[House Report 111-215]
[From the U.S. Government Publishing Office]


111th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    111-215

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



 
               COAST GUARD ACQUISITION REFORM ACT OF 2009

                                _______
                                

 July 20, 2009.--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

                        [To accompany H.R. 1665]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Transportation and Infrastructure, to whom 
was referred the bill (H.R. 1665) to structure Coast Guard 
acquisition processes and policies, and for other purposes, 
having considered the same, report favorably thereon without 
amendment and recommend that the bill do pass.

                       Purpose of the Legislation

    H.R. 1665, the ``Coast Guard Acquisition Reform Act of 
2009'', strengthens Coast Guard acquisition management 
processes and establishes personnel-related standards and 
policies for individuals in the Coast Guard's acquisition 
workforce.

                  Background and Need for Legislation

    Coast Guard capital expenditures are funded through the 
appropriations made by Congress to its Acquisition, 
Construction, and Improvement (AC&I) account, which funds 
expenses related to ``acquisition, construction, renovation, 
and improvement of aids to navigation, shore facilities, 
vessels, and aircraft, including equipment related thereto; and 
maintenance, rehabilitation, lease and operation of facilities 
and equipment.''\1\ The total Coast Guard AC&I appropriation 
for fiscal year 2009 is just under $1.5 billion.
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    \1\Consolidated Security, Disaster Assistance, and Continuing 
Appropriations Act, 2009 (P.L. 110-329).
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    The largest single acquisition program funded through the 
AC&I budget is the Deepwater acquisition program. According to 
the most recent acquisition program baseline (APB) for the 
Deepwater program--APB 1.1, adopted May 15, 2007--the Deepwater 
acquisitions are projected to cost a total of $24 billion and 
to require 25 years to complete.
    The Deepwater acquisition program is the largest single 
acquisition effort the Coast Guard has ever undertaken and is 
intended to upgrade or modernize nearly all of its air and 
surface assets. The acquisition program was formulated by the 
Coast Guard in the early 1990s. At that time, after assessing 
its mission needs and measuring these against the obsolescence 
of its existing technology, the service decided that rather 
than simply buy single new assets to replace its existing 
assets, it would pursue a system-of-systems acquisition 
approach, through which it would acquire an integrated suite of 
assets that together could provide the ``functional 
capabilities'' required to fulfill its mission needs.
    Given the complexity of the acquisition effort to be 
undertaken, the Coast Guard decided that it would follow the 
example of Department of Defense agencies by engaging a private 
firm to serve as the Lead Systems Integrator (LSI). The 
Deepwater LSI was to exercise primary responsibility for 
managing the development of the system-of-systems--including 
selecting the individual assets to be included in the system 
and managing their integration around a common operating 
picture (real-time displays of operational views that could be 
shared by all assets and stations). The Coast Guard also 
decided it would manage the Deepwater acquisitions outside the 
service's existing acquisition management structure--a decision 
that ultimately served to limit the oversight the service was 
prepared to exercise over the program in its early years.
    In June 2002, the Integrated Coast Guard Systems (ICGS) 
team, comprised of Lockheed Martin and Northrop Grumman, was 
awarded a $17 billion, Indefinite Delivery/Indefinite Quantity 
(IDIQ) contract to serve as the LSI and implement the Deepwater 
acquisitions; this initial contract extended for five years, 
and included five additional five-year options.
    The requirements for the Deepwater acquisitions that were 
developed to inform the award of the initial IDIQ in June 2002 
had been formulated prior to the terror attacks of September 
11, 2001. In 2003, the Coast Guard was transferred from the 
Department of Transportation to the Department of Homeland 
Security (DHS) and the Coast Guard began to alter the overall 
mission requirements for assets produced under the Deepwater 
IDIQ; these alterations were generally made after the IDIQ had 
already been awarded.
    Almost from the signing of the Deepwater contract, the 
Coast Guard encountered challenges in managing the LSI. These 
challenges were enumerated in multiple reports issued by the 
Government Accountability Office (GAO) and the DHS Office of 
the Inspector General. One of the over-arching problems 
identified with the management of the Deepwater IDIQ was a 
failure by the Coast Guard to develop specific metrics to 
measure contractor performance or hold the ICGS team 
accountable for compliance with contract requirements. 
Additionally, because of its reliance on the management 
services provided by the LSI, the Coast Guard had only a 
limited role in identifying the specific assets that were to be 
built under Deepwater or in controlling the production-related 
decisions made to meet contract requirements (such as 
determining the mix of assets or number of specific assets that 
would be built to meet requirements). Further, because the 
effectiveness of the Deepwater procurements was to be assessed 
at the level of the overall system-of-systems, inadequate 
testing and evaluation was performed on individual assets. 
Similarly, the decision to manage the Deepwater contract at the 
system level meant that none but the largest cost overruns 
would trigger cost ceiling breaches; cost breaches on 
individual assets might be too small to register as significant 
breaches of the initial $17 billion (and later $24 billion) 
overall Deepwater cost baseline.
    Several of the individual acquisition efforts undertaken in 
the early years of Deepwater failed or proved too impractical 
to pursue. Perhaps the most highly publicized failure was the 
effort to lengthen the Coast Guard's existing 110-foot patrol 
