Coast Guard: Preliminary Observations on Deepwater Program Assets
and Management Challenges (15-FEB-07, GAO-07-446T).		 
                                                                 
The U.S. Coast Guard's Deepwater program was designed to upgrade 
or replace its aging legacy aircraft and vessels with assets	 
focusing on the Coast Guard's traditional at-sea roles. After the
September 11, 2001 terrorist attacks, the Coast Guard took on	 
additional security missions, resulting in revisions to the	 
Deepwater plan. GAO's prior work raised concerns about Coast	 
Guard's efforts to upgrade or acquire assets on schedule, and	 
manage and effectively monitor the system integrator. This	 
testimony provides GAO's preliminary observations on (1) events  
and issues surrounding the Coast Guard's bridging strategy to	 
convert the legacy 110-foot patrol boats to 123-foot patrol	 
boats; (2) the status of the Coast Guard's efforts to acquire new
or upgraded Deepwater assets; and (3) the Coast Guard's ability  
to effectively manage the Deepwater program, hold contractors	 
accountable, and control costs through competition. GAO's	 
preliminary observations are based on audit work performed from  
August 2006 to February 2007.					 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-07-446T					        
    ACCNO:   A65986						        
  TITLE:     Coast Guard: Preliminary Observations on Deepwater       
Program Assets and Management Challenges			 
     DATE:   02/15/2007 
  SUBJECT:   Aircraft						 
	     Competition					 
	     Contract administration				 
	     Cost control					 
	     Equipment upgrades 				 
	     Human capital management				 
	     Military forces					 
	     Military procurement				 
	     Performance measures				 
	     Program evaluation 				 
	     Program management 				 
	     Risk assessment					 
	     Schedule slippages 				 
	     Ships						 
	     Strategic planning 				 
	     Technology modernization programs			 
	     Coast Guard Deepwater Project			 
	     Coast Guard Integrated Deepwater System		 
	     Fast Response Cutter				 
	     Long-Range Interceptor				 
	     National Security Cutter				 
	     Offshore Patrol Cutter				 
	     Short-Range Prosecutor				 

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GAO-07-446T

   

     * [1]Summary
     * [2]Background
     * [3]Coast Guard Removed 123-foot Patrol Boats from Service for O
     * [4]Deepwater Asset Delivery Schedule is Mixed, with 7 of 10 on

          * [5]Assets That Are on Schedule as of January 2007

               * [6]Long-Range Interceptor
               * [7]Short-Range Prosecutor
               * [8]Maritime Patrol Aircraft
               * [9]Long-Range Surveillance Aircraft
               * [10]Medium-Range Recovery Helicopter
               * [11]Multi-Mission Cutter Helicopter

          * [12]Deepwater Asset Reported to Be on Schedule as of January 200

               * [13]National Security Cutter

          * [14]Deepwater Assets Behind Schedule as of January 2007

               * [15]Offshore Patrol Cutter
               * [16]Fast Response Cutter
               * [17]Vertical Unmanned Aerial Vehicle

     * [18]Preliminary Observations on the Status of Deepwater Program

          * [19]Program Management

               * [20]Integrated Product Teams
               * [21]Human Capital
               * [22]Communications with Field Personnel

          * [23]Concerns Remain with Holding System Integrator Accountable

               * [24]Award Fee Criteria
               * [25]Award Term Evaluation
               * [26]Establishing Criteria and Documenting Changes to the
                 Baselin

          * [27]Limited Knowledge of Cost Control Achieved Through Competiti

     * [28]GAO Contact and Staff Acknowledgments
     * [29]GAO's Mission
     * [30]Obtaining Copies of GAO Reports and Testimony

          * [31]Order by Mail or Phone

     * [32]To Report Fraud, Waste, and Abuse in Federal Programs
     * [33]Congressional Relations
     * [34]Public Affairs

Testimony Before the Subcommittee on Homeland Security, Committee on
Appropriations, House of Representatives

United States Government Accountability Office

GAO

For Release on Delivery Expected at 10:00 a.m. EST

Thursday, February 15, 2007

COAST GUARD

Preliminary Observations on Deepwater Program Assets and Management
Challenges

Statement of John P. Hutton, Acting Director Acquisition and Sourcing
Management

GAO-07-446T

Mr. Chairman and Members of the Subcommittee:

I appreciate the opportunity to participate in today's hearing to discuss
our preliminary observations on the status of the United States Coast
Guard's Integrated Deepwater System program. These observations are based
upon our ongoing analysis for this Committee and the Senate Appropriations
Committee, and we plan to provide a more complete analysis when we issue
our report later this year.

Deepwater is a 25-year, $24-billion effort to upgrade or replace existing
Coast Guard aircraft and vessels in order to carry out its missions along
our coastlines and farther out at sea. An initial emphasis of the
Deepwater program was to improve existing assets, known as "legacy"
assets, as a bridging strategy until new assets could be delivered and
begin operating. One of the key legacy assets to be improved was the
110-foot patrol boat, which was to be converted to a 123-foot patrol boat
by lengthening the hull and modernizing various components. While the
Coast Guard originally planned to convert all 49 of its 110-foot patrol
boats to 123-foot patrol boats, it halted the patrol boat conversion
program after 8 boats because of hull buckling and the inability of these
converted patrol boats to meet post-September 11, 2001 mission
requirements.

The Deepwater program is eventually to include 10 major classes of new or
upgraded assets--5 major classes each of aircraft and vessels. By 2027,
under these 10 asset classes, a total of 215 vessels and 240 aircraft are
to be acquired or upgraded. To carry out this effort, the Coast Guard has
relied on an acquisition strategy that allows a prime contractor (system
integrator) to manage the acquisition process, including identifying the
assets needed, and then using tiers of subcontractors to design and build
the assets.

Since 2001, we have reviewed the Deepwater program and have informed
Congress, the Department of Homeland Security (DHS), and the Coast Guard
of the problems, risks, and uncertainties inherent with such a large
acquisition. In March 2004, we made recommendations to the Coast Guard to
address three broad areas of concern: improving program management,
strengthening contractor accountability, and promoting cost control
through greater competition among potential subcontractors.^1 In April
2006, we issued a follow-on report describing efforts the Coast Guard had
taken to address the outstanding recommendations.^2

1GAO, Contract Management: Coast Guard's Deepwater Program Needs Increased
Attention to Management and Contractor Oversight, [35]GAO-04-380
(Washington, D.C.: Mar. 9, 2004).

This statement offers preliminary observations on the Coast Guard's
management of the Deepwater program. Specifically, it discusses:

           o events and issues surrounding the problems encountered with the
           Coast Guard's bridging strategy to convert the legacy 110-foot
           patrol boats to 123-foot patrol boats;
           o the status of the Coast Guard's efforts to acquire new or
           upgraded Deepwater assets; and
           o the Coast Guard's ability to effectively manage the Deepwater
           program, hold contractors accountable, and control costs through
           competition.

