Coast Guard: Challenges for Addressing Budget Constraints (Chapter
Report, 05/14/97, GAO/RCED-97-110).

Pursuant to a congressional request, GAO reviewed the fiscal constraints
that the Coast Guard is facing and the efforts that it is making to
adjust to constrained budgets, focusing on: (1) the extent of the gap
between the funding needed to maintain the Coast Guard's current level
of services and the funding that the Office of Management and Budget
(OMB) has targeted for the agency through fiscal year (FY) 2002; (2) the
Coast Guard's strategy for addressing this gap, and whether the strategy
is adequate; and (3) what additional actions, if any, would help close
the gap. GAO did not verify the accuracy of or attempt to validate the
Coast Guard's estimates for future acquisition needs.

GAO noted that: (1) deficit reduction efforts will create substantial
pressure on the Coast Guard's budget; (2) by FY 2002, the Coast Guard is
projected to have a gap of as much as $493 million between OMB's budget
target and the estimated cost of maintaining services at current levels;
(3) eliminating a gap of this size means that by FY 2002, the Coast
Guard would need to identify cuts in operating expenses of $363 million
and defer a substantial portion of its budget to replace or modernize
its aging ships, aircraft, and facilities through FY 2002, according to
OMB and Coast Guard estimates; (4) whether the Guard can close the gap
with its current budget strategy is highly uncertain and is likely to
remain so for some time: (5) Coast Guard managers have acknowledged the
task's enormity, but have not yet fully developed an approach or a
specific plan for addressing the task; (6) agency managers have begun to
strengthen planning and budgeting processes, but these changes will not
be fully in place for a year or more, and their usefulness in addressing
immediate needs for reductions is unclear; (7) in the meantime, the
Coast Guard continues to rely heavily on its past strategy, which
focuses almost exclusively on cutting costs through greater efficiency;
(8) while this strategy has yielded savings of about $343 million,
achieving OMB's targets will be a much more difficult challenge; (9) the
gap's sheer size and the dwindling number of available
efficiency-related options mean that in developing its plan for meeting
OMB's budget targets, the Coast Guard may have to reexamine its current
focus; (10) GAO's past work shows that when private-sector and public
organizations have successfully faced fiscal constraints like the Coast
Guard's, they have done so through a much broader approach that includes
the consideration of alternatives; (12) except for the recent
streamlining program, the Coast Guard has relatively incomplete
knowledge about the savings that it can anticipate in the next several
years from cost-saving steps that are in various stages of
implementation; (13) as a result, the agency does not know the degree to
which these steps would close future funding gaps; (14) in addition, the
Coast Guard may have to consider measures that call for considerable
change in its operating culture or that stir public opposition; and (15)
fully addressing such options may require further study or new implemen*

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  RCED-97-110
     TITLE:  Coast Guard: Challenges for Addressing Budget Constraints
      DATE:  05/14/97
   SUBJECT:  Deficit reduction
             Marine safety
             Budget cuts
             Strategic planning
             Cost control
             Mission budgeting
             User fees
             Future budget projections
             Presidential budgets
             Base closures
IDENTIFIER:  Oil Spill Liability Trust Fund
             Aquatic Resources Trust Fund
             Coast Guard National Plan for Streamlining
             Coast Guard Capital Investment Plan
             Coast Guard Vessel Traffic Service 2000 Program
             
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Cover
================================================================ COVER


Report to Congressional Requesters

May 1997

COAST GUARD - CHALLENGES FOR
ADDRESSING BUDGET CONSTRAINTS

GAO/RCED-97-110

Future Budget for U.S.  Coast Guard

(344501)


Abbreviations
=============================================================== ABBREV

  AC&I - acquisition, construction, and improvements
  CBO - Congressional Budget Office
  CVS - commercial vessel safety
  DOD - Department of Defense
  DOT - Department of Transportation
  ELT - emergency locator transmitter
  EPIRB - emergency position indicating radio beacon
  GAO - General Accounting Office
  GPRA - Government Performance and Results Act
  IIP - International Ice Patrol
  ISC - integrated support command
  OMB - Office of Management and Budget
  SAR - search and rescue
  USCG - U.S.  Coast Guard
  VTS - vessel traffic service
  WLIC - inland construction buoy tender