boats to 123 feet and install new, upgraded information 
technology suites into the boats. The original task order for 
this procurement was issued on August 2, 2002; in June 2005, 
the Coast Guard decided that the conversion process would be 
suspended at eight boats because ``the converted cutters lacked 
adequate capabilities to meet their expanded post 9/11 
operational requirements.''\2\ In November 2006, the eight 
converted boats were removed from service because of concerns 
about their operational safety; they have subsequently been de-
commissioned. Examinations of the vessels conducted just prior 
to their removal from service found that they had ``significant 
buckling'', ``displayed deck cracking and hull deformation'', 
and had ``developed shaft alignment problems related to other 
structure issues''.\3\
---------------------------------------------------------------------------
    \2\Press Release, Coast Guard, Coast Guard Suspends Converted 
Patrol Boat Operations (Nov. 30, 2006) (accessed on March 17, 2009 at 
https://www.piersystem.com/go/doc/786/138897/).
    \3\Id.
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    Other procurement efforts initiated in the early years of 
the Deepwater contract, including the first effort to procure a 
vertical unmanned aerial vehicle and the first effort to 
develop a Fast Response Cutter (FRC), were never built after 
failing to pass design or prototype testing. These failures 
wasted in excess of $100 million.
    On May 19, 2006, the Coast Guard awarded an additional 
award term totaling 43 months to the ICGS team, which extended 
the contract through January 2011. Unlike the first contract 
award, however, this contract extension did not guarantee any 
quantity of assets to be procured from ICGS.
    In February 2007, the Defense Acquisition University (DAU) 
published a ``quick look'' study on the Deepwater program, 
which had been requested by the Coast Guard. A summary of the 
DAU's findings about the Deepwater program is presented below.
           Many design changes were added to the 
        program even after key engineering milestones had been 
        crossed to respond to the Coast Guard's new mission 
        needs after 9/11;
           Funding provided to the Deepwater effort was 
        often below the levels negotiated in the Coast Guard's 
        contract with ICGS;
           The contract structure of the initial 
        Deepwater contract was inappropriate to the changing 
        missions and requirements of the assets to be acquired 
        under Deepwater and to the systems integration tasks 
        required under the program;
           ICGS endeavored to keep work within its own 
        team rather than maximize competition throughout U.S. 
        industry and draw on existing Coast Guard 
        infrastructure;
           There were insufficient numbers of Coast 
        Guard acquisition personnel in place and these 
        personnel had insufficient experience with the 
        management of major systems acquisition efforts; and
           The Coast Guard lacked a management model 
        and management processes adequate for the efficient 
        management of acquisition programs as large as the 
        Deepwater program.\4\
---------------------------------------------------------------------------
    \4\Defense Acquisition University, Quick Look Study: United States 
Coast Guard Deepwater Program (2007).
---------------------------------------------------------------------------
    In April 2007, the Coast Guard announced a series of major 
changes in its management of Deepwater--changes that would also 
affect its management of all its acquisition efforts. 
Specifically, Admiral Thad Allen, Commandant of the Coast 
Guard, announced that the service would:
           Assume the role as lead systems integrator 
        for all Deepwater assets and other major acquisitions 
        as appropriate;
           Assume responsibility for life cycle 
        logistics functions for Deepwater assets;
           Expand the role of the American Bureau of 
        Shipping and other third-parties as appropriate to 
        ensure assets meet design and construction standards;
           Work with the ICGS team to resolve 
        outstanding contract issues pertaining to the National 
        Security Cutter;
           Consider procuring assets directly from 
        prime vendors when this was in the best interests of 
        the government; and,
           Convene regular meetings between the 
        Commandant and the ICGS team to adjudicate and resolve 
        Deepwater contracting issues.\5\
---------------------------------------------------------------------------
    \5\Press Release, Coast Guard, Statement by ADM Thad Allen on the 
Converted 123-Foot Patrol Boats and Changes to the Deepwater 
Acquisition Program (Apr. 17, 2007)(https://www.piersystem.com/go/doc/
786/154307/).
---------------------------------------------------------------------------
    At the same time, the Coast Guard began reorganizing its 
acquisition management processes.
    On July 13, 2007, the Coast Guard created a new Acquisition 
Directorate (known as CG-9). The Acquisition Directorate re-
integrated the Coast Guard's acquisition-related functions into 
a single unit employing standard processes for managing 
acquisition efforts. The Directorate is managed by the 
Assistant Commandant for Acquisition. The Directorate is 
comprised of program management personnel, contracting 
management personnel, and personnel with expertise in cost 
estimation, risk assessment, training and certification, and 
strategic planning. The Deepwater program is now managed 
directly by the Acquisition Directorate; the Program Executive 
Officer for the Deepwater acquisition effort, who 
simultaneously serves as the Director of Acquisition Programs, 
is located within the Directorate and reports to the Assistant 
Commandant for Acquisition.
    Currently, the Assistant Commandant for Acquisition reports 
directly to the Chief of Staff who, in turn, reports to the 
Vice Commandant, who then reports to the Commandant. On January 
22, 2009, DHS requested that the Coast Guard nominate a 
Component Acquisition Executive (CAE). On March 2, the Coast 
Guard nominated the Vice Commandant to be the CAE; DHS has not 
yet finalized the appointment. If the appointment is finalized, 