The preliminary findings and observations noted in this testimony are
based on our review of key documents, including the 2005 Deepwater
Acquisition Program Baseline; schedule information provided by the Coast
Guard; Coast Guard memoranda regarding the 123-foot patrol boat
conversion; and Coast Guard's human capital plan, its award fee and award
term documentation, and its competition monitoring plan. We conducted
interviews with Coast Guard officials at agency headquarters in
Washington, D.C.; officials in Coast Guard's System Integration Program
Office in Arlington, VA; and Coast Guard contractor staff. In addition, we
interviewed Coast Guard officials during visits to the Pacific and
Atlantic Area Commands and their associated Maintenance and Logistics
Commands and at the Coast Guard's Aircraft Repair and Supply Center. Our
work was conducted from August 2006 to February 2007 in accordance with
generally accepted government auditing standards. Appendix I contains a
list of related GAO products.

Summary

Numerous events, dating back to January 2001, resulted in the failure of
the Coast Guard's bridging strategy to convert its legacy 110-foot patrol
boats into 123-foot patrol boats. These converted boats were removed from
service on November 30, 2006 because of operational and safety concerns.
Specifically, the Coast Guard cited that the 123-foot patrol boats in
service in Key West, Florida displayed deck cracking, hull buckling, and
shaft alignment problems related to other structural issues. The mission
of these boats involved, among other things, drug interdiction,
intercepting illegal aliens, and providing support for antiterrorist
activities. According to the Commandant of the Coast Guard, actions are
being taken to mitigate the impact of the removal of these patrol boats on
mission activities. For example, patrol hours of some 110-foot patrol
boats have been increased through the addition of crews from the 123-foot
patrol boats; other Coast Guard vessels have been deployed to assist in
missions formerly performed by the 123-foot patrol boats; and permission
has been secured from the U.S. Navy to continue using 179-foot cutters on
loan for an additional 5 years. We will continue to review the actions the
Coast Guard is taking to mitigate the removal from service of the 123-foot
patrol boats.

^2 GAO, Coast Guard: Changes to Deepwater Appear Sound, and Program
Management Has Improved, but Continued Monitoring is Warranted,
[36]GAO-06-546 (Washington, D.C.: Apr. 28, 2006).

Of the 10 classes of upgraded or new Deepwater aircraft and vessels, the
delivery record for first-in-class assets (that is, the first of multiple
aircraft or vessels to be delivered within each class) is mixed.
Specifically, 7 of the 10 asset classes are on or ahead of schedule. Among
these, 5 first-in-class assets have been delivered on or ahead of
schedule; and 2 others remain on schedule but their planned delivery dates
are in 2009 or beyond. Three Deepwater asset classes are currently behind
schedule due to various problems related to designs, technology, or
funding. For example, the Fast Response Cutter (a new vessel), which had
been scheduled for first-in-class delivery in 2007, has been delayed by at
least 2 years in part because work on its design was suspended until
technical problems related to its hull and other issues can be addressed.
The Vertical Unmanned Aerial Vehicle (a new aircraft), which had also been
scheduled for delivery in 2007, has been delayed by 6 years due to
evolving technological developments, among other things. In addition, the
Offshore Patrol Cutter, which had a planned delivery date in 2010, has now
been delayed by 5 years.

In 2001, we described the Deepwater project as risky due to the unique,
untried acquisition strategy for a project of this magnitude within the
Coast Guard--a "systems of systems" approach with a contractor as the
integrator. In 2004, we reported that there were significant risks related
to program management, contractor accountability, and cost control, and we
made recommendations in all these areas. The Coast Guard's ability to
effectively manage the program has been challenged by staffing shortfalls
and poor communication and collaboration among Deepwater program staff,
contractors, and field personnel. Despite documented problems in schedule,
performance, cost control, and contract administration, measures for
holding the contractor accountable resulted in an award fee of $4 million
(of the maximum $4.6 million) for the first year. Through the first 4
years of the Deepwater contract, the system integrator received award fees
that ranged from 87 percent to 92 percent of the total possible award fee
(scores that ranged from "very good" to "excellent" based on Coast Guard
criteria), for a total of over $16 million. Further, the program's ability
to control Deepwater costs is uncertain given the Coast Guard's lack of
detailed information on the contractor's competition decisions. While the
Coast Guard has taken some actions to improve program outcomes, our
assessment of the program and its efforts to address our recommendations
continues, and we plan to report on our findings later this year.

Background

The Coast Guard is the lead federal agency for maritime security within
DHS. The Coast Guard is responsible for a variety of missions, including
ensuring ports, waterways, and coastline security; conducting search and
rescue missions; interdicting illicit drug shipments and illegal aliens;
and enforcing fisheries laws. In 1996, in order to continue carrying out
its responsibilities and operations, the Coast Guard initiated the
Deepwater program to replace or upgrade its aging vessels, aircraft, and
other essential equipment.

As originally conceived, Deepwater was designed around producing aircraft
and vessels that would function in the Coast Guard's traditional at-sea
roles--such as interdicting illicit drug shipments or rescuing mariners
from difficulty at sea--and the original 2002 Deepwater program was
focused on those traditional missions. After the terrorist attacks on
September 11, 2001, the Coast Guard was also assigned homeland security
missions related to protection of ports, waterways, and coastal areas.
Based on its revised mission responsibilities, the Coast Guard updated its
Deepwater Acquisition Program Baseline in November 2005. The new baseline
contained changes in the balance between new assets to be acquired and
legacy assets to be upgraded and adjusted the delivery schedule and costs
for many of these assets. Overall, the Deepwater acquisition schedule was
lengthened by 5 years, with the final assets now scheduled for delivery in
2027.

Upon its completion, the Deepwater program is to consist of 5 new classes
of vessels, 1 new class of fixed-wing aircraft, 1 new class of unmanned
aerial vehicles, 2 classes of upgraded helicopters, and 1 class of
upgraded fixed-wing aircraft.^3 The 215 new vessels consist of five new
asset classes--the National Security Cutter (NSC), Offshore Patrol Cutter
(OPC), Fast Response Cutter (FRC), Long-Range Interceptor (LRI), and
Short-Range Prosecutor (SRP). The 240 aircraft are composed of two new
aircraft classes, the Vertical Unmanned Aerial Vehicle (VUAV) and the
Maritime Patrol Aircraft (MPA); and three upgraded asset classes--the
Long-Range Surveillance Aircraft (LRS), Medium-Range Recovery Helicopter
(MRR), and the Multi-Mission Cutter Helicopter (MCH).

