Coast Guard: Observations on the Fiscal Year 2009 Budget, Recent 
Performance, and Related Challenges (06-MAR-08, GAO-08-494T).	 
                                                                 
The U.S. Coast Guard, a multi-mission maritime military service  
within the Department of Homeland Security, has requested more	 
than $9 billion for fiscal year 2009 to address its		 
responsibilities for homeland security missions (such as	 
undocumented migrant interdiction) and non-homeland security	 
missions (such as environmental protection). Integral to	 
conducting its missions, is the Deepwater program--a 25-year, $24
billion effort to upgrade or replace vessels and aircraft. This  
testimony discusses: budget request and trends, and performance  
statistics, challenges in balancing operations across multiple	 
missions, and Deepwater affordability, management, and its impact
on operations. GAO's comments are based on products issued from  
1997 to 2008. This testimony also discusses on-going work related
to patrol boat operations. To conduct its work, GAO analyzed	 
documentation and interviewed relevant officials.		 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-08-494T					        
    ACCNO:   A81221						        
  TITLE:     Coast Guard: Observations on the Fiscal Year 2009 Budget,
Recent Performance, and Related Challenges			 
     DATE:   03/06/2008 
  SUBJECT:   Agency missions					 
	     Appropriated funds 				 
	     Budget activities					 
	     Budget allowances					 
	     Cost analysis					 
	     Federal funds					 
	     Funds management					 
	     Homeland security					 
	     Maritime security					 
	     Military aircraft					 
	     Military vessels					 
	     Performance appraisal				 
	     Performance management				 
	     Performance measures				 
	     Program management 				 
	     Systems integration				 
	     Systems testing					 
	     Coast Guard Deepwater Project			 

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GAO-08-494T

   

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Testimony: 

Before the Subcommittee on Oceans, Atmosphere, Fisheries, and Coast 
Guard, Committee on Commerce, Science, and Transportation, U.S. Senate: 

United States Government Accountability Office: 

GAO: 

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

Thursday, March 6, 2008: 

Coast Guard: 

Observations on the Fiscal Year 2009 Budget, Recent Performance, and 
Related Challenges: 

Statement of Stephen L. Caldwell, Director Homeland Security and 
Justice Issues: 

GAO-08-494T: 

GAO Highlights: 

Highlights of GAO-08-494T, a testimony before the Subcommittee on 
Oceans, Atmosphere, Fisheries, and Coast Guard, Committee on Commerce, 
Science, and Transportation, U.S. Senate. 

Why GAO Did This Study: 

The U.S. Coast Guard, a multi-mission maritime military service within 
the Department of Homeland Security, has requested more than $9 billion 
for fiscal year 2009 to address its responsibilities for homeland 
security missions (such as undocumented migrant interdiction) and non-
homeland security missions (such as environmental protection). Integral 
to conducting its missions, is the Deepwater programï¿½a 25-year, $24 
billion effort to upgrade or replace vessels and aircraft. This 
testimony discusses: budget request and trends, and performance 
statistics, challenges in balancing operations across multiple 
missions, and Deepwater affordability, management, and its impact on 
operations. GAOï¿½s comments are based on  products issued from 1997 to 
2008.  This testimony also discusses on-going work related to patrol 
boat operations.  To conduct its work, GAO analyzed documentation and 
interviewed relevant officials. 


What GAO Found: 

The Coast Guardï¿½s fiscal year 2009 budget request is approximately 7 
percent higher than its fiscal year 2008 enacted budget, generally 
because of proposed increases in both operating expenses and 
acquisition, construction, and improvements funding. The Coast Guard 
expects to meet its performance goals for 6 of its 11 mission areas for 
fiscal year 2007, similar to the performance it reported for fiscal 
year 2006.  The Coast Guard also continues to develop additional 
measures to better understand the links between resources expended and 
results achieved. 

The Coast Guard continues to face challenges balancing its various 
missions with its finite resources and has had difficulties funding and 
executing both its homeland security and non-homeland security 
missions.  GAOï¿½s work has shown that the Coast Guardï¿½s homeland 
security requirements continue to increase and that it has been unable 
to keep up with these rising security demands.  For example, the Coast 
Guard is not meeting its requirements for providing vessel escorts and 
conducting security patrols.  The Coast Guard is also facing additional 
requirements to conduct more inspections of maritime facilities and 
provide security at a growing number of facilities that import 
hazardous cargos. 

The Deepwater acquisition program continues to be a source of 
challenges and progress for the Coast Guard. In terms of affordability, 
the magnitude of Deepwater fundingï¿½representing about 11 percent of the 
agencyï¿½s proposed fiscal year 2009 budgetï¿½presents a long-term 
challenge. In terms of management, the Coast Guard has made changes to 
improve program management by moving away from reliance on a system 
integrator, increasing government monitoring of program outcomes and 
competitively purchasing selected assets. In terms of operations, 
delays in the procurement of new patrol boats have increased resource 
requirements to maintain older legacy patrol boats and keep them 
operating. 

Figure: The Coast Guard must balance its finite resources across 
security and other missions. 

This figure is a combination of two Coast guard photographs. 

[See PDF for image] 

Source: U.S. Coast Guard. 

[End of figure] 

What GAO Recommends: 

GAO has made recommendations to DHS in prior reports to develop 
strategic plans, better plan the use of its human capital, establish 
performance measures, and improve program operations. DHS has generally 
concurred with these recommendations and is making progress to address 
them.  We provided a draft of this information to DHS and the Coast 
Guard and incorporated technical comments as appropriate. 

To view the full product, including the scope
and methodology, click on [hyperlink, http://www.GAO-08-494T].
For more information, contact Stephen Caldwell at (202) 512-9610 or 
[email protected].

[End of section] 

Madam Chair and Members of the Subcommittee: 

I am pleased to be here today to discuss the Coast Guard's fiscal year 
2009 budget and related issues. For more than 10 years, we have 
provided Congress with information and observations on the Coast 
Guard's budget and related issues.[Footnote 1] Consistent with this 
approach, this statement will periodically include information from our 
prior work to help provide perspective as appropriate. During the last 
10 years, the Coast Guard's budget and missions have continued to grow. 
For example, the Coast Guard's budget was $3.8 billion for fiscal year 
1997 compared to $9.35 billion for fiscal year 2009. In terms of 
missions, the terrorist attacks of September 11, 2001 have led to a 
myriad of additional and complex Coast Guard missions related to 
homeland security, such as conducting harbor patrols, reducing the flow 
of undocumented migrants, and participating in global military 
operations. 

To help fulfill its missions, the Coast Guard is implementing a program 
to modernize its fleet. The Coast Guard's Deepwater program is a 25- 
year, $24 billion effort to upgrade or replace existing vessels and 
aircraft to carry out its missions along our coastlines and farther out 
at sea. The program is eventually to include 10 major classes of new or 
upgraded vessels and aircraft, and 5 other classes of projects, 
including command, control, communications, computer, intelligence 
surveillance, and reconnaissance systems. 

This statement will discuss: 

* budget request and trends, and performance statistics on achieving 
its missions, 

* challenges in balancing its operations across its multiple missions, 
and: 

* Deepwater affordability, management, and its impact on operations. 

The Coast Guard is a multi-mission, maritime military service within 
the Department of Homeland Security. The Coast Guard's responsibilities 
fall into two general categories--those related to homeland security 
missions, such as ports, waterways, and coastal security (including 
conducting harbor patrols and other activities to prevent terrorist 
attacks), defense readiness, and undocumented migrant interdiction; and 
those related to non-homeland security missions, such as search and 
rescue, marine environmental protection (including oil spill response), 
illegal drug interdiction, and polar ice operations. 

An assessment of the Coast Guard's fiscal year 2009 budget should be 
considered in the context of broader federal budgetary issues. As we 
have reported elsewhere, the federal government's deteriorating long- 
range financial condition and long-term fiscal imbalance are matters of 
increasing concern. The nation faces large and growing structural 
deficits due primarily to rising health care costs and known 
demographic trends that will constrain the government's ability to pay 
for other obligations and discretionary expenses.[Footnote 2] 
Addressing this long-term fiscal issue is an overarching challenge. As 
a result, there is a need to engage in a fundamental review, 
repriorization, and reengineering of the base of the government. 
Understanding and addressing the federal government's financial 
condition and long-term fiscal imbalance are critical to maintain 
fiscal flexibility so that we can respond to current and emerging 
social, economic, and security challenges.[Footnote 3] 

An assessment of the Coast Guard's budget should also be considered in 
the context of risk management. Risk management is a strategy for 
helping policy makers to make decisions about allocating finite 
resources and take actions in the face of uncertainty. The Coast Guard 
cannot afford to protect all maritime areas and facilities against all 
possible threats. As a result, it must make choices about how to 
allocate its resources to most effectively manage risk. Risk management 
has been widely supported by the President and Congress, as a 
management approach for homeland security, and the Secretary of 
Homeland Security has made it the centerpiece of departmental policy. 
The Coast Guard has used risk management to develop security plans for 
port areas.[Footnote 4] 

This statement is based in part on ongoing work being done for this 
subcommittee and on prior GAO work focusing on the Coast Guard's 
programmatic and management initiatives completed over the past ten 
years.[Footnote 5] In assessing the Coast Guard's budget resources, we 
analyzed budget, performance, and acquisitions documents and conducted 
interviews with Coast Guard officials. With regard to the budget 
assessment, our scope was limited due to the short time available since 
the release of the President's fiscal year 2009 budget request. 
Additionally, this review did not include evaluating whether the 
proposed funding levels are appropriate for the Coast Guard's stated 
needs. Our work on homeland security is based on a series of reviews we 
conducted in the aftermath of 9/11. This work involved discussions with 
appropriate Coast Guard and other federal officials at headquarters and 
field units in domestic and international locations, reviews of related 
program documents, analysis of program databases (including reliability 
assessments), as well as discussions with other domestic and 
international stakeholders in the maritime industry. 