the Vice Commandant would have authority over Level III 
acquisitions and Level II acquisitions, as delegated by DHS.
    The Coast Guard has proposed reorganizing its top-level 
military leadership. Under the proposed reorganization, the 
Vice Commandant position would become a four-star position (it 
is currently a three-star position); additionally, the Chief of 
Staff's position as well as the Atlantic Area and Pacific Area 
Commander positions would be eliminated and four new three-star 
positions would be created (each of which would report directly 
to the Vice Commandant). One of the four Deputy Commandant 
positions to be created is the Deputy Commandant for Mission 
Support, who is to have four direct reports:
           Assistant Commandant for Acquisition (which 
        currently is and would remain a 2-star position),
           Chief Information Officer,
           Chief Sustainment Officer (essentially 
        overseeing lifecycle maintenance), and
           Chief Human Resource Officer.
    The Coast Guard believes that its projected organization of 
the Acquisition Directorate--and its placement under the Deputy 
Commandant for Mission Support--would enable the service to 
better manage the entire life cycle of an acquired asset.
    The Coast Guard issued a ``Blueprint for Acquisition 
Reform'' (Blueprint) to guide the implementation of the new 
policies and procedures it is implementing to strengthen the 
management of Coast Guard acquisition initiatives and to guide 
the organization of the Acquisition Directorate. The Blueprint 
was first issued on July 9, 2007, with the most recent version 
issued in July 2008. The Blueprint is to be updated in July of 
each year. The Blueprint sets forth the Coast Guard's plans for 
organizational alignment and leadership, the development of new 
policies and procedures, human capital management and 
development, and information management and stewardship.
    The release of the Blueprint and the creation of the 
Acquisition Directorate are intended to: standardize 
acquisition procedures within the Coast Guard; ensure that the 
service is equipped to control procurement-related costs and 
that acquisition efforts adhere to set schedules; and empower 
program managers to effectively manage acquisition efforts 
(previously, program managers were at best ``partners'' to LSI 
personnel).
    As of December 2008, the Coast Guard indicated that it had 
assigned a Level III-certified program manager (Level III 
certification is the highest certification available to a 
program manager) to each of its 14 Level I acquisitions (under 
DHS Acquisition Directive 102-01, acquisition efforts are 
classed as Level I, II, or III depending on their total life-
cycle costs--with Level I acquisitions having life-cycle costs 
at or above $1 billion). Seven of the Level III-certified 
program managers assigned to Level I acquisitions were military 
officers and five were members of the civil service (two 
program managers were each managing two separate Level I 
acquisitions). As of February 2009, the Coast Guard had 27 
military officers who had achieved a Level III program manager 
certification, including three Admirals, 12 Captains, 11 
Commanders, and four Lieutenant Commanders.
    In 2008, the Coast Guard assigned the Admiral currently 
serving as the Assistant Commandant for Acquisition (who is a 
Level III-certified program manager) to be the commander of 
District 13 (headquartered in Seattle); this assignment was 
made as part of the Coast Guard's regular process for rotating 
its personnel. The Program Executive Officer for the Deepwater 
acquisition effort, also a Level-III certified program manager, 
was assigned to be the Assistant Commandant for Acquisition. A 
Captain recently selected for promotion to Rear Admiral who 
lacked a Level III program manager certification at the time of 
his selection was named to be the Program Executive Officer for 
Deepwater. These assignments are to take effect on or about 
July 1, 2009.
    While the Coast Guard has made significant improvements in 
strengthening its acquisition workforce and implementing 
policies and procedures that should enable it to more 
effectively manage acquisition efforts, challenges remain. In a 
June 2008 report on the Deepwater procurements, the GAO found 
that the changes in the Deepwater management and the creation 
of the Acquisition Directorate have ``increased 
accountability'' because ``Coast Guard project managers and 
technical experts now hold the greater balance of management 
responsibility and accountability for program outcomes.''\6\ 
Nonetheless, the GAO found that the Coast Guard still ``faces 
challenges in building a capable government workforce to manage 
this large acquisition.''\7\
---------------------------------------------------------------------------
    \6\GAO, Coast Guard: Change in Course Improves Deepwater Management 
and Oversight, but Outcome Still Uncertain 3 (2008).
    \7\Id.
---------------------------------------------------------------------------
    Specifically, in the June 2008 report, the GAO indicates 
that as the Coast Guard assumes responsibility for individual 
assets, there are some system-level aspects of the program that 
the service is ``not fully positioned to manage.''\8\ 
Additionally, the GAO noted that the Coast Guard confronts an 
on-going shortage of civilian acquisition staff members (which 
is a problem throughout the Federal Government), the service 
lacks an acquisition career path for military personnel, and it 
continues to rely on contractors for specific types of 
technical and programmatic expertise.\9\
---------------------------------------------------------------------------
    \8\Id. at 4.
    \9\Id. at 13-14.
---------------------------------------------------------------------------
    In the 110th Congress, the Subcommittee held three hearings 
on the Coast Guard's Deepwater acquisition program. On January 
30, 2007, the Subcommittee met to receive a status update on 
the Deepwater acquisitions. On March 8, 2007, the Subcommittee 
met to consider the Bush Administration's fiscal year 2008 
budget request for the U.S. Coast Guard, and also received 
testimony from the Coast Guard, the DHS Inspector General and 
the GAO on the Deepwater acquisition program. On June 12, 2007, 
the Subcommittee met to receive an initial update from the 