^3In addition to these asset classes, Coast Guard plans to procure
surveillance data from another unmanned aerial vehicle, the RQ-4A. Because
this is not to be acquired as a capital investment, we do not include it
among the assets to be acquired or upgraded.

Table 1 provides an overview, by asset class, of the Deepwater vessels to
be acquired and table 2 provides an overview of the Deepwater aircraft to
be acquired or upgraded. As noted in Table 1, the 140-foot FRC was
designated as a replacement vessel for the 110-foot and 123-foot patrol
boats.

Table 1: Deepwater Vessels to be Acquired

Table 2: Deepwater Aircraft to be Upgraded or Acquired

Since 2001, we have reviewed the Deepwater program and have informed
Congress, DHS, and Coast Guard of the problems, risks, and uncertainties
inherent with such a large acquisition that relies on a system integrator
to identify the assets needed and then using tiers of subcontractors to
design and build the assets. In March 2004, we made recommendations to the
Coast Guard to address three broad areas of concern: improving program
management, strengthening contractor accountability, and promoting cost
control through greater competition among potential subcontractors (see
table 3). ^4 We have issued a number of follow-on reports describing
efforts the Coast Guard has taken to address these recommendations. (See
app. I for a list of related GAO products.)

^4 [37]GAO-04-380

Table 3: Status of GAO Recommendations to the U.S. Coast Guard Regarding
Management of the Deepwater Program, as of April 28, 2006

                     Recommendations to the                Recommendation
Areas of concern  U.S. Coast Guard                      status
Key components    Put in place a human                  Implemented (human
of management     capital plan to ensure                capital plan was
and oversight     adequate staffing of the              implemented)
                     Deepwater program                         
                     Improve integrated        Partially   
                     product teams (IPTs)      implemented 
                     responsible for managing              
                     the program by providing              
                     better training,                      
                     approving charters for                
                     sub-IPTs, and improving               
                     systems for sharing                   
                     information between                   
                     teams                                 
                     Provide field operators   Partially   
                     and maintenance           implemented 
                     personnel with timely                 
                     information and training              
                     on how the transition to              
                     Deepwater assets will                 
                     occur and how                         
                     maintenance                           
                     responsibilities are to               
                     be divided between the                
                     system integrator and                 
                     Coast Guard personnel                 
Procedures for    Develop measurable award              Implemented
ensuring          fee criteria consistent                   
contractor        with guidance from the                    
accountability    Office of Federal                         
                     Procurement Policy                        
                     Provide for better input  Implemented 
                     from U.S. Coast Guard                 
                     performance monitors                  
                     Hold the system           Implemented 
                     integrator accountable                
                     in future award fee                   
                     determinations for                    
                     improving effectiveness               
                     of the IPTs                           
                     Establish a baseline for  Will not be 
                     determining whether the   implemented 
                     acquisition approach is               
                     costing the government                
                     more than the                         
                     traditional asset                     
                     replacement approach                  
                     Establish a time frame    Partially   
                     for when the models and   implemented 
                     metrics will be in place              
                     with the appropriate                  
                     degree of fidelity to be              
                     able to measure                       
                     contractor's progress                 
                     toward improving                      
                     operational                           
                     effectiveness                         
                     Establish criteria to     Partially   
                     determine when to adjust  implemented 
                     the project baseline and              
                     document the reasons for              
                     change                                
Control of        For subcontracts over $5              Implemented
future costs      million awarded by the                    
through           system integrator to the                  
competition       two major subcontractors,                 
                     require notification to                   
                     the Coast Guard about                     
                     decision to perform the                   
                     work in-house rather than                 
                     contracting it out                        
                     Develop a comprehensive   Partially   
                     plan for holding the      implemented 
                     system integrator                     
                     accountable for ensuring              
                     adequate competition                  
                     among suppliers                       

Source: GAO-04-380 and GAO-06-546.

Coast Guard Removed 123-foot Patrol Boats from Service for Operational and
Safety Reasons, and is Acting to Mitigate Operational Impacts

Between January 2001 and November 2006, numerous events led up to the
failure of the Coast Guard's bridging strategy to convert the legacy
110-foot patrol boats into 123-foot patrol boats. In January 2001, an
independent study found that the 110-foot patrol boats based in south
Florida and Puerto Rico were experiencing severe hull corrosion and that
their structural integrity was deteriorating rapidly.^5 To address these
issues, the Coast Guard's original (2002) Deepwater plan included a
strategy to convert all 49 of the 110-foot patrol boats into 123-foot
patrol boats to strengthen the hulls. Also, the plan was to provide
additional capabilities, such as stern launch and recovery capabilities
and enhanced and improved command, control, communications, computers,
intelligence, surveillance, and reconnaissance (C4ISR). While Coast Guard
originally planned to convert all 49 of its 110-foot patrol boats to
123-foot patrol boats, it halted the patrol boat conversion program after
8 boats because of continued hull buckling and the inability of these
converted patrol boats to meet post-September 11, 2001 mission
requirements. These 8 converted boats were removed from service on
November 30, 2006 because of operational and safety concerns.

The first patrol boat conversion was completed in March 2004, on the
Matagorda. Between March 2004 and late August 2004, the Matagorda
underwent additional maintenance that was not included in the contract to
convert it to 123 feet, according to Coast Guard officials. On September
10, 2004, while en route to its home port in Key West, the Matagorda
experienced hull and deck buckling, while transiting the Gulf of Mexico.

By March 2005, 2 other converted 123-foot patrol boats, the Nunivak and
the Padre, also began experiencing problems with hull buckling. That same
month, similar hull deformations were discovered in 3 other 123-foot
patrol boats--the Metompkin, Vashon, and Monhegan. As a result of the
deteriorating hull conditions, Coast Guard imposed operational
restrictions in April 2005 on the 123-foot patrol boats. These
restrictions specified that the converted patrol boats could not operate
in seas with wave heights exceeding 8 feet (they were originally intended
to operate in seas up to roughly 13 feet) and that they had to operate at
reduced speeds. Figure 1 provides a timeline of key events that led to the
eventual removal from service of the 123-foot patrol boats.

^5 CSC Advanced Marine, Evaluation of the 110' WPB Class Cutter Fleet
(January 2001).

Figure 1: Timeline of Key Events Leading to Removal from Service of
123-foot Patrol Boats

The Coast Guard is taking actions to mitigate the operational impacts
resulting from the removal of the 123-foot patrol boats from service.
Specifically, in recent testimony, the Commandant of the Coast Guard
stated that Coast Guard has taken the following actions:

           o multi-crewing certain 110-foot patrol boats with crews from the
           123-foot patrol boats that have been removed from service so that
           patrol hours for these vessels can be increased;
           o deploying other Coast Guard vessels to assist in missions
           formerly performed by the 123-foot patrol boats; and
           o securing permission from the U.S. Navy to continue using
           179-foot cutters on loan from the Navy for an additional 5 years
           (these were originally to be returned to the Navy in 2008) to
           supplement the Coast Guard's patrol craft.