To assess the status of the Deepwater program, we reviewed key Coast 
Guard documentation such as the Major Systems Acquisition Manual, 
acquisition program baselines, and human capital plans. We also 
conducted interviews with Coast Guard officials, including program 
managers, contracting officials, and subject matter experts to discuss 
acquisition planning efforts and actions being taken by the Coast Guard 
and to obtain information on shipbuilding. In reviewing patrol boat 
operations and Coast Guard efforts to mitigate the loss of the 123-foot 
patrol boats, we reviewed reports, memoranda, operational hour data, 
and other documents. We also interviewed Coast Guard officials 
responsible for developing and implementing these sustainment and 
mitigation strategies. Finally, we provided a draft of this testimony 
to DHS and the Coast Guard and incorporated their technical comments as 
appropriate. 

We conducted this performance audit from October 2007 to March 2008 in 
accordance with generally accepted government auditing standards. Those 
standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe that 
the evidence obtained provides a reasonable basis for our findings and 
conclusions based on our audit objectives. 

Summary: 

The Coast Guard's fiscal year 2009 budget request is approximately 7 
percent higher than its fiscal year 2008 enacted budget, which 
continues the upward trend seen in recent years. Major increases in 
this year's budget are attributable to operating expenses for the 
funding of additional marine inspectors and new command and control 
capabilities. Major increases in this year's budget are also attributed 
to acquisition, construction and improvements for continued enhancement 
and replacement of aging infrastructure. Within this budget, there are 
also a number of reallocations that do not impact the total amount of 
funding. With respect to the agency's performance, the Coast Guard 
expects to meet its performance goals for 6 of its 11 mission areas for 
fiscal year 2007, consistent with its performance for fiscal year 2006. 
The Coast Guard also continues to develop additional performance 
measures in an effort to capture additional segments of program 
activity and to develop ways to better understand the links between 
resources it expends and the results it achieves. 

The Coast Guard continues to face challenges balancing its various 
missions within its finite resources. For several years, we have 
reported that the Coast Guard has had difficulties fully funding and 
executing both homeland security missions and its traditional non- 
homeland security missions. Our work has shown that the Coast Guard's 
requirements continue to increase in homeland security in part due to 
additional statutory requirements. In several cases, the Coast Guard 
has been unable to keep up with these security demands, for example, by 
not meeting its own requirements for providing vessel escorts and 
conducting security patrols at some ports. In other cases, the Coast 
Guard is facing additional requirements to conduct more inspections of 
maritime facilities or provide security at a growing number of 
facilities that import hazardous cargos such as Liquefied Natural Gas 
(LNG). The Coast Guard faces additional non-homeland security 
requirements such as updating port plans (as part of an all-hazards 
approach) and updating regulations related to oil spills and the Oil 
Spill Liability Trust Fund. The Coast Guard also has additional longer 
term non-homeland security requirements, such as those related to the 
protection of marine areas near Hawaii and increased vessel traffic in 
the Arctic and surrounding areas. 

The Deepwater acquisition program continues to present challenges and 
progress in terms of affordability, management, and operations. With 
respect to affordability, the Coast Guard faces challenges based on the 
magnitude of the funding requirements--which represents about 11 
percent of the agency's proposed budget for fiscal year 2009--compared 
to the agency's overall and AC&I budgets. For example, Deepwater 
represents nearly 82 percent of the Coast Guard's total AC&I budget of 
$1.21 billion, leaving little room, in the AC&I budget especially, for 
other pressing needs such as inland aids to navigation vessels. With 
respect to the management of the Deepwater program, the Coast Guard has 
made progress through a number of actions to improve the management of 
the program. These actions include taking over many of the management 
functions that the contractor formerly conducted. The Coast Guard also 
continues to make progress in implementing some of our prior 
recommendations on how to better manage the program. With respect to 
operations, the delay in the acquisition of new assets has created 
challenges in keeping older legacy assets operating until they can be 
replaced. For example, problems and delays with the Coast Guard's 
acquisition of new patrol boats forced the agency to incur additional 
costs to maintain older patrol boats and incur opportunity costs in 
terms of lost or reallocated missions. The Coast Guard plans to acquire 
replacement patrol boats beginning in 2010. 

Background: 

The Coast Guard is an Armed Service of the United States and the only 
military organization within the Department of Homeland Security (DHS). 
It is the principle federal agency responsible for maritime safety, 
security, and environmental stewardship through multi-mission 
resources, authorities, and capabilities. To accomplish its 
responsibilities, the Coast Guard is organized into two major commands 
that are responsible for overall mission execution--one in the Pacific 
area and the other in the Atlantic area. These commands are divided 
into 9 districts, which in turn are organized into 35 sectors that 
unify command and control of field units and resources, such as 
multimission stations and patrol boats. In its fiscal year 2009 posture 
statement, the Coast Guard reported having nearly 49,100 full-time 
positions--about 42,000 military and 7,100 civilians. In addition, the 
agency reported that it has about 8,100 reservists who support the 
national military strategy or provide additional operational support 
and surge capacity during times of emergency, such as natural 
disasters. Finally, the Coast Guard reported that it utilizes the 
services of about 29,000 volunteer auxiliary personnel who conduct a 
wide array of activities, ranging from search and rescue to boating 
safety education. The Coast Guard has responsibilities that fall under 
two broad missions--homeland security and non-homeland security. The 
Coast Guard responsibilities are further divided into 11 programs, as 
shown in table 1. 

Table 1: Homeland Security and Non-Homeland Security Programs by 
Mission Area: 

Mission and program: Homeland security mission-programs: * Ports, 
waterways, and coastal security; 
Activities and functions of each mission-program: Conducting harbor 
patrols, vulnerability assessments, intelligence gathering and 
analysis, and other activities to prevent terrorist attacks and 
minimize the damage from attacks that occur. 

Mission and program: Homeland security mission-programs: * Undocumented 
migrant interdiction; 
Activities and functions of each mission-program: Deploying cutters and 
aircraft to reduce the flow of undocumented migrants entering the 
United States by maritime routes. 

Mission and program: Homeland security mission-programs: * Defense 
readiness; 
Activities and functions of each mission-program: Participating with 
the Department of Defense (DOD) in global military operations, 
deploying cutters and other boats in and around harbors to protect DOD 
force mobilization operations. 

Mission and program: Non-homeland security mission-programs: * Search 
and rescue; 
Activities and functions of each mission-program: Operating 
multimission stations and a national distress and response 
communication system, conducting search and rescue operations for 
mariners in distress. 

Mission and program: Non-homeland security mission-programs: * Living 
marine resources; 
Activities and functions of each mission-program: Enforcing domestic 
fishing laws and regulations through inspections and fishery patrols. 

Mission and program: Non-homeland security mission-programs: * Aids to 
navigation and waterways management; 
Activities and functions of each mission-program: Managing U.S. 
waterways and providing a safe, efficient, and navigable marine 
transportation system, maintaining the extensive system of navigation 
aids, monitoring marine traffic through vessel traffic service centers. 

Mission and program: Non-homeland security mission-programs: * Ice 
operations; 
Activities and functions of each mission-program: Conducting polar 
operations to facilitate the movement of critical goods and personnel 
in support of scientific and national security activity, conducting 
domestic icebreaking operations to facilitate year-round commerce, 
conducting international ice operations to track icebergs below the 
48th north latitude. 

Mission and program: Non-homeland security mission-programs: * Marine 
environmental protection; 
Activities and functions of each mission-program: Preventing and 
responding to marine oil and chemical spills, preventing the illegal 
dumping of plastics and garbage in U.S. waters, preventing biological 
invasions by aquatic nuisance species. 

Mission and program: Non-homeland security mission-programs: * Marine 
safety; 
Activities and functions of each mission-program: Setting standards and 
conducting vessel inspections to better ensure the safety of passengers 
and crew aboard commercial vessels, partnering with states and boating 
safety organizations to reduce recreational boating deaths. 

Mission and program: Non-homeland security mission-programs: * Illegal 
drug interdiction; 
Activities and functions of each mission-program: Deploying cutters and 
aircraft in high drug-trafficking areas and gathering intelligence to 
reduce the flow of illegal drugs through maritime transit routes. 

Mission and program: Non-homeland security mission-programs: * Other 
law enforcement (foreign fish enforcement); 
Activities and functions of each mission-program: Protecting U.S. 
fishing grounds by ensuring that foreign fishermen do not illegally 
harvest U.S. fish stocks. 

Source: Coast Guard. 

Note: The Coast Guard's homeland security and non-homeland security 
missions are delineated in section 888 of the Homeland Security Act of 
2002 (P. L. 107-296, 116 Stat. 2135, 2249 (2002)). Starting with the 
fiscal year 2007 budget, however, the Office of Management and Budget 
(OMB) designated the Coast Guard's illegal drug interdiction and other 
law enforcement mission-programs--which were originally homeland 
security missions--as non-homeland security missions for budgetary 
purposes. 

[End of table] 

For each of these 11 mission-programs, the Coast Guard has developed 
performance measures to communicate agency performance and provide 
information for the budgeting process to Congress, other policymakers, 
and taxpayers. The Coast Guard's performance measures are published in 
various documents, including the Coast Guard's Posture Statement, which 
includes the fiscal year 2009 Budget-in-Brief. The Coast Guard's 2009 
Budget-in-Brief reports performance information to assess the 
effectiveness of the agency's performance as well as a summary of the 
agency's most recent budget request. The performance information 
provides performance measures for each of the Coast Guard's mission- 
programs, as well as descriptions of the measures and explanations of 
performance results. 

