintenance, but the regulations
require us to set those things aside.
The area commanders look at these things and when it
becomes clear that we need to seek a waiver to get around that,
you know, like an operational or geographic restriction, we go
through that process and we generally do that if there's a
maintenance issue on the ship that prevents it from getting
where it needs to go. If it is consuming far too many
operational hours to transit to and from and it limits what we
can do in theater, those are all things that are considered
when we make those decisions.
Senator Sullivan. Well, I'm going to cut you off here,
Admiral. I'm sorry.
Ms. Mak, I'll come back to you on this question, if that's
OK, but I do think the area commanders that I've talked to, all
of them agree with me on this, the Coast Guard District 17
commanders. But I'm sorry, I've gone way over my time.
Senator Baldwin.
Senator Baldwin. No worries, no worries.
As I noted in my opening statement, Wisconsin is home to
many experienced shipbuilders and suppliers. Some Wisconsin
companies seem to be getting shut out of Coast Guard
procurement.
By way of example, the Coast Guard operates more than 700
boats that have outboard motors. Only 91 of those 700 use U.S.
motors, like those made in Wisconsin by Mercury Marine or
Evinrude. In other words, 87 percent of Coast Guard's small
watercraft use foreign-made outboard motors.
I introduced my Made in America Shipbuilding Act to address
these unacceptable situations by expanding current Buy American
laws to cover all Federal agencies, all classes of ships, and
substantially more shipboard components, including outboard
motors.
So, Admiral, do you believe that procuring more U.S.-
manufactured shipboard components would strengthen the domestic
industrial base and support U.S. national security?
Admiral Haycock. So I'm proud to say that we comply with
Buy American requirements currently and if the regulations
change, we would be onboard and support that, as well. The
challenges we have with the industrial base is, if we're not
careful, we create an artificial demand signal that's not
sustainable. You know, we want to go with American products and
end user items in our inventory, but we feel like if you want
to keep the costs reasonable and be good stewards of our
resources, competition is the best way to do that and so, you
know, we try to maximize competition.
The people that originally created the Buy American Act put
in provisions to provide flexibility for ship designers and
shipbuilders and other agencies, as well, you know, for other
procurements and such, to give them such flexibility, because
sometimes there are items that just aren't made in America.
There's just not a demand signal for industry to respond to. In
other cases, there are, but they're not competitive in pricing.
We don't typically tell the contractors what items must be
U.S.-built. We follow the Buy American Shipbuilding Act, which
gives them a little flexibility, and that allows them to be
competitive with one another and come up with competitive
pricing in proposals and so one proposal might offer certain
ship items to be domestic and some foreign. Another one might
be a little bit different, trying to distinguish themselves
from one another.
And then we do an evaluation of that, based upon the
evaluation criteria, like a best value or low cost sort of
thing, and then the shipbuilder, the designer, goes through
with the proposal as they've submitted it.
So we make sure that we have all the shipbuilding Buy
American clauses from the FAR are in our contracts to support
that and our program managers monitor that carefully to make
sure that the shipbuilders are complying with that, as well,
but there are times when we end up with foreign components in
like some of our engines, like you've indicated, on the
outboard engines and such, and typically for like small boats
and such, once we do have a component, it doesn't make sense to
just go out and change the things, you know, unless there's
something broken and needs to be fixed.
So when we have to do wholesale changes, that's all done
competitively, but until that happens, we typically, for
keeping the costs for maintenance down because our maintenance
dollars are precious and few, we typically stick with what we
were provided until something forces us to go otherwise.
Senator Baldwin. I'm going to dig a little deeper in this.
So Coast Guard procurement contracts and subcontracts that are
not bound by Buy American laws, such as acquisitions of
outboard motors, diesel engines or auxiliary and deck
equipment, can you give me or the Committee some examples of
Coast Guard contracts with foreign companies?
Admiral Haycock. For what I do in acquisitions, all of our
ship designs and ship construction are done domestically. So
our national security cutters built at Huntington-Ingalls, you
know, the FRC's built down at Bollinger Shipyards, the OPC's
are going to be done by Eastern Shipbuilding.
Senator Baldwin. But I'm seeking--can you give me some
examples of contracts that the Coast Guard has with foreign
companies?
Admiral Haycock. I don't have that. I didn't come prepared
to provide that. I can get it for the record.
Senator Baldwin. If you can do that and follow up, that
would be great. This you may have to do also and follow up: How
much taxpayer money does the Coast Guard spend on contracts
with foreign companies annually, and if you want to just
generally answer now and then follow up with specifics for the
Committee, that would be great.
Admiral Haycock. I would need to take that for the record,
ma'am. I don't have that data with me.
Senator Baldwin. OK. And then what proactive steps, if any,
does the Coast Guard take to seek contracts with American
manufacturers and small businesses in cases where the law does
not require you to?
Admiral Haycock. We are making a concerted effort over the
last several years to communicate better with industry in
general. So we try to do things like have industry days where
we basically bring industry in and have conversations about
what our current and future needs are to make it easier for
them to identify opportunities to do business with the Coast
Guard. So we've done a bunch of those as of late.
We've done some reverse industry days, as well, where they
actually have the floor and help us to better understand how to
do that sort of thing. So we're actively going after increased
communications to help with that.
Senator Sullivan. Thank you. We're going to start with a
second round of questioning here.
I think some of our colleagues are going to be coming back,
but, Ms. Mak, do you have any views on the issues the Admiral
and I were discussing as it relates to the potential
opportunity and cost savings to be honest of the shipbuilding
yard in Ketchikan as it relates to maintenance?
I don't know if you've looked at that issue, but it's an
important one that can reduce costs and actually continue to
create jobs in my state.
Ms. Mak. I have not looked at that issue, so I really am
limited to what I can say, but I do agree that if it's in the
regulation and that's what Coast Guard has to follow. They have
to follow the Federal Acquisition Regulations.
Anything that defers from that would have to require an
actual change in law and that would have to be----
Senator Sullivan. Or a change in regulation, right.
Ms. Mak. Right. Interpretation.
Senator Sullivan. Correct. Or a waiver.
Ms. Mak. Correct.
Senator Sullivan. Right. OK. Let me turn to an issue that I
know all three of you have focused on and is really important
to the country and, Mr. O'Rourke, your point is really
important. We need to get it right.
So I'm just going to open this up. It deals with the polar
security cutter and the acquisition timeline. You may have also
seen, it's not just important for the Coast Guard but I think
for the national security of the country with increasing
strategic interests globally in the Arctic Region.
Secretary Mattis has talked about this, all the co-COMs
have, and so in this year's NDAA signed by the President just a
few months ago, there was a significant provision that I
authored that has the authorization for six additional
icebreakers, three polar class, three mediums.
So here's my question, and I'm just going to throw it out
to all of you because I think a good discussion on this is
important.
The initial schedule, which I think was a little bit kind
of, you know, spit balled, was one icebreaker will take 10
years and a billion dollars to build, which, I mean, we put a
man on the moon in less amount of time than that in terms of
the time.
Where are we right now and how can we do this correctly but
accelerate the acquisition schedule?
I'm going to throw something out that'll, you know, make
the shipbuilders in America a little bit nervous, but, you
know, if it's going to take seven to ten years, why shouldn't
we just lease some icebreakers, polar class heavy icebreakers
right now?
The Fins build them for $250 million a year. So I'd just
like to open it up to all of you. Maybe, Mr. O'Rourke, we could
start with you, but I really would like to hear, and if you're
in disagreement with each other, please go ahead and say that.
It's always good when we have panelists who have a little bit
of different views. It actually helps us.
Mr. O'Rourke. In terms of accelerating the timeline, the
Coast Guard has been able to do that relative to schedules we
were looking at a few years ago in a couple of ways.
One is by forming the Joint Integrated Program Office with
the Navy and they are using----
Senator Sullivan. We all think that was a good move, so
that's a good initiative by the Coast Guard.
Mr. O'Rourke. Right. And the Navy is sharing their best
practices with the Coast Guard and that has helped to take some
time out of the timeline.
Second, the Coast Guard and the Navy have decided to use a
parent design acquisition strategy. This is an icebreaker that
will be derived from an existing icebreaker design and that
shortens the design time. That ten-year schedule you mentioned
earlier was roughly five years to design and roughly five years
to then build the lead ship.
