[House Report 110-270]
[From the U.S. Government Publishing Office]



                                                                       
110th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    110-270

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



 
                INTEGRATED DEEPWATER PROGRAM REFORM ACT

                                _______
                                

 July 30, 2007.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

Mr. Oberstar, from the Committee on Transportation and Infrastructure, 
                        submitted the following

                              R E P O R T

                             together with

                        [To accompany H.R. 2722]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Transportation and Infrastructure, to whom 
was referred the bill (H.R. 2722) to restructure the Coast 
Guard Integrated Deepwater Program, and for other purposes, 
having considered the same, reports favorably thereon with an 
amendment and recommends that the bill as amended do pass.

    The amendment is as follows:
    Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Integrated Deepwater Program Reform 
Act''.

SEC. 2. IMPLEMENTATION OF COAST GUARD INTEGRATED DEEPWATER ACQUISITION 
                    PROGRAM.

  (a) Use of Private Sector Entity as a Lead Systems Integrator.--
          (1) In general.--Except as otherwise provided in this 
        subsection, the Secretary may not use a private sector entity 
        as a lead systems integrator for procurements under, or in 
        support of, the Deepwater Program beginning on the earlier of 
        October 1, 2011, or the date on which the Secretary certifies 
        in writing to the Committee on Transportation and 
        Infrastructure of the House of Representatives and the 
        Committee on Commerce, Science, and Transportation of the 
        Senate that the Coast Guard has available and can retain 
        sufficient contracting personnel and expertise within the Coast 
        Guard, through an arrangement with other Federal agencies, or 
        through contracts or other arrangements with private sector 
        entities, to perform the functions and responsibilities of the 
        lead system integrator in an efficient and cost-effective 
        manner.
          (2) Completion of existing delivery orders and task orders.--
        The Secretary may use a private sector entity as a lead systems 
        integrator to complete any delivery order or task order under 
        the Deepwater Program that was issued to the lead systems 
        integrator on or before the date of enactment of this Act.
          (3) Assistance of other federal agencies.--In any case in 
        which the Secretary is the systems integrator under the 
        Deepwater Program, the Secretary may obtain any type of 
        assistance the Secretary considers appropriate, with any 
        systems integration functions, from any Federal agency with 
        experience in systems integration involving maritime vessels 
        and aircraft.
          (4) Assistance of private sector entities.--In any case in 
        which the Secretary is the systems integrator under the 
        Deepwater Program, the Secretary may, subject to the 
        availability of appropriations, obtain by grant, contract, or 
        cooperative agreement any type of assistance the Secretary 
        considers appropriate, with any systems integration functions, 
        from any private sector entity with experience in systems 
        integration involving maritime vessels and aircraft.
  (b) Competition.--
          (1) In general.--Except as otherwise provided in this 
        subsection, the Secretary shall use full and open competition 
        for each class of asset acquisitions under the Deepwater 
        Program for which an outside contractor is used, if the asset 
        is procured directly by the Coast Guard or by the Integrated 
        Coast Guard System acting under a contract with the Coast 
        Guard.
          (2) Exception.--The Secretary may use a procurement method 
        that is less than full and open competition to procure an asset 
        under the Deepwater Program, if--
                  (A) the Secretary determines that such method is in 
                the best interests of the Federal Government; and
                  (B) by not later than 30 days before the date of the 
                award of a contract for the procurement, the Secretary 
                submits to the Committee on Transportation and 
                Infrastructure of the House of Representatives and the 
                Committee on Commerce, Science, and Transportation of 
                the Senate a report explaining why such procurement is 
                in the best interests of the Federal Government.
          (3) Limitation on application.--Paragraph (1) shall not apply 
        to a contract, subcontract, or task order that was issued 
        before the date of enactment of this Act, if there is no change 
        in the quantity of assets or the specific type of assets 
        procured.
  (c) Required Contract Terms.--The Secretary shall include in each 
contract, subcontract, and task order issued under the Deepwater 
Program after the date of the enactment of this Act the following 
provisions, as applicable:
          (1) Technical reviews.--A requirement that the Secretary 
        shall conduct a technical review of all proposed designs, 
        design changes, and engineering changes, and a requirement that 
        the contractor must specifically address all engineering 
        concerns identified in the technical reviews, before any funds 
        may be obligated.
          (2) Responsibility for technical requirements.--A requirement 
        that the Secretary shall maintain the authority to establish, 
        approve, and maintain technical requirements.
          (3) Cost estimate of major changes.--A requirement that an 
        independent cost estimate must be prepared and approved by the 
        Secretary before the execution of any change order costing more 
        than 5 percent of the unit cost approved in the Deepwater 
        Program baseline in effect as of May 2007.
          (4) Performance measurement.--A requirement that any 
        measurement of contractor and subcontractor performance must be 
        based on the status of all work performed, including the extent 
        to which the work performed met all cost, schedule, and mission 
        performance requirements outlined in the Deepwater Program 
        contract.
          (5) Early operational assessment.--For the acquisition of any 
        cutter class for which an Early Operational Assessment has not 
        been developed--
                  (A) a requirement that the Secretary of the 
                Department in which the Coast Guard is operating shall 
                cause an Early Operational Assessment to be conducted 
                by the Department of the Navy after the development of 
                the preliminary design of the cutter and before the 
                conduct of the critical design review of the cutter; 
                and
                  (B) a requirement that the Coast Guard shall develop 
                a plan to address the findings presented in the Early 
                Operational Assessment.
          (6) Transient electromagnetic pulse emanation.--For the 
        acquisition or upgrade of air, surface, or shore assets for 
        which compliance with transient electromagnetic pulse emanation 
        (TEMPEST) is a requirement, a provision specifying that the 
        standard for determining such compliance shall be the air, 
        surface, or shore asset standard then used by the Department of 
        the Navy.
          (7) Offshore patrol cutter underway requirement.--For any 
        contract issued to acquire an Offshore Patrol Cutter, 
        provisions specifying the service life, fatigue life, days 
        underway in general Atlantic and North Pacific Sea conditions, 
        maximum range, and maximum speed the cutter shall be built to 
        achieve.
          (8) Inspector general access.--A requirement that the 
        Department of Homeland Security's Office of the Inspector 
        General shall have access to all records maintained by all 
        contractors working on the Deepwater Program, and shall have 
        the right to privately interview any contractor personnel.
  (d) Life Cycle Cost Estimate.--
          (1) In general.--The Secretary shall develop an authoritative 
        life cycle cost estimate for the Deepwater Program.
          (2) Contents.--The life cycle cost estimate shall include 
        asset acquisition and logistics support decisions and planned 
        operational tempo and locations as of the date of enactment of 
        this Act.
          (3) Submittal.--The Secretary shall--
                  (A) submit the life cycle cost estimate to the 
                Committee on Transportation and Infrastructure of the 
                House of Representatives and the Committee on Commerce, 
                Science, and Transportation of the Senate within 4 
                months after the date of enactment of this Act; and
                  (B) submit updates of the life cycle cost estimate to 
                such Committees annually.
  (e) Contract Officers.--The Secretary shall assign a separate 
contract officer for each class of cutter and aircraft acquired or 
rehabilitated under the Deepwater Program, including the National 
Security Cutter, the Offshore Patrol Cutter, the Fast Response Cutter 
A, the Fast Response Cutter B, maritime patrol aircraft, the aircraft 
HC-130J, the helicopter HH-65, the helicopter HH-60, and the vertical 
unmanned aerial vehicle.
  (f) Technology Risk Report.--The Secretary shall submit to the 
Committee on Transportation and Infrastructure of the House of 
Representatives and the Committee on Commerce, Science, and 
Transportation of the Senate a report identifying the technology risks 
and level of maturity for major technologies used on each class of 
asset acquisitions under the Deepwater Program, including the Fast 
Response Cutter A (FRC-A), the Fast Response Cutter B (FRC-B), the 
Offshore Patrol Cutter (OPC), and the Vertical Unmanned Aerial Vehicle 
(VUAV), not later than 90 days before the date of award of a contract 
for such an acquisition.
  (g) Submission of Assessment Results and Plans to Congress.--The 
Commandant of the Coast Guard shall submit to the Committee on 
Transportation and Infrastructure of the House of Representatives and 
the Committee on Commerce, Science, and Transportation of the Senate--
          (1) the results of each Early Operational Assessment 
        conducted pursuant to subsection (c)(5)(A) and the plan 
        approved by the Commandant pursuant to subsection (c)(5)(B) for 
        addressing the findings of such assessment, within 30 days 
        after the Commandant approves the plan; and
          (2) a report describing how the recommendations of each Early 
        Operational Assessment conducted pursuant to subsection 
        (c)(5)(A) on the first in class of a new cutter class have been 
        addressed in the design on which construction is to begin, 
        within 30 days before initiation of construction.