To carry out these missions, the Coast Guard has a program underway-- 
called the Deepwater program--to acquire a number of assets such as 
vessels, aircraft, and command, control, communications, computer, 
intelligence surveillance, and reconnaissance systems. Appendix I 
provides additional details on specific vessels and aircraft. The Coast 
Guard began the Deepwater program in the mid-1990s and it is the 
largest acquisition program in the agency's history. Rather than using 
a traditional acquisition approach of replacing individual classes of 
legacy vessels and aircraft through a series of individual 
acquisitions, the Coast Guard chose a system-of-systems strategy, that 
would replace the legacy assets with a single, integrated 
package.[Footnote 6] To carry out this acquisition, the Coast Guard 
decided to use a systems integrator--a private sector contractor 
responsible for designing, constructing, deploying, supporting, and 
integrating the various assets to meet projected Deepwater operational 
requirements at the lowest possible costs, either directly or through 
subcontractors. In June 2002, the Coast Guard awarded the Deepwater 
systems integrator contract to Integrated Coast Guard Systems (ICGS)-- 
a business entity led and jointly owned by Lockheed Martin and Northrup 
Grumman Ship Systems. For 10 years, we have reviewed the Deepwater 
program and have informed Congress, the Departments of Transportation 
and Homeland Security, and the Coast Guard of the risks and 
uncertainties inherent in such a large acquisition.[Footnote 7] 

Budget Increases are for Both OE and AC&I, Recent Performance is 
Steady: 

The Coast Guard's fiscal year 2009 budget is about 6.9 percent higher 
than its 2008 enacted levels.[Footnote 8] Major increases in this 
year's budget are attributable to operating expenses for the funding of 
additional marine inspectors and new command and control capabilities. 
Major increases in this year's budget are also attributed to 
acquisition, construction and improvements for continued enhancement 
and replacement of aging vessels, aircraft, and infrastructure. The 
Coast Guard expects to meet 6 of 11 performance targets for fiscal year 
2007, the same level of performance as fiscal year 2006. 

Overall Budget Request is 6.9 Percent Higher than Previous Year's 
Enacted Budget: 

The Coast Guard's budget request in fiscal year 2009 is $9.35 billion, 
or 6.9 percent more than the enacted fiscal year 2008 budget (see fig. 
1).[Footnote 9] About $6.2 billion, or approximately 66 percent, is for 
operating expenses. This operating expense funding supports 11 
statutorily identified mission-programs and increases in salaries, 
infrastructure and maintenance costs. This also includes increased 
funding for additional marine inspectors, new and existing command and 
control and intelligence capabilities, and to address rulemaking 
projects. The greatest change from the previous year is in the AC&I 
request, which at $1.2 billion reflects about a 35 percent increase 
from fiscal year 2008. This increase includes funding for such things 
as Deepwater program enhancements to the Coast Guard's operational 
fleet of vessels and aircraft, and for continued development of new 
assets, as well as emergency maintenance. The remaining part of the 
overall budget request consists primarily of retiree pay and health 
care fund contributions. If the Coast Guard's total budget request is 
granted, overall funding will have increased by over 37 percent (or 17 
percent after inflation) since fiscal year 2003. Looking back further, 
overall funding will have increased by approximately 143 percent (or 87 
percent after inflation) since fiscal year 1997. 

Figure 1: Coast Guard Budget from Fiscal Year 2003 to Fiscal Year 2009: 

This figure is a combination line graph showing Coast Guard budget from 
fiscal year 2003 to fiscal year 2009. The X axis represents actual, 
enacted, and requested. The Y axis represents dollars in millions. One 
line represents OE, one represents ACI, and the other represents Total. 

[See PDF for image] 

Source: GAO analysis of Coast Guard data. 

Note: The Coast Guard's budget consists of discretionary and mandatory 
funding line items. The operating expenses and acquisition, 
construction, and improvements line items make up the biggest portion 
of discretionary funding. Other line items in the Coast Guard's 
discretionary budget include environmental compliance and restoration, 
health care contributions, research and development, and reserve 
training costs. Retiree pay is the largest item in the Coast Guard's 
mandatory funding budget, and the Coast Guard is requesting $1.23 
billion for retiree pay in 2009. Other mandatory funding line items 
include boating safety, the Oil Spill Liability Trust Fund, and the 
gift fund. 

[End of figure] 

Overall, the Coast Guard's budget request for homeland security 
missions represents approximately 40 percent of the overall budget, 
with the non-homeland security funding representing approximately 60 
percent. However, the Coast Guard does not request funding by mission; 
it does so by appropriation account. Nonetheless, the Coast Guard 
provides a comparison of homeland security versus non-homeland security 
funding as part of the President's fiscal year budget request. 
According to the Coast Guard, an activity-based cost model is used to 
estimate homeland security versus non-homeland security funding for its 
missions. This is done by averaging past expenditures to forecast 
future spending, and these amounts are revised from the estimates 
reported previously. Although the Coast Guard reports summary financial 
data by homeland security and non-homeland security missions to the 
Office of Management and Budget, as a multi-mission agency, the Coast 
Guard can be conducting multiple mission activities simultaneously. For 
example, a multi-mission asset conducting a security escort is also 
monitoring safety within the harbor and could be diverted to conduct a 
search and rescue case. As a result, it is difficult to accurately 
detail the level of resources dedicated to each mission. Figure 2 shows 
the estimated funding levels for fiscal year 2009 by each mission 
program. However, actual expenditures are expected to vary from these 
estimates, according to the Coast Guard. 

Figure 2: Coast Guard Fiscal Year 2009 Budget Request by Mission- 
Program as Estimated by the Coast Guard's Mission Cost Model: 

This figure is a bar graph showing Coast Guard fiscal year budget 
request by mission program as estimated by the Coast Guard's mission 
cost model. The X axis represents Non-homeland security, and Homeland 
Security. The Y axis represents millions of dollars. 

[See PDF for image] 

Source: GAO analysis of Coast Guard data. 

[End of figure] 

Performance Remains Steady: 

The Coast Guard expects to meet 6 of 11 performance targets in fiscal 
year 2007, the same overall level of performance as 2006, and overall 
performance trends for most mission-programs remain steady.[Footnote 
10] In fiscal year 2007, as in fiscal year 2006, the Coast Guard met 5 
targets--Ports, Waterways, and Coastal Security; Undocumented Migrant 
Interdiction; Marine Environmental Protection; Other Law Enforcement; 
and Ice Operations--and agency officials reported that the Coast Guard 
expects to meet the target for one additional program, Illegal Drug 
Interdiction, when results become available in August 2008.[Footnote 
11] This potentially brings the number of met targets to 6 out of 11. 
In addition, the Coast Guard narrowly missed performance targets for 3 
of its non-homeland security mission-programs, Search and Rescue, 
Living Marine Resources, and Aids to Navigation; and more widely missed 
performance targets for two other mission-programs, Marine Safety and 
Defense Readiness. Performance in 6 of 11 Coast Guard mission-programs 
improved in the last year, although improvements in the Marine Safety 
and Search and Rescue mission-programs were insufficient to meet 2007 
performance targets. Alternatively, while performance decreased for the 
Ports, Waterways, and Coastal Security program, the performance target 
was still met. Meanwhile, three mission-programs that did not meet 2007 
performance targets, Defense Readiness, Living Marine Resources, and 
Aids to Navigation, demonstrated lowered performance in 2007 compared 
to 2006 performance. (See App. II for more information on Coast Guard 
performance results.) 

In 2006, we completed an examination of the Coast Guard's non-homeland 
security performance measures to assess their quality.[Footnote 12] We 
reported that while the Coast Guard's non-homeland security measures 
are generally sound and the data used to collect them are generally 
reliable, the Coast Guard had challenges associated with using 
performance measures to link resources to results. Such challenges 
included comprehensiveness (that is, using a single measure per mission-
program may not convey complete information about overall performance) 
and external factors outside of the agency's control (such as weather 
conditions, which can, for example, affect the amount of ice that needs 
to be cleared or the number of mariners who must be rescued). According 
to Coast Guard officials, new performance measures are currently under 
development to further capture performance for its mission-programs, 
and that link resources to results. For example, officials described 
efforts to develop a new measure that captures an additional segment 
under its search and rescue mission-program, called Lives Unaccounted 
For. Also, two new measures are under development to further capture 
the Coast Guard's risk management efforts and link resources to results 
under the ports, waterways and coastal security mission-program. As we 
have reported, the Coast Guard appears to be moving in the right 
direction with these efforts. However, since these efforts are long-
term in nature, it remains too soon to determine how effective the 
Coast Guard's larger efforts will be at clearly linking resources to 
performance results as certain initiatives are not expected to be 
implemented until 2010.[Footnote 13] 

Coast Guard Continues to Face Challenges in Balancing Its Homeland 
Security and Non-Homeland Security Missions: 

After the September 11, 2001 terrorist attacks, the Coast Guard's 
priorities and focus had to shift suddenly and dramatically toward 
protecting the nation's vast and sprawling network of ports and 
waterways. Coast Guard cutters, aircraft, boats and personnel normally 
used for non-homeland security missions were shifted to homeland 
security missions, which previously consumed only a small portion of 
the agency's operating resources. Although we have previously reported 
that the Coast Guard was restoring activity levels for many of its non- 
homeland security mission-programs, the Coast Guard continues to face 
challenges in balancing its resources among each of its mission- 
programs. Further complicating this balance issue is the understanding 
that any unexpected events--a man-made disaster (such as a terrorist 
attack) or a natural disaster (such as Hurricane Katrina)--could result 
in again shifting resources between homeland security and non-homeland 
security missions. It is also important to note that assets designed to 
fulfill homeland security missions can also be used for non-homeland 
security missions. For example, new interagency operational centers 
(discussed in more detail below) can be used to coordinate Coast Guard 
and other federal and non-federal participants across a wide spectrum 
of activities, including non-homeland security missions. 