Senator Sullivan. So no one's saying ten years and a
billion dollars for one ship anymore, I hope?
Mr. O'Rourke. Not to my knowledge and a big part of the
reason is that the design portion of that ten-year timeline has
now been compressed in part by adopting the parent design
strategy.
So these are two things that have brought the timeline
shorter than what we were looking at earlier and, as I
mentioned in my opening remarks, the estimated cost of this
ship has come down, perhaps considerably, from that earlier $1
billion figure and that may be due in part to the tank testing
that has been done by the Coast Guard in conjunction with the
Canadians up at the Canadian Tow Tank that has allowed us to
examine hull designs for that ship that can more efficiently
break ice than the older hull designs from 40 years ago that
can allow the engine and the propulsion plant to be smaller and
the ship therefore to be smaller and less expensive. That's one
reason, not the only one, why the estimated cost of the ship
has come down.
Now that said, GAO has indicated that there's a risk of the
lead ship being delivered late and I agree with that
assessment.
The Navy's experience in building lead ships is that they
often come in late and so my sense is that there's a risk of
the lead icebreaker coming in late, perhaps as much as a year
or more late, and that has a couple of implications.
One is that it could put some cost pressure on the ship.
One of the reasons it might be late is that it's using more
labor to build than what was originally projected.
The Navy and the Coast Guard can insulate the government
against that risk by using a fixed price contract, which the
Navy and the Coast Guard plan to do.
This can also have implications for what you do to bridge
the time between the retirement of the Polar Star and that lead
ship coming in and has implications for the amount of money you
want to put into the Polar Star to extend its service life, for
example, or to do a short-term bridging lease of a ship, which
the Coast Guard has done in the past with some foreign
icebreakers.
Last, however,----
Senator Sullivan. The Coast Guard has done that previously?
I was unaware of that.
Mr. O'Rourke. There have been three instances where the
Coast Guard has done short-term leases of foreign icebreakers
to bridge gaps in----
Senator Sullivan. How long is short-term?
Mr. O'Rourke. This would have been on the order of maybe a
year or two and one of them involved the Swedish ship and one
or two of them actually involved Russian icebreakers.
Senator Sullivan. Well, we're not going with the Russian
option.
Mr. O'Rourke. Right.
Senator Sullivan. I think it's a disgrace that we have men
and women who serve in the uniform of the United States of
America deploying on a ship that's that old and they do a great
job keeping it up to speed, but, holy cow, that ship is very,
very, very old and I think it's almost becoming unseaworthy.
Mr. O'Rourke. The foreign icebreakers may not always be
available for lease and they have some other potential
downsides, as well, but we have done that in the past as a
bridging option.
But the one thing I will finish by saying is that if there
is a chance of a late delivery on the lead ship, then that
could become an argument for beginning construction of the lead
ship as soon as you bring the design of that ship to a high
level of completion and the ship is otherwise ready to begin
construction.
If you think there's going to be a gap, why delay the start
of the ship as long as the ship is ready to begin? That's the
least you can do to minimize that gap in time that might result
if, in spite of your own best efforts, the ship does wind up
being late compared to its original schedule.
Senator Sullivan. Ms. Mak, you want to comment on the
schedules and other issues related to the polar security?
Ms. Mak. Thank you. Regarding the foreign icebreakers,
regarding that question, I would say that foreign icebreakers
from friendly nations generally serve different functions,
different missions, and they break ice that is different than
the polar regions.
The national security cutter here is multi-missioned, non-
nuclear, and has to traverse the globe on different climates
year-round, both poles. We don't have--even foreign nations
don't have a cutter of that type.
But it is also important to know with regards to schedule
that the U.S. shipbuilding industry has not built an icebreaker
of this magnitude in decades. So there's going to be a lot of
significant requirements that are going to be needed and to be
addressed.
When it comes to schedule, overall from an acquisition
perspective, we've repeatedly found that compressed optimistic
schedules is one of the main reasons why programs don't take
this knowledge-based acquisition approach and they end up
causing the program to cost more in the long run and that
because you're doing a lot of concurrency and rework.
So in our report this past summer, we are encouraging the
Coast Guard to take the time to do it right and to really focus
on getting the knowledge base needed for design stability,
technology, maturity, and address the schedule issues and put
in reasonable times for schedules.
At this point, the current acquisition only has a buffer
which is of 6 months between the target date of when they're
supposed to deliver in September 2023 and then the baseline
date of March 2024.
There are no schedule--there are other schedule risks that
aren't involved which may or may not be within the Coast
Guard's control. They have not planned time, you know, basic
layout of piping, machinery, cabling, testing, bid protests,
some of the things that are out of their control, delays on the
contractor's side. All those need to be considered in their
schedule as they build it.
Senator Sullivan. Thank you.
Admiral, and again, I apologize to my Ranking Member here.
I think this is an important discussion that also relates to
the Great Lakes, as well, the polar region.
Admiral Haycock. I don't want to disappoint, but I don't
have any major disagreements with my colleagues.
Senator Sullivan. What about short-term leasing?
Admiral Haycock. So for short-term leasing, we have looked
at this, I would say exhaustively. We did an analysis of
alternatives which took quite a bit of time, it was pretty
thorough, and looked across the globe at what sort of
icebreakers were available to do the sort of missions that we
need them to do, and we quickly netted it down to only two
designs that would meet our needs.
One was a Soviet and the other one was a Canadian design
that hasn't yet been built. For obvious reasons, we weren't
going to go with the parent craft design from the Soviet Union
or from Russia and so some of the designs that have been
proffered, you know, likely will be using some of the Canadian
design as kind of the basis of the design.
We've looked at Scandinavian designs and such and our
mission is so different from theirs that their designs just
simply won't work. There are some very unique things that we
do, you know, here in the United States and in the Coast Guard
in particular. You know, we need a polar security cutter that
can transit from its home port in the United States all the way
down to Antarctica to do a mission and come back. It has to be
able to go all the way up into the Arctic and back.
You know, the Scandinavian countries don't go those
distances typically, and not routinely like we do. So that
requires some design tradeoffs in terms of, you know--a ship
that breaks ice well is not one that handles well in heavy seas
and so there's tradeoffs and things that need to be done, but
we confirmed pretty quickly that there's nothing we can lease
out there that will do the job.
Now the National Science Foundation has leased some foreign
icebreakers for the McMurdo Breakout in the past and I think
they've had mixed results with that. Sometimes they're
available, sometimes they're not, but to do Coast Guard
missions, to be able to be present in the Arctic to do a
massive search and rescue mission for the cruise liners and
along those lines, the polar security cutter is our best bet,
sir, and that's why we're putting such an emphasis on it and
it's why we're moving, you know, hard and fast on that.
I concur with Ms. Mak. There are risks there. The schedule
is tight, without a doubt, but we need this now and so we have
to move fast to make it happen.
You know, we concur with the recommendations that GAO made
and we're thankful that they looked at the program and made
their recommendations. We're moving out to address those
things, but the need for the polar security cutter is now, and
I think the Commandant has indicated we need six polar cutters.
Three of them need to be heavy and we need one now and we've
enjoyed tremendous support from Congress on this and we're
hoping that we'll continue to get that support, sir, because
any stall will have schedule and cost implications.
But, more importantly, any hesitancy on the part of
resource in this sends a signal to industry, the industrial
base, and sends mixed signals on whether we're serious about it
or not. We need them engaged and we need them being innovative
to come up with a solution that will work for us.
Senator Sullivan. Thank you.
Senator Baldwin.
Senator Baldwin. I continue on the icebreaking theme for a
moment here.
Admiral, I've spoken in this Committee many times about the
importance of icebreaking operations on the Great Lakes and my
position that the economic data and operational reports from
the field in recent winters show that the Coast Guard doesn't
have enough assets to effectively meet its icebreaking mission.
Most recently, I raised that at the Commandant's April
Nomination Hearing.
It's why I have fought to include $5 million in additional
funding above the Coast Guard's budget requests in Fiscal Year
2017 and 2018 for the survey and design of a Great Lakes
icebreaker that is at least as capable as the Mackinaw.