SEC. 3. CHIEF ACQUISITION OFFICER.

  (a) In General.--Chapter 3 of title 14, United States Code, is 
amended by adding at the end the following:

``Sec. 55. Chief Acquisition Officer

  ``(a) Establishment of Agency Chief Acquisition Officer.--The 
Commandant shall appoint or designate a career reserved employee as 
Chief Acquisition Officer for the Coast Guard, who shall--
          ``(1) have acquisition management as that official's primary 
        duty; and
          ``(2) report directly to the Commandant to advise and assist 
        the Commandant to ensure that the mission of the Coast Guard is 
        achieved through the management of the Coast Guard's 
        acquisition activities.
  ``(b) Authority and Functions of the Chief Acquisition Officer.--The 
functions of the Chief Acquisition Officer shall include--
          ``(1) monitoring the performance of acquisition activities 
        and acquisition programs of the Coast Guard, evaluating the 
        performance of those programs on the basis of applicable 
        performance measurements, and advising the Commandant regarding 
        the appropriate business strategy to achieve the mission of the 
        Coast Guard;
          ``(2) increasing the use of full and open competition in the 
        acquisition of property and services by the Coast Guard by 
        establishing policies, procedures, and practices that ensure 
        that the Coast Guard receives a sufficient number of sealed 
        bids or competitive proposals from responsible sources to 
        fulfill the Government's requirements (including performance 
        and delivery schedules) at the lowest cost or best value 
        considering the nature of the property or service procured;
          ``(3) ensuring the use of detailed performance specifications 
        in instances in which performance-based contracting is used;
          ``(4) making acquisition decisions consistent with all 
        applicable laws and establishing clear lines of authority, 
        accountability, and responsibility for acquisition 
        decisionmaking within the Coast Guard;
          ``(5) managing the direction of acquisition policy for the 
        Coast Guard, including implementation of the unique acquisition 
        policies, regulations, and standards of the Coast Guard;
          ``(6) developing and maintaining an acquisition career 
        management program in the Coast Guard to ensure that there is 
        an adequate professional workforce; and
          ``(7) as part of the strategic planning and performance 
        evaluation process required under section 306 of title 5 and 
        sections 1105(a)(28), 1115, 1116, and 9703 of title 31--
                  ``(A) assessing the requirements established for 
                Coast Guard personnel regarding knowledge and skill in 
                acquisition resources management and the adequacy of 
                such requirements for facilitating the achievement of 
                the performance goals established for acquisition 
                management;
                  ``(B) in order to rectify any deficiency in meeting 
                such requirements, developing strategies and specific 
                plans for hiring, training, and professional 
                development; and
                  ``(C) reporting to the Commandant on the progress 
                made in improving acquisition management capability.''.
  (b) Clerical Amendment.--The table of sections at the beginning of 
such chapter is amended by adding at the end the following:

``55. Chief Acquisition Officer.''.

  (c) Special Rate Supplements.--
          (1) Requirement to establish.--Not later than 1 year after 
        the date of enactment of this Act and in accordance with part 
        9701.333 of title 5, Code of Federal Regulations, the 
        Commandant of the Coast Guard shall establish special rate 
        supplements that provide higher pay levels for employees 
        necessary to carry out the amendment made by this section.
          (2) Subject to appropriations.--The requirement under 
        paragraph (1) is subject to the availability of appropriations.

SEC. 4. TESTING AND CERTIFICATION.

  (a) In General.--The Secretary shall--
          (1) cause each cutter, other than a National Security Cutter, 
        acquired by the Coast Guard and delivered after the date of 
        enactment of this Act to be classed by the American Bureau of 
        Shipping, before acceptance of delivery;
          (2) cause the design and construction of each National 
        Security Cutter, other than National Security Cutter 1 and 2, 
        to be certified by an independent third party with expertise in 
        vessel design and construction certification to be able to meet 
        a 185-underway-day requirement under general Atlantic and North 
        Pacific sea conditions for a period of at least 30 years;
          (3) cause all electronics on all aircraft, surface, and shore 
        assets that require TEMPEST certification and that are 
        delivered after the date of enactment of this Act to be tested 
        and certified in accordance with TEMPEST standards and 
        communications security (COMSEC) standards by an independent 
        third party that is authorized by the Federal Government to 
        perform such testing and certification; and
          (4) cause all aircraft and aircraft engines acquired by the 
        Coast Guard and delivered after the date of enactment of this 
        Act to be certified for airworthiness by an independent third 
        party with expertise in aircraft and aircraft engine 
        certification, before acceptance of delivery.
  (b) First in Class of a Major Asset Acquisition.--The Secretary shall 
cause the first in class of a major asset acquisition of a cutter or an 
aircraft to be subjected to an assessment of operational capability 
conducted by the Secretary of the Navy.
  (c) Final Arbiter.--The Secretary shall be the final arbiter of all 
technical disputes regarding designs and acquisitions of vessels and 
aircraft for the Coast Guard.

SEC. 5. NATIONAL SECURITY CUTTERS.