Coast Guard Commandant on the service's implementation of the 
changes the Commandant had announced to the management of the 
Deepwater contract.
    On April 18, 2007, the Committee on Transportation and 
Infrastructure convened a hearing to review the results of an 
investigation of the Deepwater program conducted by Committee 
investigative staff. This investigation closely examined the 
multiple factors that contributed to the failure of the effort 
to lengthen the 110-foot patrol boats to 123 feet, including 
limited oversight exercised by Coast Guard acquisition 
management officials, rigid adherence to schedule, and 
contractor self-certification.
    In the 111th Congress, on March 23, 2009, Chairman Cummings 
introduced H.R. 1665, the ``Coast Guard Acquisition Reform Act 
of 2009''. On March 24, 2009, the Subcommittee on Coast Guard 
and Maritime Transportation held a hearing, ``Overview of Coast 
Guard Acquisition Policies and Programs,'' to review the 
changes the service had implemented in its acquisition 
management processes since 2007, and to examine H.R. 1665.
    During that hearing, Rear Admiral Gary Blore, the Assistant 
Commandant for Acquisition, announced that under an agreement 
signed the morning of the hearing, all options for extending 
the Deepwater contract with the ICGS team beyond the date of 
expiration of the current award, January 24, 2011, had been 
eliminated.
    Admiral Blore also indicated that the current APB for the 
Deepwater program would not be updated again. Instead, in 
keeping with the service's decision to manage Deepwater on an 
asset-by-asset basis, Admiral Blore explained that the Coast 
Guard is now working to develop individual APBs for each class 
of assets to be acquired under Deepwater. Importantly, however, 
Admiral Blore acknowledged that when the individual APBs that 
had been approved at the time of the hearing were added to the 
original cost estimates for those assets that did not yet have 
individual ABPs, the cost of the Deepwater program was 
projected to exceed $26 billion. This suggests that cost 
overruns may continue to plague Coast Guard acquisition 
efforts.
    Admiral Blore also spoke about the importance of providing 
to the Coast Guard the kinds of authorities to hire trained 
acquisition professionals and to provide incentives to new 
hires that other agencies, particularly the Department of 
Defense, currently have. Further, Admiral Blore indicated that 
the Coast Guard is moving to create a ``quasi career path'' in 
the acquisition field--and he indicated that the service will 
work to inform younger officers of the kinds of tours and 
certifications that are available in the acquisition field and 
to identify the qualifications and professional experiences 
necessary to prepare an officer for assignment to the senior 
levels of the Coast Guard's acquisition management workforce.
    Admiral Blore also discussed the requirement changes that 
led, in part, to the significant cost overruns with the Rescue 
21 system, the largest non-Deepwater acquisition effort being 
conducted by the Coast Guard. Rescue 21 is intended to replace 
the Coast Guard's National Distress Response System, which was 
activated in the 1970s, with an upgraded Very High Frequency-
Frequency Modulated (VHF-FM) communications system that will 
improve the service's ability to locate mariners in distress, 
coordinate with Federal, State and local first responders, and 
reduce communication coverage gaps in coastal areas. The 
original acquisition baseline for the Rescue 21 project was 
adopted on April 16, 1999; at that time, the system was 
projected to cost $250 million and the acquisition was 
projected to be completed in fiscal year 2006. The baseline for 
this project was revised five times between 1999 and 2008. The 
acquisition baseline now stands at nearly $1.1 billion and the 
projected completion date is fiscal year 2017; this most recent 
acquisition program baseline was adopted on May 27, 2008.
    Mr. John P. Hutton, Director of the GAO's Acquisition and 
Sourcing Management unit, also testified at the March 24, 2009, 
Subcommittee hearing. Mr. Hutton commended the Coast Guard's 
move toward an asset-by-asset management approach, stating it 
would allow program performance to be measured in more detail 
and would enable cost and schedule breaches to be identified at 
a much lower level than was possible when the Deepwater 
acquisitions were managed at the system-of-systems level. 
Further, he indicated that the Coast Guard's reorganization of 
its acquisition directorate and its move away from the use of 
private sector LSI was putting a more structured and 
disciplined acquisition approach in place for the Deepwater 
program.
    Mr. Hutton indicated that because of the lack of civilian 
staff in the acquisition field, the Coast Guard is still 
relying on contractors in some key positions, such as cost 
estimation and program management support. Mr. Hutton indicated 
that over-reliance on contractors in such positions can lead to 
the performance by these contractors of what are inherently 
governmental functions. Over-reliance on contractors can also 
lead to cost increases if government personnel cannot ensure 
effective management in the government's best interest.
    Mr. Hutton also indicated that a key factor in controlling 
costs is ensuring the effective definition of requirements 
before an asset acquisition is initiated to ensure that the 
acquiring agency understands what it is buying and that the 
requirement can be maintained with limited alteration 
throughout the acquisition effort, thereby reducing the risk to 
the government that arises from the modification of 
requirements during an acquisition effort. He also mentioned 
that one of the key steps remaining in the development of the 
Coast Guard's acquisition management capacity is the creation 
and maintenance of a qualified acquisition workforce.
    H.R. 1665 responds directly to the issues that the 
Committee on Transportation and Infrastructure and the 
Subcommittee on Coast Guard and Maritime Transportation have 
examined in five hearings conducted during the 110th and 111th 
Congresses. It also requires the implementation of acquisition-
related policies and procedures and personnel standards that 
will build on the acquisition reform efforts the service has 
already undertaken.