In the Senate version of the Fiscal Year 2019 Homeland
Security Funding Bill, I've helped secure another $5 million.
In April, the Coast Guard reported that it was using the
funding to develop operational requirements, evaluate current
icebreaking capability and to survey and analyze the Mackinaw
to inform a future design.
It's almost 6 months later and I still believe that the
Coast Guard is moving too slowly on this important program.
So I'm wondering if you can provide me with a brief update
right now and then commit to briefing my staff in much more
detail in the coming weeks?
Admiral Haycock. So, first, let me thank you for your
support and also, you know, concur if you would like us to come
and brief you in detail, we'd be happy to do so.
As an acquirer, I work based upon requirements and so I
rely on the operation of the Commander to tell me what his
needs are and then I find the best way of meeting those needs
and so I believe our operation community is identifying what
are the specific requirements that we need for the next
generation of Great Lakes icebreaker.
While we're doing that, we are putting money into
revitalizing our current icebreaking fleet up there, a 140-foot
fleet, and so nine of those cutters are going through a service
life extension to make sure there are no gaps in service up
there.
So the Coast Guard is doing that work and we're about two-
thirds done with that program and we'll be wrapping that up in
the next couple years. Those cutters will have new life
breathed in them and they'll continue to do the mission and
meet our needs up there.
It's like anything. We have to balance. As stewards of the
funds that you give us, we need disciplined approaches to these
things and so the work we're doing on the requirements is part
of that disciplined approach and if I don't take the
disciplined approach, then GAO will note that, right, because
their job is to hold us accountable and identify those things
that we're doing that are overly risky and such.
So we need to make sure we do the due diligence and
understand what their requirements are. Otherwise, we'll end up
possibly with the wrong asset and they'll be over-budget or
costs, that sort of thing. So we want to make sure that we do
the right thing up front to deliver what the capability is
that's needed up there.
Senator Baldwin. Back to the Made in America Shipbuilding
Act, it would not only help strengthen our national security
but I think it also makes a strong economic argument for
government by lowering life cycle costs.
When ships need repairs or new parts, American-made parts
are easier and cheaper to acquire and the repairs tend to take
less time.
Admiral, have you experienced increased life cycle costs
because of foreign-made components or had difficulty repairing
or finding replacements for them?
Admiral Haycock. I can give you some anecdotal information.
I can tell you that on our inland fleet, some of the cutters
that ply our inland waters, you know, the Ohio, the
Mississippi, the Missouri, that sort of thing, some of those
have some foreign-made engines that come from Italy, and we're
finding that it is very difficult to support those. Again
getting the parts, getting them in a reasonable time-frame, is
challenging and so those challenge our ability to stretch our
maintenance dollars to get all of our needs met and keep our
fleets operational.
So there are definitely consequences that come with having
foreign-made components in user items.
Senator Baldwin. And I want to just ask, Mr. O'Rourke and
Ms. Mak, has GAO or CRS studied how using U.S.-made shipboard
components impact the cost and feasibility of maintenance and
sustainment of such equipment over the life cycle of the
vessel?
Mr. O'Rourke. The CRS has not looked at that.
Senator Baldwin. OK.
Ms. Mak. The GAO has also not looked at that.
Senator Baldwin. All right. So, Ms. Mak, I would like to
get the GAO to study this issue and I will certainly follow up
with a formal request to do so.
Ms. Mak. Sure. Absolutely.
Senator Sullivan. Well, I'm pleased to have Senator Wicker
here, who's the sea power subcommittee of the Armed Services
Committee and being Mississippi's Senator knows also a little
bit about shipbuilding.
Senator Wicker.
STATEMENT OF HON. ROGER F. WICKER,
U.S. SENATOR FROM MISSISSIPPI
Senator Wicker. I'm a proud member of this Subcommittee,
too, Mr. Chairman.
Admiral Haycock, let's talk a little. I've been over in a
classified briefing with Defense Department people, so that's
the reason I missed a bit of this hearing.
Let's talk about national security cutters. We make them at
Huntington-Ingalls in Pascagoula, Mississippi, and last
Wednesday, we saw the Coast Guard Cutter Stratton offloading
more than 22,000 pounds of cocaine seized in less than a month
in the Eastern Pacific.
Congress is faced with a decision to fully or partially
fund the acquisition of a 12th national security cutter in
Fiscal Year 2019. This 12th NSC would complete a one-for-one
replacement of the 12 Hamilton Class cutters.
Why is that important, and can you discuss the impact that
these national security cutters have on the Coast Guard's
efforts to carry out its core missions?
Admiral Haycock. Thank you, sir. The national security
cutter is a tremendous asset and I think we are finding that as
each day goes by and we deploy these things, we're learning
more and more things about what they can do.
I was the commanding officer of a high-endurance cutter,
one of the ones that was replaced by a national security
cutter, and I'm shocked and proud to know that, you know,
national security cutters are typically pulling in more drugs,
you know, pulling drugs off the water in one deployment than I
was able to do during two years onboard my high-endurance
cutter. They're having a profound impact in curbing trans-
national crime in the way of counter-drug mission.
Our goal, and I don't think this is a surprise, we're
trying to push the borders as far as we can, you know, our
enforcement borders as far as we can from our physical borders,
right, and so, you know, getting those cutters on scene and
trying to intercept that stuff well before it gets to our
shores is a priority for us and those cutters have been doing a
fantastic job with it.
Senator Wicker. OK. Let's talk about the polar security
cutter fleet.
There's a difference in the Senate Homeland Security
Appropriations Bill which funds $750 million for the polar
security cutter recapitalization. The House does not have any
money in there for that.
So what are the stakes of the House prevailing and not
having money in there versus the Senate figure of $750 million
being approved?
Admiral Haycock. Before you got here, I talked a little bit
about the support we've gotten from Congress on the polar
security cutter program. It has been phenomenal and it has
allowed us to make much progress.
We are closer to recapitalizing the icebreaker fleet than
we have been in 40 years and so we are on the cusp of getting
there.
The funding that are in the bills is of vital importance
for us to make progress in that area and I've got two concerns.
One is if we don't get it, it's going to definitely have
schedule impacts. We can get some stuff on contract, like the
detail design, but things like long lead materials and stuff
we'll be challenged to get which will impact our ability to
deliver on time.
The other piece of it is the support that we've gotten from
Congress over the years has put excitement in industry in, you
know, building the ship and learning more and getting lessons
learned from it and applying to other shipbuilding programs.
If we don't get the funding we need, that sends a signal to
the industrial base that the nation isn't serious about the
polar security cutter and the need for the polar security
cutter is greater now than it has ever been.
Senator Sullivan had talked a little bit earlier today
about the shape the Polar Star is in and we're going to put
some money into Polar Star to extend its service life so we can
get a polar security cutter, you know, in theater, but if we
want to have year-round access to the polar regions for
national security, national sovereignty, and search and rescue,
and the other missions the Coast Guard does, we need to keep
making progress on that, sir, and the $750 million will send a
clear signal to the industrial base and the Nation at large
that we're serious about getting polar security cutters.
Senator Wicker. Thank you very much. I move we adjourn.
[Laughter.]
Senator Sullivan. Well, I actually support Senator Wicker's
focus on another national security cutter. Those are credible
platforms and I had the honor of being at the commissioning of
the Douglas Monroe out in Seattle and it was really impressive.
Senator Blumenthal.
STATEMENT OF HON. RICHARD BLUMENTHAL,
U.S. SENATOR FROM CONNECTICUT
Senator Blumenthal. Thank you very much, Mr. Chairman.
I want to focus on the importation of opioids, synthetic
opioids particularly, but drugs in general, and what kinds of
additional resources the Coast Guard would need to combat the
flow of opioids into this country?
Admiral Haycock. So the operational aspect of the counter-
drug mission is a little outside of my lanes as an acquisition
officer.
I can tell you that we have a program of record that we've
established for the polar security cutter, the national
security cutter, the fast response cutter, and the offshore
patrol cutter, which are all key elements of curbing
transnational crime and the importation of narcotics and such
into our country.
We believe that the program of record that we've put out
there is sufficient to do what we need to do. Now there are
some areas where we could improve in ways of unmanned assets,
in particular aerial assets, and so we've done some work in
that regard.