We will continue to review the actions the Coast Guard is taking to
mitigate the removal from service of the 123-foot patrol boats as part of
our ongoing work.

Deepwater Asset Delivery Schedule is Mixed, with 7 of 10 on or Ahead of Schedule
and 3 Behind Due to Various Factors

Our review of available data show that as of January 2007, of the 10
classes of Deepwater assets to be acquired or upgraded, 4 are ahead of
schedule; 3 remain on schedule (and for 1 of these, design problems have
arisen); and 3 are behind scheduled delivery and face design, funding, or
technology challenges. Using the 2005 Deepwater Acquisition Program
Baseline as the baseline, figure 2 indicates, for each asset class,
whether delivery of the first-in-class (that is, the first of several to
be produced in its class) is ahead of schedule, on schedule, or behind
schedule, as of January 2007.

Figure 2: Comparison of the Estimated Delivery Dates for the
First-in-Class Deepwater Assets from the 2005 Deepwater Acquisition
Baseline and as of January 2007

Among the Deepwater assets, 3 of the 5 aircraft classes are upgrades to
existing legacy systems, and these are all on or ahead of schedule; 1 new
aircraft class is ahead of schedule; and the remaining new aircraft class
is 6 years behind schedule. With respect to Deepwater vessels, all 5 asset
classes are new, and of these, 2 are behind schedule, and a third, while
on schedule, faces structural modifications. The remaining 2 new maritime
assets are small vessels that are on or ahead of schedule at this time.
Table 4 provides an overview of schedule status for the Deepwater aircraft
and vessel classes.

Table 4: Delivery Status of the Deepwater Aircraft and Vessels, as of
January 2007

Asset category           Behind schedule On schedule Ahead of schedule 
Upgraded legacy aircraft N/A^a           MCH         LRS, MRR          
New aircraft             VUAV            N/A^a       MPA               
New vessels              OPC, FRC^b      NSC, LRI    SRP               

Source: GAO analysis of Coast Guard data.

aThere are no such assets in this category.

bThe FRC will replace the 110-foot and 123-foot patrol boats.

Assets That Are on Schedule as of January 2007

The status of each asset class, and our preliminary observations on the
factors affecting their status, is discussed below.

  Long-Range Interceptor

The LRI is a 36-foot small boat that is to be carried and deployed on each
NSC and OPC. Coast Guard has one LRI on contract for delivery in August
2007, to match delivery of the first NSC.

  Short-Range Prosecutor

According to the Coast Guard, the SRP is on schedule at this time and 8
have been delivered to date. Coast Guard is currently planning to pursue
construction and delivery of the remaining SRPs outside of the system
integrator contract. By doing so, the Coast Guard expects to achieve a
cost savings.

  Maritime Patrol Aircraft

The MPA is a commercial aircraft produced in Spain that is being acquired
to replace the legacy HU-25 aircraft and will permit the Coast Guard to
carry out missions, such as search and rescue, marine environmental
protection, and maritime security. The first MPA was delivered to the
Coast Guard in December 2006, and the second and third are due for
delivery by April 2007. Pilots and aircrew participated in training
classes in Spain, and Coast Guard is to take responsibility for the
development and implementation of MPA's maintenance and logistics.

  Long-Range Surveillance Aircraft

The LRS is an upgraded legacy fixed-wing aircraft that includes 6 C-130Js
and 16 C-130Hs. The first aircraft entered the modification process in
January 2007, and five additional aircraft are to be modified by July
2008. In fiscal year 2008, funding has been requested to upgrade the
C-130H radar and avionics, and for the C-130J fleet introduction.

  Medium-Range Recovery Helicopter

The MRR is an upgraded legacy HH-60 helicopter. It began receiving a
series of upgrades beginning in fiscal year 2006, which will continue into
fiscal year 2012, including the service life extension program and radar
upgrades.

  Multi-Mission Cutter Helicopter

The MCH is an upgraded legacy HH-65 helicopter. According to Coast Guard
officials, the MCH assets will not have a single delivery date, as the
process involves three phases of upgrades. Phase I is the purchase and
delivery of new engines and engine control systems, Phase II is a
service-life extension program, and Phase III includes communications
upgrades. A Coast Guard official stated that 84 of the 95 HH-65s should be
re-engined by June 2007, and all 95 should be finished by October 2007.
The fiscal year 2008 congressional justification states that Phase II
began in fiscal year 2007 and will end in fiscal year 2014, and that Phase
III is to begin in fiscal year 2008 and is to end in fiscal year 2014.

Deepwater Asset Reported to Be on Schedule as of January 2007, Despite Design
Issues

  National Security Cutter

According to Coast Guard documentation, the NSC is on schedule for
delivery despite required modifications regarding its structural
integrity. In particular, the Coast Guard Commandant recently stated that
internal reviews by Coast Guard engineers, as well as by independent
analysts, have concluded that the NSC, as designed, will need structural
reinforcement to meet its expected 30-year service life. In addition, the
DHS Office of Inspector General recently reported that the NSC design will
not achieve a 30-year service life based on an operating profile of 230
days underway per year in general Atlantic and North Pacific sea
conditions and added that Coast Guard technical experts believe the NSC's
design deficiencies will lead to increased maintenance costs and reduced
service life.^6

To address the structural modifications of the NSC, Coast Guard is taking
a two-pronged approach. First, Coast Guard is working with contractors to
enhance the structural integrity of the hulls of the remaining six NSCs
that have not yet been constructed. Second, after determining that the
NSC's deficiencies are not related to the safe operation of the vessel in
the near term, Coast Guard has decided to address the structural
modifications of the hulls of the first two cutters as part of planned
depot-level maintenance about 5 years after they are delivered. The
Commandant stated that he decided to delay the repairs to these hulls to
prevent further delays in construction and delivery.

^6 DHS OIG-07-23.

Deepwater Assets Behind Schedule as of January 2007

  Offshore Patrol Cutter

Coast Guard officials have stated that further work on the development of
the OPC is on hold and the Coast Guard did not request funding for the OPC
in fiscal years 2007 or 2008. Delivery of the first OPC has been delayed
by 5 years--from 2010 to 2015.