  (a) National Security Cutters 1 and 2.--
          (1) Report on options under consideration.--The Secretary 
        shall submit to the Committee on Transportation and 
        Infrastructure of the House of Representatives and the 
        Committee on Commerce, Science, and Transportation of the 
        Senate--
                  (A) within 120 days after the date of enactment of 
                this Act, a report describing in detail the cost 
                increases that have been experienced on National 
                Security Cutters 1 and 2 since the date of the issuance 
                of the task orders for construction of those cutters 
                and explaining the causes of these cost increases; and
                  (B) within 180 days after the date of enactment of 
                this Act, a report on the options that the Coast Guard 
                is considering to strengthen the hulls of National 
                Security Cutter 1 and National Security Cutter 2, 
                including--
                          (i) the costs of each of the options under 
                        consideration;
                          (ii) a schedule for when the hull 
                        strengthening repairs are anticipated to be 
                        performed; and
                          (iii) the impact that the weight likely to be 
                        added to each the cutter by each option will 
                        have on the cutter's ability to meet both the 
                        original performance requirements included in 
                        the Deepwater Program contract and the 
                        performance requirements created by contract 
                        Amendment Modification 00042 dated February 7, 
                        2007.
          (2) Design assessment.--Not later than 30 days before the 
        Coast Guard signs any contract, delivery order, or task order 
        to strengthen the hull of either of National Security Cutter 1 
        or 2 to resolve the structural design and performance issues 
        identified in the Department of Homeland Security Inspector 
        General's report OIG-07-23 dated January 2007, the Secretary 
        shall submit to the Committee on Transportation and 
        Infrastructure of the House of Representatives and the 
        Committee on Commerce, Science, and Transportation of the 
        Senate all results of an assessment of the proposed hull 
        strengthening design conducted by the Naval Surface Warfare 
        Center, Carderock Division, including a description in detail 
        of the extent to which the hull strengthening measures to be 
        implemented on those cutters will enable the cutters to meet a 
        185-underway-day requirement under general Atlantic and North 
        Pacific sea conditions for a period of at least 30 years.
  (b) National Security Cutters 3 Through 8.--Not later than 30 days 
before the Coast Guard signs any contract, delivery order, or task 
order authorizing construction of National Security Cutters 3 through 
8, the Secretary shall submit to the Committee on Transportation and 
Infrastructure of the House of Representatives and the Committee on 
Commerce, Science, and Transportation of the Senate all results of an 
assessment of the proposed designs to resolve the structural design, 
safety, and performance issues identified by the Department of Homeland 
Security Office of Inspector General report OIG-07-23 for the hulls of 
those cutters conducted by the Naval Surface Warfare Center, Carderock 
Division, including a description in detail of the extent to which such 
designs will enable the cutters to meet a 185-underway-day requirement 
under general Atlantic and North Pacific sea conditions.

SEC. 6. MISCELLANEOUS REPORTS.

  (a) In General.--The Secretary shall submit the following reports to 
the Committee on Transportation and Infrastructure of the House of 
Representatives and the Committee on Commerce, Science, and 
Transportation of the Senate:
          (1) Within 4 months after the date of enactment of this Act, 
        a justification for why 8 National Security Cutters are 
        required to meet the operational needs of the Coast Guard, 
        including--
                  (A) how many days per year each National Security 
                Cutter will be underway at sea;
                  (B) where each National Security Cutter will be home 
                ported;
                  (C) the amount of funding that will be required to 
                establish home port operations for each National 
                Security Cutter;
                  (D) the extent to which 8 National Security Cutters 
                deployed without vertical unmanned aerial vehicles 
                (VUAV) will meet or exceed the mission capability 
                (including surveillance capacity) of the 12 Hamilton-
                class high endurance cutters that the National Security 
                Cutters will replace;
                  (E) the business case in support of constructing 
                National Security Cutters 3 through 8, including a 
                cost-benefit analysis; and
                  (F) an analysis of how many Offshore Patrol Cutters 
                would be required to provide the patrol coverage 
                provided by a National Security Cutter.
          (2) Within 4 months after the date of enactment of this Act, 
        a report on--
                  (A) the impact that deployment of a National Security 
                Cutter and other cutter assets without the vertical 
                unmanned aerial vehicle (VUAV) will have on the amount 
                of patrol coverage that will be able to be provided 
                during missions conducted by the National Security 
                Cutter and all other cutters planned to be equipped 
                with a VUAV;
                  (B) how the coverage gap will be made up;
                  (C) an update on the current status of the 
                development of the VUAV; and
                  (D) the timeline detailing the major milestones to be 
                achieved during development of the VUAV and identifying 
                the delivery date for the first and last VUAV.
          (3) Within 30 days after the elevation to flag-level for 
        resolution of any design or other dispute regarding the 
        Deepwater Program contract or an item to be procured under that 
        contract, including a detailed description of the issue and the 
        rationale underlying the decision taken by the flag officer to 
        resolve the issue.
          (4) Within 4 months after the date of enactment of this Act, 
        a report detailing the total number of change orders that have 
        been created by the Coast Guard under the Deepwater Program 
        before the date of enactment of this Act, the total cost of 
        these change orders, and their impact on the Deepwater Program 
        schedule.
          (5) Within 180 days after the date of enactment of this Act, 
        a report detailing the technology risks and level of maturity 
        for major technologies used on maritime patrol aircraft, the 
        HC-130J, and the National Security Cutter.
          (6) Not less than 60 days before signing a contract to 
        acquire any vessel or aircraft, a report comparing the cost of 
        purchasing that vessel or aircraft directly from the 
        manufacturer or shipyard with the cost of procuring it through 
        the Integrated Coast Guard System.
          (7) Within 30 days after the Program Executive Officer of the 
        Deepwater Program becomes aware of a likely cost overrun 
        exceeding 5 percent of the overall asset acquisition contract 
        cost or schedule delay exceeding 5 percent of the estimated 
        asset construction period under the Deepwater Program, a report 
        by the Commandant containing a description of the cost overrun 
        or delay, an explanation of the overrun or delay, a description 
        of Coast Guard's response, and a description of significant 
        delays in the procurement schedule likely to be caused by the 
        overrun or delay.
          (8) Within 90 days after the date of enactment of this Act, 
        articulation of a doctrine and description of an anticipated 
        implementation of a plan for management of acquisitions 
        programs, financial management (including earned value 
        management and cost estimating), engineering and logistics 
        management, and contract management, that includes--
                  (A) a description of how the Coast Guard will 
                cultivate among uniformed personnel expertise in 
                acquisitions management and financial management;
                  (B) a description of the processes that will be 
                followed to draft and ensure technical review of 
                procurement packages, including statements of work, for 
                any class of assets acquired by the Coast Guard;
                  (C) a description of how the Coast Guard will conduct 
                an independent cost estimating process, including 
                independently developing cost estimates for major 
                change orders; and
                  (D) a description of how Coast Guard will strengthen 
                the management of change orders.
          (9) Within 4 months after the date of enactment of this Act, 
        a report on the development of a new acquisitions office within 
        the Coast Guard describing the specific staffing structure for 
        that directorate, including--
                  (A) identification of all managerial positions 
                proposed as part of the office, the functions that each 
                managerial position will fill, and the number of 
                employees each manager will supervise; and
                  (B) a formal organizational chart and identification 
                of when managerial positions are to be filled.
          (10) Ninety days prior to the issuance of a Request for 
        Proposals for construction of an Offshore Patrol Cutter, a 
        report detailing the service life, fatigue life, maximum range, 
        maximum speed, and number of days underway under general 
        Atlantic and North Pacific Sea conditions the cutter shall be 
        built to achieve.
          (11) The Secretary shall report annually on the percentage of 
        the total amount of funds expended on procurements under the 
        Deepwater Program that has been paid to each of small 
        businesses and minority-owned businesses.
          (12) Within 120 days after the date of enactment of this Act, 
        a report on any Coast Guard mission performance gap due to the 
        removal of Deepwater Program assets from service. The report 
        shall include the following:
                  (A) A description of the mission performance gap 
                detailing the geographic regions and Coast Guard 
                capabilities affected.
                  (B) An analysis of factors affecting the mission 
                performance gap that are unrelated to the Deepwater 
                Program, including deployment of Coast Guard assets 
                overseas and continuous vessel shortages.
                  (C) A description of measures being taken in the near 
                term to fill the mission performance gap, including 
                what those measures are and when they will be 
                implemented.
                  (D) A description of measures being taken in the long 
                term to fill the mission performance gap, including 
                what those measures are and when they will be 
                implemented.
                  (E) A description of the potential alternatives to 
                fill the mission performance gap, including any 
                acquisition or lease considered and the reasons they 
                were not pursued.
  (b) Report Required on Acceptance of Delivery of Incomplete Asset.--
          (1) In general.--If the Secretary accepts delivery of an 
        asset after the date of enactment of this Act for which a 
        contractually required certification cannot be achieved within 
        30 days after the date of delivery or with any system that is 
        not fully functional for the mission for which it was intended, 
        the Secretary shall submit to the Committee on Transportation 
        and Infrastructure of the House of Representatives and the 
        Committee on Commerce, Science, and Transportation of the 
        United States Senate within 30 days after accepting delivery of 
        the asset a report explaining why acceptance of the asset in 
        such a condition is in the best interests of the United States 
        Government.
          (2) Contents.--The report shall--
                  (A) specify the systems that are not able to achieve 
                contractually required certifications within 30 days 
                after the date of delivery and the systems that are not 
                fully functional at the time of delivery for the 
                missions for which they were intended;
                  (B) identify milestones for the completion of 
                required certifications and to make all systems fully 
                functional; and
                  (C) identify when the milestones will be completed, 
                who will complete them, and the cost to complete them.