We've actually deployed an unmanned air vehicle on Coast
Guard Cutter Stratton for several years now as an effort to
kind of learn what sort of capabilities it can bring to the
fight and better understand what sort of training and policy
and procedure we would need to actually execute it and to run
it efficiently and effectively and that, the SUAS, the small
unmanned aerial vehicle we've been using, has contributed to
countless drug interdictions in theater and the ships
absolutely love it, and so we are making great progress on
putting that capability on the national security cutters.
I think it's something that we might want to think about
for follow-on is, you know, do we deploy it on the offshore
patrol cutters? Do we deploy it on FRCs?
We're also working with CBP on land-based UAS. So we're
part of a joint program office with that out in Southwest
Border. So we have Coast Guard folks that are part of that
team, some of them that are pilots and some of them are
planners, that sort of thing. So we're getting great lessons
learned from that effort with CBP to determine what our
resources might need to be and what sort of requirements a
land-based UAS can provide for the Coast Guard in the fight
against drugs.
Senator Blumenthal. Well, I realize that it may not be
directly in your area of expertise, but it certainly should be
involved in our recapitalization criteria because the Coast
Guard is on the front line of our war against illicit drug
trafficking and I've seen in my visits around the country the
resources that are deployed.
So I would somewhat take issue with the contention that the
resources are adequate now because in this war, we're losing.
We're losing the war against the illicit importation of drugs
and it's not only across the borders, our southern borders,
it's also by sea, and I think that area of combat is too often
lost on the American public as well as on public officials.
I want to ask you about the Coast Guard Museum in New
London. I am assuming that you can state unequivocally that the
Coast Guard maintains its unambiguous commitment and 100
percent dedication to assuring that that Coast Guard Museum is
built in New London.
Admiral Haycock. I can, sir. We are excited about that. The
Coast Guard has a great story to tell and it's unfortunate that
not more people know it and so the museum will go a long way
toward helping the general public understand our missions and
our contributions to our nation and so we work closely with the
National Coast Guard Museum Association and, you know, we're
excited about that coming online.
Senator Blumenthal. And, finally, in the minute I have
left, I want to highlight another issue, which is admissions to
the Coast Guard Academy.
There have been very significant complaints, based on data,
about potential discrimination in the admissions policies to
the Coast Guard. I think it's an area that deserves attention
at the highest levels. I've communicated my concern to the
leadership of the Coast Guard and I hope that you can commit
that there will be a thorough review and examination of the
admissions policies so as to assure the public that there is no
discriminatory practice whatsoever in admissions or in the
policies and practices of the Coast Guard Academy generally?
Admiral Haycock. I can say unequivocally, sir, that this
has the attention of the highest levels of the Coast Guard
without a doubt.
Senator Blumenthal. Thank you. Thank you, Mr. Chairman.
Senator Baldwin. Thank you, Senator Blumenthal.
I want to, Admiral Haycock, talk about language that was
inserted in the Fiscal Year 2018 Omnibus. They have an
explanatory statement that says, ``The Coast Guard, to the
maximum extent practicable, is directed to utilize components
when contracting for new vessels, U.S.-manufactured components.
Such components include auxiliary equipment, such as pumps for
shipboard services, and propulsion equipment, including
engines, reduction gears, and propellers.''
While this language doesn't go as far as the legislation
I've been describing, the Made in America Shipbuilding Act that
I authored, I'd like to know how the Coast Guard is applying
this congressional direction to the acquisitions of the heavy
polar icebreakers and the inland waterways tenders, and I will
preface this with saying, you know, I understand that the Coast
Guard complies with all current laws and regulations, but this
expression of congressional intent is calling for the
application of Buy America provisions above the bare minimum of
following the law.
So can you tell me a little bit about how you're applying
that language in the Fiscal Year 2018 Omnibus?
Admiral Haycock. We appreciate your support on that and
probably the best way to address this is if I were to come and
brief you and we could come and give you the facts and figures
and things you need.
When we try to comply with the Buy American Act, we're not
using it as a shield. We want to buy American and I think the
question that I was raised earlier was, you know, what are the
life cycle costs associated with that sort of thing.
There has been no studies on that, as you've already found,
and I think such a study would be very helpful because it will
help us to make wiser decisions in the future. Oftentimes, when
the shipbuilders or the designers or other companies doing
other work, when they pick foreign components, sometimes, as I
indicated earlier, it's because that sort of industrial base
doesn't exist.
For example, on the Polar Class and on the polar security
cutter, I'm not aware of any manufacturers in the U.S. that
make a propulsion pod of the size and strength necessary for a
polar security cutter, but they are made over in the
Scandinavian countries where they routinely use that sort of
technology for their icebreakers and so if we try to force
something like that to be a buy American, it can be done but it
would add a considerable amount of time and probably cost to
the vessel because the industrial base would have to spool up
to do that sort of thing. It would be a lot of R&D. There will
be a lot of initial entry costs into that market and then the
question that we have to ask ourselves is, is that demand
sustainable?
Once all the polar security cutters are built, is there
going to be a sustainable demand for pods, for example, in the
United States, and I can't answer that question. I think a
study might be helpful to do that.
But those are the sorts of challenges that we run into, and
then the other piece is the cost basis, and it would be helpful
to have a study that would help us to kind of figure out if we
decrease the acquisition cost up front but we increase the life
cycle costs, is that a good trade because the life cycle costs
are about 70 percent of the cost of an asset in its lifetime.
So we are constantly looking for ways to reduce life cycle
costs and we've done things like put some of our sustainers in
key leadership positions to ensure that those sorts of issues
are looked at as we go through the acquisition process.
Senator Baldwin. One, I think, final question for me.
Admiral, can you provide an update on the acquisition timeline
for the inland waterways and Western River tenders?
Specifically, when does the Coast Guard plan to issue an RFP,
and will the Coast Guard consider using off-the-shelf designs
from experienced shipbuilders in order to save time and money?
Admiral Haycock. So we are open to using parent craft
designs and such. We're just starting an analysis of
alternatives and that's a disciplined part of the process. We
have to go out and look and see what exists out in the world,
you know, in terms of designs and ships that have already been
built and the components and such and so we'll do this
assessment and that'll kind of do market research and kind of
survey what's available out there.
One of the challenges we have right now is the Coast Guard
missions are different than a lot of the commercial companies
out there, right. So I think you'll find that a lot of the
boats and the pushers and such that are plying the rivers have
a very small crew, maybe a crew of five, right, and they're not
required to travel incredibly long distances between stops for
fuel and supplies and such.
For our ships, to do our missions, because our folks
typically will get off the ship and they'll be clearing brush
from aids to navigation that prevent people from seeing them,
they're repairing aids to navigation in some dangerous places
with snakes and other vermin and stuff. So to do those sorts of
missions, that are vastly different from the commercial world,
requires a very diverse crew and--alongside the same lines--if
we want to increase diversity in the literal term in our
service, we need to make sure that those assets are capable of
having women in the crew and the current assets don't have that
capability.
And so that's a little bit unique from what we see when you
look at how many people we need to put on the ship and to be
able to have mixed gender berthing. That offers some
interesting design considerations.
So that will all be looked at as part of the analysis of
alternatives. It's going to be probably nine months or so
before we can get all that work done and figure out exactly
what that means, but we're definitely open to looking at
commercially available designs and seeing if those can be
modified inexpensively.
We've already reached out to the Army Corps of Engineers to
do some initial kind of concept work up in Philadelphia and
they've provided a number of options to look at, which include
monohulls, which means it's a single ship that does everything,
or using maybe a pusher and a barge, kind of like the way we do
the mission now.
So those are all things we're looking at. It's going to be
probably a year or so. I don't have it memorized, but it will
probably be a year before we start, you know, looking at moving
forward with the actual acquisition, formal acquisition of it.
Our goal is to get something--get the ships into service in
the early 2023 timeframe, I think, and the approach we're
taking is actually fairly accelerated when you compare it to
some of the other acquisitions we've done in the past.
I know that the country recognized the need for those
things and so we're moving as fast as we can to make that
happen. Does that answer your question?
Senator Baldwin. It does. Thank you.