Letter
=============================================================== LETTER


274164

May 1997

The Honorable Wayne T.  Gilchrest
Chairman
The Honorable Bob Clement
Ranking Minority Member
Subcommittee on Coast Guard
 and Maritime Transportation
Committee on Transportation
 and Infrastructure
House of Representatives

The Honorable Howard Coble
House of Representatives

In response to your request, this report discusses the fiscal
constraints that the U.S.  Coast Guard is facing and the efforts that
the agency is making to adjust to constrained budgets.  This report
contains recommendations to the Secretary of Transportation and two
matters for congressional consideration to assist the Coast Guard in
meeting its budget targets. 

As requested, unless you publicly announce its contents earlier, we
plan no further distribution of this report until 7 days after the
date of this letter.  We will then send copies to the Secretary of
Transportation; the Commandant of the Coast Guard; the Director,
Office of Management and Budget; and other interested parties.  We
will make copies available to others upon request. 

If you or your staff have any questions, please call me at (202)
512-2834.  Major contributors to this report are listed in appendix
III. 

John H.  Anderson, Jr.
Director, Transportation
 Issues


EXECUTIVE SUMMARY
============================================================ Chapter 0


   PURPOSE
---------------------------------------------------------- Chapter 0:1

Since fiscal year 1992, the Coast Guard has assumed increased
responsibilities while shrinking its workforce by nearly 10 percent
and operating with a budget that has risen about 1 percent a year in
actual dollars.  The Commandant of the Coast Guard told the Congress
in 1996 that funding was no longer sufficient to sustain the normal
pace of operations over time.  Yet the Coast Guard, like the federal
government as a whole, faces the prospect of further budget cuts to
meet deficit reduction targets over the next several years. 

The Chairman and Ranking Minority Member of the Subcommittee on Coast
Guard and Maritime Transportation, House Committee on Transportation
and Infrastructure, asked GAO to determine how the Coast Guard plans
to carry out its roles and missions in the face of stringent budgets. 
GAO's review addressed the following questions: 

  What is the extent of the gap between the funding needed to
     maintain the Coast Guard's current level of services and the
     funding that the Office of Management and Budget (OMB) has
     targeted for the agency through fiscal year 2002? 

  What is the Coast Guard's strategy for addressing this gap, and is
     the strategy adequate? 

  What additional actions, if any, would help close the gap? 


   BACKGROUND
---------------------------------------------------------- Chapter 0:2

The Coast Guard, a Department of Transportation (DOT) agency, is
responsible for maritime missions that include conducting search and
rescue operations; protecting the marine environment; enforcing
fisheries, immigration, and drug laws; and facilitating the safe
navigation of vessels through U.S.  waters.  The Coast Guard's nearly
43,000 full-time military and civilian employees, 7,800 reservists,
and 34,000 volunteer auxiliary staff provide services through a
number of boat stations, air stations, marine safety offices, and
other facilities located in coastal areas and navigable lakes and
rivers.  The agency maintains a sizable fleet of cutters and other
vessels, airplanes, and helicopters to carry out its functions. 

The Coast Guard's budget for fiscal year 1997 is about $3.8 billion. 
Operating expenses account for nearly three-fourths of this amount;
the remainder is mainly for military retirement pay and capital
purchases.  The President has requested an increase of about $137
million for fiscal year 1998, primarily for increased drug
interdiction efforts, pay increases and other employee-related
programs, and mandatory increases for retirees. 

Most of the Coast Guard's funding comes from the Department of the
Treasury's General Fund.  The agency also receives moneys from the
Oil Spill Liability Trust Fund (for the prevention and cleanup of oil
spills) and from the Boat Safety Account of the Aquatic Resources
Trust Fund (for a national recreational boating safety program). 
Since 1982, the Coast Guard has also received varying annual
amounts--$6 million to $490 million--from the Department of Defense
for national security activities. 