  Fast Response Cutter

Concerns about the viability of the design of the FRC have delayed the
delivery of the first FRC by at least 2 years. As we have previously
reported,^7 design and delivery of the original FRC was accelerated as a
bridging strategy to offset the failed conversion of the 110-foot patrol
boats into 123-foot patrol boats. According to the 2005 Deepwater
Acquisition Program Baseline, the first FRC was scheduled to be delivered
in 2007--11 years earlier than the 2018 date listed in the original (2002)
Deepwater plan. Coast Guard suspended design work on the FRC in late
February 2006; however, because of design risks, including excessive
weight and horsepower requirements. As a result, Coast Guard is moving
forward with a "dual-path approach" for acquiring new patrol boats to
replace its existing 110-foot and 123-foot patrol boats.

The first component of this dual path approach is to have the Deepwater
system integrator purchase a commercial (off-the-shelf) patrol boat design
that can be adapted for Coast Guard use.^8 According to Coast Guard
officials, unlike the original plans, this FRC class is not expected to
meet all performance requirements originally specified, but is intended as
a way to field an FRC more quickly than would otherwise occur and that
can, therefore, serve as an interim replacement for the deteriorating
fleet of 110-foot patrol boats. The Coast Guard Commandant recently stated
that the Coast Guard expects delivery of the commercial FRCs in the first
half of fiscal year 2010, about 2 years behind the estimated delivery date
specified in the 2005 Deepwater Acquisition Program Baseline.

^7GAO, Coast Guard: Status of Deepwater Fast Response Cutter Design
Efforts, [38]GAO-06-764 (Washington, D.C.: June 23, 2006).

The second component of the dual-path approach is to eventually acquire
another cutter--a redesigned FRC.^9 However, due to continuing questions
about the feasibility of its planned composite hull, Coast Guard has now
further delayed a decision about its development or acquisition until it
receives results from two studies. First, the Coast Guard is conducting a
business case analysis comparing the use of composite versus steel hulls.
Second, the Coast Guard told us that DHS's Science and Technology
Directorate will be conducting tests on composite hull technology, and
that it will wait to see the results of these tests before making a
decision on the redesigned FRC. Until recently, the Coast Guard
anticipated delivery of the redesigned FRC in 2009 or 2010. However, the
decision to not request funding for this redesigned FRC in fiscal year
2008, and to await the results of both studies before moving forward, will
likely further delay delivery of the redesigned FRC.

  Vertical Unmanned Aerial Vehicle

According to the Coast Guard, evolving technological developments and the
corresponding amount of funding provided in fiscal year 2006 have delayed
the delivery of the VUAV by 6 years--from 2007 to 2013. As a result, the
Coast Guard has adjusted the VUAV development plan. The fiscal year 2008
DHS congressional budget justification indicates that the Coast Guard does
not plan to request funding for the VUAV through fiscal year 2012. Coast
Guard originally intended on matching the NSC and VUAV delivery dates so
that the VUAV could be launched from the NSC to provide surveillance
capabilities beyond the cutter's visual range or sensors. However, with
the delay in the VUAV's development schedule, it no longer aligns with the
NSC's initial deployment schedule. Specifically, Coast Guard officials
stated that the VUAV will not be integrated with the NSC before fiscal
year 2013, 6 years later than planned. Coast Guard officials stated that
they are discussing how to address the operational impacts of having the
NSC operate without the VUAV. In addition, Coast Guard officials explained
that since the time of the original contract award, the Department of
Defense has progressed in developing a different unmanned aerial
vehicle--the Fire Scout--that Coast Guard officials say is more closely
aligned with Coast Guard needs. Coast Guard has issued a contract to an
independent third party to compare the capabilities of its planned VUAV to
the Fire Scout.

^8 Coast Guard refers to this vessel as the FRC-B.

^9 Coast Guard refers to this as the FRC-A.

Preliminary Observations on the Status of Deepwater Program Management,
Contractor Accountability, and Cost Control

Since the inception of the Deepwater program, we have expressed concerns
about the risks involved with the Coast Guard's system-of-systems
acquisition approach and the Coast Guard's ability to manage and oversee
the program. Our concerns have centered on three main areas: program
management, contractor accountability, and cost control through
competition. We have made a number of recommendations to improve the
program--most of which the Coast Guard has agreed with and is working to
address. However, while actions are under way, a project of this magnitude
will likely continue to experience other problems as more becomes known.
We will continue our work focusing on the Coast Guard's efforts to address
our recommendations and report on our findings later this year.

Program Management

In 2004, we reported that the Coast Guard had not effectively implemented
key components needed to manage and oversee the system integrator.
Specifically, we reported at that time and subsequently on issues related
to integrated product teams (IPT), the Coast Guard's human capital
strategy, and communication with field personnel (individuals responsible
for operating and maintaining the assets). Our preliminary observations on
the Coast Guard's progress in improving these program management areas,
based on our ongoing work, follow.

  Integrated Product Teams

In 2004, we found that IPTs, the Coast Guard's primary tool for managing
the Deepwater program and overseeing the contractor, had not been
effective due to changing membership, understaffing, insufficient
training, lack of authority for decision making, and inadequate
communication. We recommended the Coast Guard take actions to address IPT
effectiveness. We subsequently reported that IPT decision-making was to a
large extent stove-piped, and some teams lacked adequate authority to make
decisions within their realm of responsibility.^10 Coast Guard officials
believed collaboration among the subcontractors was problematic and that
the system integrator wielded little influence to compel decisions among
them. For example, proposed design changes to assets under construction
were submitted as two separate proposals from both subcontractors rather
than one coherent plan. According to Coast Guard performance monitors,
this approach complicated the government review of design changes because
the two proposals often carried overlapping work items, thereby forcing
the Coast Guard to act as the system integrator in those situations.
Although some efforts have been made to improve the effectiveness of the
IPTs--such as providing them with more timely charters and entry-level
training--our preliminary observations are that more improvements are
needed.

The Coast Guard's ability to assess IPT performance continues to be
problematic. Former assessments of IPT effectiveness simply focused on
measures such as frequency of meetings, attendance, and training. As a
result, IPTs received positive assessments while the assets under their
realm of responsibility--such as the National Security Cutter--were
experiencing problems. The new team measurements include outcome-based
metrics such as cost and schedule performance of assets (ships, aircraft,
and command, control, communications, computers, intelligence,
surveillance, and reconnaissance (C4ISR)). However, Deepwater's overall
program management quarterly report shows that the connection between IPT
performance and program results continues to be misaligned.^11 For
example, the first quarterly report to incorporate the new measurements,
covering the period October to December 2006, indicates that the IPTs'
performance for all domains is "on-schedule or non-problematic" even while
some assets' cost or schedule performance is rated "behind schedule or
problematic." ^12 Further, even though the Deepwater program is addressing
fundamental problems surrounding the 123-foot patrol boat and FRC, IPTs no
longer exist for these assets. In some cases, Coast Guard officials stated
they have established work groups outside of the existing IPT structure to
address identified issues and problems related to assets, such as the NSC.
We will continue to review the IPTs' roles and relevance in the management
of the Deepwater program.