So seeing no other Senators at this moment, I will announce
that the hearing record will remain open for two weeks. During
this time, Senators may submit questions for the record. Upon
receipt, the witnesses are requested to submit their written
answers to the Committee as soon as possible.
I want to thank the witnesses for appearing today.
This hearing is now adjourned.
[Whereupon, at 10:52 a.m., the hearing was adjourned.]
A P P E N D I X
Prepared Statement of Rear Admiral Michael J. Silah, NOAA Director,
Office of Marine and Aviation Operations and Director, NOAA
Commissioned
Officer Corps, National Oceanic and Atmospheric Administration,
U.S. Department of Commerce
Introduction
Good morning Chairman Sullivan, Ranking Member Baldwin, and Members
of the Subcommittee. My name is Rear Admiral Michael Silah, and I am
the Director of the Office of Marine and Aviation Operations (OMAO) and
Director of the NOAA Commissioned Corps at the National Oceanic and
Atmospheric Administration (NOAA), within the Department of Commerce.
Thank you for inviting me to testify today on our work providing
environmental intelligence gathering platforms for the Nation. NOAA
appreciates the opportunity to participate today along with our
colleagues from the U.S. Coast Guard, Government Accountability Office,
and Congressional Research Service.
For over two hundred years, NOAA and its predecessor organizations
have provided foundational data, products, and services to support
safe, efficient maritime commerce. Each day, nearly every American
relies on the data, products, and services NOAA provides. These
products and services include daily weather forecasts, navigational
tools to support the country's nearly $4.6 trillion in economic
activity generated by U.S. seaports, and assessments of the health of
the Nation's fisheries. Through our network of observations, models,
forecasts, and assessments, we put environmental information into the
hands of people who need it. Over the years, NOAA has made significant
investments to ensure the agency can leverage new technologies to
provide the best products and services possible. However, challenges to
the agency's observational infrastructure still exist, especially for
our aging research and survey ships.
Current Status
Currently, NOAA's fleet includes 16 research and survey ships.
Every year, NOAA's ships conduct more than 100 missions for collection
of data critical for nautical charts, fishery quotas, exploration of
America's 4.3 million square mile Exclusive Economic Zone, storm surge
modeling, and weather forecasting. NOAA's line offices, other U.S.
government agencies, communities, and businesses around the Nation rely
on these data to keep U.S. ports open to maritime commerce, understand
changes to the planet, monitor the health of fish stocks, and plan for
severe storm events.
The age of NOAA ships represents a continued and pressing concern.
NOAA's aging vessels are increasingly unreliable and expensive to
maintain. At the conclusion of Quarter 3 FY 2018, unscheduled
maintenance on the NOAA fleet had cost $13.5 million and caused more
than 425 lost operational days at sea. By the end of 2018, half of the
NOAA ships in the NOAA fleet will have exceeded their design service
life. Escalating unbudgeted costs and lost days at sea will undermine
NOAA's ability to meet its missions, and could have the following
impacts: significant degradation of mapping capabilities on the West
Coast and in the United States Arctic, including the Pacific Ocean,
Bering Sea, and Arctic Ocean; a substantial loss of hydrographic survey
capability on the East Coast and the Caribbean; and a reduced ability
to conduct fishery and marine mammal stock assessments, monument and
sanctuary stewardship in the Central, Southern, and Western Pacific,
and trawl-based stock assessments in the Gulf of Mexico.
The NOAA Fleet Plan
The NOAA Fleet Plan assesses NOAA's current and projected at-sea
observational infrastructure needs in carrying out its mission of
protecting lives and property. It evaluates the status of the fleet and
the current and future capabilities required to meet NOAA's public
safety, economic, and stewardship missions, and sets a plan of action.
NOAA treats the Fleet Plan as a living document whose execution
incorporates new information that impacts acquisition strategies and/or
priorities. At a minimum, NOAA plans to reevaluate and revise the plan
every five years.
To help formulate the plan, NOAA performed an internal assessment
in 2012-2013 to refresh NOAA's mission requirements. The assessment
determined that a different mix of ships and a push toward new
observational technologies are needed to better fulfill NOAA's mission
requirements.
In January 2016, NOAA established an Independent Review Team (IRT)
of senior-level scientific and industry experts to assess
recapitalization planning for the NOAA fleet, recommend measures
required to address identified deficiencies, and identify ways to
overcome organizational impediments. The IRT is now a Standing Review
Board for OMAO and continues to advise NOAA on its fleet
recapitalization efforts.
Towards this same objective, NOAA established an internal team of
experts from across NOAA in May of 2016 to assess the NOAA fleet's
current composition and capabilities, long-term recapitalization
planning, utilization of alternatives to the NOAA fleet (commercial
contracting, Academic Research fleet, other public-funded vessels),
current operational systems (crewing, scheduling), current maintenance
practices, technology readiness and infusion (instrumentation and
mechanical), and risk identification and planning. The efforts of this
team produced the NOAA Fleet Plan, which outlined a comprehensive
solution for long-term recapitalization of the NOAA fleet. The NOAA
Fleet Plan was approved and published for distribution on October 31,
2016.
The NOAA Fleet Plan calls for the acquisition of new ships and at-
sea data collection capabilities. NOAA's ships need to be adaptable and
extensible to provide the infrastructure and capabilities necessary to
meet mission requirements now and in the future. In contrast to the
wide variety of vessel types that currently comprise the NOAA fleet,
the future NOAA fleet will reduce the overall vessel types and focus on
a core mission with secondary missions that make the best use of the
vessels' capabilities. NOAA will leverage aspects of previous designs
to the extent possible to meet multiple core mission requirements.
Standardization is critical for efficient maintenance, sparing,
upgrades and optimal crewing models. Each vessel type will incorporate
the latest commercial technologies and will be able to accommodate new
technologies as they become available. Across the fleet, core equipment
types will be standardized as much as possible to reduce operation and
maintenance costs as well as help to establish an effective reserve of
spares to minimize ship down time. The final decision on ship
retirements will be based on the material condition of the ships in
concert with the alignment of mission capabilities of the ship and the
fleet.
There are distinct considerations to evaluate in order to execute
the recapitalization strategy. Efforts will be made throughout the
process to leverage proven and existing design features from previous
ship classes. This will not only help to create mission system
standardization to meet multiple core mission requirements but also
will help improve sparing and logistic support across the fleet. A
stable budget profile is required for the sequencing of ship
acquisitions and is critical to effective planning. Congress has
appropriated approximately $75 million annually since 2016, providing
continuity and stability in fleet planning and acquisition.
First, NOAA continues to proceed with the design and construction
of two new NOAA general purpose oceanographic Class A vessels. These
vessels will have primary capabilities to conduct oceanographic
monitoring, research, and modeling activities and secondary
capabilities for assessment and management of living marine resources
and for charting and surveying activities. By utilizing the existing
Navy Auxiliary General Oceanographic Research (AGOR) 27 specifications
and adapting them to meet NOAA-specific requirements, NOAA will
minimize the impact of lost fleet capacity and capability while
leveraging government resources, saving years of time and millions of
dollars. NOAA has entered into an agreement with the U.S. Navy to
utilize their ship acquisition expertise in support of this effort.
Second, NOAA continues to conduct a requirements analysis and will
proceed with concept designs for at least two Class B vessels. This
class will have a primary capability to perform charting and surveying
activities, with secondary capabilities for assessment and management
of living marine resources and oceanographic monitoring, research, and
modeling activities. Based on the extensive timeline needed for new
construction acquisitions, it is critical to initiate the ship design
and acquisition process as soon as possible.
Third, NOAA continues its requirements analysis and will proceed
with concept designs of at least two multipurpose, low-endurance,
shallow-draft, trawl-capable stock assessment Class C vessels. These
specialized vessels will meet specific assessment and management of
living marine resource requirements in coastal waters and the Gulf of
Mexico.
Fourth, NOAA will proceed with initial requirements analysis and
concept designs for the Class D vessels. These vessels would support
the primary mission of assessment and management of living marine
resources (trawl capable) with capabilities for secondary missions of
charting and surveying, and oceanographic monitoring, research, and
modeling.