Homeland Security Mission Requirements Continue to Increase: 

The Coast Guard's heightened responsibilities to protect America's 
ports, waterways, and waterside facilities from terrorist attacks owe 
much of their origin to the Maritime Transportation Security Act (MTSA) 
of 2002.[Footnote 14] This legislation, enacted in November 2002 
established, among other things, a port security framework that was 
designed to protect the nation's ports and waterways from terrorist 
attacks by requiring a wide range of security improvements. The SAFE 
Port Act, enacted in October 2006, made a number of adjustments to 
programs within the MTSA-established framework, creating some 
additional programs or lines of efforts and altering others.[Footnote 
15] The additional requirements established by the SAFE Port Act have 
added to the resource challenges already faced by the Coast Guard as 
described below: 

* Inspecting domestic maritime facilities: Pursuant to Coast Guard 
guidance, the Coast Guard has been conducting annual inspections of 
domestic maritime facilities to ensure that they are in compliance with 
their security plans. The Coast Guard conducted 2,126 of these 
inspections in 2006. However, Coast Guard policy directed that they be 
announced in advance. The SAFE Port Act added additional requirements 
that inspections be conducted at least twice per year and that one of 
these inspections be conducted unannounced. More recently, the Coast 
Guard has issued guidance requiring that unannounced inspections be 
more rigorous than before. In February 2008, we reported that 
fulfilling the requirement of additional and potentially more rigorous 
inspections, may require additional resources in terms of Coast Guard 
inspectors. Thus, we recommended that the Coast Guard reassess the 
adequacy of its resources for conducting facility inspections. The 
Coast Guard concurred with our recommendation.[Footnote 16] 

* Inspecting foreign ports: In response to a MTSA requirement, the 
Coast Guard established the International Port Security Program to 
assess and, if appropriate, make recommendations to improve security in 
foreign ports. Under this program, teams of Coast Guard officials 
conduct country visits to evaluate the implementation of security 
measures in the host nations' ports and to collect and share best 
practices to help ensure a comprehensive and consistent approach to 
maritime security in ports worldwide. The SAFE Port Act established a 
minimum number of assessments and congressional direction has called 
for the Coast Guard to increase the pace of its visits to foreign 
ports. However, to increase its pace, the Coast Guard may have to hire 
and train new staff, in part because a number of experienced personnel 
associated with this inspection program are rotating to other positions 
as part of the Coast Guard's standard personnel rotation policy. Coast 
Guard officials also said that they have limited ability to help 
countries build on or enhance their own capacity to implement security 
requirements because--other than sharing best practices or providing 
presentations on security practices--the program does not currently 
have the resources or authority to directly assist countries with more 
in-depth training or technical assistance.[Footnote 17] 

* Fulfilling port security operational requirements: The Coast Guard 
conducts a number of operations at U.S. ports to deter and prevent 
terrorist attacks. Operation Neptune Shield, first issued in 2003, is 
the Coast Guard's operations order that sets specific security 
activities (such as harbor patrols and vessel escorts) for each port. 
As individual port security concerns change, the level of security 
activities also change, which affects the resources required to 
complete the activities. As we reported in October 2007, many ports are 
having difficulty meeting their port security requirements, with 
resource constraints being a major factor.[Footnote 18] Thus, we made a 
number of recommendations to the Coast Guard concerning resources, 
partnerships, and exercises. The Coast Guard concurred with our 
recommendations.[Footnote 19] 

* Meeting security requirements for additional LNG terminals: The Coast 
Guard is also faced with providing security for vessels arriving at 
four domestic onshore LNG import facilities. However, the number of LNG 
tankers bringing shipments to these facilities will increase 
considerably because of expansions that are planned or underway. For 
example, industry analysts expect approximately 12 more LNG facilities 
to be built over the next decade. As a result of these changes, Coast 
Guard field units will likely be required to significantly expand their 
security workloads to conduct new LNG security missions. To address 
this issue, in December 2007 we recommended that the Coast Guard 
develop a national resource allocation plan that addresses the need to 
meet new LNG security requirements. The Coast Guard generally concurred 
with our recommendation.[Footnote 20] 

* Boarding and inspecting foreign vessels: Security compliance 
examinations and boardings, which include identifying vessels that pose 
either a high risk for non-compliance with international and domestic 
regulations, or a high relative security risk to the port, are a key 
component in the Coast Guard's layered security strategy.[Footnote 21] 
According to Coast Guard officials and supporting data, the agency has 
completed nearly all examinations and boardings of targeted vessels. 
However, an increasing number of vessel arrivals in U.S. ports may 
impact the pace of operations for conducting security compliance 
examinations and boardings in the future. For example, in the 3-year 
period from 2004 through 2006, distinct vessel arrivals rose by nearly 
13 percent and, according to the Coast Guard, this increase is likely 
to continue.[Footnote 22] Moreover, officials anticipate that the 
increase in arrivals will also likely include larger vessels, such as 
tankers, that require more time and resources to examine. Similarly, 
the potential increase in the number of arrivals and the size of 
vessels is likely to impact security boardings, which take place 12 
miles offshore, and are consequently even more time-and resource- 
intensive. While targeted vessels remain the priority for receiving 
examinations and boardings, it is unclear to what extent increased 
resource demands may impact the ability of the Coast Guard field units 
to complete these activities on all targeted vessels.[Footnote 23] 

* Establishing interagency operational centers: The SAFE Port Act 
called for the establishment of interagency operational centers 
(command centers that bring together the intelligence and operational 
efforts of various federal and nonfederal participants), directing the 
Secretary of Homeland Security to establish such centers at all high-
priority ports no later than 3 years after the Act's 
enactment.[Footnote 24] The Act required that the centers include a 
wide range of agencies and stakeholders, as the Secretary deems 
appropriate, and carry out specified maritime security functions. Four 
existing sector command centers the Coast Guard operates in partnership 
with the Navy are a significant step toward meeting these requirements, 
according to a senior Coast Guard official. The Coast Guard is also 
piloting various aspects of future interagency operational centers at 
existing centers and is also working with multiple interagency partners 
to further develop this project.[Footnote 25] The Coast Guard estimates 
that the total acquisition cost of upgrading sector command centers 
into interagency operational centers at the nation's 24 high priority 
ports will be approximately $260 million. This includes investments in 
information systems, sensor networks, and facilities upgrades and 
expansions. Congress funded a total of $60 million for the construction 
of interagency operational centers for fiscal year 2008. The Coast 
Guard has not requested any additional funding for the construction of 
these centers as part of its fiscal year 2009 budget request. However, 
the Coast Guard is requesting $1 million to support its Command 21 
acquisition project (which includes the continued development of its 
information management and sharing technology in command 
centers).[Footnote 26] So, while the Coast Guard's estimates indicate 
that it will need additional financial resources to establish the 
interagency operational centers required by law, its current budget and 
longer term plans do not include all of the necessary funding. 

* Updating area maritime security plans: MTSA, as amended, required 
that the Coast Guard develop, in conjunction with local public and 
private port stakeholders, Area Maritime Security Plans. The plans 
describe how port stakeholders are to deter a terrorist attack or other 
transportation security incident, or secure the port in the event such 
an attack occurs. These plans were initially developed and approved by 
the Coast Guard by June 2004. MTSA also requires that the plans be 
updated at least every five years. The SAFE Port Act added a 
requirement to the plans specifying that they include recovery issues 
by identifying salvage equipment able to restore operational trade 
capacity. This requirement was established to ensure that the waterways 
are cleared and the flow of commerce through United States ports is 
reestablished as efficiently and quickly as possible after a security 
incident.[Footnote 27] The Coast Guard, working with local public and 
private port stakeholders, is required to revise their plans and have 
them completed and approved by June 2009. This planning process may 
require an investment of Coast Guard resources, in the form of time and 
human capital at the local port level for existing plan revision and 
salvage recovery development, as well as at the national level for the 
review and approval of all the plans by Coast Guard headquarters. In 
December 2007, we recommended that the Coast Guard develop national 
level guidance that ports can use to plan for addressing economic 
consequences, particularly in the case of port closures. The Coast 
Guard generally concurred with this recommendation.[Footnote 28] 

Non-Homeland Security Mission Requirements Also Continue to Increase: 

While the Coast Guard continues to be in the vortex of the nation's 
response to maritime-related homeland security concerns, it is still 
responsible for rescuing those in distress, protecting the nation's 
fisheries, keeping vital marine highways operating efficiently, and 
responding effectively to marine accidents and natural disasters. Some 
of the Coast Guard's non-homeland security mission-programs are facing 
the same challenges as its homeland security mission-programs with 
regard to increased mission requirements as detailed below: 

* Revising port plans into all hazard plans: In February 2007, we 
reported that most port authorities conduct planning for natural 
disasters separately from planning for homeland security 
threats.[Footnote 29] However, port and industry experts, as well as 
recent federal actions, are now encouraging an all-hazards approach to 
disaster planning and recovery--that is, disaster preparedness planning 
that considers all of the threats faced by the port, both natural (such 
as hurricanes) and man-made (such as a terrorist attack). For homeland 
security planning, federal law provides for the establishment of Area 
Maritime Security Committees with wide stakeholder representation, and 
some ports are using these committees, or another similar forum with 
wide representation, in their disaster planning efforts. Federal law 
also provides for the establishment of separate committees (called Area 
Committees) for maritime spills of oil and hazardous 
materials.[Footnote 30] We recommended that the Secretary of Homeland 
Security encourage port stakeholders to use existing forums such as 
these that include a range of stakeholders to discuss all-hazards 
planning efforts.[Footnote 31] Revising area plans using an all-hazards 
approach may require additional Coast Guard resources at the local port 
level and at the national level. 