                       Summary of the Legislation


        TITLE I--RESTRICTION ON USE OF LEAD SYSTEMS INTEGRATORS

Sec. 101. Procurement structure

    This section prohibits the use of a LSI beginning 180 days 
after the date of enactment of the Act. However, the Coast 
Guard is permitted to continue to use a LSI for the completion 
of National Security Cutters 2 and 3, the National Distress and 
Response System Modernization Program (known as Rescue 21), and 
other on-going acquisitions.
    However, all exemptions for the use of a LSI except for 
National Security Cutters 2 and 3 and the Rescue 21 program 
expire on September 30, 2011; after that date, no private-
sector LSI can be used. The prohibition on the use of a 
private-sector LSI could take effect earlier if the Commandant 
certifies that the Coast Guard has available the personnel and 
expertise within the service or through the use of contracts 
with private sector entities or agreements with other Federal 
agencies to enable it to perform the LSI function itself.
    This section also requires full and open competition for 
contracts issued by the Coast Guard and any LSI employed by the 
Coast Guard.

                TITLE II--COAST GUARD ACQUISITION POLICY

Sec. 201. Operational requirements

    This section requires the Coast Guard to establish specific 
operational requirements for a new acquisition before awarding 
a production contract for the acquisition. The Coast Guard must 
also enable a full assessment of the trade-offs among 
performance, cost, and schedule to be made.

Sec. 202. Required contract terms

    This section requires the Commandant to put certain terms 
in all contracts for acquisitions with costs equal to or 
exceeding $10,000,000. The required terms include:
     All certifications regarding contractor 
performance shall be made by the Coast Guard or an independent 
third-party; self-certification of compliance with performance 
requirements is not allowed.
     All contracts must designate the Coast Guard as 
the final technical authority for all requirements.
     All contracts shall measure the performance of 
contractors and subcontractors on the status of actual work 
performed, including the extent to which the work met cost and 
schedule requirements.
     TEMPEST standards for an asset shall be those in 
use by the Navy for the type of asset for which the TEMPEST 
test is required. TEMPEST (not an acronym--it is a formerly 
classified DOD code word from the 1950s) is the short name 
referring to investigation, study, and control of compromising 
emanations from telecommunications and Automated Information 
Systems equipment. TEMPEST testing is comprised of visual and 
instrumented inspections to ensure compliance with emission 
security requirements.
     For contracts for an Offshore Patrol Cutter (a 
large cutter--but slightly smaller than the National Security 
Cutters), the contracts shall specify the service life, hull 
fatigue life, and days underway under specific sea conditions 
the ship will be built to meet.

Sec. 203. Life-Cycle cost estimates

    This section requires the Coast Guard to develop life-cycle 
cost estimates for projects expected to cost more than $10 
million and to result in the development of assets with service 
lives of 10 years. In addition, the Coast Guard is required to 
develop independent life-cycle cost estimates for acquisitions 
that have total acquisition costs exceeding $100,000,000 or 
total life-cycle costs exceeding $300,000,000. These life-cycle 
costs estimates must be updated as the acquisition prepares to 
cross each acquisition milestone.

Sec. 204. Test and evaluation

    This section requires the Coast Guard to develop and 
approve a formal Test and Evaluation Master Plan (TEMP), which 
will guide all developmental and operational testing on 
acquisitions with total acquisition costs exceeding 
$100,000,000 or total life-cycle costs exceeding $300,000,000.
    As part of the TEMP, the service is required to identify 
and resolve any safety concerns with new assets. A safety 
concern is defined as any hazard that is likely to cause 
serious bodily injury or death to a Coast Guard member or that 
could cause major damage to the asset. If such problems are 
found before a contract for the production of an asset is 
issued, they must be resolved before a contract is issued, or, 
if a contract for any level of production is issued before they 
are resolved, the safety concerns must be reported to Congress 
along with an explanation of why the service is proceeding with 
a contract for any level of production of the asset before the 
issue is resolved together with an explanation of how it will 
be resolved. If a safety concern is found in an asset already 
in some level of production, the service must communicate the 
concern to Congress and explain how it will be resolved.

Sec. 205. Capability standards

    This section imposes requirements on specific asset types, 
including requiring that: all new vessels other than the 
National Security Cutter (which is already under construction) 
be classed by the American Bureau of Shipping; TEMPEST testing 
be performed by an authorized independent third party; before a 
contract is signed to resolve the hull fatigue issues with 
National Security Cutters 1 and 2, the Coast Guard must provide 
Congress a description of the measures that will be performed 
and conduct a cost-benefit analysis of the measures; and 
aircraft be assessed by a third party for airworthiness.