Future Fleet and Vessel Procurement Status
The acquisition process is underway for the first two Class A
ships. The NOAA AGOR Variant (NAV) is a 240-foot ship designed to
commercial standards and capable of oceanographic science and data
collection in coastal and deep ocean areas.
The NAV A vessels are being procured through an Interagency
Agreement with the U.S. Navy as an assisted acquisition. The Program is
currently conducting the Source Selection activities to support
contract execution.
The vessels are expected to come on-line as existing assets are
retired; minimizing or eliminating fleet capacity gaps is critical for
data collection that feeds weather forecasts and fishery quotas,
protects marine monuments, and maps our Nation's Exclusive Economic
Zone.
It is for these same reasons that NOAA has initiated early design
and acquisition planning activities for Class B and C vessels. To the
greatest extent practicable, we will seek to leverage common hull,
machinery, and/or mission systems to gain economies during the
acquisition process as well as to reduce life cycle and fleet
management costs.
Partnerships
NOAA has decommissioned more ships in the last ten years than it
has introduced. Since 2008, the NOAA fleet has decreased from 21 to 16
operational ships. There are capacity gaps and, therefore, requirements
that could not be met by the NOAA fleet. To the extent possible, NOAA
has implemented mitigation strategies to minimize the requirements
gaps, including: increased maintenance, increased use of charters,
changes to ships working grounds, ``piggyback projects'', and
introduction of new technology. Mitigation strategies are limited
regionally, by capability requirements and availability, and by project
requirements. Thus, these mitigations are largely maximized in current
fleet operations.
NOAA continues to coordinate with its maritime partners to maximize
days at sea productivity by assessing and incorporating government and
commercially-driven technologies such as unmanned, autonomous, and
remotely operated systems, as well as data analytics. These operational
assessments have included unmanned operations from the Arctic to
Antarctic as well as across NOAA's mission sets. Having a multi-
mission, inter-operable, and coordinated Federal oceanographic fleet
with groundbreaking technologies will improve operational capacity at
the Federal level. NOAA is currently assessing the efficiency and
effectiveness of meeting requirements through unmanned systems. We will
use the results of this analysis to develop a comprehensive NOAA-wide
plan that ensures it is using unmanned systems in a way that supports
NOAA requirements in the most cost-effective manner.
Other Opportunities
The future NOAA fleet must be adaptable and extensible to provide
the infrastructure and capabilities to evolve with future changes in
technology and mission requirements. While it is impossible to predict
all future advances in technology or changes in requirements, new ships
must provide capabilities to allow for and support efficient
operations, evolving requirements, and increasingly sophisticated
technology.
Unmanned airborne and marine vehicles are enhancing ocean science
at NOAA and extending the data collection capacity of the NOAA fleet.
This includes autonomous underwater vehicles, tethered remotely
operated vehicles, unmanned surface vehicles powered by wind, sun, and
waves, and portable aerial systems launched from NOAA ships. In Fiscal
Year 2018, NOAA invested $2 million to accelerate autonomous
hydrographic mapping and autonomous sampling of ocean conditions
towards operational maturity. NOAA is also incorporating unmanned
systems requirements into the new ship designs. Future vessels will be
able to operate multiple unmanned systems in tandem with on-board
technologies, significantly expanding mission capacity and potentially
reducing the cost per unit effort of these observations.
Every effort is being made to follow the process outlined in the
NOAA Fleet Plan while taking advantage of arising opportunities that
may facilitate the process. Based on the near term and pressing need to
bring new ships online, NOAA is investigating the possibility of
acquiring vessels from Federal partners. NOAA is committed to an open
and competitive process to carry out conversions, repairs, and new
builds. The Miller Act waiver provided in the recently enacted John S.
McCain National Defense Authorization Act for 2019 will also provide
much needed flexibility and open up more shipyards to work on the NOAA
fleet.
Conclusion
NOAA plays a unique and important role in providing critical
informational infrastructure to support safe, reliable, and efficient
marine navigation and environmental intelligence gathering across the
planet. Partnerships are integral to achieving success in this ever-
evolving and challenging environment. There is more work to be done to
facilitate ship acquisitions but NOAA is working to develop and apply
new technologies and collect data in innovative ways to improve our
products and services.
NOAA will continue to properly, efficiently, and effectively
acquire new vessels while mitigating the challenges of an aging fleet
and maintaining an inherently governmental capability to conduct NOAA
critical missions.
Thank you again for the opportunity to testify today. I appreciate
the Subcommittee's time and attention and look forward to answering
your questions.
______
Oceana
October 10, 2018
Via e-mail
Hon. Senator Thune,
Chairman, Senate Committee on Commerce, Science, and Transportation,
Washington, DC.
Hon. Senator Sullivan,
Chairman, Senate Commerce Subcommittee on Oceans, Atmosphere,
Fisheries, and Coast Guard,
Washington, DC.
Hon. Senator Nelson,
Ranking Member, Senate Committee on Commerce, Science, and
Transportation,
Washington, DC.
Hon. Senator Baldwin,
Ranking Member, Senate Commerce Subcommittee on Oceans, Atmosphere,
Fisheries, and Coast Guard,
Washington, DC.
Dear Chairman Thune, Ranking Member Nelson, Chairman Sullivan, and
Ranking Member Baldwin:
Oceana, the largest international ocean conservation organization
solely focused on protecting the world's oceans, strongly supports
robust fleet recapitalization of the National Oceanic and Atmospheric
Administration (NOAA) and the U.S. Coast Guard. Oceana and its more
than 725,000 members and supporters in the United States are committed
to supporting the mission and functions of NOAA and the Coast Guard,
both of which provide critical ocean research, stewardship and
enforcement functions in the United States.
NOAA currently maintains and operates a fleet of 16 ships, which
are used to perform key at-sea missions including charting and
surveying, oceanographic research and monitoring, and living marine
resource assessments. Within NOAA, the National Marine Fisheries
Service (NMFS) uses many of these ships for its fisheries management
efforts, including research and stock assessments, monitoring, and
enforcement. Maintaining sufficient at-sea capacity is essential for
NMFS' ability to sustainably manage U.S. fish stocks.
NOAA's October 2016 Final Report of the Independent Review Team on
NOAA Fleet Recapitalization reports that by 2028, eight of NOAA's 16
ships will reach the end of their extended service life, rendering them
inoperable. By 2030, two more ships will reach the end of their
extended service life. NOAA has stated that all at-sea missions will be
negatively impacted when these ships begin to come offline. The agency
additionally acknowledges a six-to-eight-year timeline required for
obtaining funding and for designing, building, and commissioning new
ships. In other words, without concerted and immediate efforts to
recapitalize the NOAA fleet, the agency will experience a crippling
lapse in its ability to carry out mission-critical functions related to
weather and climate predictions, fisheries research and management, and
other key efforts within the next decade.
The Coast Guard is similarly focused on recapitalization and has
embarked on a multi-decade process to recapitalize aging ships and
aircraft. While the Coast Guard is currently procuring several new
fleet assets, the Government Accountability Office (GAO) has identified
maintenance, equipment, and funding issues that could undermine the
Coast Guard's key capabilities related to maritime safety, security,
and environmental stewardship.\1\
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For these reasons, Oceana applauds today's subcommittee hearing
titled ``The Future of the Fleets: Coast Guard and NOAA Ship
Recapitalization'' to examine the critical need for Coast Guard and
NOAA fleet recapitalization.
Thank you for your attention to these critical fleet infrastructure
issues.
Sincerely,
Jacqueline Savitz,
Chief Policy Officer, North America.
______
Ocean Conservancy
Washington, DC, October 11, 2018
Hon. Dan Sullivan,
Chair,
Subcommittee on Oceans, Atmosphere, Fisheries, and the Coast Guard,
U.S. Senate,
Washington, DC.
Hon. Tammy Baldwin,
Ranking Member,
Subcommittee on Oceans, Atmosphere, Fisheries, and the Coast Guard,
U.S. Senate,
Washington, DC.
Dear Chairman Sullivan and Ranking Member Baldwin:
We are writing to express our support for the recapitalization of
the maritime fleets at our Nation's premier ocean agencies: the
National Oceanic and Atmospheric Administration (NOAA) and the United
States Coast Guard.