* Revising oil spill regulations to protect the Oil Spill Liability 
Trust Fund: As the recent accident in San Francisco Bay illustrates, 
the potential for an oil spill exists daily across coastal and inland 
waters of the United States. Spills can be expensive with considerable 
costs to the federal government and the private sector. The Oil 
Pollution Act of 1990[Footnote 32] (OPA) authorized the Oil Spill 
Liability Trust Fund, which is administered by the Coast Guard, to pay 
for costs related to removing oil spilled and damages incurred by the 
spill when the vessel owner or operator responsible for the spill--that 
is, the responsible party--is unable to pay.[Footnote 33] In September 
2007, we reported that the fund has been able to cover costs from major 
spills--i.e., spills for which the total costs and claims paid was at 
least $1 million--that responsible parties have not paid, but 
additional risks to the fund remain, particularly from issues with 
limits of liability.[Footnote 34] Limits of liability are the amount, 
under certain circumstances, above which responsible parties are no 
longer financially liable for spill removal costs and damage claims. 
The current liability limits for certain vessel types, notably tank 
barges, may be disproportionately low relative to costs associated with 
such spills, even though limits of liability were raised for the first 
time in 2006.[Footnote 35] In addition, although OPA calls for periodic 
regulatory increases in liability limits to account for significant 
increases in inflation, such increases have never been made.[Footnote 
36] To improve and sustain the balance of the fund, we recommended that 
the Coast Guard determine what changes in the liability limits were 
needed. The Coast Guard concurred with our recommendation. Aside from 
issues related to limits of liability, the fund faces other potential 
drains on its resources, including ongoing claims from existing spills, 
spills that may occur without an identifiable source, and therefore, no 
responsible party, and a catastrophic spill that could strain the 
fund's resources.[Footnote 37] 

* Safeguarding the new national marine monument: In December 2000, 
Executive Order 13178 authorized the creation of the Northwestern 
Hawaiian Islands Coral Reef Ecosystem Reserve, called 
Papahanaumokuakea. The Reserve is about 140,000 square miles in area-- 
slightly smaller than the state of Montana, our 4TH largest state. In 
2006 the President declared this region a national monument to be 
monitored by the U.S. Fish and Wildlife Service and National Oceanic 
and Atmospheric Administration, with support from the State of Hawaii 
and the Coast Guard. The Coast Guard's stewardship mission includes 
preserving the marine environment, which includes monitoring fishing 
activities and law enforcement, marine species protection, debris 
recovery and oil spill clean-up and prevention. These activities are 
supported by collaboration with other organizations, but nevertheless 
require regular aerial surveillance patrols and monitoring of vessel 
traffic. To ensure that commercial fishing is limited to selected 
vessels until 2011, several Coast Guard vessels patrol the region and 
conduct search and rescue missions, protect threatened species, or 
respond to potential hazards such as debris or damaged vessels. 
According to the Coast Guard, monument surveillance has added an 
additional enforcement responsibility onto an existing mission workload 
without the benefit of increased funding, personnel, or vessels and 
aircraft. 

* Increasing polar activity: The combination of expanding maritime 
trade, tourism, exploratory activities and the shrinking Arctic ice cap 
may increase the demand for Coast Guard resources across a variety of 
non-homeland security missions. Moreover, multiple polar nations have 
recognized the value of natural resources in the Arctic region and have 
therefore sought to define and claim their own Arctic seabed and supply-
chain access. However, the increase in Arctic activity has not seen a 
corresponding increase in Coast Guard capabilities. For example, two of 
the three Coast Guard polar ice-breakers are more than 30 years 
old.[Footnote 38] The continued presence of U.S.-flagged heavy 
icebreakers capable of keeping supply routes open and safe may be 
needed to maintain U.S. interests, energy security, and supply chain 
security. These new demands, combined with the traditional Polar 
mission to assist partner agencies such as the National Science 
Foundation in research while protecting the environment and commercial 
vessels in U.S. waterways, reflect a need for an updated assessment of 
current and projected capabilities. In the explanatory statement 
accompanying the DHS fiscal year 2008 appropriations, the Committees on 
Appropriations of the House of Representatives and Senate directed the 
Coast Guard to submit a report that assesses the Coast Guard's Arctic 
mission capability and an analysis of the effect a changing environment 
may have on the current and projected polar operations, including any 
additional resources in the form of personnel, equipment, and vessels. 

Coast Guard Deepwater Program Continues to Experience Challenges and 
Progress Related to Affordability, Management, and Operations: 

Over the years, our testimonies on the Coast Guard's budget and 
performance have included details on the Deepwater program related to 
affordability, management, and operations.[Footnote 39] Given the size 
of Deepwater funding requirements, the Coast Guard will have a long 
term challenge in funding the program within its overall and AC&I 
budgets. In terms of management, the Coast Guard has taken a number of 
steps to improve program management and implement our previous 
recommendations. Finally, problems with selected Deepwater assets--the 
110-foot patrol boats that were upgraded and converted to 123-foot 
boats and subsequently grounded due to structural problems --have 
forced the Coast Guard to take various measures to mitigate the loss of 
these boats. These mitigating measures have resulted in increased costs 
to maintain the older 110-foot patrol boats and reallocation of 
operations across the various missions. These additional costs and 
mission shifts are likely to continue until the Coast Guard acquires 
new patrol boats. 

Funding Deepwater Poses a Long Term Affordability Challenge: 

The Deepwater program represents a significant portion of the Coast 
Guard's budget, especially for acquisition, construction and 
improvements (AC&I). The Deepwater program, at $990 million, accounts 
for approximately 11 percent of the Coast Guard's overall $9.3 billion 
budget request for the entire agency for fiscal year 2009. As noted at 
the beginning of this statement, the overall federal government faces a 
long-term fiscal imbalance, which will put increased pressure on 
discretionary spending at individual agencies. In addition, Deepwater 
dominates the Coast Guard's capital spending as it represents nearly 82 
percent of the agency's total AC&I request of $1.21 billion. This 
leaves relatively little funding for non-homeland security assets 
which--as we reported last year--compete with the Deepwater program for 
AC&I resources. For example, many inland aids-to-navigation vessels are 
reaching the end of their designed service lives and, without major 
rehabilitation or replacement, their ability to carry out their 
designated missions will likely decline in the future.[Footnote 40] 
While the Coast Guard has considered options for systematically 
rehabilitating or replacing these vessels, it has requested relatively 
little funding in the fiscal year 2009 budget request. Specifically, 
the Coast Guard has requested $5 million in AC&I funds for survey and 
design activities to allow them to begin examining options for a new 
vessel to replace the aging inland river aids-to-navigation cutters. 

As we reported last year, Deepwater continues to represent a 
significant source of unobligated balances--money appropriated but not 
yet spent for projects included in previous years' budgets.[Footnote 
41] The unobligated balances for Deepwater total $566 million as of the 
end of fiscal year 2007, which is about 56 percent of the Coast Guard's 
fiscal year 2009 request for Deepwater.[Footnote 42] These unobligated 
balances have accumulated for a variety of reasons--such as technical 
design problems and related delays--where the Coast Guard has found 
itself unable to spend previous year acquisition appropriations. For 
two Deepwater assets where the Coast Guard has postponed acquisition-- 
the Offshore Patrol Cutter and the Vertical Unmanned Aerial Vehicle-- 
the Coast Guard did not request funds for fiscal year 2008. In the 
fiscal year 2008 appropriation, Congress rescinded $132 million dollars 
in unobligated balances for these two assets. For fiscal year 2009, the 
Coast Guard has requested relatively small amounts (approximately $3 
million each) for these two assets. 

Given the magnitude of the program within Coast Guard's overall and 
AC&I budgets, affordability of the Deepwater program has been an 
ongoing concern over the years. Our 1998 report on Deepwater indicated 
that the Coast Guard's initial planning estimate for Deepwater was $9.8 
billion (in then-year constant dollars) over a 20-year period.[Footnote 
43] At that time, we said that the agency could face major financial 
obstacles in proceeding with a Deepwater program at that funding level 
because it would consume virtually all of the Coast Guard's projected 
capital spending. Our 2001 testimony noted that affordability was the 
biggest risk for the Deepwater program because the Coast Guard's 
contracting approach depended on a sustained level of funding each 
fiscal year over the life of the program.[Footnote 44] In 2005, the 
Coast Guard revised the Deepwater implementation plan to consider post- 
9/11 security requirements.[Footnote 45] The revised plan increased 
overall cost estimates from $17 billion to $24 billion, to include 
annual appropriations ranging from $650 million to $1.5 billion per 
year through fiscal year 2026. Continuing into future budgets, 
Deepwater affordability will continue to be a major challenge to the 
Coast Guard given the other demands upon the agency for both capital 
and operations spending. 

Coast Guard Making Changes to Improve Management of Deepwater: 

In the wake of serious performance and management problems, the Coast 
Guard is making a number of changes to improve the management of the 
Deepwater program.[Footnote 46] The Coast Guard is moving away from the 
ICGS contract and the "system-of-systems" model, with the contractor as 
systems integrator, to a more traditional acquisition strategy, where 
the Coast Guard will manage the acquisition of each asset separately. 
It has recognized that it needs to increase government management and 
oversight and has begun to transfer system integration and program 
management responsibilities back to the Coast Guard. The Coast Guard 
began taking formal steps to reclaim authority over decision-making and 
to more closely monitor program outcomes. It has also begun to 
competitively purchase selected assets, expand the role of third 
parties to perform independent analysis, and reorganize and consolidate 
its acquisition function to strengthen its ability to manage projects. 