Sec. 206. Acquisition program reports

    This section requires the Coast Guard to report to Congress 
for any acquisition with total acquisition costs exceeding 
$100,000,000 or total life-cycle costs exceeding $300,000,000, 
the key performance parameters the asset will be built to 
achieve, the systems with which the asset will be 
interoperable, the anticipated unit cost for the asset, and a 
detailed schedule for the asset's acquisition process showing 
when the asset will be completed and when it will be fully 
deployed.

Sec. 207. Undefinitized contractual actions

    This section prohibits the Coast Guard from entering an 
undefinitized contractual action unless it is approved by the 
Head of Contracting Activity. Undefinitized contractual actions 
are procurements for which the contractual terms, 
specifications, or price are not agreed upon before the 
performance of the contract is begun.
    If an undefinitized contractual action is approved, this 
section sets specific conditions on such actions, including how 
much money can be paid to a contractor before the contract is 
definitized.
    Exceptions are provided for contracting actions relating to 
contingency operations, operations in response to emergency 
situations, and operations in response to disasters designated 
by the President under the Stafford Act.

Sec. 208. Guidance on excess pass-through charges

    This section requires the Commandant to issue guidance to 
ensure that excessive pass-through charges are not paid by the 
Coast Guard to an LSI for work performed by subcontractors. 
Excessive pass-through charges are defined as charges to the 
Federal Government by a contractor or subcontractor that are 
overhead or profit on work performed by a lower-tier 
subcontractor other than reasonable charges for the direct 
costs of managing the lower-tier subcontractors.

Sec. 209. Acquisition of major capabilities: Alternatives analysis

    This section requires that before the Coast Guard acquires 
an asset that is experimental or technically immature or that 
has total acquisition costs exceeding $100,000,000 or total 
life-cycle costs exceeding $300,000,000, the service must 
commission from a third party an alternatives analysis of the 
asset to be acquired. The alternatives analysis must include: 
an assessment of the technical maturity of the asset; whether 
different quantities or combinations of assets could meet the 
service's mission needs; the safety record of the asset; and 
the full life-cycle costs of the asset.

Sec. 210. Cost overruns and delays

    This section specifies that for any acquisition with total 
acquisition costs exceeding $100,000,000 or total life-cycle 
costs exceeding $300,000,000, the Coast Guard must report to 
Congress when a cost overrun of greater than 10 percent is 
likely to occur, a delay of more than 180 days is likely to 
occur, or a failure for a new asset or class of assets is 
anticipated. The report must include a description of the cause 
of the reportable event and a plan for fixing the issue.
    If an acquisition with total acquisition costs exceeding 
$100,000,000 or total life-cycle costs exceeding $300,000,000 
is likely to experience a cost breach of more than 20 percent 
or a delay of more than 12 months, the Coast Guard must certify 
that the asset is essential to the service, that there are no 
alternatives to the asset, that new cost or schedule estimates 
are reasonable, and that the management structure for the asset 
is adequate.

Sec. 211. Report on former Coast Guard officials employed by 
        contractors to the agency

    This section requires the Comptroller General to report 
annually on those Flag-level officers and Members of the Senior 
Executive Service who have left the Coast Guard within the past 
5 years and are now receiving compensation for employment with 
a Coast Guard contractor.
    A Coast Guard contractor is defined as any person receiving 
at least $10,000,000 in contractor awards from the Coast Guard.

Sec. 212. Department of Defense consultation

    This section requires the Commandant to make arrangements 
as appropriate for assistance in contracting and acquisition 
programming with the Secretary of Defense.

                    TITLE III--COAST GUARD PERSONNEL

Sec. 301. Chief Acquisition Officer

    This section establishes the Chief Acquisition Officer 
position within the Coast Guard. The section requires that the 
person appointed to the position be either a Rear Admiral or a 
civilian member of the Senior Executive Service. It requires 
that the person appointed to the position have a Level III 
Program Management certification and 10 years of acquisition 
experience, of which at least four shall have been spent 
managing a program with total acquisition costs exceeding 
$100,000,000 or total life-cycle costs exceeding $300,000,000. 
Further, this section requires that all Flag-level officers 
serving in the Acquisition Directorate meet these same 
standards. The section lists those types of positions (such as 
program executive officer, program manager, and deputy program 
manger) that constitute qualifying experience. These 
requirements become effective beginning October 1, 2011 (which 
is the same date when the use of the LSI is fully prohibited).
    This section also requires that design and related 
acquisition issues elevated to the Chief Acquisition Officer 
for resolution be reported to Congress within 45 days of the 
elevation.

Sec. 302. Improvements in Coast Guard acquisition management

    This section makes a number of changes in the Coast Guard's 
management of its acquisition personnel and policies, including 
requiring: that anyone assigned to be the program manager of a 
program with total acquisition costs exceeding $100,000,000 or 
total life-cycle costs exceeding $300,000,000 be a Level III 
certified program manager; the Commandant to maintain all 
technical authorities for projects with total acquisition costs 
exceeding $100,000,000 or total life-cycle costs exceeding 
$300,000,000 and to designate positions in the acquisition 
workforce and ensure that individuals assigned to these 
positions have the expertise to carry them out; and further 
requires the Coast Guard to report annually on the adequacy of 
its acquisition workforce to meet anticipated acquisition 
workloads in the coming year. In addition, this section states 
that no preference for military personnel shall be shown in 
appointments to the acquisition workforce--and this section 
requires the Commandant to ensure that appropriate career paths 
are available for military and civilian personnel in the 
acquisition workforce. The Coast Guard is required to take into 
account the need to maintain a balanced workforce in the 
acquisition field in which women and members of racial and 
ethnic minorities are appropriately represented.
    Finally, the Coast Guard is required to issue guidance for 
major systems acquisition programs on the qualifications, 
responsibilities, tenure, and accountability of program 
managers and to develop a comprehensive strategy to enhance the 
role of program managers.