SEC. 7. USE OF THE NAVAL SEA SYSTEMS COMMAND, THE NAVAL AIR SYSTEMS 
                    COMMAND, AND THE SPACE AND NAVAL WARFARE SYSTEMS 
                    COMMAND TO ASSIST THE COAST GUARD IN EXERCISING 
                    TECHNICAL AUTHORITY FOR THE DEEPWATER PROGRAM AND 
                    OTHER COAST GUARD ACQUISITION PROGRAMS.

  (a) Findings.--Congress finds that the Coast Guard's use of the 
technical, contractual, and program management oversight expertise of 
the Department of the Navy in ship and aircraft production complements 
and augments the Coast Guard's organic expertise as it procures assets 
for the Deepwater Program.
  (b) Inter-Service Technical Assistance.--The Secretary may enter into 
a memorandum of understanding or a memorandum of agreement with the 
Secretary of the Navy to provide for the use of the Navy Systems 
Commands to assist the Coast Guard with the oversight of Coast Guard 
major acquisition programs. Such memorandum of understanding or 
memorandum of agreement shall, at a minimum provide for--
          (1) the exchange of technical assistance and support that the 
        Coast Guard Chief Engineer and the Coast Guard Chief 
        Information Officer, as Coast Guard Technical Authorities, may 
        identify;
          (2) the use, as appropriate, of Navy technical expertise; and
          (3) the temporary assignment or exchange of personnel between 
        the Coast Guard and the Navy Systems Commands to facilitate the 
        development of organic capabilities in the Coast Guard.
  (c) Technical Authorities.--The Coast Guard Chief Engineer, Chief 
Information Officer, and Chief Acquisition Officer shall adopt, to the 
extent practicable, procedures that are similar to those used by the 
Navy Senior Acquisition Official to ensure the Coast Guard Technical 
Authorities, or designated Technical Warrant Holders, approve all 
technical requirements.
  (d) Coordination.--The Secretary, acting through the Commandant of 
the Coast Guard, may coordinate with the Secretary of the Navy, acting 
through the Chief of Naval Operations, to develop processes by which 
the assistance will be requested from the Navy Systems Commands and 
provided to the Coast Guard.
  (e) Report.--Not later than 120 days after the date of enactment of 
this Act and every twelve months thereafter, the Commandant of the 
Coast Guard shall report to the Committee on Transportation and 
Infrastructure of the House of Representatives and the Committee on 
Commerce, Science, and Transportation of the Senate on the activities 
undertaken pursuant to such memorandum of understanding or memorandum 
of agreement.

SEC. 8. DEFINITIONS.

  In this Act:
          (1) Deepwater program.--The term ``Deepwater Program'' means 
        the Integrated Deepwater Systems Program described by the Coast 
        Guard in its report to Congress entitled ``Revised Deepwater 
        Implementation Plan 2005'', dated March 25, 2005. The Deepwater 
        Program primarily involves the procurement of cutter and 
        aviation assets that operate more than 50 miles offshore.
          (2) Secretary.--The term ``Secretary'' means the Secretary of 
        the department in which the Coast Guard is operating.

                       Purpose of the Legislation

    H.R. 2722, as amended, restructures the Integrated 
Deepwater Program of the U.S. Coast Guard. The bill establishes 
new acquisitions management systems under civilian leadership 
within the Coast Guard to enable the Coast Guard to effectively 
manage its Deepwater procurement program, to assume the role of 
lead systems integrator for the program, and to ensure that all 
assets produced under the program meet the highest quality 
standards.

