Coast Guard: Observations on Agency Performance, Operations and  
Future Challenges (15-JUN-06, GAO-06-448T).			 
                                                                 
The Coast Guard's fiscal year 2007 budget request total $8.4	 
billion, an increase of 4 percent ($328 million) over the	 
approved budget for fiscal year 2006 and a slowing of the	 
agency's budget increases over the past 2 fiscal years. This	 
testimony, which is based on both current and past GAO work,	 
synthesizes the results of these reviews as they pertain to	 
meeting performance goals, adjusting to added responsibilities,  
acquiring new assets (especially the Deepwater program--to	 
replace or upgrade cutters and aircraft, and the Rescue 21	 
program--to modernize rescue communications), and meeting other  
future challenges.						 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-06-448T					        
    ACCNO:   A55561						        
  TITLE:     Coast Guard: Observations on Agency Performance,	      
Operations and Future Challenges				 
     DATE:   06/15/2006 
  SUBJECT:   Agency missions					 
	     Federal agency reorganization			 
	     Internal controls					 
	     Organizational change				 
	     Performance management				 
	     Performance measures				 
	     Procurement practices				 
	     Program management 				 
	     Strategic planning 				 
	     Budget requests					 
	     Program goals or objectives			 
	     Coast Guard Deepwater Project			 
	     Coast Guard Rescue 21 System			 

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GAO-06-448T

     

     * Summary
     * Budget Request Reflects Moderate Growth, While Overall Progr
          * Coast Guard Reported Progress Made in Meeting Program Perfor
          * Overall Progress Came Despite Additional Demands Posed by Hu
     * The Coast Guard Continues with Organizational Changes and Ex
          * New Field Command Structure Aimed at Improving Operational E
          * New Maritime Security Response Team to Provide Additional Se
          * New and Evolving Coast Guard Partnerships Designed to Improv
     * Progress Made with Ongoing Acquisition Efforts, but Continue
          * Progress Continues in Making Recommended Improvements to Dee
               * Strengthening Integrated Product Teams
               * Providing Field Personnel with Guidance and Training on Tra
          * Design Risks Have Delayed Delivery of the Fast Respose Cutte
          * Rescue 21 Continues to Be of Concern as It Enters Implementa
          * Coast Guard in Early Phase of Developing the Nationwide Auto
     * Coast Guard Faces Future Challenges as It Balances Missions
          * Some ATON and Icebreaking Assets Show Decline and May Need A
               * Coast Guard's Condition Measures Show Decline in Some ATON a
               * Increasing Amount of Maintenance on ATON and Domestic Icebre
               * Polar Class Icebreaking Assets Are in Need of Significant Ma
          * The Coast Guard Is Undertaking New Responsibility beyond Typ
     * Concluding Observations
     * GAO Contacts and Staff Acknowledgments
     * Programs Meeting Fiscal Year 2005 Performance Targets
          * Program Expected to Meet Fiscal Year 2005 Target
          * Programs Not Meeting Targets in Fiscal Year 2005
     * GAO's Mission
     * Obtaining Copies of GAO Reports and Testimony
          * Order by Mail or Phone
     * To Report Fraud, Waste, and Abuse in Federal Programs
     * Congressional Relations
     * Public Affairs

GAO

For Release on Delivery Expected at 10:30 a.m. EDT

Thursday, June 15, 2006

COAST GUARD

Observations on Agency Performance, Operations and Future Challenges

Statement of Stephen L. Caldwell, Acting Director

Homeland Security and Justice Issues

GAO-06-448T

Testimonybefore the Subcommittee on Fisheries and Coast Guard, Committee
on Commerce, Science, and Transportation, U.S. Senate

Madame Chair and Members of the Subcommittee:

I am pleased to be here today to discuss the President's fiscal year 2007
budget request for the Coast Guard-funding that the Coast Guard believes
is critical to improving its performance and reducing vulnerabilities
within the U.S. maritime domain. As you know, the Coast Guard has faced
many extraordinary challenges and new responsibilities in recent years,
including heightened responsibility for protecting America's ports,
waterways, and waterside facilities from terrorist attacks, while
maintaining responsibility for many other programs important to the
nation's interests, such as helping stem the flow of illegal drugs and
illegal immigration, protecting important fishing grounds, and responding
to marine pollution. Overall, the Coast Guard has met these heightened
responsibilities despite added challenges posed by the declining condition
of its aging assets and special surge operations it has periodically
experienced-such as responding to Hurricane Katrina.

My testimony today provides (1) an overview of the Coast Guard's fiscal
year 2007 budget request and key performance information, (2) a discussion
of the changes and initiatives the Coast Guard has implemented to meet
growing responsibilities, (3) a status update on some current acquisition
efforts, and (4) a look at some future Coast Guard challenges as it
attempts to balance its various missions. My testimony is drawn from a
number of reports we have issued on Coast Guard operations, as well as
from work done specifically for this hearing. In some cases our work is
still ongoing and fuller results will be reported once the engagements are
completed. The scope of our work did not include evaluating whether the
proposed funding levels are commensurate with the Coast Guard's stated
needs. All of our work has been conducted in accordance with generally
accepted government auditing standards. (See app. I for additional
information regarding our scope and methodology and see related GAO
reports for a listing of recent reports.)

                                    Summary

Although the Coast Guard's budget continues to grow, the agency's fiscal
year 2007 budget request indicates a more moderate growth than that of
previous years. Even with the need to sustain new homeland security
duties, respond to particularly destructive hurricanes, and cope with
aging assets, the Coast Guard reported that its fiscal year 2005
performance, as self-measured by its ability to meet performance targets,
was the highest since the terrorist attacks in September 2001. The Coast
Guard reported that it met or exceeded performance targets for 7 of 11
programs, and anticipates meeting the target for 1 additional program once
final results for the year are available. Coast Guard officials attributed
the missed targets to, among other factors, the increased flow of migrants
and staffing shortages for certain security units within the defense
readiness program. In particular, our ongoing work found that the Coast
Guard's response to Hurricane Katrina highlighted three key elements that
enabled the Coast Guard to provide an unprecedented search and rescue
response during Hurricane Katrina: a priority on training and contingency
planning, a flexible organizational structure, and the agency's
operational principles.

The Coast Guard has undertaken three organizational changes designed to
assist it in adjusting to its added responsibilities. First, it is
completing a realignment of its field structure, an effort that, according
to the Coast Guard, will allow a field level commanding officer to manage
operational resources more efficiently. Second, Coast Guard officials
expect that the development and implementation of a new Maritime Security
Response Team, modeled after Department of Defense (DOD) counter-terrorism
teams, will provide increased counterterrorism capability to respond to
threats in waters under Coast Guard jurisdiction. Finally, new and
expanded partnerships that cut across both government and industry to
address maritime security concerns also have the potential to improve
operational effectiveness and efficiency. For instance, under requirements
of the Maritime Transportation Security Act of 2002 (MTSA), each Coast
Guard Captain of the Port is required to work in conjunction with a range
of local partners to develop a security plan for its port area to address
security vulnerabilities and respond to any incidents.1 Another
partnership that leverages governmental resources is the Coast Guard's
relationship with the National Oceanic and Atmospheric Administration
(NOAA). This partnership allows vessel tracking information obtained with
NOAA technology to be shared with the Coast Guard, thereby assisting the
Coast Guard with its enforcement of domestic fisheries regulations.

Our recent reviews indicate that while the Coast Guard has made progress
in managing Deepwater acquisitions, further actions are needed and the
lessons learned from this effort have not been applied to other ongoing
acquisitions. In specific, the Coast Guard has successfully implemented
most of GAO's recommendations to improve the Integrated Deepwater System,
the largest, and most significant ongoing Coast Guard acquisition
initiative. However, further attention and action are needed before all of
our past recommendations for improving accountability and program
management can be considered fully implemented. Despite these improvements
in program management, the Deepwater program has continued to encounter
difficulties, most recently in the acquisition of the Fast Response
Cutters which are scheduled to replace the Coast Guard's aging patrol boat
fleet. Meanwhile, the Rescue 21 program-an effort to replace antiquated
command, control, and communication infrastructure used to monitor mariner
distress calls and coordinate search and rescue operations-continues to be
of concern as the program has been plagued by delays, technical problems,
and cost escalation. Currently estimated implementation costs have
escalated from $250 million to more than $710.5 million, and GAO's
analysis, based on prior trends, indicates that Rescue 21 costs could be
as high as $872 million. In addition, the program's originally proposed
schedule for full implementation has slipped by 5 years resulting in
continuing performance challenges for field units, and the potential for
additional costs to keep the current system functioning until it is
replaced. These problems and the causes underlying them have much in
common with the issues we identified with the Deepwater program which has
also experienced management and contractor oversight problems, schedule
delays, and cost escalation. A third acquisition effort, designed to
provide the Coast Guard with the capability to transmit and receive
information to and from vessels entering and leaving U.S. waters, is still
early in its development, limiting the Coast Guard's ability to identify
and leverage potential partners to share costs, according to Coast Guard
officials. The Coast Guard is taking steps to better manage these
programs, but it cannot lose sight of the need to address and resolve
these ongoing acquisition management concerns.

1Pub. L. No. 107-295, 116 Stat. 2064 (2002).

The Coast Guard also faces two additional challenges in managing its
assets and balancing its various missions. Our ongoing work for this
committee found that some of the Coast Guard's buoy tenders and
icebreakers are deteriorating and may need additional resources to sustain
or replace them. Like the Deepwater assets, many of these types of assets
are approaching or have exceeded their initial design service lives, and
our preliminary observations indicate that the Coast Guard's key measure
of their condition shows a decline for some assets of both types. Although
the Coast Guard has identified the need to sustain or replace these
assets, no funds have been budgeted to carry out this project. A second
challenge the Coast Guard faces is the addition of a new mission,
defending the air space surrounding the nation's capital, which falls
outside its traditional focus on the maritime environment and therefore
represents further growth in its responsibilities. While groundwork has
been laid through the request of fiscal year 2007 funds to purchase the
equipment necessary to carry out this new responsibility, it is likely to
require additional personnel and training.

Budget Request Reflects Moderate Growth, While Overall Program Performance
                                    Improved

The Coast Guard's fiscal year 2007 budget request shows continued growth
but at a more moderate pace than that of the past 2 years. The current
budget request reflects a proposed increase of about $328 million,
compared to increases for each of the past 2 budget years that exceeded
$500 million for each year.2 (See fig. 1.) About $5.5 billion, or more
than 65 percent of the total funding request of $8.4 billion, is for
operating expenditures.3 The acquisition, construction, and improvements
(AC&I) account amounts to another $1.2 billion, or about 14 percent, and
the remainder is primarily for retiree pay and healthcare fund
contributions. (See app. II for more detail on the Coast Guard's fiscal
years 2002-2007 budget accounts.)