The Congress and the President have reached agreement in principle to
achieve a balanced budget by fiscal year 2002.  OMB, the lead agency
for coordinating the administration's efforts to balance the budget,
develops and periodically updates budget targets for each federal
agency to use in managing toward a balanced budget.  In setting these
targets, OMB also estimates the funds that each agency would need to
maintain its current level of services in future years.  If an
agency's current estimate for services exceeds budget targets, the
agency is expected to take the necessary steps to eliminate the gap. 


   RESULTS IN BRIEF
---------------------------------------------------------- Chapter 0:3

Deficit reduction efforts will create substantial pressure on the
Coast Guard's budget.  By fiscal year 2002, the Coast Guard is
projected to have a gap of as much as a $493 million between OMB's
budget target and the estimated cost of maintaining services at
current levels.  Eliminating a gap of this size means that by fiscal
year 2002, the Coast Guard would need to identify cuts in operating
expenses of $363 million, or an average of about $90 million each
year.  The Coast Guard would also have to defer a substantial portion
of its budget--at least $130 million--to replace or modernize its
aging ships, aircraft, and facilities through fiscal year 2002,
according to OMB's and the Coast Guard's estimates. 

Whether the Coast Guard can close the gap with its current budget
strategy is highly uncertain at this point and is likely to remain so
for some time.  Coast Guard managers have acknowledged the enormity
of the task but have not yet fully developed an approach or a
specific plan for addressing the task.  To their credit, agency
managers have begun to strengthen planning and budgeting processes
through such steps as developing new business and capital expenditure
plans.  But these changes will not be fully in place for a year or
more, and their usefulness in addressing immediate needs for
reductions is unclear.  In the meantime, the Coast Guard continues to
rely heavily on its past strategy, which focuses almost exclusively
on cutting costs through greater efficiency--that is, on providing
all services at the same levels as before but doing so at less cost. 
While this strategy has yielded savings of about $343 million,
achieving OMB's targets will be a much more difficult challenge. 

The sheer size of the gap and the dwindling number of available
efficiency-related options mean that in developing its plan for
meeting OMB's budget targets, the Coast Guard may have to reexamine
its current focus of addressing efficiency measures alone.  GAO's
past work shows that when private-sector and public organizations
have successfully faced fiscal constraints like the Coast Guard's,
they have done so through a much broader approach that includes the
consideration of other alternatives, such as changing the services
provided or reassessing how they are paid for.  As the first step in
developing its plan, the Coast Guard needs to quantify the extent of
likely savings from ongoing or planned actions.  Except for the
recent streamlining program, the Coast Guard has relatively
incomplete knowledge about the savings that it can anticipate in the
next several years from cost-saving steps that are in various stages
of implementation.  As a result, the agency does not know the degree
to which these steps would close future funding gaps.  In addition,
the Coast Guard may have to consider measures that call for
considerable change in its operating culture, such as changing its
military rotation policy, or that stir public opposition, such as
closing small boat stations.  Fully addressing such options may
require further study or new implementation strategies. 


   PRINCIPAL FINDINGS
---------------------------------------------------------- Chapter 0:4


      PROJECTED GAP IS SUBSTANTIAL
-------------------------------------------------------- Chapter 0:4.1

OMB's budget targets call for capping the Coast Guard's expenditures
in most discretionary spending categories at the requested levels for
fiscal year 1998 throughout fiscal 1999-2002, with no adjustments for
inflation.  For operating expenditures--everything from salaries and
benefits to maintenance and training--a freeze translates into a
reduction in purchasing power and therefore a need to make cuts in
activities.  Cuts are necessary because costs rise from year to year
as a result of inflation and other factors, even if funding levels do
not.  If no funding is received to cover the additional cost of
providing the same level of operations, the Coast Guard must find
ways to cover the loss in purchasing power by reducing costs.  If
OMB's targets become the mark that the Coast Guard must meet during
fiscal years 1999-2002, the Coast Guard will have to make cuts of
$363 million in the operating portion of its budget--an average of
about $90 million each year. 