                Background and Need for the Legislation

    The Deepwater Program is a series of procurements intended 
to renew the Coast Guard's fleet of cutters and aircraft. 
Currently expected to cost $24 billion and to require 25 years 
to complete, the program encompasses 91 cutters, 124 small 
surface craft, 244 new or converted aircraft, including both 
helicopters and fixed-wing airplanes, and command, control, 
communication, computer, intelligence, surveillance, and 
reconnaissance (``C4ISR'') systems. The procurements conducted 
under Deepwater are intended to create a ``system of 
systems''--meaning a suite of assets that are fully integrated 
and inter-operable.
    On June 25, 2002, the Coast Guard awarded the contract for 
the Deepwater Program to Integrated Coast Guard Systems 
(``ICGS''), a joint venture comprised of Lockheed Martin and 
Northrop Grumman. The contract awarded in 2002 was an 
indefinite delivery, indefinite quantity contract with a five-
year baseline ending in 2007. In June 2007, the Coast Guard 
announced the award of a new 43-month term to ICGS; however, 
the award did not include guaranteed work and the Coast Guard 
indicated at the time of the announcement that no task orders 
issued under the new award would exceed 18 months.
    Significant problems have been encountered in procurements 
conducted under Deepwater, including structural buckling of the 
eight 110-foot patrol boats that were lengthened to 123 feet, 
failure of the first design for the new Fast Response Cutter, 
and failure of the initial design effort of the vertical 
unmanned aerial vehicle. Most recently, the Department of 
Homeland Security's Office of the Inspector General (``OIG'') 
has found that the hull fatigue life on the National Security 
Cutter (``NSC''), the most expensive asset to be procured under 
the Deepwater Program, may not meet contractual requirements. 
The Coast Guard does not agree that the NSC will be unable to 
meet contractual requirements because its interpretation of 
contractual requirements differs from the OIG's interpretation 
of these requirements. However, the Coast Guard does agree that 
there are problems associated with the fatigue life of the 
hulls of the NSCs and will utilize a design for the 
construction of NSC 3 that is different from that utilized for 
NSCs 1 and 2.
    Numerous studies on Deepwater issued by the OIG, the 
Government Accountability Office, and the Defense Acquisitions 
University have analyzed problems in the Deepwater contract and 
shortcomings in the Coast Guard's management of the contract 
that have contributed to the problems encountered in the 
procurement. Among other factors, these groups have criticized 
the issuance of a performance-based contract that lacked clear 
standards for assessing performance and that ceded too much 
authority for technical decisions from the Coast Guard and to 
the ICGS contractor. Analysts have also criticized the lack of 
in-house management and technical oversight capacity within the 
Coast Guard.
    On January 30, 2007, the Subcommittee on Coast Guard and 
Maritime Transportation held its first oversight hearing of the 
110th Congress on the Deepwater Program. The Subcommittee 
received testimony from Admiral Thad Allen, Commandant of the 
United States Coast Guard; Dr. Leo Mackay, President of 
Integrated Coast Guard Systems; and Mr. Phillip Teel, President 
of Northrop Grumman Ship Systems.
    In his testimony, Admiral Allen stated that the Coast Guard 
is creating a new acquisitions directorate to professionalize 
the management of acquisitions efforts in the Coast Guard and 
the management of human capital. The Commandant also announced 
that the Coast Guard would serve as the final technical 
authority on acquisitions efforts. Further, he testified that 
the Coast Guard would put business practices into place 
intended to guarantee contractor performance, allow clear 
assignment of responsibility and accountability, and address 
problems that had arisen from contractor self-certification.
    Admiral Allen indicated that he did not agree with the 
conclusion of the OIG claim that the contract for Deepwater 
required the National Security Cutter to be built to be 
underway for at least 230 days per year. Admiral Allen stated 
that the contract requires the ship to be built to be away from 
its home port for 230 days per year but to be able to serve 
only 170- to 180-mission days. He further argued that building 
a ship to be operating in a mission area for 230 days per year 
would require construction of a ship much heavier and more 
expensive than the Coast Guard actually needs.
    In his testimony, Mr. Teel discussed the changes that are 
occurring in techniques for forecasting the fatigue life of 
vessels and indicated that current techniques for developing 
such forecasts continue to be refined. In response to questions 
about the NSC, he indicated that he could not be certain when 
or if a crack would occur in the NSC.
    On March 8, 2007, the Subcommittee on Coast Guard and 
Maritime Transportation held a hearing on the Coast Guard's 
fiscal year 2008 budget, including the budget for the Deepwater 
Program. The Subcommittee received testimony from Admiral Thad 
Allen, the Commandant of the United States Coast Guard; Master 
Chief Petty Officer Charles W. Bowen, the Master Chief Petty 
Officer of the Coast Guard; Mr. Richard Skinner, the Inspector 
General of the Department of Homeland Security; and Mr. Stephen 
Caldwell of Government Accountability Office.
    Admiral Allen testified that he was uncertain if the Coast 
Guard could complete the Deepwater Program within the currently 
projected $24 billion budget. He further testified regarding 
the NSC that Northrop Grumman felt they had met the contractual 
requirements for the ship but the Coast Guard did not agree.
    Mr. Skinner testified that the Inspector General's office 
had conducted four audits of Deepwater over the past two and 
one-half years and these audits revealed the dominant influence 
of expediency over performance quality, flaws with the terms 
and conditions of the contract, and that the Coast Guard lacks 
the appropriate number of people and the right mix of expertise 
to manage the Deepwater Program. Mr. Skinner indicated that the 
Coast Guard was moving to correct all of these problems--but 
that the implementation of corrections would require a change 
of culture within the service. He further stated that one of 
the most important practices to ensuring the success of 
performance-based contracting is continuity in personnel. The 
appointment of military personnel to oversee acquisitions is 
directly contrary to this objective because it ensures 
turnover. Further, he indicated that there is no career path in 
the Coast Guard for military personnel who aspire to manage 
acquisitions to receive the work experience and training that 
they will need to be able to manage any acquisition program, 
particularly one as complicated as Deepwater.
    Mr. Caldwell testified that there were many areas of 
uncertainty in the Deepwater contract that could cause the 
program to exceed $24 billion in costs, including continued 
growth in the costs of individual assets. He also supported the 
point that civilians could bring needed continuity to the 
Deepwater Program.
    On April 18, 2007, the Committee on Transportation and 
Infrastructure held an investigative hearing to examine 
contractor compliance with the requirements of the Deepwater 
contract, particularly on the 123-foot patrol boat program. The 
Committee received testimony from 13 witnesses, including two 
former employees of Lockheed Martin, five current or former 
employees of the Coast Guard, Admiral Gary Blore, who will head 
the Coast Guard's new acquisitions directorate, and Vice 
Admiral Paul Sullivan, Commander of the United States Navy's 
Naval Sea Systems Command.
    The Committee heard testimony indicating that the ICGS team 
installed non-conforming topside equipment, non-low-smoke 
cabling, cameras that did not provide a 360-degree field of 
coverage, and non-shielded cabling. Further, the Committee 
heard testimony indicating that the Coast Guard may not have 
followed all standard procedures in obtaining transient 
electromagnetic pulse emanation (``TEMPEST'') certifications 
for the vessels. The Coast Guard maintains that no data was 
transmitted over non-TEMPEST standard communications equipment.
    During the April 18, 2007 hearing, the Committee also 
examined the circumstances regarding the decisions made by the 
Coast Guard to implement the ICGS proposal to lengthen the 
hulls of 110-foot patrol boats to 123 feet. Specifically, the 
Committee heard testimony indicating that the Coast Guard 
decided to move ahead with the lengthening effort despite 
warnings from the United States Navy that the proposed design 
for the lengthened boat was flawed and could lead to problems 
with the hulls. The U.S. Navy was correct and the boats have 
subsequently been determined unseaworthy.
    Ms. Cathy Martindale, a contracting officer for the Coast 
Guard, testified that there were an insufficient number of 
contracting officers assigned to oversee the major procurement 
programs within Deepwater during its early years. Other 
witnesses indicated that, at the time of the 123-foot patrol 
boat program, the Coast Guard did not have the necessary 
personnel in place to effectively manage contractor 
performance.
    On June 12, 2007, the Subcommittee on Coast Guard and 
Maritime Transportation held a hearing to assess changes made 
in the Coast Guard's management of Deepwater. The Subcommittee 
received testimony from Admiral Thad Allen, Commandant of the 
United States Coast Guard; and Mr. Richard Skinner, the 
Inspector General of the Department of Homeland Security.
    Admiral Allen testified that he was in the process of 
hiring 50 additional personnel to work in the Deepwater Program 
management office. He indicated that the Coast Guard would move 
the integration functions currently being performed in the 
Systems Integration Program Office to Coast Guard Headquarters 
as part of the ongoing reorganization. However, he estimated it 
would take six to 12 months to accomplish the reorganization.
    Admiral Allen testified that the Coast Guard had moved to 
rescind acceptance of the delivery of the 123-foot patrol 
boats, which have been removed from service due to hull 
buckling. Admiral Allen further testified that the American 
Bureau of Shipping would classify the new Fast Response Cutter 
being procured directly by the Coast Guard. He stated that 
changes that the Coast Guard anticipates making in the hull of 
NSC 1 to strengthen the hull's fatigue life will be made at 
government expense because Northrop Grumman believes that it 
has met the requirements of the Deepwater contract.
    Inspector General Skinner testified that a transitional 
period--perhaps lasting two to three years--will be required 
before the Coast Guard is ready to assume the role of lead 
systems integrator. He further emphasized the need to ensure 
continuity on the integrated teams created under Deepwater and 
stated that civilians can bring such continuity to the program. 
Inspector General Skinner testified that he is concerned that 
the Coast Guard may have difficulty resolving the structural 
design and performance issues associated with NSCs 1 and 2 as 
well as NSCs 3 through 8. He also stated that he believes that 
the cost and operational impact of structural modifications to 
all of the cutters should be identified and evaluated fully 
before the Coast Guard authorizes construction of any new NSC.

                       Summary of the Legislation


Section 1. Short title

    Section 1 cites the Act as the ``Integrated Deepwater 
Program Reform Act''.