If the Coast Guard's total budget request is granted, overall funding will
have increased by more than 50 percent since fiscal year 2002, an increase
of $2.82 billion. According to Coast Guard officials, much of the
additional $328 million in this fiscal year's budget request, which is
about 4 percent over and above the fiscal year 2006 budget of $8.1
billion, covers such things as salary and benefit increases and
maintenance. In addition, more than $57 million of this increase is to
establish a permanent National Capital Region Air Defense program to
enforce the National Capital Region no-fly zone, a program previously
conducted by U.S. Customs and Border Protection (CBP).4 By comparison, the
increases for the AC&I account for this time period have been even greater
than the overall funding increase, growing by 66 percent since fiscal year
2002. However, the fiscal year 2007 AC&I budget request of almost $1.2
billion represents little change in funding from the Coast Guard's fiscal
year 2006 enacted AC&I budget.

2GAO's analysis of the Coast Guard's budget is presented in nominal terms
throughout this testimony.

3The $8.4 billion request for the Coast Guard represents about 20 percent
of the Department of Homeland Security's (DHS) budget request for fiscal
year 2007.

4In addition to the $57.4 million request, the Coast Guard's fiscal year
2007 budget request includes a $5 million transfer from CBP to support the
National Capital Regional Air Defense program.

Figure 1: Coast Guard Budget from Fiscal Year 2002 to Fiscal Year 2007

Notes: In order to provide greater year-to-year consistency for budget
comparisons, the fiscal years 2005 and 2006 enacted amounts do not include
supplemental appropriations. The supplemental amounts were largely for
unforeseen events. According to a Coast Guard budget official, in fiscal
year 2005 the Coast Guard received supplemental appropriations of $34
million for Operation Iraqi Freedom and $195 million for hurricane and
tsunami relief efforts, and in fiscal year 2006 the Coast Guard received
supplemental appropriations of $100 million for Operation Iraqi Freedom
and $206 million for Hurricane Katrina relief efforts.

The total Coast Guard budget is a sum of operating expenses; AC&I and
other accounts such as environmental compliance and restoration;
alteration of bridges; retired pay; research, development, testing and
evaluation; oil spill recovery; boat safety; and Medicare-eligible
healthcare fund contributions. Operating expenses and the AC&I accounts
are almost 80 percent of the total Coast Guard's budget request for fiscal
year 2007, and are shown because they are of primary interest for this
analysis. Detailed information on all of these accounts is in app. II.

Coast Guard Reported Progress Made in Meeting Program Performance Targets

Even with sustained homeland security responsibilities, aging assets, and
a particularly destructive hurricane season stretching resources across
the agency, in fiscal year 2005 the Coast Guard reported that 7 of its 11
programs met or exceeded program performance targets.5 In addition, the
agency reported that it anticipates meeting the target for 1 additional
program when final results become available in July 2006, potentially
bringing the total met targets to 8 out of 11 programs.6 According to
Coast Guard documents, the agency missed targets for three
programs-undocumented migrant interdiction, defense readiness, and living
marine resources-in fiscal year 2005, as it had in some previous years.
Coast Guard officials attributed these missed targets to, among other
factors, the increased flow of migrants and staffing shortages for certain
security units within the defense readiness program. (See app. III for
more detailed information on each program.) If the Coast Guard meets 8
performance targets as it predicts, the results would represent the
greatest number of performance targets met in the last 4 years. (See fig.
2.) The preliminary results of our ongoing work reviewing the Coast
Guard's six non-homeland security performance measures suggests that, for
the most part, the data used for the measures are reliable and the
measures themselves are sound. That is, they are objective, measurable,
and quantifiable as well as cover key program activities. However, given
the DHS policy of reporting only one main performance measure per program
and the limits on how comprehensive a single measure is likely to be,
there may be opportunities to provide additional context and information
to decisionmakers about Coast Guard performance results. We will provide
final results on this work in a report to be published later this summer.

5These seven programs are ice operations, search and rescue, marine
environmental protection, marine safety, aids to navigation, U.S.
exclusive economic zone enforcement, and ports, waterways, and coastal
security.

6The one additional program the Coast Guard anticipates meeting the target
for is the illegal drug interdiction program.

Figure 2: Number of Performance Targets the Coast Guard Met, or
Anticipates Meeting, for the Coast Guard's 11 Programs for Fiscal Years
2002 through 2005

Notes: Fiscal year 2005 data includes the illegal drug interdiction
program for which final data are not yet available. Data for this program
are not available because the performance measures are based, in part, on
data from other agencies that are not reported until later in the fiscal
year. However, based on past data trends and performance data collected to
date, the Coast Guard anticipates meeting the performance target for this
program.

For fiscal year 2002 the Coast Guard had performance measures and targets
for 9 of its 11 programs-the two programs without measures and targets
were the marine safety and ports, waterways, and coastal security
programs. For fiscal years 2003 and 2004, the Coast Guard had performance
measures and targets for 10 of its 11 programs-the one program without a
measure and target during this time was the ports, waterways, and coastal
security program.

Overall Progress Came Despite Additional Demands Posed by Hurricane Katrina

This overall progress came in a year when the Coast Guard faced
significant additional demands brought on by Hurricane Katrina. As it had
to do when it implemented MTSA and when it conducted heightened port
security patrols immediately after the September 2001 terrorist attacks,
the Coast Guard found itself operating at an increased operational tempo
for part of fiscal year 2005. Although the Hurricane Katrina response
period was relatively brief for some missions, such as search and rescue,
Coast Guard officials told us that the sheer magnitude of the response
made it unique, and responding to it tested the agency's preparedness and
ability to mobilize large numbers of personnel and assets within a short
time. In this effort, the Coast Guard had several responsibilities during
and immediately following the hurricane: to conduct search and rescue; to
direct the closing and re-opening of ports in cooperation with
stakeholders,(such as shipping companies, harbor police, DHS, CBP, and
local fire and police departments), to ensure safety and facilitate
commerce, thereby lessening the economic impact of the storm on the
nation; and to monitor pollution clean up of the many oil spills that
occurred in the wake of the flooding. For the purposes of this testimony,
I would like to focus on the Coast Guard's search and rescue response. We
are conducting a more complete review of the Coast Guard's role and
response to Hurricane Katrina across several mission areas under the
authority of the Comptroller General, and expect to provide additional
information later this summer. So far, however, this work is showing that
three factors appear to have been key to the Coast Guard's response to
Hurricane Katrina:

           o  The Coast Guard was prepared to respond to search and rescue
           needs. Although the magnitude of Hurricane Katrina required
           substantial response and relief efforts, the Coast Guard was well
           prepared to act since it places a priority on training and
           contingency planning. First and foremost, the missions the Coast
           Guard performed during Hurricane Katrina were the same missions
           that the Coast Guard trains for and typically performs on a
           day-to-day basis. The Coast Guard's mission areas include, among
           others, search and rescue, law enforcement, regulatory functions,
           and, most recently, homeland security responsibilities, allowing
           the Coast Guard to respond and act in a myriad of situations.
           However, with regard to Hurricane Katrina, the magnitude of the
           Coast Guard's mission activity appears noteworthy. For example,
           for all of 2004, according to the Coast Guard's Fiscal Year 2005
           Report, the Coast Guard responded to more than 32,000 calls for
           rescue assistance and saved nearly 5,500 lives. By comparison, in
           17 days of Hurricane Katrina response, Coast Guard officials
           reported conducting over 33,500 rescues, including rescuing 24,135
           people by boat and helicopter and evacuating 9,409 people from
           hospitals. Coast Guard officials we spoke to underscored the
           importance of the planning, preparation, and training that they
           regularly conduct that allowed them to complete the many
           challenging missions presented by Katrina.

           o  The Coast Guard's organizational structure and practices
           facilitated the agency's response. In terms of the Coast Guard's
           organizational structure, the Coast Guard has personnel and assets
           throughout the United States, which allows for more flexible
           response to threats. In terms of Coast Guard practices, according
           to the hurricane and severe weather plans we reviewed for Coast
           Guard Districts 7 (Florida region) and 8 (Gulf region), and
           discussions we had in Washington, D.C., Virginia, Florida,
           Alabama, and Louisiana with Coast Guard officials responsible for
           implementing those plans, the Coast Guard tracks the likely path
           of an approaching storm, anticipates the necessary assets to
           address the storm's impact, and repositions personnel and aircraft
           out of harm's way, with a focus on reconstituting assets to
           respond to local needs once it is safe to do so. Given the
           magnitude of Hurricane Katrina, the Coast Guard took a more
           centralized approach to prioritize personnel and assets to
           respond, but the operational command decisions remained at the
           local level. That is, the Coast Guard's Atlantic Area Command
           played a key role in identifying additional Coast Guard resources,
           and worked with District Commands to quickly move those resources
           to the affected Gulf region, while local operational commanders
           directed personnel and assets to priority missions based on their
           on-scene knowledge.

           o  The Coast Guard's operational principles facilitated the
           agency's actions. Throughout our field work, Coast Guard officials
           referred to the principles of Coast Guard operations that guide
           the agency's actions. Coast Guard officials identified these
           principles, which ranged from the importance of having clear
           objectives and flexibility to managing risks and exercising
           restraint, as instrumental in their preparation for Hurricane
           Katrina.7 The Coast Guard prides itself on these operational
           principles that collectively form the foundation of Coast Guard
           culture and actions during operations. These principles set an
           expectation for individual leadership in crisis, and personnel are
           trained to take responsibility and action as needed based on
           relevant authorities and guidance. For example, during the initial
           response to Hurricane Katrina, a junior-level pilot, who first
           arrived on-scene in New Orleans with the planned mission of
           conducting an environmental inspection flight, recognized that
           search and rescue helicopters in the area could not communicate
           with officials on the ground, including those located at hospitals
           and at safe landing areas. This pilot took the initiative while
           on-scene-an operational principle-to redirect her planned mission,
           changing it from an environmental flight to creating the first
           airborne communication platform in the area. Doing so helped
           ensure that critical information was relayed to and from
           helicopter pilots conducting search and rescue so that they could
           more safely and efficiently continue their vital mission. When we
           consulted her commanding officer about these actions, he supported
           her decision and actions and noted that Coast Guard personnel
           generally have the flexibility to divert from their intended
           mission to accomplish a more important mission, without obtaining
           advance supervisory approval. He indicated that this was not only
           common practice, but it was supported by a written directive at
           his unit.