People across the Nation rely on the vital services that are
delivered by the fleet of ships and aircraft operated by both NOAA and
the Coast Guard. NOAA's fleet of ships and aircraft are critical
infrastructure for data collection in support of the U.S. economy in
sectors including fisheries economics, emergency management,
navigational support and more. The Coast Guard's fleet of vessels is
essential for national security, marine domain awareness and patrolling
our oceans and ensuring safety at sea.
NOAA fleet
Since 2008, the NOAA fleet has decreased from 21 ships to 16
currently operational ships. Without recapitalization, the NOAA fleet
will be reduced to half its current size by 2028. Of the 16 ships that
comprise the NOAA fleet, most are outdated. Three of the 16 vessels
have been in service for more than 40 years and eight of the 16 vessels
have exceeded their designed service life as of this year.
By 2028, the projected loss of eight ships to the NOAA fleet would
``significantly undermine NOAA's ability to meet its mission, resulting
in the total absence of mapping capabilities on the West Coast and in
the United States Arctic, specifically in the Pacific Ocean, Bering Sea
and Arctic Ocean; a 75 percent loss of its hydrographic survey
capability on the East Coast and in the Caribbean; and the inability to
conduct fishery and marine mammal stock assessments, monument and
sanctuary stewardship in the Central, Southern, and Western Pacific,
and trawl-based stock assessments in the Gulf of Mexico.'' \1\
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NOAA%20Fleet%20Plan%20103116.pdf
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Unlike other Federal and academic agencies whose primary mission is
research, the data NOAA collects feed directly into operational
products like navigational charts, storm surge models, weather
forecasts, or fishery models to support regional catch allocations.
NOAA ships are vital to our commercial fisheries. Annual NOAA surveys
form the basis for our fisheries management system and without an
adequate number of operational ships, surveys cannot be conducted,
negatively impacting commercial fisheries worth billions of dollars.
In addition to maintaining current fleet levels to avoid these
negative results, NOAA needs to expand beyond the current 16 vessels to
properly address the changing world in which we live. Climate change,
for example, exemplifies the need for NOAA to increase its fleet size:
As climate change influences our shipping routes at
unprecedented rates in the Arctic, more charting is needed in
the region to ensure safe navigation and other safety needs for
the expanding industry.
Climate change is also impacting both our commercial and
recreational fisheries. The NOAA fleets provide the best
available scientific information and data so that fishery
managers may make critical decisions to support fisheries,
ecosystems and local economies. A robust modern fleet is needed
to help managers and fishing communities be prepared for and
respond to changes in the ocean.
As climate change continues to bring about more severe
coastal storms, we will increasingly need rapid response
efforts to chart the changing underwater landscape to ensure
safe shipping can resume at ports and coastal waters to support
local economic recovery.
NOAA's fleet is also critical for modern ocean exploration. The
Okeanos Explorer cost less than 1 percent of the estimated $2 billion
NASA mission to Europa.\2\ And yet the Okeanos Explorer is reaching and
exploring places in the ocean that are even more foreign and unknown to
us than our solar system. We can explore new horizons here on earth for
a tiny fraction of the cost of exploring space. But we cannot do it
without NOAA ships.
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Coast Guard Fleet
The Coast Guard fleet provides numerous beneficial services to the
U.S. economy and national security. For example, the Coast Guard fleet
patrols U.S. waters to enforce maritime and fisheries laws, like the
Magnuson-Stevens Act and laws that forbid illegal fishing by foreign
boats. It also provides a critical safety net when vessels--including
fishing vessels--encounter trouble on the seas. The presence or absence
of Coast Guard vessels can be a matter of life and death.
In the Arctic, as sea ice diminishes and maritime activity in the
region grows, the need for additional Coast Guard icebreaking capacity
will only become more acute. At this time, the Coast Guard operational
icebreaking fleet consists of one heavy icebreaker commissioned in 1976
and one medium icebreaker commissioned in 2000. Investment in new Polar
Security cutters is a critical first step toward increased icebreaking
capacity that will enable the Coast Guard to better meet its national
security, search and rescue, law enforcement, environmental protection,
and other missions in Arctic waters.
Without the proper fleets of ships, we cannot appropriately conduct
science, monitor the health of our fisheries, respond to environmental
disasters including oil spills, enforce environmental laws that protect
the oceans, and establish a peaceful U.S. presence in frontier regions
like the Arctic.
Sincerely,
Janis Searles Jones,
Chief Executive Officer,
Ocean Conservancy.
______
Environmental Defense Fund
Washington, DC, October 24, 2018
Hon. John Thune, Chairman,
Hon. Bill Nelson, Ranking Member,
Committee on Commerce, Science, and Transportation,
United States Senate,
Washington, DC.
Dear Chairman Thune and Ranking Member Nelson:
Thank you for convening a hearing on the important topic of the
recapitalization of the National Oceanic and Atmospheric Administration
(NOAA) and Coast Guard fleets. The Environmental Defense Fund (EDF) and
its two million members and supporters advocate for solutions that both
protect the environment and promote economic development. Our Oceans
program focuses on sustainable fisheries management, including many
issues brought before this Committee. EDF strongly supports
revitalization of the NOAA and Coast Guard fleets.
EDF is keenly aware of the vital role played by NOAA and Coast
Guard vessels. NOAA vessels undertake critical research on the marine
ecosystem, including tracking the abundance of fish and other marine
animals. These data are included in stock assessments, which form the
foundation for determining overfishing levels, species rebuilding
schedules, and the appropriate amount of catch permissible in each
fishery. Inadequate resources to maintain and update the fleet can
result in vessels being abruptly removed from service, requiring delays
in or even cancellation of scheduled scientific work. As a result, the
fundamental underpinnings of our world-class fisheries management
system may be undermined, resulting in environmental damage, lost
economic opportunity, and mistrust by stakeholders in fisheries
regulations. Similarly, the Coast Guard performs essential missions to
protect life at sea and help enforce rules that ensure fairness and
sustainability in our fisheries.
Very simply, the environment and the economy both rely on the
critically important work of the NOAA and Coast Guard fleets. For many
years, resources have lagged behind data collection, enforcement and
other needs. We strongly support the agencies' efforts to recapitalize
their fleets so as to protect fisheries resources, the marine
environment more generally, the lives of fishermen and other boaters,
and the extensive economic activity that relies on the proper
functioning of NOAA and Coast Guard vessels.
Thank you for your consideration of our views on this important
issue and for your support in providing adequate resources to support
NOAA and Coast Guard fleet recapitalization.
Very truly yours,
Matt Tinning,
Associate Vice President, Oceans.
______
Response to Written Questions Submitted by Hon. Tammy Baldwin to
RADM Michael J. Silah
Question 1. For each of the last five fiscal years, how much
taxpayer money has NOAA spent on fleet-related equipment and services
provided by foreign companies? This amount should include all contracts
and subcontracts with foreign companies.
Answer. Over the last five fiscal years NOAA spent $2.7 million on
foreign business contracts. The majority of the contracts were for
parts and equipment that must be provided by the original vendor or
manufacturer. Further, approximately $1 million was for contracts that
foreign businesses received via competition. Of those competed
contracts, the majority were for foreign port services while our
vessels are sailing internationally.
Question 2. Please provide detailed examples of NOAA contracts or
subcontracts with foreign companies for fleet-related equipment and
services.
Answer. The majority of contracts with foreign companies are not
competitive because the equipment being purchased is the only piece of
equipment on the market that can meet NOAA's needs, such as transducers
or other equipment where the company is the original equipment
manufacturer. Another example of NOAA contracting with foreign
companies is for port husbanding services at foreign ports while a ship
is sailing internationally.
Question 3. What proactive steps, if any, does NOAA take to seek
contracts or subcontracts with American manufacturers and small
businesses in cases where the law does not require you to do so?