The Coast Guard also continues to make progress in implementing our 
earlier recommendations to better manage the Deepwater program. In 
March 2004, we made 11 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 subcontractors.[Footnote 47] Of the 
five recommendations that remained open as of our June 2007 report, we 
have closed two, pertaining to the Coast Guard's use of models and 
metrics to measure the contractor's progress toward improving 
operational effectiveness and establishing criteria for when to adjust 
the total ownership baseline.[Footnote 48] The Coast Guard has taken 
actions on the three recommendations that remain open, such as 
designating Coast Guard officials as the lead on integrated product 
teams, developing a draft maintenance and logistics plan for the 
Deepwater assets, and decreasing their reliance on ICGS, including 
potentially eliminating the award term provision from the ICGS 
contract. 

Problems with Assets and Delays Create Operational and Resource 
Challenges: 

Deferring acquisitions of new vessels and aircraft can affect the cost 
of operations, in that the cost-savings and reliability advantages of 
new or modernized assets may not be realized, and the cost of 
maintaining older assets can increase.  For example, delays in the 
acquisition of new patrol boats have forced the Coast Guard to incur 
additional costs to maintain the older patrol boats.  As part of its 
Deepwater program, the Coast Guard planned to have ICGS convert all 49 
existing 110-foot patrol boats into 123-foot patrol boats with 
additional capabilities.  This conversion project was halted after the 
first eight 110-foot patrol boats were converted and began to suffer 
structural and operational problems.  In November 2006, all eight 123-
foot patrol boats were removed from service and the Coast Guard had to 
take steps to better sustain its remaining 110-foot patrol boats.  In 
fiscal year 2005, as the 123-foot patrol boats conversion was 
experiencing problems, the Coast Guard initiated the Mission 
Effectiveness Project  to replace portions of the hull structure and 
mechanical equipment on selected 110-foot patrol boats to improve their 
overall mission effectiveness until a new replacement patrol boat is 
ultimately delivered.  The Coast Guard has been appropriated a total of 
$109.7 million for this effort through fiscal year 2008, and in its 
fiscal Year 2009-2013 Five Year Capital Investment Plan indicates it 
will need an additional $56.3 million through fiscal year 2012.  In 
addition, the Coast Guard plans on implementing a ï¿½high tempo, high 
maintenanceï¿½ initiative for eight of its 110-foot patrol boats.  This 
initiative is aimed at increasing the number of annual operational 
hours for these eight patrol boats, at a cost of $11.5 million in 
fiscal year 2008. 

The removal of the 123-foot patrol boats from service has also 
increased operational costs in terms of lost or reallocated missions. 
The loss of the eight 123-foot patrol boats created a shortage of 
vessels in District 7, where they were all homeported (i.e., 
based).[Footnote 49] As a result, the Coast Guard developed various 
strategies to mitigate the loss of these boats in District 7--which 
impacted the ability of the Coast Guard to interdict illegal migrants. 
One of the Coast Guard's strategies was to shift deployments of some 
vessels to District 7 from other districts within the Coast Guard's 
Atlantic Area. In fiscal year 2007 the Coast Guard redeployed several 
vessels--which contributed approximately 6,600 operational hours in 
District 7-from Districts 1, 5, 8 and the Atlantic Area Command. As 
discussed in the previous section, the Coast Guard faced a trade off 
between homeland security missions and non-homeland security missions. 
In general, this mitigating strategy has led to increased homeland 
security operations in District 7 (e.g., for migrant interdiction) at 
the expense of some non-homeland security missions (e.g., living marine 
resources and aids to navigation) in the Districts providing the 
assets. For example, District 5 officials estimated that the loss of 
one medium-endurance cutter deployment from its district to District 7 
reduced its non-homeland security operations by potentially preventing 
District 5 from performing approximately 24 vessel boardings and 
issuing 17 violation notices in its living marine resources 
mission.[Footnote 50] 

These additional costs will likely continue until the Coast Guard can 
acquire the replacement patrol boat--the Fast Response Cutter (FRC)-- 
the FRC was conceived as a patrol boat with high readiness, speed, 
adaptability and endurance. ICGS proposed a fleet of 58 FRCs 
constructed of composite materials (later termed FRC-As). Although 
estimates of the initial acquisition cost for these composite materials 
were high, they were chosen for their perceived advantages over other 
materials (e.g., steel), such as lower maintenance and life-cycle 
costs, longer service life, and lower weight. However, in February 2006 
the Coast Guard suspended FRC-A design work in order to assess and 
mitigate technical risks.[Footnote 51] As an alternative to the FRC-A, 
the Coast Guard planned to purchase 12 modified commercially available 
patrol boats (termed FRC-Bs). In June 2007, the Coast Guard issued a 
request for proposals for the design, construction and delivery of a 
modified commercially available patrol boat for the FRC-B. In late 
2006, the Coast Guard estimated that the total acquisition cost for 12 
FRC-Bs would be $593 million. The Coast Guard expects to award the FRC- 
B contract in the third quarter of fiscal year 2008, with the lead 
patrol boat to be delivered in 2010. Coast Guard officials stated that 
their goal is still to acquire 12 FRC-Bs by 2012. The Coast Guard 
intends to award a fixed price contract for design and construction of 
the FRC-B, with the potential to acquire a total of 34 cutters. 

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

GAO Contacts and Staff Acknowledgments: 

For information about this statement, please Contact Stephen L. 
Caldwell, Director, Homeland Security and Justice Issues, at (202) 512- 
9610, or [email protected]. Contact points for our Office of 
Congressional Relations and Public Affairs may be found on the last 
page of this statement. This testimony was prepared under the direction 
of Dawn Hoff, Assistant Director. Other individuals making key 
contributions to this testimony include Jonathan Bachman, Christopher 
Conrad, Adam Couvillion, Anthony DeFrank, Wayne Ekblad, Susan Fleming, 
Jessica Gerrard-Gough, Geoffrey Hamilton, Maura Hardy, Christopher 
Hatscher, John Hutton, Lara Kaskie, Monica Kelly, J. Kristopher Keener, 
Daniel Klabunde, Richard Krashevski, Ryan Lambert, Scott Purdy, Ralph 
Roffo, Michele Mackin, James McTigue, Linda Miller, Kate Siggerud, 
April Thompson, Tatiana Winger, and Susan Zimmerman. 

[End of section] 

Appendix I: Status of Selected Deepwater Assets: 

Appendix I provides information on key vessels and aircraft that are 
part of the Deepwater program. In 2005, the Coast Guard revised its 
Deepwater acquisition program baseline to reflect updated cost, 
schedule, and performance measures. The revised baseline accounted for, 
among other things, new requirements imposed by the events of September 
11. The initially-envisioned designs for some assets, such as the 
Offshore Patrol Cutter and Vertical Unmanned Aerial Vehicle, are being 
rethought. Other assets, such as the National Security Cutter and 
Maritime Patrol Aircraft, are in production. Table 2 shows the 2005 
baseline and current status of selected Deepwater assets. 

Table 2: Progress of Selected Deepwater Assets: 

[See PDF for image] 

Source: GAO analysis of Coast Guard documents. 

[End of figure] 

Appendix II: Performance Results by Mission-Program from Fiscal Year 
2003 through Fiscal Year 2007: 

Table 3: Performance Results by Mission-Program from Fiscal Year 2003 
Through Fiscal Year 2007: 

Mission-program: Mission-programs meeting 2007 targets: Ports, 
Waterways, and Coastal Security; 
Mission- program performance measure: Percent reduction in maritime 
terrorism risk over which the Coast Guard has influence; 
Performance Results 2003: n/a; 
2004: n/a; 
2005: 14%; 
2006: 17%; 
2007: 15%; 
Performance target for 2007: 15%. 

Mission-program: Mission-programs meeting 2007 targets: Undocumented 
Migrant Interdiction; 
Mission-program performance measure: Percentage of interdicted or 
deterred illegal migrants entering the United States through illegal 
means; 
Performance Results 2003: 85.3%; 
2004: 87.1%; 
2005: 85.5%; 
2006: 89.1%; 
2007: 93.7%; 
Performance target for 2007: 91%. 

Mission-program: Mission-programs meeting 2007 targets: Marine 
Environmental Protection; 
Mission-program performance measure: Average of oil and chemical spills 
greater than 100 gallons per 100 million tons shipped; 
Performance Results 2003: 29.4; 
2004: 22.1; 
2005: 18.5; 
2006: 16.3; 2007: 15; 
Performance target for 2007: 19. 

Mission-program: Mission-programs meeting 2007 targets: U.S. Exclusive 
Economic Zone Enforcement; 
Mission- program performance measure: Number of detected Exclusive 
Economic Zone (EEZ) incursions by foreign fishing vessels; 
Performance Results 2003: 152; 
2004: 247; 
2005: 174; 
2006: 164; 
2007: 119; 
Performance target for 2007: 199. 

Mission-program: Mission-programs meeting 2007 targets: Ice Operations 
(domestic icebreaking); 
Mission- program performance measure: Number of waterway closure days; 
Performance Results 2003: 7; 
2004: 4; 
2005: 0; 
2006: 0; 
2007: 0; 
Performance target for 2007: 2[A]. 

Mission-program: Mission-program expected to meet 2007 target: Illegal 
Drug Interdiction; 
Mission-program performance measure: Percentage of cocaine removed out 
of total estimated cocaine entering through the United States through 
maritime means[B]; 
Performance Results 2003: Not reported; 
2004: 30.7%; 
2005: 27.3%; 
2006: 25.3%; 
2007: 31.4%[C]; 
Performance target for 2007: 26%. 