           While acknowledging the importance of these operational
           principles, it is equally important to note that the response to
           Hurricane Katrina also hinged on discipline and adherence to
           critical plans. For example, multiple aircraft were operating in a
           confined space with little separation, thus adhering to critical
           search and rescue plans, as well as using experience and judgment,
           resulted in numerous rescues despite these difficult
           circumstances. While the Hurricane Katrina search and rescue
           effort was unprecedented, sustaining this effort might have been
           much more difficult if it had gone on for a much longer period.
           Combining a longer-term catastrophic response with the continuing
           needs of the agency's day-to-day missions would be more
           challenging for a small service such as the Coast Guard. Relative
           to other military services, the Coast Guard is small,  and when
           resources are shifted to any one specific mission area, other
           mission areas may suffer.8 For example, Coast Guard units in
           Florida sent many air and surface assets to the Gulf region to
           respond to Hurricane Katrina. While the assets were deployed to
           the Gulf region, the Coast Guard noticed a spike in the level of
           illegal migration activity off of the Florida coast. However, once
           Coast Guard assets returned to the Florida region, the Coast Guard
           initiated a more intensive air and sea patrol schedule to markedly
           announce their return to the area, and focus on interdicting
           illegal migrants.

7The Coast Guard's seven operational principles include the Principle of:
(1) Clear Objective, (2) Effective Presence, (3) Unity of Effort, (4)
On-Scene Initiative, (5) Flexibility, (6) Managed Risk, and (7) Restraint.
U.S. Department of Transportation, Coast Guard Publication 1, U.S. Coast
Guard: America's Maritime Guardian, (Washington DC, 2002).

8Consisting of approximately 39,000 active duty personnel, the Coast Guard
is a multi-mission agency with a longstanding federal leadership role in
protecting life and property at sea, such as directing search and rescue
operations. Furthermore, the Coast Guard is a military service responsible
for protecting U.S. ports and waterways. Other U.S. military branches
include: U.S. Army with approximately 488,900 active duty personnel; U.S.
Navy with approximately 358,700 active duty personnel; U.S. Air Force with
approximately 351,700 active duty personnel; and U.S. Marines with
approximately 178,700 active duty personnel.

The Coast Guard Continues with Organizational Changes and Expanded Partnerships
                        to Meet Growing Responsibilities

Coast Guard organizational changes and expanded partnerships have helped
to alleviate some resource pressures posed by added responsibilities or
further deterioration of assets, as well as help accomplish its mission
responsibilities. I would like to highlight three of these efforts: a
revised field structure that consolidates decision-making processes at the
operational level into a single command, a new resource for confronting
and neutralizing terrorist activity, and new and stronger partnerships
both within and outside DHS.

New Field Command Structure Aimed at Improving Operational Efficiency

In conducting our work for this hearing, we followed up with the Coast
Guard to obtain an update on the implementation of a new field command
structure that unifies previously disparate Coast Guard units, such as air
stations, groups, and marine safety offices into integrated commands.9 As
we reported to you last year, the Coast Guard began making this change to
improve mission performance through better coordination of Coast Guard
command authority with operational resources such as boats and aircraft.10
Under the previous field structure, for example, a marine safety officer
who had the authority to inspect a vessel at sea or needed an aerial view
of an oil spill as part of an investigation would often have to coordinate
a request for a boat or an aircraft through a district office, which would
obtain the resource from a group or air station. Under the realignment,
these operational resources are to be available under the same commanding
officer-allowing for more efficient operations. This revised structure
involves dividing operations into 35 geographic "sectors." Coast Guard
officials stated that all 35 sectors have been established as of May 2006.
According to Coast Guard personnel, the realignment is particularly
important for coordinating with other federal, state, and local agencies,
as well as meeting new homeland security responsibilities and preparing
for the challenge of protecting the United States against terrorist
attacks.

9A Coast Guard group is an operational unit that oversees station
operations and provides guidance on policy and administrative matters.

10GAO, Coast Guard: Observations on Agency Priorities in Fiscal Year 2006
Budget Request, GAO-05-364T (Washington, D.C.: Mar. 17, 2005).

New Maritime Security Response Team to Provide Additional Security Capability

Another initiative to protect the United States against terrorist attacks
is the Coast Guard's development and implementation of a Maritime Security
Response Team (MSRT)-a prototype team similar to DOD's counter-terrorism
teams. The Coast Guard, in cooperation with DOD and other federal law
enforcement agencies, plans to outfit the MSRT with specialized tactical
equipment and train the team to conduct high-risk boardings of vessels and
perform other offensive counter-terrorism activities within the maritime
environment. The Coast Guard's $4.7 million request for fiscal year 2007
would provide the team with chemical, biological, radiological, nuclear,
and explosive detection equipment; improve the Coast Guard's Special
Missions Training Center facility; and provide additional personnel and
operating capacity for a third 60-member unit, building the team toward
24/7 response capabilities. Coast Guard officials said that once the MSRT
is fully developed, it will provide active counter-terrorism and advanced
interdiction operations and address capacity and capability gaps in
national maritime counter-terrorism response.

New and Evolving Coast Guard Partnerships Designed to Improve Operational
Effectiveness and Efficiency

In addition to partnering efforts associated with the development of the
first MSRT, the Coast Guard is developing other partnerships, both
internal and external to DHS, designed in part to improve operational
effectiveness and efficiency. For example, the Coast Guard is currently
developing a pilot program to increase operational efficiencies between
the Coast Guard and CBP aimed at pushing potential threats away from U.S.
ports. This offshore operation, currently in a pilot stage, includes the
integration of each agency's vessel targeting efforts, unifies their
boarding operations, and includes professional exchange opportunities.
Although this effort is only being tested within the Pacific Area Command
of the Coast Guard, according to a senior Coast Guard official, the
Pacific Command intends to send its results to Coast Guard headquarters so
the agency can determine how to best implement the program across the
Coast Guard at a later date.

In addition to partnering with other federal agencies, the Coast Guard has
also initiated partnerships with both government and industry. Under
regulations implementing MTSA, a Coast Guard Captain of the Port must
develop an Area Maritime Security Plan in consultation with an Area
Maritime Security Committee. These committees are typically composed of
members from federal, local, and state governments; law enforcement
agencies; maritime industry and labor organizations; and other port
stakeholders that may be affected by security policies. The security plan
they develop is intended to provide a communication and coordination
framework for the port stakeholders and law enforcement officials to
follow in addressing security vulnerabilities and responding to any
incidents. Stakeholders in two ports we visited identified their Area
Maritime Security Committees as an invaluable forum for port partners. For
example, they said meetings of these committees serve as an opportunity
for members of the port community to network with one another, build
relationships, address various maritime-related issues, and coordinate
security planning efforts.

The Coast Guard has expanded its partnership with NOAA to enforce domestic
fisheries regulations. NOAA operates a technology-based system, called the
vessel monitoring system, to track and monitor fishing vessels. This
system offers real-time data on a ship's course and position, where the
ship has requested to fish, the type of fishing requested, and the number
of days the ship has been out of port. The Coast Guard uses this
information to assist with its enforcement of domestic fisheries
regulations by identifying vessels that may not be in compliance with
domestic fisheries regulations. For example, the monitoring information
will show if fishing vessels are operating within a restricted area.
According to Coast Guard officials, the information shared from this
partnership has allowed Coast Guard assets to be used more efficiently in
checking on potentially noncompliant vessels and enforcing fishing laws.

Progress Made with Ongoing Acquisition Efforts, but Continued Attention Is
                                   Warranted

Our recent reviews indicate that while the Coast Guard has made progress
in managing the Deepwater program, further actions are needed and the
lessons learned from this effort have not been applied to other ongoing
acquisitions. For example, even with the Coast Guard's improved management
and oversight of its Deepwater program, further steps are needed before
all of our past recommendations for improving accountability and program
management can be considered fully implemented. In addition, the
acquisition of Fast Response Cutters has recently experienced setbacks.
Meanwhile, the Rescue 21 program continues to be of concern as the program
has been plagued by delays, technical problems, and cost escalation-issues
that parallel the problems encountered in the early years of the Deepwater
program. Another program, the Nationwide Automatic Identification System,
is still in early development stages and specific technical system
requirements remain undefined. As a result, according to Coast Guard
officials, this has affected the Coast Guard's efforts to respond to our
recommendation that the agency cultivate potential partnerships in order
to leverage resources toward implementing the system. Because all of these
programs are important for the Coast Guard in meeting growing operational
demands, they bear close monitoring to help ensure they are delivered in
an efficient and effective manner.

Progress Continues in Making Recommended Improvements to Deepwater Program
Management, but Some Recommendations Are Not Yet Fully Implemented

One of the largest and most significant acquisitions that the Coast Guard
has undertaken is the upgrade and replacement of its Deepwater assets, an
acquisition approach that has raised a number of management and
accountability concerns over the past 8 years.11 The Coast Guard has
devoted considerable attention to concerns that we and others raised, in
particular to implementing recommendations for improvement. Our past
concerns about the Deepwater program have been in three main
areas-ensuring better program management and oversight, ensuring greater
accountability on the part of the system integrator, and creating
sufficient competition to help act as a control on costs-and to address
these concerns, we made a total of 11 recommendations.12 Table 1 provides
an overview of the 11 recommendations, including their current status. In
short, five recommendations have been fully implemented, five have been
partially implemented, and one has not been implemented.13 Three of the
five partially implemented recommendations appear close to being fully
implemented, in that the actions taken appear to be sufficient but results
are not yet known or final procedural steps (such as issuing a policy
currently in draft form) are not complete. The remaining two partially
implemented recommendations, both of which deal with effective program
management and contractor oversight, remain somewhat more problematic, and
these are discussed further below. In both cases, however, the steps
needed to fully implement these recommendations are relatively
straightforward.

11GAO, Contract Management: Coast Guard's Deepwater Program Needs
Increased Attention to Management and Contractor Oversight, GAO-04-380
(Washington, D.C.: Mar. 9, 2004).