^10 GAO, Coast Guard: Progress Being Made on Addressing Legacy Asset
Condition Issues and Program Management, but Acquisition Challenges
Remain, GAO-05-757 (Washington, D.C.: July 22, 2005).

^11 The program management reports were produced on a monthly basis in the
past; now they are produced on a quarterly basis.

^12 IPTs are focused on the development and fielding of a particular
product (e.g., the NSC) and are organized by domain. Examples of domains
are air, surface, C4ISR, and legacy assets.

  Human Capital

We also reported in 2004 that the Coast Guard had not adequately staffed
its program management function for Deepwater. Although its Deepwater
human capital plan set a goal of a 95 percent or higher "fill rate"
annually for both military and civilian personnel, funded positions were
below this goal. We recommended that the Coast Guard follow the procedures
in its Deepwater human capital plan to ensure that adequate staffing was
in place and that turnover of Coast Guard military personnel was
proactively addressed. The Coast Guard subsequently revised its Deepwater
human capital plan in February 2005 to emphasize workforce planning,
including determining needed knowledge, skills, and abilities and
developing ways to leverage institutional knowledge as staff rotate out of
the program. We reported in 2005 that the Coast Guard also took some
short-term steps to improve Deepwater program staffing, such as hiring
contractors to assist with program support functions, shifting some
positions from military to civilian to mitigate turnover risk, and
identifying hard-to-fill positions and developing recruitment plans
specifically for them.

However, in February 2007, Coast Guard officials told us that key human
capital management objectives outlined in the revised plan have not been
accomplished and that the staffing levels needed to accomplish the known
workload have not been achieved. In one example, a manager cited the need
for five additional staff per asset under his domain to satisfy the
current workload in a timely manner: contracting officer's technical
representative, scheduler, cost estimator, analyst, and configuration
manager. Further, a February 2007 independent analysis found that the
Coast Guard does not possess a sufficient number of acquisition personnel
or the right level of experience needed to manage the Deepwater
program.^13 The Coast Guard has identified an acquisition structure
re-organization that includes human capital as one component of the
reform. We will continue to monitor the implementation of the
reorganization as part of our ongoing work.

  Communications with Field Personnel

In 2004, we found that the Coast Guard had not adequately communicated to
field personnel decisions on how the new and old assets were to be
integrated during the transition and whether Coast Guard or system
integrator personnel--or both--would be responsible for maintenance. We
recommended that the Coast Guard provide timely information and training
on the transition to Deepwater assets. In 2006, we reported that the Coast
Guard had taken some steps to improve communications between Deepwater
program and field personnel, including having field personnel as members
on some IPTs. However, we continued to express concerns that field
personnel were not receiving important information regarding training,
maintenance, and integration of new Deepwater assets.

^13 Defense Acquisition University, Quick Look Study: United States Coast
Guard Deepwater Program, (Fort Belvoir, VA.): Feb. 5, 2007

During our ongoing work, the field personnel involved in operating and
maintaining the assets and Deepwater program staff we interviewed
expressed continued concern that maintenance and logistics plans had not
been finalized. Another official commented that there continues to be a
lack of clarity defining roles and responsibilities between the Coast
Guard and system integrator for maintenance and logistics. Coast Guard
officials stated in fall 2006 that the system integrator was contractually
responsible for developing key documents related to plans for the
maintenance and logistics for the NSC and Maritime Patrol Aircraft.
However, Deepwater program officials stated that because the Coast Guard
was not satisfied with the level of detail provided in early drafts of
these plans, it was simultaneously developing "interim" plans that it
could rely on while the system integrator continued to develop its own
versions. While the Coast Guard's more active role may help its ability to
ensure adequate support for Deepwater assets that are coming on-line in
the near term, our on-going work will continue to focus on this issue.

Concerns Remain with Holding System Integrator Accountable

Our 2004 review revealed that the Coast Guard had not developed
quantifiable metrics to hold the system integrator accountable for its
ongoing performance. For example, the process by which the Coast Guard
assessed performance to make the award fee determination after the first
year of the contract lacked rigor. At that time, we also found that the
Coast Guard had not yet begun to measure contractor performance against
Deepwater program goals--the information it would need by June 2006 to
decide whether to extend the system integrator's contract award term by up
to another 5 years. Additionally, we noted that the Coast Guard needed to
establish a solid baseline against which to measure progress in lowering
total ownership cost--one of the three overarching goals of the Deepwater
program. Furthermore, the Coast Guard had not developed criteria for
potential adjustments to the baseline. Preliminary observations from our
ongoing work on the Coast Guard's efforts to improve system integrator
accountability follow.

  Award Fee Criteria

In 2004 we found the first annual award fee determination was based
largely on unsupported calculations. Despite documented problems in
schedule, performance, cost control, and contract administration
throughout the first year, the program executive officer awarded the
contractor an overall rating of 87 percent, which fell in the "very good"
range as reported by the Coast Guard award fee determining official. This
rating resulted in an award fee of $4 million of the maximum $4.6 million.
The Coast Guard continued to report design, cost, schedule, and delivery
problems, and evaluation of the system integrator's performance continued
to result in award fees that ranged from 87 percent to 92 percent of the
total possible award fee (with 92 percent falling into the "excellent"
range), or $3.5 to $4.8 million annually, for a total of over $16 million
the first 4 years on the contract. The Coast Guard continues to revise the
award fee criteria under which it assesses the system integrator's
performance.

The current award fee criteria demonstrate the Coast Guard's effort to use
both objective and subjective measures and to move toward clarity and
specificity with the criteria being used. For example, the criteria
include 24 specific milestone activities and dates to which the system
integrator will be held accountable for schedule management. However, we
recently observed two changes to the criteria that could affect the Coast
Guard's ability to hold the contractor accountable. First, the current
award fee criteria no longer contain measures that specifically address
IPTs, despite a recommendation we made in 2004 that the Coast Guard hold
the system integrator accountable for IPT effectiveness. The Coast Guard
had agreed with this recommendation and, as we reported in 2005, it had
incorporated award fee metrics tied to the system integrator's management
of Deepwater, including administration, management commitment,
collaboration, training, and empowerment of the IPTs. Second, a new
criterion to assess both schedule and cost management states that the
Coast Guard will not take into account milestone or cost impacts
determined by the government to be factors beyond the system integrator's
control. However, a Coast Guard official stated that there are no formal
written guidelines that define what factors are to be considered as being
beyond the system integrator's control, what process the Coast Guard is
going to use to make this determination, or who is ultimately responsible
for making those determinations.