Section 2. Implementation of Coast Guard Integrated Deepwater 
        Acquisition Program

    Section 2 prohibits the use of a private firm as a lead 
systems integrator for procurements under, or in support of, 
the Deepwater Program on the earlier of October 1, 2011, or the 
date on which the Secretary certifies in writing to the 
Committees that the Coast Guard has available and can retain 
sufficient contracting personnel and expertise within the Coast 
Guard to perform the functions and responsibilities of the lead 
system integrator. The Coast Guard can continue to use a 
private sector lead systems integrator to complete any delivery 
order or task order issued on or before the date of enactment 
of this Act.
    This section also requires the Secretary to use full and 
open competition for each class of asset acquisitions under the 
Deepwater Program except when the Secretary determines that it 
is in the best interests of the Federal Government to use a 
different procurement method and he reports to the Committees 
on why such procurement is in the best interests of the Federal 
Government.
    In addition, this section sets forth a number of specific 
requirements to be included in any future contracts, delivery 
orders, or task orders issued under Deepwater, including 
requirements subjecting designs to certain technical reviews 
and mandating the development of independent cost estimates. 
This section:
           Requires the Coast Guard to maintain the 
        authority to establish, approve, and maintain technical 
        requirements and requires that any measurement of 
        contractor and subcontractor performance be based on 
        the status of all work performed;
           Specifies that Department of the Navy 
        TEMPEST standards are to be cited in contracts for the 
        acquisition of all assets that require TEMPEST 
        certifications;
           Requires that an Early Operational 
        Assessment be performed for any new asset class after 
        the development of the primary design and before the 
        conduct of the critical design review of the cutter;
           Requires any contract issued for an Offshore 
        Patrol Cutter to clearly specify the service life, 
        fatigue life, days underway under general Atlantic and 
        North Pacific Sea conditions, maximum range, and 
        maximum speed the cutter shall be built to achieve; and
           Requires that all contracts include 
        provisions guaranteeing that the OIG has the right to 
        privately interview all contractor personnel working on 
        Deepwater and providing the OIG with access to all 
        records maintained by contractors working on Deepwater.
    Finally, section 2 requires the Coast Guard to develop and 
update annually a life-cycle cost estimate that includes asset 
acquisition and logistics support decisions and to assign 
separate contract officers for each class of cutter and 
aircraft acquired or rehabilitated under the Deepwater Program.

Section 3. Chief Acquisition Officer

    Section 3 amends chapter 3 of title 14, United States Code, 
to require the appointment of a civilian, career reserved 
employee as Chief Acquisition Officer, reporting directly to 
the Commandant of the Coast Guard. The section also specifies a 
number of authorities specifically reserved to the Chief 
Acquisition Officer and functions to be performed by that 
position.
    The Committee believes that the appointment of a civilian 
with extensive professional experience in acquisitions 
management to head the Deepwater acquisitions effort will 
provide the senior-level expertise and technical skills 
necessary to effectively and efficiently manage the Deepwater 
Program.

Section 4. Testing and certification

    Section 4 establishes new standards for the testing and 
certification of assets procured under the Deepwater Program. 
The section requires all cutters, other than the NSCs, to be 
classed by the American Bureau of Shipping (``ABS'') before 
acceptance of delivery. It requires the design and construction 
of NSCs 3 through 8 to be certified by an independent third 
party, such as the ABS or Navy, to be able to be underway for 
at least 185 days per year for 30 years. Similarly, the section 
requires that all aircraft be certified by an independent third 
party and requires all electronics that require TEMPEST 
certification to be certified in accordance with TEMPEST 
standards by an independent third party.

Section 5. National security cutters

    Section 5 requires the Secretary to submit specific reports 
to the Committee on Transportation and Infrastructure and the 
Committee on Commerce, Science, and Transportation. 
Specifically, the section requires the Coast Guard to submit to 
the Committees a report detailing cost increases experienced 
during the acquisition of the NSCs and a report on options 
under consideration by the Coast Guard to strengthen the hulls 
of NSCs 1 and 2. This section also requires that, not later 
than 30 days before the Coast Guard signs any contract, 
delivery order, or task order to strengthen the hull of either 
NSC 1 or 2, the Coast Guard shall submit to the Committees all 
results of an assessment of the proposed hull strengthening 
design conducted by the Naval Surface Warfare Center (Carderock 
Division), including a description of the extent to which such 
measures will enable NSCs 1 and 2 to meet a 185-underway-day 
requirement for at least 30 years. Similarly, the section 
requires that, not later than 30 days before the Coast Guard 
signs any contract, delivery order, or task order authorizing 
construction of NSC 3 through 8, the Coast Guard shall submit 
to the Committees all results of an assessment of the proposed 
designs to resolve the structural design, safety, and 
performance issues identified by the OIG, including a 
description of the extent to which such designs will enable 
NSCs 3 through 8 to meet a 185-underway-day requirement.

Section 6. Miscellaneous reports

    Section 6 requires the submission of a number of reports on 
the Deepwater Program, including the following:
           A justification for why eight NSCs is the 
        appropriate number of NSCs to meet the Coast Guard's 
        operational needs;
           A report on the impact that deployment of 
        the NSCs without vertical unmanned aerial vehicles will 
        have on the amount of patrol coverage that will be able 
        to be provided during missions conducted by NSCs;
           A report on the total number and cost of 
        change orders created under the Deepwater contract and 
        their impact on the Deepwater Program schedule;
           A report comparing the costs of purchasing 
        assets through ICGS or directly from the manufacturer 
        or shipyard;
             A report on specific cost overruns and 
        schedule delays encountered under Deepwater;
           A report on how the Coast Guard will develop 
        acquisitions management and financial management 
        expertise among its personnel; and,
           An annual report on the percentage of total 
        funding expended on Deepwater Program procurements that 
        has been awarded to small businesses and minority-owned 
        businesses.

Section 7. Use of the Naval Sea Systems Command, the Naval Air Systems 
        Command, and the Space and Naval Warfare Systems Command to 
        assist the Coast Guard in exercising technical authority for 
        the Deepwater Program and other Coast Guard Acquisition 
        Programs

    Section 7 authorizes the Secretary to enter into a 
memorandum of understanding or a memorandum of agreement with 
the Secretary of the Navy to provide for the use of the Navy 
Systems Command to assist the Coast Guard with the oversight of 
Coast Guard major acquisition programs. Such memorandum shall 
provide for the exchange of technical assistance and support, 
the use of Navy technical expertise, and the temporary 
assignment or exchange of personnel between the Coast Guard and 
the Navy Systems Commands to facilitate the development of 
organic capabilities in the Coast Guard. The section requires 
the Coast Guard Chief Engineer, Chief Information Officer, and 
Chief Acquisition Officer to adopt, to the extent practicable, 
procedures that are similar to those used by the Navy Senior 
Acquisition Official to ensure the Coast Guard Technical 
Authorities approve all technical requirements. The section 
requires the Coast Guard to report to the Committees annually 
on the activities undertaken pursuant to such memorandum.

Section 8. Definitions

    Section 8 defines the term ``Deepwater Program'' as the 
Integrated Deepwater Systems Program described by the Coast 
Guard in its March 25, 2005 report to Congress entitled 
``Revised Deepwater Implementation Plan 2005''. The Deepwater 
Program primarily involves the procurement of cutter and 
aviation assets that operate more than 50 miles offshore.
    The section defines the term ``Secretary'' as the Secretary 
of the department in which the Coast Guard is operating.