12In June 2002, the Coast Guard contracted with Integrated Coast Guard
Systems to identify and deliver the assets needed to meet a set of mission
requirements specified by the Coast Guard. Integrated Coast Guard Systems
is a business entity jointly owned by Lockheed Martin Corporation and
Northrop Grumman Ship Systems, which act as first-tier subcontractors and
either provide Deepwater assets or award second-tier subcontracts for
providing the assets.

13The Coast Guard disagreed with and declined to implement a
recommendation that pertained to updating its cost baseline to determine
whether the Deepwater acquisition approach is costing more than a
conventional acquisition approach. While we stand behind our original
recommendation, we decided not to pursue it further because the Coast
Guard has decided not to take action on this issue.

Table 1: Status of GAO Recommendations to the U.S. Coast Guard Regarding
Management of the Deepwater Program

                          Recommendations to the U.S. Coast    Recommendation
Areas of concern       Guard                                status       
Key components of      Put in place a human capital plan to Implemented  
management and         ensure adequate staffing of the      
oversight are not      Deepwater program                    
effectively            Improve integrated product teams     Partially    
implemented            responsible for managing the program implemented  
                          by providing better training,                     
                          approving charters, and improving                 
                          systems for sharing information                   
                          between teams                                     
                          Provide field personnel with         Partially    
                          guidance and training on             implemented  
                          transitioning to new Deepwater                    
                          assets                                            
Procedures for         Develop measurable award fee         Implementeda 
ensuring contractor    criteria consistent with guidance    
accountability are     from the Office of Federal           
inadequate             Procurement Policy                   
                          Provide for better input from Coast  Implemented  
                          Guard technical representatives                   
                          Hold the system integrator           Implemented  
                          accountable for improving                         
                          effectiveness of the integrated                   
                          product teamsb                                    
                          Establish a baseline for determining Will not be  
                          whether the acquisition approach is  implemented  
                          costing the government more than the              
                          tradition asset replacement approach              
                          Establish a time frame for putting   Partially    
                          steps in place to measure            implemented  
                          contractor's progress toward                      
                          improving operational effectiveness               
                          Establish criteria to determine when Partially    
                          to adjust the project baseline and   implemented  
                          document the reasons for change                   
Control of future      For subcontracts over $5 million     Implementeda 
costs through          awarded by the system integrator to  
competition remains at the two major subcontractors,        
risk because of weak   require notification to the Coast    
oversight              Guard about decision to perform the  
                          work in-house rather than            
                          contracting it out                   
                          Develop a comprehensive plan for     Partially    
                          holding the system integrator        implemented  
                          accountable for ensuring adequate                 
                          competition among suppliers                       

Source: GAO analysis of Coast Guard data.

aDetermined to be implemented during work performed in 2005 for GAO's
report, Coast Guard: Progress Being Made on Addressing Deepwater Legacy
Asset Condition Issues and Program Management, but Acquisition Challenges
Remain, GAO-05-757 (Washington, D.C.: July 22, 2005).

bIntegrated product teams are responsible for overall program planning and
management, asset integration, and overseeing delivery of specific
Deepwater assets. They are generally chaired by a subcontractor
representative and consist of members from subcontractors and the Coast
Guard.

  Strengthening Integrated Product Teams

In 2004, we reported that the integrated product teams (IPTs), the Coast
Guard's primary tool for managing the Deepwater program and overseeing
contractor activities, were struggling to carry out their missions because
of four major issues: (1) lack of timely charters to provide authority
needed for decision making, (2) inadequate communication among team
members, (3) high staff turnover, and (4) insufficient training. Despite
progress in addressing these four issues, we do not consider this
recommendation to be fully implemented. There are indications that the
IPTs are still not succeeding in developing sufficient collaboration among
subcontractors. Coast Guard officials recently reported that collaboration
among the subcontractors continues to be problematic and that the system
integrator wields little influence to compel decisions among them. For
example, when dealing with proposed design changes for assets under
construction, the system integrator has submitted the changes as two
separate proposals from both first-tier subcontractors rather than
coordinating the separate proposals into one coherent plan. According to
Coast Guard performance monitors, because the two proposals often carry a
number of overlapping work items, this approach complicates the Coast
Guard's review of the needed design change. Several improvements designed
to address these problems are under way, but it is too early to determine
if these will effectively eliminate the problems.

  Providing Field Personnel with Guidance and Training on Transitioning to New
  Deepwater Assets

In 2004, we reported the Coast Guard had not effectively communicated
decisions on how new Deepwater and existing assets are to be integrated
during the transition and whether Coast Guard or contractor personnel (or
a combination of the two) will be responsible for maintenance of the
Deepwater assets. For example, Coast Guard field personnel, including
senior-level operators and naval engineering support command officials,
said they had not received information about how they would be able to
continue meeting their missions using existing assets while also being
trained on the new assets. Since that time the Coast Guard has placed more
emphasis on outreach to field personnel, including surveys, face-to-face
meetings, and membership in IPTs. Despite these efforts, there are
indications that the actions are not yet sufficient to consider the
recommendation to be fully implemented. In particular, our review of
relevant documents and discussions with key personnel make clear that
field operators and maintenance personnel are still concerned that their
views are not adequately acknowledged and addressed, and have little
information about maintenance and logistics plans for the new Deepwater
assets. For example, though the first National Security Cutter is to be
delivered in August 2007, field and maintenance officials have yet to
receive information on plans for crew training, necessary shore facility
modifications, or how maintenance and logistics responsibilities will be
divided between the Coast Guard and the system integrator. According to
Coast Guard officials, many of these decisions need to be made and
communicated very soon in order to allow for proper planning and
preparation in advance of the National Security Cutter's delivery.

Design Risks Have Delayed Delivery of the Fast Respose Cutter

Despite improvements in Deepwater program management, the Coast Guard has
encountered difficulties in the conversion and acquisition of one
Deepwater asset-its Fast Response Cutter (FRC). Under the original 2002
Deepwater Implementation Plan, all 49 of the Coast Guard's 110-foot patrol
boats were to be converted into 123-foot patrol boats, with increased
capabilities, as a bridging strategy until a replacement vessel, the
140-foot FRC, came on line beginning in 2018. The Coast Guard converted 8
of the 110-foot patrol boats to 123-foot boats, but discontinued further
conversions because the patrol boats were experiencing technical
difficulties, such as hull buckling, and were not able to meet
post-September 11, 2001 mission requirements. This prompted the Coast
Guard to revise this part of the Deepwater program. The 2005 Revised
Deepwater Implementation Plan reflected the Coast Guard's cancellation of
further patrol boat conversions and acceleration of the design and
delivery of the FRC, which was being designed to use composite materials
in the hull, decks and bulkheads.14 Under the 2005 revised plan, the first
FRC was scheduled to come on line in 2007-11 years earlier than originally
planned.

In late February 2006, the Coast Guard suspended design work on the FRC
because of risks with the emerging design. In particular, an independent
design review by third-party consultants preliminarily demonstrated, among
other things, that the FRC would be far heavier and less efficient than a
typical patrol boat of similar length. As a result, the Coast Guard is now
pursuing three strategies for moving forward with the FRC acquisition. The
first strategy involves Integrated Coast Guard Systems, the prime
contractor, purchasing design plans for and building an "off-the-shelf"
patrol boat that could be adapted for Coast Guard use as a way to increase
patrol hours until the FRC design could be finalized. The Coast Guard
issued a request for information in April 2006 to assess the off-the shelf
options. The second strategy is to revise the requirements of the FRC in
order to allow for modifications to the current FRC design. Concurrent
with the first two strategies, the Coast Guard's third strategy is to have
a third party reassess the analyses used in the decision to use composite
materials for the FRC to determine if the use of composite materials will,
in fact, reduce total ownership costs. The result of the Coast Guard
pursuing these strategies is that the Coast Guard would end up with two
classes of FRCs. The first class of FRCs would be based on an adapted
design from a patrol boat already on the market, to expedite delivery, and
a follow-on class that would be based on revisions made to address the
problems identified in the original FRC design plans. Pursuant to these
three strategies, Coast Guard officials now estimate that the first FRC
will likely not be delivered until late fiscal year 2009, at the earliest.
GAO plans to release a report in late June 2006 providing updated
information on the status of FRC design efforts.

14Composite materials, as used in shipbuilding, are typically
fiber-reinforced plastic laminates consisting of plies of various
reinforcing fabrics laminated together. Integrated Coast Guard Systems
decided to use composite materials for the FRC's hull after an analysis of
alternatives found that the use of such materials instead of steel
generally offers several advantages, such as lower maintenance and life
cycle costs, a longer service life, and reduced weight.

Rescue 21 Continues to Be of Concern as It Enters Implementation Phase

The Rescue 21 acquisition program-the Coast Guard's effort to replace its
antiquated command, control and communication infrastructure used
primarily to monitor mariner distress calls, and coordinate search and
rescue operations-continues to be of concern as the program has been
plagued by numerous delays, technical problems, and cost overruns. GAO's
recently released report shows that the program is about 5 years behind
its originally proposed schedule for full implementation in 2006, as a
result primarily of delays in development and testing of the system.15 In
addition, these delays have raised the Coast Guard's estimated costs for
bringing Rescue 21 up to full operating capability from $250 million to
$710.5 million.16 Moreover, our analysis of contractor performance trends,
including a significant number of contract items not completed as planned
and requiring renegotiation, indicates that total acquisition cost
overruns will continue, and implementation costs could reach as high as
$872 million.17

These delays, technical problems, and cost overruns are the result of
deficiencies in Coast Guard acquisition management and contractor
oversight-deficiencies similar to those that we identified earlier in the
Deepwater program. Such a pattern is of concern because it suggests that
the Coast Guard has not translated the lessons learned from Deepwater to
its overall acquisition management.18 In particular, deficiencies in the
Rescue 21 program include common problems of acquisition management and
oversight including ineffective project monitoring and risk management,
poorly defined user requirements, unrealistic schedule and cost estimates
developed by the contractor, and limited executive-level oversight. And
although the Coast Guard has developed the high-level requirements for
Rescue 21, it has relied solely on the contractor to manage these
requirements.

15GAO, United States Coast Guard: Improvements Needed in Management and
Oversight of Rescue System Acquisition, GAO-06-623 (Washington, D.C.: May
31, 2006).

16In April 2006, the Department of Homeland Security approved a new
acquisition program baseline for Rescue 21 with a total acquisition cost
of $730.2 million after decreasing certain functionality.

17The Coast Guard's fiscal year 2007 budget request for Rescue 21 is $40
million, a slight decrease from the $41 million Congress approved for
fiscal year 2006.