  Award Term Evaluation

The Deepwater program management plan included three overarching goals of
the Deepwater program: increased operational effectiveness, lower total
ownership cost, and customer satisfaction to be used for determining
whether to extend the contract period of performance, known as the award
term decision. We reported in 2004 that the Coast Guard had not begun to
measure the system integrator's performance in these three areas, even
though the information was essential to determining whether to extend the
contract after the first 5 years.^14 We also reported that the models the
Coast Guard was using to measure operational performance lacked the
fidelity to capture whether improvements may be due to Coast Guard or
contractor actions, and program officials noted the difficulty of holding
the contractor accountable for operational effectiveness before Deepwater
assets are delivered. We made a recommendation to Coast Guard to address
these issues.

According to a Coast Guard official, the Coast Guard evaluated the
contractor subjectively for the first award term period in May 2006, using
operational effectiveness, total ownership costs, and customer
satisfaction as the criteria. The result was a new award term period of 43
of a possible 60 months. To measure the system's operational
effectiveness, the Coast Guard has developed models to simulate the effect
of the Deepwater assets' capabilities on its ability to meet its missions
and to measure the "presence" of those assets. However, in its assessment
of the contractor, the Coast Guard assumed full operational capability of
assets and communications and did not account for actual asset operating
data. Furthermore, the models still lacked the fidelity to capture whether
operational improvements are attributable to Coast Guard or contractor
actions. As a result the contractor received credit for factors beyond its
control--although no formal process existed for approving such factors.
Total ownership cost was difficult to measure, thus the contractor was
given a neutral score, according to Coast Guard officials.^15 Finally, the
contractor was rated "marginal" in customer satisfaction.

The Coast Guard has modified the award term evaluation criteria to be used
to determine whether to grant a further contract extension after the
43-month period ends in January 2011. The new criteria incorporate more
objective measures.

           o While the three overall Deepwater program objectives
           (operational effectiveness, total ownership costs, and customer
           satisfaction) carried a weight of 100 percent under the first
           award term decision, they will represent only about a third of the
           total weight for the second award term decision. The criteria
           include items such as new operational effectiveness measures that
           will include an evaluation of asset-level key performance
           parameters, such as endurance, operating range, and detection
           range.
           o The new award term criteria have de-emphasized measurement of
           total ownership cost, concentrating instead on cost control.
           Program officials noted the difficulty of estimating ownership
           costs far into the future, while cost control can be measured
           objectively using actual costs and earned value data. In 2004, we
           recommended that the Coast Guard establish a total ownership cost
           baseline that could be used to periodically measure whether the
           Deepwater system-of-systems acquisition approach is providing the
           government with increased efficiencies compared to what it would
           have cost without this approach. Our recommendation was consistent
           with the cost baseline criteria set forth in the Deepwater program
           management plan. The Coast Guard agreed with the recommendation at
           the time, but subsequently told us it does not plan to implement
           it.

^14 Award-term incentives can best be described as a variant of an
award-fee incentive, where the contractor is rewarded for excellent
performance with an extension of the contract period instead of additional
fee.

^15 The award term determination rated total ownership cost as "good."

In our current work, we will explore the implication of the revised award
term evaluation criteria and the Coast Guard's ability to measure the
overarching goals of the acquisition strategy.

  Establishing Criteria and Documenting Changes to the Baseline

Establishing a solid baseline against which to measure progress in
lowering total ownership cost is critical to holding the contractor
accountable. The Coast Guard's original plan, set forth in the Deepwater
program management plan, was to establish as its baseline the dollar value
of replacing assets under a traditional, asset-by-asset approach as the
"upper limit for total ownership cost." In practice, the Coast Guard
decided to use the system integrator's estimated cost of $70.97 billion
plus 10 percent (in fiscal year 2002 dollars) for the system-of-systems
approach as the baseline. In 2004, we recommended that the Coast Guard
establish criteria to determine when the total ownership cost baseline
should be adjusted and ensure that the reasons for any changes are
documented.

Since then, the Coast Guard established a process that would require DHS
approval for adjustments to the total ownership cost baseline. The
Deepwater Program Executive Officer maintains authority to approve
baseline revisions at the asset or domain level. However, depending on the
severity of the change, these changes are also subject to review and
approval by DHS. In November 2005, the Coast Guard increased the total
ownership cost baseline against which the contractor will be evaluated to
$304 billion. Deepwater officials stated that the adjustment was the
result of incorporating the new homeland security mission requirements and
revising dollar estimates to a current year basis. Although the Coast
Guard is required to provide information to DHS on causal factors and
propose corrective action for a baseline breach of 8 percent or more, the
8 percent threshold has not been breached because the threshold is
measured against total program costs and not on an asset basis.^17 For
example, the decision to stop the conversion of the 49 110-foot patrol
boats after 8 hulls did not exceed the threshold; nor did the damages and
schedule delay to the NSC attributed to Hurricane Katrina. During our
ongoing work, Coast Guard officials acknowledged that only a catastrophic
event would ever trigger a threshold breach. According to a Coast Guard
official, DHS approval is pending on shifting the baseline against which
the system integrator is measured to an asset basis.

Limited Knowledge of Cost Control Achieved Through Competition

Further, our 2004 report also had recommendations related to cost control
through the use of competition. We reported that, although competition
among subcontractors was a key mechanism for controlling costs, the Coast
Guard had neither measured the extent of competition among the suppliers
of Deepwater assets nor held the system integrator accountable for taking
steps to achieve competition.^18 As the two first-tier subcontractors to
the system integrator, Lockheed Martin and Northrop Grumman have sole
responsibility for determining whether to provide the Deepwater assets
themselves or hold competitions--decisions commonly referred to as "make
or buy." We noted that the Coast Guard's hands-off approach to make-or-buy
decisions and its failure to assess the extent of competition raised
questions about whether the government would be able to control Deepwater
program costs.

The Coast Guard has taken steps to establish a reporting requirement for
the system integrator to provide information on competition on a
semi-annual basis. The system integrator is to provide detailed plans,
policies, and procedures necessary to ensure proper monitoring, reporting,
and control of its subcontractors. Further, reports are to include total
procurement activity, the value of competitive procurements, and the
subcontractors' name and addresses. The system integrator provided the
first competition report in October 2006. However, because the report did
not include the level of detail required by Coast Guard guidelines, a
Coast Guard official deemed that the extent of competition could not be
validated by the information provided and a request was made to the system
integrator for more information. We will continue to assess the Coast
Guard's efforts to hold the system integrator accountable for ensuring an
adequate degree of competition.

^17 According to DHS officials, a baseline breach occurs when a cost or
schedule threshold is exceeded or when a performance threshold cannot be
met.

^18 See GAO-04-380.

                                   - - - - -

Mr. Chairman, this concludes my testimony. I would be happy to respond to
any questions Members of the Committee may have.