            Legislative History and Committee Consideration

    To date, the Committee on Transportation and Infrastructure 
has held four hearings on the Deepwater Program in the 110th 
Congress. On January 30, 2007, the Subcommittee on Coast Guard 
and Maritime Transportation held its first oversight hearing of 
the 110th Congress on the Deepwater Program. On March 8, 2007, 
the Subcommittee on Coast Guard and Maritime Transportation 
held a hearing on the Coast Guard's fiscal year 2008 budget, 
including the budget for the Deepwater Program. On April 18, 
2007, the Committee on Transportation and Infrastructure held 
an investigative hearing to examine contractor compliance with 
the requirements of the Deepwater contract, particularly on the 
123-foot patrol boat program. On June 12, 2007, the 
Subcommittee on Coast Guard and Maritime Transportation held a 
hearing to assess changes made in the Coast Guard's management 
of Deepwater.
    On June 14, 2007, Subcommittee on Coast Guard and Maritime 
Transportation Chairman Elijah E. Cummings introduced H.R. 
2722, the Integrated Deepwater Program Reform Act.
    On June 26, 2007, the Subcommittee on Coast Guard and 
Maritime Transportation met in open session to consider H.R. 
2722. During consideration of the bill, the Subcommittee 
adopted three amendments. First, the Subcommittee adopted, by 
voice vote, an amendment requiring a report on the Coast Guard 
performance gap due to the removal of Deepwater Program assets 
from service and a clear description of the actions being taken 
by the Coast Guard to fill the mission performance gap. Second, 
the Subcommittee adopted an amendment that changed the deadline 
for prohibiting the use of a private sector lead systems 
integrator under the Deepwater program. H.R. 2722, as 
introduced, prohibited the use of a private sector lead systems 
integrator for procurements under, or in support of, the 
Deepwater Program beginning two years after the date of 
enactment of the Act. The Subcommittee adopted, by voice vote, 
an amendment that prohibits the use of a private firm as a lead 
systems integrator for procurements under, or in support of, 
the Deepwater Program on the earlier of October 1, 2011, or the 
date on which the Secretary certifies in writing to the 
Committees that the Coast Guard has available and can retain 
sufficient contracting personnel and expertise within the Coast 
Guard to perform the functions and responsibilities of the lead 
system integrator. The amendment also clarified that the Coast 
Guard may acquire from private entities any necessary 
assistance to carry out systems integration functions. Finally, 
the Subcommittee adopted, by voice vote, an amendment that 
authorizes the Department of Homeland Security to create pay 
supplements for Coast Guard acquisitions personnel. 
Specifically, the amendment requires the Coast Guard to 
establish special pay rate supplements that provide higher pay 
levels for employees necessary to carry out acquisitions 
functions. The Subcommittee recommended the bill, as amended, 
favorably to the Committee on Transportation and Infrastructure 
by voice vote.
    On June 28, 2007, the Committee on Transportation and 
Infrastructure met in open session to consider H.R. 2722, as 
recommended favorably by the Subcommittee. The Committee 
adopted, by voice vote, an amendment that authorizes the 
Secretary to enter into a memorandum of understanding or a 
memorandum of agreement with the Secretary of the Navy to 
provide for the use of the Navy Systems Command to assist the 
Coast Guard with the oversight of Coast Guard major acquisition 
programs. The Committee ordered the bill, as amended, reported 
favorably to the House by voice vote.

                              Record Votes

    Clause 3(b) of Rule XIII of the House of Representatives 
requires each committee report to include the total number of 
votes cast for and against on each record vote on a motion to 
report and on any amendment offered to the measure or matter, 
and the names of those members voting for and against. There 
were no recorded votes taken in connection with any amendment 
offered to H.R. 2722 or with ordering H.R. 2722 reported. A 
motion to order H.R. 2722, as amended, reported favorably to 
the House was agreed to by voice vote with a quorum present.

                      Committee Oversight Findings

    With respect to the requirements of clause 3(c)(1) of Rule 
XIII of the Rules of the House of Representatives, the 
Committee's oversight findings and recommendations are 
reflected in this report.

                          Cost of Legislation

    Clause 3(d)(2) of rule XIII of the Rules of the House of 
Representatives does not apply where a cost estimate and 
comparison prepared by the Director of the Congressional Budget 
Office under section 402 of the Congressional Budget Act of 
1974 has been timely submitted prior to the filing of the 
report and is included in the report. Such a cost estimate is 
included in this report.

                    Compliance With House Rule XIII

    1. With respect to the requirement of clause 3(c)(2) of 
rule XIII of the Rules of the House of Representatives, and 
308(a) of the Congressional Budget Act of 1974, the Committee 
references the report of the Congressional Budget Office 
included in the report.
    2. With respect to the requirement of clause 3(c)(4) of 
rule XIII of the Rules of the House of Representatives, the 
performance goals and objectives of H.R. 2722 are to 
restructure the Coast Guard Integrated Deepwater Program alter 
the Coast Guard's management of the Deepwater acquisitions 
program.
    3. With respect to the requirement of clause 3(c)(3) of 
rule XIII of the Rules of the House of Representatives and 
section 402 of the Congressional Budget Act of 1974, the 
Committee has received the following cost estimate for H.R. 
2722 from the Director of the Congressional Budget Office.
                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, July 17, 2007.
Hon. James L. Oberstar, Chairman,
Committee on Transportation and Infrastructure,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 2722, the 
Integrated Deepwater Program Reform Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Deborah Reis.
            Sincerely,
                                           Peter R. Orszag,
                                                          Director.
    Enclosure.

H.R. 2722--Integrated Deepwater Program Reform Act

    Summary: H.R. 2722 addresses the contracting practices used 
by the United States Coast Guard (USCG) for the Integrated 
Deepwater Program (IDP), a 25-year, $24 billion initiative to 
replace many of the agency's vessels, aircraft, and other 
assets.
    Assuming appropriation of the necessary amounts, CBO 
estimates that the USCG would spend $5 million over the next 
two years for additional contracting personnel and to develop a 
life-cycle cost estimate for the IDP, as required by the 
legislation. That increase in spending would probably be more 
than offset by savings in future years.
    Several provisions of H.R. 2722 could increase other costs 
of administering contracts under the IDP, but those provisions 
and other reforms required by the bill also could result in 
lower procurement expenditures. Moreover, many of the bill's 
required reforms may be carried out by the USCG even in the 
absence of legislation. CBO expects that implementing those 
reforms (whether under current law or as a result of enacting 
H.R. 2722) would reduce the long-term cost of the program, but 
we cannot estimate the likely size of that cost savings or 
clearly identify what proportion of any long-term savings would 
be attributable to this legislation and what share would result 
from changes that the Coast Guard would implement under current 
law.
    Any annual costs or savings realized by the agency as a 
result of the legislation would depend on future changes in the 
level of discretionary appropriations for this initiative. 
Enacting this legislation would not affect revenues or direct 
spending.
    The bill contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would not affect the budgets of state, local, or tribal 
governments.
    Major provisions: H.R. 2722 would restrict the Coast 
Guard's reliance on private entities to manage IDP and would 
require the agency to revise other procurement practices to 
rectify problems identified by the Department of Defense (DoD), 
the Department of Homeland Security (DHS), and the Government 
Accountability Office. The bill also would require that many 
future acquisitions for the program be open to competition and 
be subject to new testing, analysis, and certification 
requirements. Finally, the bill would require the Coast Guard 
to hire additional contracting and management personnel and to 
produce various reports on its acquisition activities.
    Estimated impact on the Federal budget: CBO estimates that 
complying with the requirements of H.R. 2722 would increase 
USCG's cost to administer IDP by $5 million over the next two 
years, assuming appropriation of the necessary amounts. We 
expect that the USCG would spend most of this amount to create 
a position for new chief acquisition officer, to hire and 
compensate new contract officers for each class of cutter and 
aircraft acquired under IDP, and to perform a comprehensive 
cost estimate for the initiative. We estimate that the cost of 
implementing other administrative requirements, such as testing 
and certifying vessels to meet U.S. Navy standards, would not 
add significantly to the costs of the Deepwater initiative.
    The budgetary impact of other provisions of the bill is 
uncertain--as is the cost of the deepwater initiative under 
existing law. According to the DHS Inspector General, the Coast 
Guard's most recent cost estimate for the program--$24 
billion--is likely to be too low because it does not take into 
account costs of hundreds of millions of dollars resulting from 
delays, design failures, and other problems. H.R. 2722 would 
seek to address those problems by requiring greater agency 
supervision and more reliance on competitive bidding. CBO 
expects that those reforms would result in savings, but we 
cannot estimate the magnitude of such savings or predict the 
extent to which some savings would be realized by implementing 
similar reforms under current law.