As discussed, we found similar problems in the Deepwater program with
comparable adverse impacts on cost, schedule and results. For example, at
the start of the program we identified a number of risks that would need
to be addressed for the program to be successful-including ensuring that
procedures and personnel are in place for managing and overseeing the
contractor, and taking steps to minimize potential problems in developing
new technology. Since that time, we have made numerous specific
recommendations to the Coast Guard based on the deficiencies uncovered by
our audits.19

The delays in implementing Rescue 21 mean that field units will continue
to face limitations in their ability to hear boaters in distress and the
agency will be subject to cost and performance challenges to maintain the
legacy equipment. For example, as a result of Rescue 21's delay, some
field units will likely continue to experience coverage gaps, limiting
their ability to monitor mariners in distress and some will continue to be
at risk of performing larger and potentially more costly searches due to
the legacy system's more limited capabilities. In addition, because the
legacy equipment is over 30 years old, it is at high risk for failure, a
factor which could result in costly repairs. Moreover, although the Coast
Guard previously issued a moratorium on upgrades to the legacy system,
delays in the Coast Guard's implementation of Rescue 21 may require units
to upgrade or install new equipment for the legacy system. This would
result in further costs, and in fact, this has already occurred at some
units.20

18Our concerns from past audits of the Deepwater acquisition focus on the
Coast Guard's overall ability to effectively and efficiently manage its
major acquisitions, oversee contractors, and translate lessons learned
from one program to another.

19 GAO-05-757 ; Coast Guard: Preliminary Observations on the Condition of
Deepwater Legacy Assets and Acquisition Management Challenges, GAO-05-651T
(Washington D.C.: June 21, 2005); Coast Guard: Preliminary Observations on
the Condition of Deepwater Legacy Assets and Acquisition Management
Challenges, GAO05-307T (Washington D.C.: Apr. 20, 2005); GAO-05-364T ;
Coast Guard: Deepwater Program Acquisition Schedule Update Needed,
GAO-04-695 (Washington D.C.: June 14, 2004);  GAO-04-380 ; Coast Guard:
Actions Needed to Mitigate Deepwater Project Risks, GAO-01-659T
(Washington, D.C.: May 3, 2001); Coast Guard: Progress Being Made on
Deepwater Project, but Risks Remain, GAO-01-564 (Washington D.C.: May 2,
2001 ); and Coast Guard: Strategies for Procuring New Ships, Aircraft, and
Other Assets, GAO/T-RCED-99-116 (Washington, D.C.: Mar. 16, 1999).

The importance of resolving acquisition management problems is underscored
by the operational benefits that are expected to be realized from system
implementation, and some of these benefits have already been achieved in a
few locations where the Rescue 21 system has been used. For example,
following Hurricane Katrina, the Coast Guard took advantage of Rescue 21's
capabilities to address communications challenges through an early
deployment of a portable antenna to Louisiana in September 2005 to provide
communications capabilities that had been lost due to the storm. In
another case, the direction-finding capability of the Rescue 21 system
helped the Coast Guard to rescue some stranded boaters who had
inaccurately identified their location to the Coast Guard.

Coast Guard in Early Phase of Developing the Nationwide Automatic Identification
System

The Coast Guard is at an early phase in developing the Nationwide
Automatic Identification System (NAIS)-an important step in the overall
effort to increase port safety and security by collecting, integrating,
and analyzing information on vessels operating within or bound for U.S.
waters-and is pursuing partnership opportunities that could potentially
accomplish NAIS installation goals more quickly and reduce installation
costs to the federal government. According to the Coast Guard, NAIS will
allow the Coast Guard to both receive and transmit information to vessels
entering and leaving U.S. waters, supporting both MTSA and the National
Plan to Achieve Maritime Domain Awareness.21 In July 2004, we recommended
that the Coast Guard seek and take advantage of opportunities to partner
with organizations willing to develop systems at their own expense as part
of the acquisition process.22 In response, according to Coast Guard
officials, the agency has begun to develop partnerships. However,
officials noted that because the project and technology are still in the
early stages of development, these partnerships remain limited. For
example, Coast Guard officials said that because the Coast Guard still
does not know all of the specific technical system requirements, they do
not yet know of all the potential partners that could enable the Coast
Guard to leverage resources. In addition, system requirements may change
as the technology is further developed, and as a result, some current
partnerships may be short-term.

20Coast Guard officials reported that the agency upgraded a console at one
unit to mitigate operational challenges and installed a new antenna at a
second unit to address coverage gaps.

21The National Plan to Achieve Maritime Domain Awareness was developed in
October 2005 in support of the National Strategy for Maritime Security, as
directed by National Security Presidential Directive-41/Homeland Security
Presidential Directive-13. The plan outlines national priorities for
achieving maritime domain awareness, including near-term and long-term
objectives, required program and resource implications, and
recommendations for organizational or policy changes.

The Coast Guard intends to use the fiscal year 2007 budget request of
$11.2 million, along with past unobligated project funding, to award a
NAIS contract in fiscal year 2007 for initial design, logistics, and
deployment in strategic ports and critical coastal areas of the country.
According to the Coast Guard, officials are performing market research as
part of the development phase of the Coast Guard and DHS major acquisition
processes, and the project office is analyzing this information to
determine capabilities within the market to satisfy NAIS requirements and
to establish an optimal acquisition strategy. Coast Guard officials we
spoke with noted that NAIS is currently in the initial stage of a major
acquisition project. As such, the acquisition project plans for costs,
schedule, and performance have not yet been established. The Coast Guard
expects these project plans to be determined later this year and stated
that both the baseline costs and current completion schedule are early
estimates and subject to revision as final requirements mature.

          Coast Guard Faces Future Challenges as It Balances Missions

The Coast Guard also faces two additional challenges in managing its
assets and balancing its various missions. The first challenge is to find
the resources to replace some additional assets, not included in the
Deepwater program, for its non-homeland security missions. Our ongoing
work found that some of the Coast Guard's existing buoy tenders and
icebreakers are approaching or have exceeded their initial design service
lives. The second challenge the Coast Guard faces is the addition of a new
mission, defending the air space surrounding the nation's capital, which
falls outside its traditional focus on the maritime environment. While
groundwork has been laid through the request of fiscal year 2007 funds to
purchase the equipment necessary to carry out this new responsibility, it
is likely to require additional personnel and training.

22GAO, Maritime Security: Partnering Could Reduce Federal Costs and
Facilitate Implementation of Automatic Vessel Identification System,
GAO-04-868 (Washington, D.C.: July 23, 2004).

Some ATON and Icebreaking Assets Show Decline and May Need Additional Resources
to Sustain Capabilities

To facilitate maritime mobility through its aids-to-navigation (ATON) and
icebreaking missions, the Coast Guard uses a variety of assets, such as
buoy tenders and icebreakers. Like the Deepwater legacy assets, many of
these types of assets are approaching or have exceeded their initial
design service lives. We are currently conducting work for this committee
to look at the condition and the Coast Guard's actions to upgrade or
better manage these assets. While this work is still ongoing, our
preliminary observations indicate that some of these assets are
experiencing maintenance issues that may require additional resources in
order to sustain or replace their capabilities.

  Coast Guard's Condition Measures Show Decline in Some ATON and Icebreaking
  Assets

From 2000 to 2004, the Coast Guard's key condition measures show a decline
for some ATON and icebreaking assets.23 For ATON and icebreaking cutter
assets, 24 the key summary measure of condition-percent of time free of
major casualties25-fluctuated but generally remained below target levels26
for some asset types. According to Coast Guard officials, even though it
did not have a centralized tracking system for the condition of its ATON
small boat assets during this time period, the Coast Guard's overall
assessments of these smaller assets indicated that most of the asset types
were in fair to poor condition. According to Coast Guard officials and
documents, the reasons for their condition include the fact that many of
the asset types are beyond their expected service lives and the general
workload of the assets has increased to carry out other missions, such as
maritime security after September 11, 2001, or providing disaster response
after events such as the recent hurricanes on the Gulf Coast.

23The assets discussed here vary greatly in terms of their size, age, and
operating environment. In terms of size they range from a 420-foot polar
icebreaker to a 21-foot trailerable boat to service aids-to-navigation. In
terms of age, the range is 2 years for recently commissioned seagoing buoy
tenders to more than 60 years for inland construction and buoy tenders.
ATON assets are located on both East and West Coasts, as well as the Gulf
Coast and major Inland Rivers such as the Mississippi while domestic
icebreakers are located on the East Coast and Great Lakes. The polar
icebreakers operate in both Arctic and Antarctic regions.

24The Coast Guard defines a cutter as any Coast Guard vessel 65 feet in
length or greater, having adequate accommodations for crew to live on
board. Boats are defined as those vessels under 65 feet in length that
usually operate near shore and on inland waterways.

25A casualty is a deficiency in mission essential equipment; a major
casualty causes the major degradation or loss of at least one primary
mission.

26The standard target level for the "percent of time free of major
casualties" is 72 percent, which is a Navy standard that has been adopted
by the Coast Guard.

  Increasing Amount of Maintenance on ATON and Domestic Icebreaking Assets Is
  Being Performed

Coast Guard personnel reported to us that crew members have had to spend
increasingly more time and resources to troubleshoot and resolve
maintenance issues on the older ATON and domestic icebreaking assets. The
Coast Guard personnel we met with indicated that because the systems and
parts are outdated compared with the technology and equipment available
today, it can be challenging and time consuming to diagnose a maintenance
issue and find parts or determine what corrective action to take. For
example, the propulsion control system on the 140-foot icebreaking tugs
uses circuit cards that were state-of-the-art when the tugs were
commissioned in the late 1970s to 1980s but are no longer manufactured
today and have been superseded by computer control systems. According to
the Coast Guard personnel we met with, the lack of a readily available
supply of these parts has forced maintenance personnel to order custom
made parts or refurbish the faulty ones, increasing the time and money it
takes to address maintenance problems. The personnel also told us that
because such equipment is outdated, finding knowledgeable individuals to
identify problems with the equipment is difficult, which further
complicates the maintenance of the assets. Crews of other assets we
visited also confirmed the difficulty of diagnosing problems and obtaining
replacement parts for other critical subsystems such as the main diesel
engines.