GAO Contact and Staff Acknowledgments

For further information about this testimony, please contact:

John Hutton, Acting Director, Acquisition and Sourcing Management, (202)
512-4841, [email protected]

Stephen L. Caldwell, Acting Director, Homeland Security & Justice, (202)
512-9610, [email protected]

In addition to the contacts named above, Penny Berrier Augustine, Amy
Bernstein, Christopher Conrad, Adam Couvillion, Kathryn Edelman, Melissa
Jaynes, Crystal M. Jones, Michele Mackin, Jessica Nierenberg, Raffaele
Roffo, Karen Sloan, and Jonathan R. Tumin made key contributions to this
report.

Appendix I: Related GAO Products

Coast Guard: Status of Deepwater Fast Response Cutter Design Efforts,
[41]GAO-06-764 (Washington, D.C.: June 23, 2006).

Coast Guard: Changes to Deepwater Plan Appear Sound, and Program
Management Has Improved, but Continued Monitoring is Warranted,
[42]GAO-06-546 (Washington, D.C.: Apr. 28, 2006).

Coast Guard: Progress Being Made on Addressing Deepwater Legacy Asset
Condition Issues and Program Management, but Acquisition Challenges
Remain, [43]GAO-05-757 (Washington, D.C.: Jul. 22, 2005).

Coast Guard: Preliminary Observations on the Condition of Deepwater Legacy
Assets and Acquisition Management Challenges, [44]GAO-05-651T (Washington,
D.C.: Jun. 21, 2005).

Coast Guard: Preliminary Observations on the Condition of Deepwater Legacy
Assets and Acquisition Management Challenges, [45]GAO-05-307T (Washington,
D.C.: Apr. 20, 2005).

Coast Guard: Deepwater Program Acquisition Schedule Update Needed,
[46]GAO-04-695 (Washington, D.C.: Jun. 14, 2004).

Contract Management: Coast Guard's Deepwater Program Needs Increased
Attention to Management and Contractor Oversight, [47]GAO-04-380
(Washington, D.C.: Mar. 9, 2004).

Coast Guard: Actions Needed to Mitigate Deepwater Project Risks,
[48]GAO-01-659T (Washington, D.C.: May 3, 2001).

Coast Guard: Progress Being Made on Deepwater Project, but Risks Remain,
[49]GAO-01-564 (Washington, D.C.: May, 2, 2001).

(440585)

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Highlights of [57]GAO-07-446T , a testimony for the Subcommittee on
Homeland Security, Committee on Appropriations, House of Representatives

February 15, 2007

COAST GUARD

Preliminary Observations on Deepwater Program Assets and Management
Challenges

The U.S. Coast Guard's Deepwater program was designed to upgrade or
replace its aging legacy aircraft and vessels with assets focusing on the
Coast Guard's traditional at-sea roles. After the September 11, 2001
terrorist attacks, the Coast Guard took on additional security missions,
resulting in revisions to the Deepwater plan. GAO's prior work raised
concerns about Coast Guard's efforts to upgrade or acquire assets on
schedule, and manage and effectively monitor the system integrator.

This testimony provides GAO's preliminary observations on (1) events and
issues surrounding the Coast Guard's bridging strategy to convert the
legacy 110-foot patrol boats to 123-foot patrol boats; (2) the status of
the Coast Guard's efforts to acquire new or upgraded Deepwater assets; and
(3) the Coast Guard's ability to effectively manage the Deepwater program,
hold contractors accountable, and control costs through competition. GAO's
preliminary observations are based on audit work performed from August
2006 to February 2007.

[58]What GAO Recommends

This testimony contains no recommendations. In 2004, GAO made 11
recommendations on management and oversight, contractor accountability,
and cost control through competition, and reported in April 2006 that
progress had been made but continued monitoring was warranted.

Numerous events since January 2001 led up to the failure of the Coast
Guard's bridging strategy to convert its legacy 110-foot patrol boats into
123-foot patrol boats. These converted boats were removed from service on
November 30, 2006 because of operational and safety concerns. According to
the Coast Guard Commandant, actions are being taken to mitigate the impact
of the removal of these patrol boats on mission activities. For example,
patrol hours of some 110-foot patrol boats have been increased through the
addition of crews from the 123-foot patrol boats, and other Coast Guard
vessels have been deployed to assist in carrying out missions.

The delivery record for the 10 classes of upgraded or new Deepwater
aircraft and vessels is mixed. Specifically, 7 of the 10 asset classes are
on or ahead of schedule. Among these, 5 first-in-class assets have been
delivered on or ahead of schedule; 2 others remain on time but their
planned delivery dates are in 2009 or beyond; therefore, delays could
still potentially occur. Three Deepwater asset classes are currently
behind schedule due to various problems related to designs, technology, or
funding. For example, the Fast Response Cutter (a new vessel), which had
been scheduled for first-in-class delivery in 2007, has been delayed by at
least 2 years in part because work on its design was suspended until
technical problems can be addressed.

From the program's outset, GAO has raised concerns about the risks
involved with the Coast Guard's acquisition strategy. In 2004, GAO
reported that program management, contractor accountability, and cost
control were all challenges, and made recommendations in these areas.
Insufficient staffing, ineffective performance measures, and the Coast
Guard's lack of knowledge about the extent to which the contractor was
using competition have contributed to program risk. The Coast Guard has
taken some actions to address these issues. GAO plans to continue to
assess the Coast Guard's Deepwater program, including its efforts to
address GAO recommendations, and will report the findings later this year.

Deepwater Vessel and Aircraft Classes

References

Visible links
  35. http://www.gao.gov/cgi-bin/getrpt?GAO-04-380
  36. http://www.gao.gov/cgi-bin/getrpt?GAO-06-546
  37. http://www.gao.gov/cgi-bin/getrpt?GAO-04-380
  38. http://www.gao.gov/cgi-bin/getrpt?GAO-06-764
  41. http://www.gao.gov/cgi-bin/getrpt?GAO-06-674
  42. http://www.gao.gov/cgi-bin/getrpt?GAO-06-546
  43. http://www.gao.gov/cgi-bin/getrpt?GAO-05-757
  44. http://www.gao.gov/cgi-bin/getrpt?GAO-05-651T
  45. http://www.gao.gov/cgi-bin/getrpt?GAO-05-307T
  46. http://www.gao.gov/cgi-bin/getrpt?GAO-04-695
  47. http://www.gao.gov/cgi-bin/getrpt?GAO-04-380
  48. http://www.gao.gov/cgi-bin/getrpt?GAO-01-659T
  49. http://www.gao.gov/cgi-bin/getrpt?GAO-01-564
  57. http://www.gao.gov/cgi-bin/getrpt?GAO-07-446T
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