Pending acquisitions

    CBO expects that implementing the bill would not directly 
affect pending acquisitions of certain classes of assets, such 
as the national security cutter and the maritime patrol 
aircraft, two assets that the USCG has already begun acquiring 
from its chosen contractor. The bill would exempt those and 
other specified projects from its requirements on management 
and competitive bidding if certain conditions are met. The 
administrative burden of meeting those conditions could cause 
delays in acquiring some fleet replacements and thus result in 
additional operating and maintenance costs over the next few 
years for existing assets. Similar delays, however, may occur 
under current law; the Coast Guard has already had to begin 
revising the design of those assets to address known problems.

Future acquisitions

    H.R. 2722 would require that future phases of IDP be 
subject to open competition and other reforms. The resulting 
savings from such reforms could be significant--perhaps 
hundreds of millions of dollars--but cannot be estimated with 
any precision. Moreover, many of the contracting changes may 
occur even in the absence of legislation. For example, the 
Coast Guard recently announced that it intends to begin 
managing the program itself rather than relying on a private 
systems integrator. The agency has also begun implementing some 
of the other reforms suggested by DHS, such as more reliance on 
competition and independent analysis.
    Any costs or savings that result from implementing the bill 
would depend on corresponding changes in annual appropriation 
acts. Annual funding for acquisitions under the program has 
varied widely--from $320 million in fiscal year 2002 to more 
than $1.1 billion to date for 2007. The President's budget 
request for 2008 includes nearly $840 million for the program.
    Intergovernmental and private-sector impact: H.R. 2722 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would not affect the budgets of state, 
local, or tribal governments.
    Previous CBO cost estimate: On May 10, 2007, CBO 
transmitted a cost estimate for S. 924, the Integrated 
Deepwater Program Reform Act, as ordered reported by the Senate 
Committee on Commerce, Science, and Transportation on April 25, 
2007. H.R. 2722 and S. 924 address similar issues. CBO 
estimates that the up-front administrative cost of complying 
with H.R. 2722 would be less than those to comply with S. 924 
because the House legislation would not require the Coast Guard 
to contract with a third party to perform a major analysis of 
IDP.
    Estimate prepared by: Federal costs: Deborah Reis; Impact 
on state, local, and tribal governments: Elizabeth Cover; 
Impact on the private sector: Craig Cammarata.
    Estimate approved by: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.

                     Compliance With House Rule XXI

    Pursuant to clause 9 of rule XXI of the Rules of the House 
of Representatives, H.R. 2722, the Integrated Deepwater Program 
Reform Act, does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9(d), 9(e), or 9(f) of rule XXI of the Rules of the 
House of Representatives.

                   Constitutional Authority Statement

    Pursuant to clause (3)(d)(1) of rule XIII of the Rules of 
the House of Representatives, committee reports on a bill or 
joint resolution of a public character shall include a 
statement citing the specific powers granted to the Congress in 
the Constitution to enact the measure. The Committee on 
Transportation and Infrastructure finds that Congress has the 
authority to enact this measure pursuant to its powers granted 
under article I, section 8 of the Constitution.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act (Public Law 104-4).

                        Preemption Clarification

    Section 423 of the Congressional Budget Act of 1974 
requires the report of any Committee on a bill or joint 
resolution to include a statement on the extent to which the 
bill or joint resolution is intended to preempt state, local, 
or tribal law. The Committee states that H.R. 2722, as amended, 
does not preempt any state, local, or tribal law.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                Applicability to the Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act (Public Law 
104-1).

         Changes in Existing Law Made by the Bill, as Reported

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (new matter is 
printed in italic and existing law in which no change is 
proposed is shown in roman):

TITLE 14, UNITED STATES CODE

           *       *       *       *       *       *       *



PART I--REGULAR COAST GUARD

           *       *       *       *       *       *       *


                CHAPTER 3--COMPOSITION AND ORGANIZATION

Sec.
41. Grades and ratings.
     * * * * * * *
55. Chief Acquisition Officer.
     * * * * * * *

Sec. 55. Chief Acquisition Officer

  (a) Establishment of Agency Chief Acquisition Officer.--The 
Commandant shall appoint or designate a career reserved 
employee as Chief Acquisition Officer for the Coast Guard, who 
shall--
          (1) have acquisition management as that official's 
        primary duty; and
          (2) report directly to the Commandant to advise and 
        assist the Commandant to ensure that the mission of the 
        Coast Guard is achieved through the management of the 
        Coast Guard's acquisition activities.
  (b) Authority and Functions of the Chief Acquisition 
Officer.--The functions of the Chief Acquisition Officer shall 
include--
          (1) monitoring the performance of acquisition 
        activities and acquisition programs of the Coast Guard, 
        evaluating the performance of those programs on the 
        basis of applicable performance measurements, and 
        advising the Commandant regarding the appropriate 
        business strategy to achieve the mission of the Coast 
        Guard;
          (2) increasing the use of full and open competition 
        in the acquisition of property and services by the 
        Coast Guard by establishing policies, procedures, and 
        practices that ensure that the Coast Guard receives a 
        sufficient number of sealed bids or competitive 
        proposals from responsible sources to fulfill the 
        Government's requirements (including performance and 
        delivery schedules) at the lowest cost or best value 
        considering the nature of the property or service 
        procured;
          (3) ensuring the use of detailed performance 
        specifications in instances in which performance-based 
        contracting is used;
          (4) making acquisition decisions consistent with all 
        applicable laws and establishing clear lines of 
        authority, accountability, and responsibility for 
        acquisition decisionmaking within the Coast Guard;
          (5) managing the direction of acquisition policy for 
        the Coast Guard, including implementation of the unique 
        acquisition policies, regulations, and standards of the 
        Coast Guard;
          (6) developing and maintaining an acquisition career 
        management program in the Coast Guard to ensure that 
        there is an adequate professional workforce; and
          (7) as part of the strategic planning and performance 
        evaluation process required under section 306 of title 
        5 and sections 1105(a)(28), 1115, 1116, and 9703 of 
        title 31--
                  (A) assessing the requirements established 
                for Coast Guard personnel regarding knowledge 
                and skill in acquisition resources management 
                and the adequacy of such requirements for 
                facilitating the achievement of the performance 
                goals established for acquisition management;
                  (B) in order to rectify any deficiency in 
                meeting such requirements, developing 
                strategies and specific plans for hiring, 
                training, and professional development; and
                  (C) reporting to the Commandant on the 
                progress made in improving acquisition 
                management capability.

           *       *       *       *       *       *       *