Sec. 303. Recognition of Coast Guard personnel for excellence in the 
        acquisition of products and services

    This section requires the Commandant to implement a program 
to recognize excellent performance by individuals and teams 
that have contributed to the long-term success of a Coast Guard 
acquisition effort.

Sec. 304. Enhanced status quo officer promotion system

    This section provides the Coast Guard the authority to 
retain and promote officers that have specialized skills to 
meet the needs of the service. The current Coast Guard 
promotion system provides the Coast Guard with generalists and 
does not readily allow for officer specialties.

Sec. 305. Acquisition workforce expedited hiring

    This section allows the Commandant to designate acquisition 
positions as ``shortage category positions'' and to use the 
authorities in 5 U.S.C. 3304, 5333, and 5753 to recruit and 
appoint highly qualified people directly to these positions. 
This provision sunsets on September 30, 2012.

            Legislative History and Committee Consideration

    H.R. 1665 is based, in part, on legislation considered in 
the 110th Congress. On June 14, 2007, Representative 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 and ordered the 
bill, as amended, reported favorably to the Committee on 
Transportation and Infrastructure by voice vote with a quorum 
present. On June 28, 2007, the Committee on Transportation and 
Infrastructure met in open session and ordered the bill, as 
amended, reported favorably to the House by voice vote with a 
quorum present. On July 30, 2007, the Committee reported the 
bill, as amended, favorably to the House. H. Rept. 110-270. On 
July 31, 2007, the House passed H.R. 2722 by a vote of 426-0.
    On September 23, 2008, Chairman Cummings introduced H.R. 
6999, the ``Integrated Deepwater Program Reform Act of 2008''. 
On September 27, 2008, the House passed H.R. 6999 by voice vote 
with a quorum present. The Senate did not complete action on 
the legislation.
    In the 111th Congress, Chairman Cummings introduced H.R. 
1665 on March 23, 2009. On April 2, 2009, the Committee on 
Transportation and Infrastructure met in open session and 
ordered the bill reported favorably to the House by voice vote 
with a quorum present.

                              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 consideration 
of H.R. 1665 or ordering the bill reported. A motion to order 
H.R. 1665 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(c)(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 objective of this legislation are to 
strengthen the management of Coast Guard acquisition processes.
    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 enclosed cost estimate for H.R. 1665 
from the Director of the Congressional Budget Office:

                                     U.S. Congress,
                               Congressional Budget Office,
                                    Washington, DC, April 15, 2009.
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. 1665, the Coast 
Guard Acquisition Reform Act of 2009.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Deborah Reis.
            Sincerely,
                                              Douglas W. Elmendorf.
    Enclosure.

H.R. 1665--Coast Guard Acquisition Reform Act of 2009

    H.R. 1665 addresses the contracting practices used by the 
U.S. Coast Guard (USCG) to acquire capital assets such as 
vessels and aircraft. The legislation would restrict the Coast 
Guard's reliance on private entities to manage such contracts 
and would require the agency to revise other procurement 
practices to rectify problems identified by the Department of 
Defense, the Department of Homeland Security, and the 
Government Accountability Office. It also would require that 
many future acquisitions be open to competition and be subject 
to specified 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.
    Assuming appropriation of the necessary amounts, CBO 
estimates that the USCG would spend less than $5 million over 
the next two or three years, mostly to develop life-cycle cost 
estimates for capital assets. We estimate that other 
administrative costs for additional required testing and 
certification would not significantly affect the agency's 
annual budget. Enactment of the bill would not affect direct 
spending or revenues.
    The contracting reforms required by H.R. 1665 could result 
in lower procurement expenditures in the future. Much of the 
long-term savings, however, might occur even in the absence of 
the legislation because the Coast Guard is already implementing 
many of the required reforms, including hiring additional 
contracting personnel. CBO cannot estimate the likely size of 
cost savings from improving procurement practices or clearly 
identify what proportion of such savings would be attributable 
to the legislation and what share would result from changes 
that the Coast Guard is already implementing under current law.
    Any annual costs or savings realized by the Coast Guard as 
a result of the legislation would depend on future changes in 
the level of discretionary appropriations for capital 
acquisitions. Annual funding for Coast Guard acquisition has 
risen rapidly in recent years--from about $640 million in 
fiscal year 2002 to nearly $1.6 billion to date for 2009. (The 
2009 figure includes nearly $100 million provided by the 
American Recovery and Reinvestment Act of 2009.) Most of the 
increase over this period stems from new funding for the 
Integrated Deepwater Initiative, which will be used to replace 
many of the agency's vessels, aircraft, and other assets and is 
expected to cost between $25 billion to $30 billion over the 
next 25 years.
    H.R. 1665 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would impose no costs on state, local, or tribal governments.
    The CBO staff contact for this estimate is Deborah Reis. 
The estimate was approved by Theresa Gullo, 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. 1665 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 (P.L. 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. 1665 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 are 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 (P.L. 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 (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