Aware of such issues, the Coast Guard completed a mission needs analysis
for ATON and domestic icebreaking assets, and developed an approach to
renovate or recapitalize these assets. This analysis, which was completed
in 2002, looked at the condition of the existing assets and their ability
to support mission needs. The analysis concluded that all of the assets
suffered in varying degrees with respect to safety, supportability,
environmental compliance, and habitability, and would need replacement or
rehabilitation to address these issues. In response to this analysis, the
Coast Guard developed a plan to systematically replace or renovate the
assets. Program officials at the Coast Guard indicated that current
estimates place the total cost to carry out this plan at about $550
million. According to a Coast Guard official, although resource proposals
to carry out this project had been made during the budget planning
processes for fiscal years 2004, 2005, 2006, and 2007, those proposals
were either deferred or terminated by DHS or the Office of Management and
Budget from inclusion in the final budget requests.

  Polar Class Icebreaking Assets Are in Need of Significant Maintenance

Preliminary observations from our review of the Coast Guard's polar
icebreaking assets revealed similar challenges for the Coast Guard to
perform the maintenance needed to sustain the capabilities of these
assets. As with the other older ATON and domestic icebreaking assets, the
two Polar Class icebreakers that are used for breaking the channel into
the Antarctic research station are reaching the end of their design
service lives of 30 years. 27 According to Coast Guard officials, the
icebreakers' age combined with recent harsh ice conditions and increased
operational tempo have left the Polar Class icebreakers unable to continue
the mission in the long term without a substantial investment in
maintenance and equipment renewal. These officials also told us that while
the hull structures are sound, critical systems such as the main gas
turbine controls and the controllable pitch propeller systems have become
unreliable. Corroborating this account of the icebreakers' condition, an
interim report issued in December 2005 by the National Research Council of
the National Academies also found that the icebreakers have become
inefficient to operate because substantial and increasing maintenance is
required to keep them operating and that significant long-term maintenance
had been deferred over the past several years.28

Given the age and obsolescence of the Polar Class icebreakers, funding for
maintenance and repair has been and will likely continue to be a
challenge. Coast Guard officials indicated that the cost of maintenance
activity for the icebreakers required that additional funding be
transferred from other Coast Guard asset maintenance accounts in previous
years in order to carry out this maintenance. For fiscal years 2005 and
2006, the Coast Guard also obtained additional funds for maintenance from
the National Science Foundation (NSF).29 The Coast Guard has considered
undertaking a project to extend the service lives of the existing assets
by refurbishing or replacing those systems that have reached the end of
their service lives. The Coast Guard estimates that this extension project
could provide an additional 25 years of service for the existing assets.
The cost to carry out this project for both Polar Class icebreakers is
estimated between $552 and $859 million. Coast Guard capital planning
documentation indicates that failure to fund this project could leave the
nation without heavy icebreaking capability and could jeopardize the
investment made in the nation's Antarctic Program. According to Coast
Guard officials, the agency has identified these needs but has not yet
requested funds in part, because other agencies have taken financial
responsibility for funding polar icebreaking assets.30

27In addition to the two Polar Class icebreakers, the Coast Guard acquired
a third icebreaker, the Healy, in 2000. Unlike the Polar Class
icebreakers, the Healy was designed to be an Arctic scientific platform
and does not have the capabilities to break ice in the Antarctic under
most conditions. According to Coast Guard officials, although the Healy
also has maintenance issues, the condition and extent of maintenance
needed for the Polar Class icebreakers is more severe.

28National Research Council of the National Academies, Polar Icebreaker
Roles and U.S. Future Needs: A Preliminary Assessment, 2005. The Council
has been tasked to conduct an assessment of the current and future roles
of the Coast Guard's polar icebreakers. A final report is expected to be
released this summer in which it will provide a more detailed analysis and
evaluation of the assets and capabilities needed to carry out the mission
over the longer term.

The Coast Guard Is Undertaking New Responsibility beyond Typical Maritime
Missions

While the Coast Guard continues to face the challenge of performing the
diverse array of responsibilities associated with its many missions, the
fiscal year 2007 budget request includes initial funding for a new Coast
Guard responsibility of enforcing a no-fly zone in the national capital
region. The scope of the mission-intercepting slow and low flying
aircraft-falls outside of the Coast Guard's typical mission of protecting
and preserving the nation's ports and waterways. According to Coast Guard
officials, DHS agreed to this mission through a memorandum of
understanding with DOD and subsequently determined that the Coast Guard
was the best suited agency within DHS to perform the mission.31 Coast
Guard officials also said, the agency will officially take over these
responsibilities from CBP in late fiscal year 2006. However, despite
previous experience performing air intercept activities, according to
Coast Guard officials, the new homeland security mission has required
additional training and assets.32 The Coast Guard's $57.4 million fiscal
year 2007 budget request, the first year of a planned 2-year project,
would provide funding to acquire five of the seven HH-65C helicopters
needed for the mission, and, according to Coast Guard officials, update
infrastructure at Air Station Atlantic City, as well as upgrade equipment
at Reagan National Airport. Officials added that efforts to train Coast
Guard pilots have already been underway. While groundwork has been laid
through the request of fiscal year 2007 funds to purchase the equipment
necessary to carry out this new responsibility, it is likely to require
additional personnel and training.

29NSF is the lead agency responsible for supporting U.S. polar research.
As such, it is the primary user of the polar icebreakers to provide
logistical support and serve as research platforms in the polar regions.
Coast Guard officials told us that under the terms of a memorandum of
agreement, entered into in 1986 and updated in 1999, NSF and other users
of the icebreakers reimbursed the Coast Guard for some of the operational
costs.

30For fiscal year 2006, responsibility for funding the polar icebreaking
assets was transferred to NSF, with the Coast Guard retaining custody of
the assets to operate and maintain them. The President's budget request
for fiscal year 2007 proposes to continue this arrangement. With this
transfer of budget authority to NSF, Coast Guard officials indicated that
while the Coast Guard plays an advisory role to NSF on the maintenance
needs of the icebreakers, NSF is now responsible for making funding
requests for maintenance projects such as the service life extension
project.

31The Coast Guard's primary mission for the National Capital Region Air
Defense program will be to determine intent of, and compel, low and slower
moving aircraft to clear National Capital Region protected airspace.

                            Concluding Observations

Several of the developments we are reporting on today are good news.
Despite many demands, the Coast Guard continues to make progress in
meeting its performance targets, and its successful search and rescue work
in responding to Hurricane Katrina is one positive aspect of what largely
otherwise appears to be an ongoing tragedy. Certainly, if one measure of
organizational excellence is performance in crisis, Hurricane Katrina
shows that the Coast Guard is well along on that scale. Excellence must
also be demonstrated in more mundane ways, however, such as how an
organization manages its acquisitions. In this case, the Coast Guard needs
to consistently, and from the beginning, employ widely known best
practices for its acquisition management processes particularly with
respect to developing requirements, project and risk management, and
ensuring proper executive level oversight. Although the Coast Guard is to
be complimented for its willingness to make improvements after our audits
have identified problems, such as with the Deepwater program, its
acquisition management would be better if the agency employed the lessons
once learned and translated them into generally-improved practices. Better
overall practices would help to ensure that future projects will not
repeat past problems and will be completed on time and at cost.

The Coast Guard has clearly been at the vortex of many of the most
sweeping changes in the federal government's priorities over the past
several years. "Homeland security" carries a much different tone, as well
as budgetary significance, in the national consciousness after September
11, 2001. However, dramatic infusions of money are no guarantee of
success; rather they bring added responsibility to ensure that large
investments of taxpayer dollars are wisely spent. Our work has shown that
the Coast Guard continues to face some challenges in balancing all of its
missions and in keeping a sustained focus on managing its significant
capital acquisition programs. Continued efforts are needed to sustain the
progress that has been made thus far.

32The Coast Guard's previous experience with air intercept activities
includes responsibility for air intercept during planned national security
special events, such as the Democratic and Republican national conventions
and the Super Bowl, as well as performing some air intercept activities as
part of its illegal drug interdiction program.

Madame Chair and Members of the Subcommittee, this completes my prepared
statement. I would be happy to respond to any questions that you or other
Members of the Subcommittee may have at this time.

                     GAO Contacts and Staff Acknowledgments

For information about this testimony, please contact Stephen L. Caldwell,
Acting Director, Homeland Security and Justice Issues, at (202) 512-9610,
or [email protected]. Contact points for our Offices of Congressional
Relations and Public Affairs may be found on the last page of this
statement. Individuals making key contributions to this testimony include
Joel Aldape, Nancy Briggs, Lisa Canini, Christopher Conrad, Adam
Couvillion, Christine Davis, Josh Diosomito, Michele Fejfar, Kathryn
Godfrey, Christopher Hatscher, Dawn Hoff, Lori Kmetz, Julie Leetch, Josh
Margraf, Dominic Nadarski, Jason Schwartz, and Stan Stenersen.

Appendix I: Objectives, Scope, and Methodology

To provide a strategic overview of the President's fiscal year 2007 budget
request for the Coast Guard, we analyzed the Coast Guard's budget
justification and other financial documents provided by the Coast Guard,
focusing on several areas of particular congressional interest. We also
interviewed Coast Guard headquarters officials familiar with the Coast
Guard's budget and acquisition processes.

To report on the Coast Guard's progress in meeting its performance
targets, we reviewed Coast Guard data and documentation addressing the
status of performance targets between fiscal years 2002 and 2005. In
reporting the performance results, we did not assess the reliability of
the data or the credibility of the performance measures used by the Coast
Guard. Previous GAO work indicates that the Coast Guard data are
sufficiently reliable for the purposes of reporting on general
performance, but we have not examined the external sources of data used
for these measures. In addition, we are currently involved in ongoing work
looking at the reliability of the data and credibility of performance
measures for the Coast Guard's six non-homeland security programs.

To determine the status of key outstanding Coast Guard recommendations, we
interviewed Coast Guard headquarters officials regarding the status of the
recommendations-including any progress made to implement them. We also
obtained and reviewed relevant documents from the Coast Guard.

To discuss the Coast Guard's response to Hurricane Katrina, we relied on
our ongoing work regarding Hurricane Katrina, with particular focus on the
Coast Guard's preparation, response, and recovery to Katrina with respect
to search and rescue, pollution response, and facilitation of maritime
missions. To obtain a more detailed understanding of the Coast Guard's
response to Hurricane Katrina, we interviewed officials, reviewed
documents, and conducted site visits at two Coast Guard Districts, the
Atlantic Command, and Coast Guard headquarters. We also interviewed city
and state officials in areas impacted by Hurricane Katrina and assisted by
the Coast Guard.