Mission-program: Mission-programs that did not meet their 2007 targets: 
Marine Safety; 
Mission-program performance measure: 5-year average annual mariner, 
passenger, and boating deaths and injuries; 
Performance Results 2003: 5,561; 
2004: 5,387; 
2005: 5,169; 
2006: 5,036; 

2007: 4,770; 
Performance target for 2007: 4,539. 

Mission-program: Mission-programs that did not meet their 2007 targets: 
Search and Rescue; 
Mission-program performance measure: Percentage of distressed mariners' 
lives saved; 
Performance Results 2003: 87.7%; 
2004: 86.8%; 
2005: 86.1%; 
2006: 85.3%; 
2007: 85.4%; 
Performance target for 2007: 86%. 

Mission-program: Mission-programs that did not meet their 2007 targets: 
Defense Readiness; 
Mission-program performance measure: Percentage of time that units meet 
combat readiness level; 
Performance Results 2003: 78%; 
2004: 76%; 
2005: 67%; 
2006: 62%; 
2007: 51%; 
Performance target for 2007: 100%. 

Mission-program: Mission-programs that did not meet their 2007 targets: 
Living Marine Resources; 
Mission-program performance measure: Percentage of fishermen found in 
compliance with federal regulations; 
Performance Results 2003: 97.1%; 
2004: 96.3%; 
2005: 96.4%; 
2006: 96.6%; 
2007: 96.2%; 
Performance target for 2007: 97%. 

Mission-program: Mission-programs that did not meet their 2007 targets: 
Aids to Navigation; 
Mission-program performance measure: 5-year average number of 
collisions, allisions, and groundings; 
Performance Results 2003: 2,000; 
2004: 1,876; 
2005: 1,825; 
2006: 1,765; 
2007: 1,823; 
Performance target for 2007: 1,664. 

Source: GAO analysis of Coast Guard data. 

Note: n/a, not available. Bold numbers indicate that performance 
targets were met previously. Performance targets for previous fiscal 
years may have been different than fiscal year 2007 targets. 

[A] The target for ice operations noted here is for domestic 
icebreaking only, and the target level varies according to the index 
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. 

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

[C] Complete data are not yet available for the illegal drug 
interdiction program. However, the Coast Guard estimates it will 
surpass the FY 2007 performance target of 26 percent with an estimated 
31.4 percent Cocaine Removal Rate. 

[End of table] 

[End of section] 

Related GAO Products: 

Coast Guard: Deepwater Program Management Initiatives and Key Homeland 
Security Missions. GAO-08-531T. Washington, D.C.: Mar. 5, 2008. 

Maritime Security: Coast Guard Inspections Identify and Correct 
Facility Deficiencies, but More Analysis Needed of Program's Staffing, 
Practices, and Data. GAO-08-12. Washington, D.C.: Feb. 14, 2008. 

Long-Term Fiscal Outlook: Action Is Needed to Avoid the Possibility of 
Serious Economic Disruption in the Future. GAO-08-411T. Washington, 
D.C.: Jan 29, 2008. 

Maritime Transportation: Major Oil Spills Occur Infrequently, but Risks 
to the Federal Oil Spill Fund Remain. GAO-08-357T. Washington, D.C.: 
Dec. 18, 2007. 

A Call for Stewardship: Enhancing the Federal Government's Ability to 
Address Key Fiscal and Other 21st Century Challenges. GAO-08-93SP. 
Washington, D.C.: Dec. 17, 2007. 

Maritime Security: Federal Efforts Needed to Address Challenges in 
Preventing and Responding to Terrorist Attacks on Energy Commodity 
Tankers. GAO-08-141. Washington, D.C.: Dec. 10, 2007. 

Homeland Security: TSA Has Made Progress in Implementing the 
Transportation Worker Identification Credential Program, but Challenges 
Remain. GAO-08-133T. Washington, D.C.: Oct. 31, 2007. 

Maritime Security: The SAFE Port Act: Status and Implementation One 
Year Later. GAO-08-126T. Washington, D.C.: Oct. 30, 2007. 

Maritime Transportation: Major Oil Spills Occur Infrequently, but Risks 
to the Federal Oil Spill Fund Remain. GAO-07-1085. Washington, D.C.: 
Sep. 7, 2007. 

Information on Port Security in the Caribbean Basin. GAO-07-804R. 
Washington, D.C.: June 29, 2007. 

Coast Guard: Challenges Affecting Deepwater Asset Deployment and 
Management and Efforts to Address Them. GAO-07-874. Washington, D.C.: 
June 18, 2007. 

Coast Guard: Observations on the Fiscal Year 2008 Budget, Performance, 
Reorganization, and Related Challenges. GAO-07-489T. Washington, D.C.: 
Apr. 18, 2007. 

Transportation Security: TSA Has Made Progress in Implementing the 
Transportation Worker Identification Credential Program, but Challenges 
Remain. GAO-07-681T. Washington, D.C.: Apr. 12, 2007. 

Port Risk Management: Additional Federal Guidance Would Aid Ports in 
Disaster Planning and Recovery. GAO-07-412. Washington, D.C.: Mar. 28, 
2007. 

Maritime Security: Public Consequences of a Terrorist Attack on a 
Tanker Carrying Liquefied Natural Gas Need Clarification. GAO-07-316. 
Washington, D.C.: Feb. 22, 2007. 

Coast Guard: Condition of Some Aids to Navigation and Domestic 
Icebreaking Vessels Has Declined: Effect on Mission Performance Appears 
Mixed. GAO-06-979. Washington, D.C.: Sep. 22, 2006. 

Coast Guard: Non-Homeland Security Performance Measures Are Generally 
Sound, but Opportunities for Improvement Exist. GAO-06-816. Washington, 
D.C.: Aug. 16, 2006. 

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

Coast Guard: Observations on Agency Performance, Operations, and Future 
Challenges. GAO-06-448T. Washington, D.C.: June 15, 2006. 

Risk Management: Further Refinements Needed to Assess Risks and 
Prioritize Protective Measures at Ports and Other Critical 
Infrastructure. GAO-06-91. Washington, D.C.: Dec. 15, 2005. 

Maritime Security: New Structures Have Improved Information Sharing, 
but Security Clearance Processing Requires Further Attention. GAO-05- 
394. Washington, D.C.: Apr. 15, 2005. 

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

Coast Guard: Key Management and Budget Challenges for Fiscal Year 2005 
and Beyond. GAO-04-636T. Washington, D.C.: Apr. 7, 2004. 

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

Coast Guard: Challenges during the Transition to the Department of 
Homeland Security. GAO-03-594T. Washington, D.C.: Apr. 1, 2003. 

Coast Guard: Budget and Management Challenges for 2003 and Beyond. GAO- 
02-538T. Washington, D.C.: Mar. 19, 2002. 

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

Coast Guard Acquisition Management: Deepwater Project's Justification 
and Affordability Need to be Addressed More Thoroughly. GAO/RCED-99-6, 
Washington, D.C.: Oct. 26, 1998. 

Coast Guard: Challenges for Addressing Budget Constraints. GAO/RCED-97- 
110. Washington, D.C.: May 1997. 

[End of section] 

Footnotes: 

[1] The back of this statement includes a listing of related GAO 
products, including budget reviews going back to 1997. 

[2] See GAO, Long-Term Fiscal Outlook: Action Is Needed to Avoid the 
Possibility of a Serious Economic Disruption in the Future, GAO-08-411T 
(Washington, D.C.: Jan. 29, 2008). 

[3] See GAO, A Call for Stewardship: Enhancing the Federal Government's 
Ability to Address Key Fiscal and Other 21st Century Challenges, GAO- 
08-93SP (Washington, D.C.: Dec. 17, 2007). 

[4] For more information on risk management and the Coast Guard's 
related efforts, see GAO, Risk Management: Further Refinements Needed 
to Assess Risks and Prioritize Protective Measures at Ports and Other 
Critical Infrastructure, GAO-06-91 (Washington, D.C.: Dec. 15, 2005). 

[5] In conjunction with this testimony, we are releasing: GAO, Maritime 
Security: Coast Guard Inspections Identify and Correct Facility 
Deficiencies, but More Analysis Needed of Program's Staffing, 
Practices, and Data, GAO-08-12 (Washington, D.C.: Feb. 14, 2008). 

[6] The Coast Guard's "system of systems" approach integrates ships, 
aircraft, sensors, and communication links together as a system to 
accomplish mission objectives. 

[7] For example, see Coast Guard Acquisition Management: Deepwater 
Project's Justification and Affordability Need to be Addressed More 
Thoroughly, GAO/RCED-99-6 (Washington, D.C.: Oct. 26, 1999). 

[8] According to Coast Guard officials, when also taking into account 
supplemental funding appropriated for fiscal year 2008, such as 
operating expenses emergency funding, the fiscal year 2009 increase is 
4.6% percent. 

[9] GAO's analysis of the Coast Guard's fiscal year 2009 budget request 
is presented in nominal terms. Supplemental funding received during 
fiscal year 2008 is not included in the analysis. 

[10] For each major Coast Guard mission-program, the Coast Guard 
reports on both a performance measure target and actual performance 
achieved, by fiscal year. In addition, performance results are based 
upon targets that may change from year to year. 

[11] The Other Law Enforcement mission-program is also known as U.S. 
Exclusive Economic Zone Enforcement, and is referred to accordingly in 
Appendix II. 

[12] GAO, Coast Guard: Non-Homeland Security Performance Measures Are 
Generally Sound, but Opportunities for Improvement Exist, GAO-06-816 
(Washington, D.C.: Aug. 16, 2006). 

[13] For more details on the Coast Guard's efforts to match resources 
to performance results, see GAO-06-816 (App. III). 

[14] Pub. L. No. 107-295, 116 Stat. 2064 (2002). 