TITLE 14, UNITED STATES CODE

           *       *       *       *       *       *       *



                CHAPTER 3--COMPOSITION AND ORGANIZATION

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

Sec. 55. Chief Acquisition Officer

  (a) Establishment of Chief Acquisition Officer.--There shall 
be in the Coast Guard a Chief Acquisition Officer selected by 
the Commandant who shall be a Rear Admiral or civilian from the 
Senior Executive Service (career reserved) and who meets the 
qualifications set forth under subsection (b). The Chief 
Acquisition Officer shall serve at the Assistant Commandant 
level and have acquisition management as that individual's 
primary duty.
  (b) Qualifications.--
          (1) The Chief Acquisition Officer and any Flag 
        Officer serving in the Acquisitions Directorate shall 
        be an acquisition professional with a program manager 
        level III certification and must have at least 10 years 
        experience in an acquisition position, of which at 
        least 4 years were spent in one of the following 
        qualifying positions:
                  (A) Program executive officer.
                  (B) Program manager of a Level 1 or Level 2 
                acquisition.
                  (C) Deputy program manager of a Level 1 or 
                Level 2 acquisition.
                  (D) Project manager for a Level 1 or Level 2 
                acquisition.
                  (E) Any other acquisition position of 
                significant responsibility in which the primary 
                duties are supervisory or management duties.
          (2) The Commandant shall periodically publish a list 
        of the positions designated under this subsection.
  (c) Authority and Functions of the Chief Acquisition 
Officer.--The functions of the Chief Acquisition Officer shall 
include--
          (1) monitoring the performance of programs and 
        projects on the basis of applicable performance 
        measurements and advising the Commandant, through the 
        chain of command, regarding the appropriate business 
        strategy to achieve the missions of the Coast Guard;
          (2) maximizing the use of full and open competition 
        at the prime contract and subcontract levels in the 
        acquisition of property, capabilities, assets, 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, 
        capability, asset, or service procured;
          (3) making acquisition decisions in concurrence with 
        the technical authority of the Coast Guard, as 
        designated by the Commandant, and consistent with all 
        other applicable laws and decisions establishing 
        procedures within the Coast Guard;
          (4) ensuring the use of detailed performance 
        specifications in instances in which performance based 
        contracting is used;
          (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 acquisition workforce;
          (7) assessing the requirements established for Coast 
        Guard personnel regarding knowledge and skill in 
        acquisition resources and management and the adequacy 
        of such requirements for facilitating the achievement 
        of the performance goals established for acquisition 
        management;
          (8) developing strategies and specific plans for 
        hiring, training, and professional development; and
          (9) reporting to the Commandant, through the chain of 
        command, on the progress made in improving acquisition 
        management capability.

           *       *       *       *       *       *       *


CHAPTER 11--PERSONNEL

           *       *       *       *       *       *       *



Sec. 253. Selection boards; notice of convening; communication with 
                    board

  (a) Before a board is convened under section 251 of this 
title, notice of the convening date, the promotion zone to be 
considered, and the officers eligible for consideration[, and 
the number of officers the board may recommend for promotion] 
shall be given to the service at large.

           *       *       *       *       *       *       *


Sec. 258. Selection boards; information to be furnished boards

  (a) In General.--The Secretary shall furnish the appropriate 
selection board convened under section 251 of this title 
with[:]--
          (1) * * *

           *       *       *       *       *       *       *

  (b) Provision of Direction and Guidance.--
          (1) In addition to the information provided pursuant 
        to subsection (a), the Commandant may furnish the 
        selection board--
                  (A) specific direction relating to the needs 
                of the Coast Guard for officers having 
                particular skills, including direction relating 
                to the need for a minimum number of officers 
                with particular skills within a specialty; and
                  (B) any other guidance that the Commandant 
                believes may be necessary to enable the board 
                to properly perform its functions.
          (2) Selections made based on the direction and 
        guidance provided under this subsection shall not 
        exceed the maximum percentage of officers who may be 
        selected from below the announced promotion zone at any 
        given selection board convened under section 251 of 
        this title.

Sec. 259. Officers to be recommended for promotion

  (a) A selection board convened to recommend officers for 
promotion shall recommend those eligible officers whom the 
board, giving due consideration to the needs of the Coast Guard 
for officers with particular skills so noted in specific 
direction furnished to the board by the Commandant under 
section 258 of this title, considers best qualified of the 
officers under consideration for promotion. No officer may be 
recommended for promotion unless he receives the recommendation 
of at least a majority of the members of a board composed of 
five members, or at least two-thirds of the members of a board 
composed of more than five members.

           *       *       *       *       *       *       *


Sec. 260. Selection boards; reports

  (a) * * *
  (b) A board convened under section 251 of this title shall 
certify that, in the opinion of at least a majority of the 
members if the board has five members, or in the opinion of at 
least two-thirds of the members if the board has more than five 
members, the officers recommended for promotion are the best 
qualified for promotion to meet the needs of the service (as 
noted in specific direction furnished the board by the 
Commandant under section 258 of this title) of those officers 
whose names have been furnished to the board.

           *       *       *       *       *       *       *



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