For capital expenditures, where the gap is $130 million, a freeze in
expenditure levels for new ships, aircraft, and facilities does not
necessarily translate into the need to make immediate cuts in
activities because the Coast Guard may be able to go on using the old
equipment.  Instead, the effect of the freeze is deferred; at some
future point, the equipment will likely need to be replaced or
modernized.  These deferrals can represent a potential funding
dilemma, in that future budgets may not be able to accommodate all of
the replacement or modernization projects that the agency believes
cannot be put off any longer.  The Coast Guard has estimated that
replacing aging equipment and facilities on a one-for-one basis would
require annual expenditures of from $768 million to about $1.2
billion in fiscal years 1999-2002, an amount that is at least double
that included in OMB's targets.  Deferring these acquisition costs
can also affect the costs of operations, in that the cost-saving
advantages of new or modernized equipment may not be realized, and
the costs of maintaining older equipment and facilities can increase. 

OMB's current targets are not the final word on how large the gap
will be.  The targets characteristically are subject to revision, on
the basis of assumptions about how well the economy will perform, and
changes in these assumptions can have a major impact on the size of
the gap.  The targets are also subject to change as the
administration and the Congress consider the trade-offs involved in
distributing limited funding among all programs, including those of
the Coast Guard.  Any of these factors could cause the Coast Guard's
funding gap to widen or narrow. 


      ADEQUACY OF STRATEGY TO MEET
      OMB'S TARGETS IS HIGHLY
      UNCERTAIN
-------------------------------------------------------- Chapter 0:4.2

For the Coast Guard, the current deficit reduction efforts come on
the heels of the largest cost-reduction effort in the agency's recent
history.  The agency's cost-reduction efforts since fiscal year 1994
occurred in two phases and have yielded savings totaling about $343
million.  The agency's efforts in fiscal years 1994-96 yielded
savings of about $266 million by eliminating over 2,600 jobs and
decommissioning old cutters and aircraft.  In fiscal year 1996, the
agency began a second round of efforts, called the National Plan for
Streamlining, from which it expects to achieve an additional $77
million in net savings by fiscal year 1999.  However, despite the
substantial savings from these cost-reduction efforts, Coast Guard
management may face an even greater fiscal challenge in the near
future.  If OMB's budget targets hold, the Coast Guard must make
additional cuts in operating expenses equal to $363 million by fiscal
year 2002.  In addition, the agency may have to defer capital
expenditures of $130 million or more, according to OMB's and the
Coast Guard's estimates. 

Coast Guard managers have not yet fully developed an approach or
specific plan to meet OMB's budget targets.  Although the Coast Guard
has taken several actions to strengthen its budget review process,
specific steps associated with these actions are just getting under
way, and some of them will take time to put in place.  The actions
include developing (1) a revised planning and budgeting process that
builds in mechanisms for identifying cost-saving alternatives, (2) a
new senior management group that provides the agency with an
additional opportunity to focus on dealing with budget targets, and
(3) a new capital-planning process designed to focus on the
scaled-down realities of the current budget environment.  But the
internal processes for developing and considering cost-cutting ideas
are not yet fully developed, and the full development of the new
capital- planning process is not expected until 1999. 

In the short term, the Coast Guard is planning to rely mainly on its
past strategy as a way to meet future budget targets.  This strategy,
which mirrors many efforts undertaken in past years, relies heavily
on asking program managers to (1) consider a number of specific
budget-cutting options suggested by top management to improve
efficiency for fiscal years 1998-99 and (2) identify additional
opportunities to operate more efficiently.  However, the Coast Guard
itself acknowledges that nearly all of what it considers to be
realistic savings opportunities have already been taken, leaving
little in the "savings locker." Given the size of the gap and the
depleted list of cost-saving efficiencies, the adequacy of this
approach in meeting much sterner budget challenges is highly
uncertain, and the agency may have to look beyond efficiency measures
only for budget-cutting options. 