[15] Pub. L. No. 109-347, 120 Stat. 1884 (2006). 

[16] GAO-08-12. 

[17] For more information on these foreign port inspections, see GAO, 
Information on Port Security in the Caribbean Basin, GAO-07-804R 
(Washington, D.C.: June 29, 2007). 

[18] See GAO, Maritime Security: The SAFE Port Act: Status and 
Implementation One Year Later, GAO-08-126T (Washington, D.C.: Oct. 30, 
2007). 

[19] The details of this recommendation are contained in a report that 
is restricted from public release and cannot be further disclosed. 

[20] For additional information on the challenges the Coast Guard faces 
with regard to energy commodity shipments, see GAO, Maritime Security: 
Federal Efforts Needed to Address Challenges in Responding to Terrorist 
Attacks on Energy Commodity Tankers, GAO-08-141 (Washington, D.C.: Dec. 
10, 2007) and Maritime Security: Public Consequences of a Terrorist 
Attack on a Tanker Carrying Liquefied Natural Gas Need Clarification, 
GAO-07-316 (Washington, D.C.: Feb. 22, 2007). 

[21] Security compliance examinations are integrated into the Coast 
Guard's Port State Control program and are carried out by marine 
inspectors, who are also responsible for ensuring compliance of safety 
and environmental regulations. These examinations may be completed in 
port or at-sea depending on the relative risk factors of the vessel. 
Security boardings are a related, but separate, effort conducted by 
armed law enforcement officers. Security boardings are typically 
carried out at-sea before the vessel arrives at a U.S. port. 

[22] "Distinct" vessel arrivals include vessels, greater than or equal 
to 500 gross tons, which called upon at least one U.S. port during the 
calendar year. It also includes passenger vessels carrying more than 12 
passengers on an international voyage. A vessel that called upon 
numerous U.S. ports in a given year only counts as one distinct 
arrival. 

[23] According to Coast Guard officials, they have revised the 
targeting matrix for security boardings, which has resulted in a 
reduction in the number of vessels boarded. Coast Guard officials noted 
that other factors may also decrease the need for the number of 
required examinations and boardings over time. These factors include 
increased awareness by vessel operators of the security code 
requirements as well as enhancements to the Coast Guard's own maritime 
domain awareness, such as the Automatic Identification System--which 
uses a device to electronically track vessels--that they anticipate 
will provide more information on vessel activities. 

[24] For additional information on these centers, see GAO, Maritime 
Security: New Structures Have Improved Information Sharing, but 
Security Clearance Processing Requires Further Attention, GAO-05-394 
(Washington, D.C.: Apr. 15, 2005). 

[25] According to the Coast Guard, these multiple interagency partners 
include Customs and Border Protection, Immigration and Customs 
Enforcement, Department of Defense, the Secure Border Initiative 
Network (SBInet) Program Office, and State and local partners. A pilot 
interagency operational center located in Charleston, South Carolina, 
known as Project Seahawk, is managed by the Department of Justice. It 
was created through an appropriation in the fiscal year 2003 
Consolidated Appropriations Resolution (Pub. L. No. 108-7, 117 Stat. 
11, 53 (2003.)). The Department of Justice has committed to funding 
Project Seahawk through fiscal year 2009. 

[26] The Coast Guard's fiscal year 2009-2013 Five Year Capital 
Investment Plan does not include funds for the construction of these 
interagency operational centers, but the plan does include a total of 
$40 million in future requests to support the Command 21 acquisition 
project. According to the Coast Guard, they are using the Command 21 
effort as the vehicle to deliver interagency operational capacity to 
its existing command centers. 

[27] Coast Guard officials have noted that any changes to the recovery 
sections of these plans need to be consistent with the national 
protocols developed for the SAFE Port Act, such as DHS's Strategy to 
Enhance the International Supply Chain released in July 2007. This 
strategy contains a plan to speed the resumption of trade in the event 
of a terrorist attack on our ports or waterways, in response to a SAFE 
Port Act requirement. 

[28] GAO-08-141. 

[29] See Port Risk Management: Additional Federal Guidance Would Aid 
Ports in Disaster Planning and Recovery, GAO-07-412 (Washington, D.C.: 
Mar. 28, 2007). 

[30] The Oil Pollution Act of 1990 (Pub. L. 101-380, 104 Stat. 484 
(1990)). 

[31] DHS generally agreed that existing forums provide a good 
opportunity to conduct outreach to and participation by stakeholders 
from various federal, state, and local agencies and as appropriate, 
industry and governmental organizations; however, the department said 
it did not endorse placing responsibility for disaster contingency 
planning on existing committees. We found during the course of our 
field work that some ports were already using existing port communities 
effectively to plan for all hazards, and we believe DHS could continue 
to use these forums as a way to engage all relevant parties in 
discussing natural disaster planning for ports. 

[32] Pub. L. 101-380, 104 Stat. 484 (1990). 

[33] OPA applies to oil discharged from vessels or facilities into 
navigable waters of the United States and adjoining shorelines. OPA 
also covers substantial threats of discharge, even if an actual 
discharge does not occur. 

[34] GAO, Maritime Transportation: Major Oil Spills Occur Infrequently, 
but Risks to the Federal Oil Spill Fund Remain, GAO-07-1085 
(Washington, D.C.: Sept. 7, 2007). 

[35] The Coast Guard and Maritime Transportation Act of 2006 (Pub. L. 
No. 109-241, 120 Stat. 516 (2006)) significantly increased the limits 
of liability from the limits set by OPA in 1990. 

[36] If the liability limits had been adjusted for inflation between 
1990 and 2006, the Fund could have saved approximately $39 million. 

[37] During the 1989 Exxon Valdez oil spill, the vessel discharged 
about 20 percent of the oil it was carrying. Clean up costs for the 
Exxon Valdez alone totaled about $2.2 billion, according to the 
vessel's owner. A catastrophic spill from a vessel could result in 
costs that exceed those of the Exxon Valdez, particularly if the entire 
contents of a tanker were released in a 'worst-case discharge' 
scenario. 

[38] For more information on polar icebreakers, see pp. 31-33 of Coast 
Guard: Observations on the Fiscal Year 2008 Budget, Performance, 
Reorganization, and Related Challenges, GAO-07-489T (Washington, D.C.: 
Apr.18, 2007). 

[39] See, for example, Coast Guard: Challenges Affecting Deepwater 
Asset Deployment and Management Efforts to Address Them, GAO-07-874 
(Washington, D.C.: June 18, 2007); Coast Guard, Observations on Agency 
Performance, Operations, and Future Challenges, GAO-06-448T 
(Washington, D.C.: June 15, 2006); Coast Guard: Observations on Agency 
Priorities in Fiscal Year 2006 Budget Request, GAO-05-364T (Washington, 
D.C.: Mar. 17, 2005); Coast Guard: Key Management and Budget Challenges 
for Fiscal Year 2005 and Beyond, GAO-04-636T (Washington, D.C.: Apr. 7, 
2004); Contract Management: Coast Guard's Deepwater Program Needs 
Increased Attention to Management and Contractor Oversight, GAO-04-380 
(Washington, D.C.: Mar. 9, 2004); Coast Guard: Budget and Management 
Challenges for 2003 and Beyond, GAO-02-538T (Washington, D.C.: Mar. 19, 
2002); and Coast Guard: Challenges for Addressing Budget Constraints, 
GAO/RCED-97-110 (Washington, D.C.: May 1997). 

[40] See GAO, Coast Guard: Condition of Some Aids to Navigation and 
Domestic Icebreaking Vessels Has Declined: Effect on Mission 
Performance Appears Mixed, GAO-06-979 (Washington, D.C.: Sep. 22, 
2006). 

[41] GAO-07-489T . 

[42] Of this $566 million, approximately $105 million was in the Fast 
Response Cutter B-class account, $82 million in the National Security 
Cutter account, and $47 million in the HC-130H Conversion/Sustainment 
Projects account, among other items. 

[43] GAO, Coast Guard Acquisition Management: Deepwater Project's 
Justification and Affordability Need to be Addressed More Thoroughly, 
GAO/RCED-99-6 (Washington, D.C.: Oct. 26, 1998). 

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

[45] The new requirements generally related to improved capabilities to 
operate in conditions of chemical, biological, and radiological 
contamination; greater anti-terrorist weaponry; development of airborne 
use of force capabilities; improved communications systems, and 
enhanced flight decks. 

[46] For example, the National Security Cutter (NSC), as designed, was 
unlikely to meet fatigue life expectations (as confirmed by a U.S. Navy 
study), leading to the Coast Guard's decision to correct structural 
deficiencies for the first two NSCs at scheduled drydocks and implement 
structural enhancements into design and production of future ships. The 
NSC has also experienced delays in delivery. In addition, the Coast 
Guard has had to suspend design work on the Fast Response Cutter-A due 
to high technical risks, after obligating approximately $35 million. 

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

[48] See GAO, Contract Management: Challenges Affecting Deepwater Asset 
Deployment and Management Efforts to Address Them, GAO-07-874 
(Washington, D.C.: June 18, 2007). The first of these recommendations, 
on measuring contractor's progress, has been overcome by events, given 
the changes in how the Coast Guard currently assesses contractor 
performance. 

[49] The Coast Guard's District 7 Command, based in Miami, FL, 
generally covers the areas and adjacent waters of coastal South 
Carolina, Florida, and Puerto Rico. 

[50] We are currently reviewing the Coast Guard's strategies for 
mitigating the loss of the eight 123-foot patrol boats in District 7 
and will be reporting our results later in the Spring. 

[51] For more information on the FRC-A, see GAO, Coast Guard: Status of 
Deepwater Fast Response Cutter Design Efforts, GAO-06-764 (Washington, 
D.C.: June 23, 2006).

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