To determine the Coast Guard's progress in implementing our prior
recommendations related to its Deepwater program, we drew from ongoing
work, which included extensive reviews and analyses of documentation
provided by the Coast Guard. We supplemented our document reviews and
analyses with extensive discussions with officials at the Deepwater
Program Executive Office, as well as with interviews with key Coast Guard
operations and maintenance officials, contract monitors, and
representatives of the system integrator.

To report on the status and cost of Coast Guard's Rescue 21 program, we
drew from our work examining (1) the reasons for significant
implementation delays and cost overruns against Rescue 21's original 2002
proposal; (2) the viability of the Coast Guard's revised cost and
implementation schedule that is projected to reach full operational
capability in 2011; and (3) the impact of Rescue 21's implementation delay
upon the Coast Guard's field units which are awaiting modernization of
antiquated communications equipment. This work has involved reviewing
acquisition plans, implementation schedules and cost estimates for Rescue
21, as well as documentation regarding problems associated with the
antiquated communications equipment. We also interviewed Coast Guard field
personnel at units using the antiquated equipment and at the two sites
where Rescue 21 has been deployed.

We also drew from our ongoing work to report on Coast Guard's ATON and
icebreaking assets. Specifically, this work is examining (1) the recent
trends in the amount of time ATON and domestic icebreaking assets have
spent performing various missions and the impact of these trends on their
primary missions; (2) the condition of the ATON and domestic icebreaking
assets and the impact of their condition on performing their primary
missions; and (3) the actions the Coast Guard has taken to upgrade or
better manage its ATON and domestic icebreaking assets or use alternatives
to carry out their missions. While conducting this work, we have
interviewed Coast Guard program and maintenance officials at headquarters,
area commands, and selected districts to obtain information on the
missions these assets carry out, the condition of the assets, and the past
and estimated future costs to maintain and deploy them. We also
interviewed these officials and reviewed documents about the Coast Guard's
plans to maintain or replace these assets. We also analyzed Coast Guard
data from 2000 to 2004 on condition tracking measures, resources spent to
operate the assets, and the number of hours the assets spent on Coast
Guard missions. Finally, we interviewed crew members of various assets,
selected by nonprobability sample-to provide diversity among asset types
and locations-to obtain their views on the condition and maintenance of
their assets and any impact the assets' condition may have had on their
ability to carry out their missions.33

This testimony is based on published GAO reports and briefings, as well as
additional audit work that was conducted in accordance with generally
accepted government auditing standards. We conducted our work for this
testimony from July 2005 through May 2006.

33Nonprobability sampling is a method of sampling where observations are
selected in a manner that is not completely random, usually using specific
characteristics of the population as criteria. Results from nonprobability
samples cannot be used to make inferences about a population because in a
nonprobability sample some elements of the population being studied have
no chance or an unknown chance of being selected as part of the sample.

Appendix II: Breakdown of the Coast Guard's Fiscal Year 2007 Request

Appendix II provides a breakdown of the Coast Guard's fiscal year 2007
budget request. In addition to operating expenses and acquisition,
construction, and improvements, the remaining Coast Guard budget accounts
include areas such as environmental compliance and restoration, reserve
training, and oil spill recovery. (See table 2.)

Table 2: Coast Guard Funding Accounts by Fiscal Year

Dollars in millions (in nominal terms)

                                                      FY     FY     FY     FY 
                           FY 2002        FY 2003   2004   2005   2006   2007 
                     actual actual actual enacted       enacted       request
Operating                $3,757         $4,920 $4,718 $5,066 $5,231 $5,519 
expenses                                                            
Acquisition,                702            720  1,007  1,065  1,220  1,170 
construction, and                                                   
improvements                                                        
Environmental                17             17     17     17     12     12 
compliance and                                                      
restoration                                                         
Alteration of                15             17     19     16     15      0 
bridges                                                             
Retired pay                 876            889  1,020  1,085  1,014  1,063 
Reserve training             83             86     94    113    118    124 
Research,                    20             22     15     19     18     14 
development,                                                        
testing, and                                                        
evaluation                                                          
Oil spill                    68             75     57     71    168    127 
recovery                                                            
Boat safety                  64             65     64     64    101    115 
Medicare-Eligible            NA             NA     NA    237    261    279 
Retiree                                                             
Healthcare Fund                                                     
Contributiona                                                       

Source: GAO analysis of Coast Guard data.

Note: NA not available.

aFiscal year 2005 funding for the Medicare-Eligible Retiree Healthcare
Fund Contribution was accounted for within the Operating Expenses
appropriation, but it is displayed here for fiscal year 2005 separately
for presentation purposes. Beginning in fiscal year 2006, the contribution
was officially re-allocated from the Operating Expenses appropriation to
the Medicare-Eligible Retiree Healthcare Fund Contribution appropriation.

Appendix III: Additional Information on Specific Coast Guard Program
Results

Appendix III provides a detailed list of Coast Guard performance results
for the Coast Guard's 11 programs from fiscal year 2002 through 2005.
Shaded entries in table 3 indicate those years that the Coast Guard
reported meeting its target; unshaded entries indicate those years that
the Coast Guard reported not meeting its target. Each program is discussed
in more detail below.

Table 3: Performance Results by Program from Fiscal Year 2002 through
Fiscal Year 2005

                              Performance results by FY                  
                Program                                      Performance 
              performance                                    target for  
Program      measure          2002        2003  2004 2005   FY 2005   
Programs      
meeting 2005  
targets       
U.S.          Number of           250         152   247               174  =< 200 
Exclusive     detected                                                    
Economic Zone Exclusive                                                   
Enforcement   Economic                                                    
              Zone                                                        
              incursions                                                  
              by foreign                                                  
              fishing                                                     
              vessels                                                     
Ice           Number of             7           7     4                 0   =< 2a 
operations    waterway                                                    
(domestic     closure                                                     
icebreaking)  days                                                        
Search and    Percentage        84.4%       87.7% 86.8%             86.1%  >= 86% 
rescue        of                                                          
              distressed                                                  
              mariners'                                                   
              lives saved                                                 
Aids to       Number of         2,098       2,000 1,876             1,825 =<1,831 
navigation    collisions,                                                 
              allisions,                                                  
              and                                                         
              groundings                                                  
Ports,        Reduce               NA          NA    NA               14%     NAb 
waterways,    homeland                                                    
and coastal   security                                                    
security      risk in the                                                 
              maritime                                                    
              domain                                                      
Marine        Average of         35.1        29.4  22.1              18.5   =< 20 
environmental oil and                                                     
protection    chemical                                                    
              spills                                                      
              greater                                                     
              than 100                                                    
              gallons per                                                 
              100 million                                                 
              tons                                                        
              shipped                                                     
Marine safety Average of       1,332e       1,307 1,299             1,311      =< 
              maritime                                                      1,317 
              injuries                                                    
              and                                                         
              fatalities                                                  
Program       
expected to   
meet 2005     
target        
Illegal drug  Percentage  Notreported Notreported 30.7%              TBDc   >=19% 
interdiction  of cocaine                                                  
              removed out                                                 
              of total                                                    
              estimated                                                   
              cocaine                                                     
              entering                                                    
              the U.S.                                                    
              through                                                     
              maritime                                                    
              meansd                                                      
Programs not  
meeting 2005  
targets       
Defense       Percentage          70%         78%   76%               67%    100% 
readiness     of time                                                     
              units meet                                                  
              combat                                                      
              readiness                                                   
              level at                                                    
              C-2 level                                                   
Living marine Percentage        97.3%       97.1% 96.3%             96.4%  >= 97% 
resources     of                                                          
              fisherman                                                   
              found in                                                    
              compliance                                                  
              with                                                        
              regulations                                                 
Undocumented  Percentage        88.3%       85.3% 87.1%             85.5%  >= 88% 
migrant       of                                                          
interdiction  interdicted                                                 
              illegal                                                     
              migrants                                                    
              entering                                                    
              the U.S.                                                    
              through                                                     
              maritime                                                    
              means                                                       

Source: GAO analysis of Coast Guard performance data.

Performance targets met

Performance targets not met

Note: TBD, to be determined; NA, not available.

aThe target for ice operations noted here is for domestic icebreaking
only, and the target level varies according to the index of severity for
an entire winter. Thus, for those winters designated as severe, the target
is 8 or fewer closure days. For winters designated as average, the target
is 2 or fewer closure days. Because 2002 and 2004 were designated as
average winters, the 7 and 4 days of closures did not meet the target.

bThe ports, waterways, and coastal securities program did not have a
numeric target for the program's performance measure because this was the
first year this performance measure was used and a numeric baseline had
not been established. However, according to the Coast Guard, in the
absence of a numeric target, the program used, and met, a target of fully
implementing all planned activities geared toward lowering the risk due to
terrorism in the maritime domain.

cComplete data are not yet available for the illegal drug interdiction
program, however, the Coast Guard anticipates meeting the performance
target for this program based on past performance.

dThe performance measure for the illegal drug interdiction program, the
percent of cocaine removed, was revised in fiscal year 2004 from the
percent of cocaine seized in order to more accurately report the impact
Coast Guard counter-drug activities have on the illicit drug trade. As a
result, the cocaine removal rates for fiscal years 2002-2003 are not
available.

eThe Coast Guard did not have a performance target for the marine safety
performance measure in fiscal year 2002. Therefore, we were unable to
determine whether marine safety program results met a performance target
for fiscal year 2002.