Answer. NOAA includes the Buy American Act in applicable
solicitations and contracts. The Buy American Act applies to all
acquisitions for the purchase of supplies, and requires that all
supplies are domestic end products unless an exemption, such as public
interest, non-availability, unreasonable cost, resale, and information
technology that is a commercial item, applies. In addition, the Buy
American Act requires, with some exceptions, the use of only domestic
construction materials in contracts for construction in the United
States. Thanks to efforts by the Senate Commerce Committee, a provision
in the John S. McCain National Defense Authorization Act for Fiscal
Year 2019 (P.L. 115-232), provides the Secretary of Commerce the same
discretionary authority as the Secretaries of Transportation, the Army,
the Navy, and the Air Force to waive bonding requirements for contracts
for construction and major repair of NOAA vessels, which will increase
the competitiveness of smaller U.S.-based shipyard and repair
facilities that are most appropriately suited for NOAA vessel repair
contracts.
Question 4. Has NOAA experienced increased lifecycle costs
resulting from the use of foreign-made components or had difficulty
repairing or finding replacements for foreign-made components? If so,
please provide specific, detailed examples.
Answer. In some cases, NOAA has found it difficult to procure
foreign-made components of our equipment, because they are not readily
available in the United States. In those cases, NOAA is required to
procure the part from the original equipment manufacturer and shipping
times, customs and security clearances have delayed the arrival of
parts. An example is motor repairs for the NOAA Ship Henry Bigelow:
Nidec-Ansaldo (Italy). Motor windings were sourced in Italy to ensure
compatibility and operation within specifications, per the original
equipment manufacturer's recommendations. Component material, including
coil wire with metric units, is most easily produced and sourced in
Europe and could not be replaced with material available stateside.
Question 5. For decades, NOAA has done great research in the Great
Lakes, particularly at the Great Lakes Environmental Research
Laboratory and also at the National Estuarine Research Reserve in
Superior, Wisconsin. But to my knowledge, NOAA has never had a ship in
the Great Lakes. Admiral Silah, I believe this has contributed to a
lack of data that is required to address some of the most pressing
challenges facing the Great Lakes, including: the need to map with
hydrographic surveys most of Lake Superior; harmful algal blooms;
invasive species; and climate change. From NOAA's perspective, what
data gaps exist in the Great Lakes?
Answer. The Great Lakes comprise the largest freshwater system on
earth and are critical to the region's drinking water supplies,
shipping, tourism, and recreational economies. NOAA has 13 vessels
ranging in size from 13 to 80 feet supporting our Great Lakes data
collection efforts, carrying out work related to harmful algal bloom
monitoring, fisheries, and water quality testing, as well as buoys and
the Great Lakes Observing System. NOAA appreciates the ecological and
economic importance of the Great Lakes and works to ensure it collects
critical data related to the region. NOAA is continually assessing data
needs nationwide in its efforts to improve its forecasting, monitoring,
and prediction capabilities to address challenges.
Question 6. And does NOAA plan to use any of its current or future
recapitalized fleet to address these challenges, including through
homeporting a ship in the Great Lakes?
Answer. NOAA has no plans to homeport any vessels in the Great
Lakes. The requirements NOAA has in the Great Lakes are most cost-
effectively met using a fleet of smaller vessels, such as those that
are located at the Great Lakes Environmental Research Laboratory in
Michigan. NOAA is in the process of starting the development of a small
boat recapitalization plan that will analyze NOAA's small boat fleet,
similar to what was recently completed with the NOAA Fleet
Recapitalization Plan. The plan is expected to assess NOAA's capacity
for meeting its small boat requirements in the Great Lakes in the long
term.
______
Response to Written Questions Submitted by Hon. Edward Markey to
RADM Michael J. Silah
Question 1. In 2017, of 8,700 days at sea requested for NOAA ships,
3,600, over 40 percent, were unmet. That's a lot of research left on
the table. NOAA's 2016 Fleet Recapitalization Plan recommended
increasing the use of charters and strengthening partnerships across
both Federal and academic sectors to increase capacity. To what extent
is NOAA currently partnering with the Navy and Coast Guard to increase
capacity fulfill its research missions? How could these partnerships be
further enhanced?
Answer. NOAA enjoys a positive relationship with the U.S. Navy. A
formal Memorandum of Agreement (MOA) is in place between NOAA and the
Oceanographer of the Navy through 2023. This MOA highlights the
important role the Oceanographer of the Navy serves as Naval Deputy to
NOAA, and also prioritizes cooperative efforts regarding meteorology,
oceanography, geospatial information and services, astronomy, precise
time interval, remote sensing, navigation and environmental readiness.
NOAA's Office of Marine and Aviation Operations has been partnering
with the Navy since 2017 on the design and construction of new research
vessels, and has longstanding ship moorage and facilities use
agreements that greatly improve NOAA's maritime operational
flexibility.
NOAA and the U.S. Coast Guard have a robust partnership that
continues to expand. NOAA and Coast Guard leadership work together to
maximize efficiencies between the two agencies in providing services
that support our Nation's economic success while safeguarding our
natural resources. There are numerous Memorandums of Understanding
(MOU) and interagency agreements between NOAA and Coast Guard. Two
prominent agreements are the Fleet Plan (October 2014) and Cooperative
Maritime Strategy (February 2013). Other agreements include an officer
exchange with a NOAA officer assigned to the Coast Guard icebreaker
Polar Star, a senior officer assigned to Coast Guard HQ as NOAA
Liaison, and a Joint Officer Training Center where NOAA and Coast Guard
Officer Candidates train together. NOAA conducts research missions
aboard Coast Guard icebreaker Healy, most recently in August 2018. The
agencies are working together with unmanned systems to maximize
efficiencies gained by sharing knowledge and expertise. NOAA will be
partnering with Coast Guard on several upcoming Unmanned Aircraft
System operational exercises planned for 2019, incorporating NOAA
Fisheries law enforcement missions into the Coast Guard training
exercises.
To enhance the already strong partnerships between NOAA and the
Navy/Coast Guard, it is recommended that the agreements between the
agencies are renewed and the organizations continue to engage to
maximize efficiencies as opportunity and technological advancements
present themselves.
Question 2. In what condition are the smaller NOAA vessels based in
Massachusetts, such as the Auk, based at the Gerry E. Studds--
Stellwagen Bank National Marine Sanctuary?
Answer. NOAA has three vessels based at the Stellwagen Bank
National Marine Sanctuary:
The R/V Auk is a 50 ft. aluminum catamaran, capable of
supporting a larger science crew for critical offshore work,
including monitoring, site characterization, diving needs, and
education and outreach. The vessel, built in 2006, is currently
in very good condition and a service life extension is
currently planned for 2023.
The T/T Auk (aka Auk-tender) is a 11 ft. inflatable that is
suitable for local sites and fair weather only. The Auk-tender
is stowed in a cradle on the Auk and deployed from its deck. It
was built in 2006 and will continue to perform adequately
through 2022.
R1606 is a 16 ft. rigid hull inflatable, kept on a trailer.
It was built in 2009 and will continue to perform adequately
through 2022.
A recent report issued by the Office of National Marine Sanctuaries
(ONMS), the Small Boat Program Fleet Assessment Report, was published
in April 2018 and has additional information on the condition and uses
of the ONMS small boat fleet.
Question 3. In what condition are the smaller research vessels used
by NOAA facilities in Massachusetts such as the Greater Atlantic
Regional Office and Science Center? What are the plans for their
refurbishment and eventual replacement?
Answer. The NOAA R/V Gloria Michelle is a 72 ft., 96 ton stern
trawler built in 1974 and acquired by NOAA in 1980 through a drug
seizure. Recent audiogage readings have shown that the 44 year old
vessel has sound hull thickness with only minor deterioration. Thinning
spots were cut out and replaced with new sheet metal. Engineering
upgrades to the trawl winches, hydraulic system, generators, and main
engine, over the last three years have extended the life of the vessel.
We expect safe and reliable service into the near future to support a
large number of new and long-term research objectives.
The NOAA R/V Victor Loosanoff is 49,10" long and 38 gross tons,
built in 1995 for the U.S. Coast Guard and transferred to NOAA in 2001.
The vessel is in good condition and received long term maintenance
(hull blasted and painted, shafts, rudders, keel coolers and propellers
were reconditioned) over the last two years, which is expected to
extend the vessel life by 10 years.
There are currently no plans to replace the Gloria Michelle or the
Victor Loosanoff. The Northeast Fisheries Science Center will continue
to maintain and refurbish the two research vessels with revenue
generated through their daily charter rate. Eventually, replacement of
the Gloria Michelle will be required.
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