             Programs Meeting Fiscal Year 2005 Performance Targets

           o  U.S. Exclusive Economic Zone Enforcement.34 The Coast Guard
           reported that in fiscal year 2005, it met the performance target
           for U.S. exclusive economic zone enforcement-defined as the number
           of foreign vessel incursions into the U. S. Exclusive Economic
           Zone, by detecting 174 foreign vessel incursions, within the
           performance target of 200 or less incursions. This represents a
           more than 30-percent decrease in foreign vessel incursions since
           fiscal year 2004, when the Coast Guard detected 247 incursions.
           Coast Guard officials attributed this decrease in incursions to
           many factors, including the agency's efforts in combating
           incursions, such as an increased number of air and water patrols,
           and the likelihood that some Mexican fleets known to cross into
           U.S. waters were damaged during the 2005 hurricane season.
           o  Ice operations. To meet this performance target, the Coast
           Guard's ice operations program must keep winter waterway closures
           to 8 days or fewer for severe winters and less than 2 days per
           year for average winters. According to Coast Guard documents, the
           agency met its target for an average winter with 0 days of
           waterway closures during the 2005 ice season.

           o  Search and rescue. The Coast Guard reported that performance in
           this area, as measured by the percentage of mariners' lives saved
           from imminent danger, was 86.1 percent, just above the target of
           86 percent for fiscal year 2005. This result is similar to the
           fiscal year 2004 result of saving 86.8 percent of lives in
           imminent danger. The Coast Guard identified continuing
           improvements in response resources and improvements made in
           commercial vessel and recreational boating safety as the main
           reasons for continuing to meet the target.

           o  Aids to navigation. According to Coast Guard reports, the aids
           to navigation program performance measure-that is, the 5-year
           average number of collisions, allisions, and groundings-improved
           in fiscal year 2005 by dropping to 1,825 incidents from 1,876
           incidents in fiscal year 2004. The fiscal year 2005 total was also
           below the target of 1,831. The Coast Guard attributes this
           continued decrease to a multifaceted system of prevention
           activities, including radio aids to navigation, communications,
           vessel traffic services, dredging, charting, regulations, and
           licensing.

           o  Ports, waterways, and coastal security. In fiscal year 2005,
           the Coast Guard began using a new measure of program
           performance-the percent reduction of terrorism-related risk in the
           maritime environment. According to Coast Guard officials, this
           measure is based on an assessment of the total amount of maritime
           risk under the Coast Guard's authority. At the end of each fiscal
           year the Coast Guard calculates the amount of this total risk that
           has been reduced by the program's activities throughout the fiscal
           year. Officials added that because of the dynamic and changing
           nature of risk, the total amount of maritime risk under the Coast
           Guard's authority-the baseline level of risk-is recalculated
           annually. Because this was the first year the agency used the
           measure, there was no previous performance baseline to establish a
           numeric annual target. However, according to the Coast Guard, in
           the absence of a numeric target, the program used, and met a
           target of fully implementing all planned activities geared toward
           lowering the risk due to terrorism in the maritime domain.

           o  Marine environmental protection. The marine environmental
           protection measure of performance is the 5-year average annual
           number of oil and chemical spills greater than 100 gallons per 100
           million tons shipped. According to Coast Guard reports, since
           fiscal year 2002, the reported average number of oil and chemical
           spills has dropped from 35.1 to 18.5 in fiscal year 2005. The
           Coast Guard identified its prevention, preparedness, and response
           programs-including industry partnerships and incentive programs-as
           reasons for the drop.

           o  Marine safety. The marine safety measure-a 5-year average of
           passenger and maritime deaths and injuries- achieved its fiscal
           year 2005 performance target of 1,317. During fiscal year 2005
           there were 1,311 incidents, a slight increase from 1,299 incidents
           in fiscal year 2004. Beginning in fiscal year 2006, the Coast
           Guard will use a revised version of this measure that includes
           injuries of recreational boaters as well, representing a broader
           and more complete view of marine safety.

34The exclusive economic zone is defined as an area within 200 miles of
U.S. shores in which U.S. citizens have primary harvesting rights to fish
stocks. The Coast Guard also refers to the U.S. exclusive economic zone
enforcement program as either the foreign fish enforcement program or as
other law enforcement.

Program Expected to Meet Fiscal Year 2005 Target

           o  Illegal drug interdiction. While complete results for the
           illegal drug interdiction performance measure-the rate at which
           the Coast Guard removes cocaine bound for the U.S. via
           non-commercial maritime transport-are not yet available, the Coast
           Guard anticipates exceeding the fiscal year 2005 target of
           removing 19 percent or more of cocaine bound for the U.S.
           According to Coast Guard officials, in fiscal year 2005 the Coast
           Guard removed a record 137.5 metric tons of cocaine bound for the
           U.S. Coast Guard officials believe that this record amount of
           cocaine removed will result in exceeding the fiscal year 2005
           performance target. Final program results are due to be published
           in July 2006.

Programs Not Meeting Targets in Fiscal Year 2005

           o  Defense Readiness. Defense readiness is measured by the percent
           of time that units meet combat readiness status at a C-2 level.35
           The Coast Guard reported that the overall level of performance for
           the defense readiness program decreased for the second consecutive
           year from a high of 78 percent in fiscal year 2003, to 76 percent
           in fiscal year 2004, and 67 percent in fiscal year 2005. According
           to Coast Guard officials, this decline in recent years was because
           of staffing shortages for certain security units within the
           defense readiness mission. According to Coast Guard officials, the
           agency intends to solve these staffing problems by offering
           incentives for participation as well as making participation
           mandatory instead of voluntary, as it was previously.

           o  Living marine resources. The Coast Guard reported that the
           performance measure for living marine resources-defined as the
           percentage of fishermen complying with federal regulations-was
           96.4 percent, just below the target of 97 percent for fiscal year
           2005. This result is similar to the fiscal year 2004 result of
           96.3 percent. According to Coast Guard officials, the agency
           missed the fiscal year 2005 target because of a variety of
           economic conditions and variables beyond Coast Guard control, such
           as hurricane damage, high fuel costs, fewer days-at-sea
           allocations, and lucrative seafood prices in some fisheries-which
           created greater incentives for fishermen to violate fishery
           regulations. The Coast Guard conducted 6,076 fisheries boardings
           in fiscal year 2005, an increase of more than 30 percent since
           fiscal year 2004. However, it is important to note that the
           compliance rate is a conservative estimate of agency performance
           because the Coast Guard targets vessels for boarding, thereby
           making it more likely that they will find vessels that are not in
           compliance with fishery regulations. According to Coast Guard
           officials, a key contributor to targeting vessels is the vessel
           monitoring system, which has enhanced the agency's ability to
           target vessels by providing more timely information.

           o  Undocumented migrant interdiction. According to Coast Guard
           reports, in fiscal year 2005 the Coast Guard did not meet its
           performance target of interdicting or deterring at least 88
           percent of undocumented aliens from Cuba, Haiti, the Dominican
           Republic, and China attempting to enter the U.S. through maritime
           routes. The Coast Guard identified 5,830 successful arrivals out
           of an estimated threat of 40,500 migrants yielding an interdiction
           and deterrence rate of 85.5 percent, a decrease from the fiscal
           year 2004 result of 87.1 percent. According to the Coast Guard,
           program performance decreased because the flow of migrants was
           higher than in previous years, increasing from almost 22,000 in
           fiscal year 2002, to more than 40,000 in fiscal year 2005. Coast
           Guard officials said that the agency is developing a new measure
           to better account for both the Coast Guard's efforts and the
           migrant flow to more accurately report program performance. This
           new measure will include migrants of all nationalities that
           successfully arrive in the U.S. through maritime routes.

35According to the Coast Guard, the C-2 combat readiness level is defined
as the level at which a unit possesses the resources and is trained to
undertake most of the wartime missions for which it is organized or
designed.

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GAO-06-546 . Washington, D.C.: April 28, 2006.

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Condition Issues and Program Management, but Acquisition Challenges
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Sustainability Remain Key Challenges. GAO-05-448T . Washington, D.C.: May
17, 2005.

Coast Guard: Preliminary Observations on the Condition of Deepwater Legacy
Assets and Acquisition Management Challenges. GAO05-307T . Washington,
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Request. GAO-05-364T . Washington, D.C.: March 17, 2005.

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Coast Guard: Key Management and Budget Challenges for Fiscal Year 2005 and
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Maritime Security: Progress Made in Implementing Maritime Transportation
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Coast Guard: Actions Needed to Mitigate Deepwater Project Risks.
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Coast Guard: Progress Being Made on Deepwater Project, but Risks Remain.
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Coast Guard: Strategies for Procuring New Ships, Aircraft, and Other
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Coast Guard's Acquisition Management: Deepwater Project's Justification
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Washington, D.C.: October 26, 1998.

(440491)

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Highlights of GAO-06-448T , a testimony before the Subcommittee on
Fisheries and Coast Guard, Committee on Commerce, Science, and
Transportation, U.S. Senate

June15, 2006

COAST GUARD

Observations on Agency Performance, Operations, and Future Challenges

According to the Coast Guard, the agency's fiscal year 2005 performance,
as self-measured by its ability to meet program goals, was the highest
since the terrorist attacks in September 2001. Even with the need to
sustain new homeland security duties, respond to particularly destructive
hurricanes, and cope with aging assets, the Coast Guard reported meeting
or exceeding performance targets for 7 of 11 mission programs, and it
anticipates meeting the target for 1 more program once final results for
the year are available. In particular, based on our discussions with Coast
Guard and other officials, as well as our review of pertinent documents,
the Coast Guard's response to Hurricane Katrina highlighted three elements
key to its mission performance: a priority on training and contingency
planning, a flexible organizational structure, and the agency's
operational principles.

Three organizational changes appear to be helping the Coast Guard adjust
to added responsibilities. First, according to agency officials, a
realigned field structure will allow local commanders to manage resources
more efficiently. Second, according to the Coast Guard, a new response
team for maritime security is expected to provide greater counterterrorism
capability. Finally, new and expanded partnerships inside and outside the
federal government have the potential to improve operational effectiveness
and efficiency.

While some progress in acquisition management has been made, continued
attention is warranted. Within the Deepwater program, additional action is
needed before certain past recommendations can be considered as fully
implemented. Also, the program recently had difficulties in acquiring Fast
Response Cutters to replace aging patrol boats. For the Rescue 21 program,
deficiencies in management and oversight appear similar to those that
plagued the Deepwater program, leading to delays and cost overruns, and
demonstrating that the Coast Guard has not translated past lessons learned
into improved acquisition practices. Two additional future challenges also
bear close attention: deteriorating buoy tenders and icebreakers that may
need additional resources to sustain or replace them, and maintaining
mission balance while taking on a new homeland security mission outside
the agency's traditional focus on the maritime environment.

Coast Guard Helicopters Such as the HH-65 (left) and HH-60 (right) Shown
Here Were Extensively Involved in the Rescues of Stranded Persons
Following Hurricane Katrina.

Source: Coast Guard.

The Coast Guard's fiscal year 2007 budget request totals $8.4 billion, an
increase of 4 percent ($328 million) over the approved budget for fiscal
year 2006 and a slowing of the agency's budget increases over the past 2
fiscal years.

This testimony, which is based on both current and past GAO work,
synthesizes the results of these reviews as they pertain to the following:

           o  meeting performance goals,

           o  adjusting to added responsibilities,

           o  acquiring new assets (especially the Deepwater program-to
           replace or upgrade cutters and aircraft, and the Rescue 21
           program-to modernize rescue communications), and

           o  meeting other future challenges.
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