      ADDITIONAL ACTIONS NEEDED ON
      SEVERAL FRONTS TO BETTER
      PREPARE FOR BUDGET
      CONTINGENCIES
-------------------------------------------------------- Chapter 0:4.3

Coast Guard officials voiced optimism that additional steps recently
undertaken or planned would yield substantial savings to offset
future funding gaps.  These steps include such projects as replacing
old motor lifeboats with fewer, more efficient ones and replacing
aircraft engines with others that use less fuel and require less
maintenance.  However, the Coast Guard does not appear to have a very
clear picture of the extent of these savings, particularly on a
year-by-year basis.  If such estimates can be developed, they would
help provide clearer indications of likely savings and earlier
warnings about the extent to which further cost-cutting efforts will
be needed.  Coast Guard officials indicated that in many cases, such
estimates could be developed. 

So far, many of the Coast Guard's cost-cutting measures have
generally not been controversial.  However, some of the cost-cutting
options that have been raised by previous studies--but not
adopted--are controversial within the Coast Guard because they
involve a change in the organizational culture.  For example, past
studies by DOT and the National Advisory Committee on Oceans and
Atmosphere have pointed out that lengthening periods between military
assignment rotations could substantially reduce the costs of
transferring military personnel, which now amount to more than $60
million a year.  The Coast Guard believes that its current policies
are best and does not plan to study this issue further. 

Other changes are controversial with the public.  The Coast Guard has
proposed consolidating small boat stations to save money.  However,
despite assurances that response capabilities will not be
significantly affected, the agency's consolidation proposals have not
been accepted by the Congress.  Also, substantial public opposition
to closing Coast Guard facilities is likely to occur in local
communities that derive significant economic benefits or services
from the agency.  If the size of budget reductions makes it necessary
for the Coast Guard to consider controversial closure actions, these
controversies need to be acknowledged and addressed.  To address a
similar situation, the Department of Defense used a "base closure"
approach under which an independent commission had authority to
recommend closures of facilities. 

GAO's past work examining a cross section of private-sector and
public organizations that have faced fiscal constraints similar to
the Coast Guard's shows that they have often adopted a much broader
approach or framework for evaluating potential cost-cutting options. 
Frequently, these broader assessments have involved a fundamental
rethinking of the missions and services performed by these
organizations and their relationship to user groups vis-a-vis the
payment for such services.  Expanding budget-cutting options to
include a reassessment of missions or user fees is likely to involve
controversy as well, given past opposition to reductions in services
and requirements to pay for services.  Partly because of these
potential controversies, the Coast Guard has not pursued significant
changes in its missions and rarely has suggested additional user fees
to pay for its services.  But if future cuts cannot be accommodated
by efficiency measures alone, the Coast Guard's strategy needs to be
nimble enough to allow quick but thorough consideration of changes in
these areas.  Because most changes in these areas would require
congressional action, it is important for the Coast Guard to be able
to identify cost-cutting options for congressional consideration as
budget targets are being debated. 


   RECOMMENDATIONS
---------------------------------------------------------- Chapter 0:5

GAO is not taking a position on the level of resources needed by the
Coast Guard to carry out its responsibilities or the specific budget
reduction options that it should adopt.  However, to enhance the
Coast Guard's strategic planning process for considering cost-cutting
options, GAO recommends that the Secretary of Transportation direct
the Commandant of the Coast Guard to

  quantify anticipated year-by-year savings already under way or
     planned, to the maximum degree possible, and

  develop a more comprehensive strategy and corresponding plan for
     addressing impending budget targets by, among other things,
     systematically identifying and prioritizing alternatives that
     could be considered if future budget targets require additional
     reductions.  Serious consideration should be given to relevant
     but unimplemented recommendations from past studies and to a
     reassessment of the Coast Guard's missions and the issue of
     users' paying for a portion of the costs for the services they
     receive. 


   MATTERS FOR CONGRESSIONAL
   CONSIDERATION
---------------------------------------------------------- Chapter 0:6

If future funding levels require the Coast Guard to consider closing
operational units, the Congress may wish to establish an independent
panel, much like the Defense Base Closure and Realignment Commission,
to review potential closures.  Also, if the Congress believes that
potentially controversial issues within the Coast Guard (such as
changing military rotation policies) merit further attention, the
Congress may wish to (1) direct the Coast Guard to commission an
outside study of these options or (2) otherwise ensure either that
the options are reviewed independently or that the Coast Guard's
studies of controversial internal issues are validated by a third
party. 


   AGENCY COMMENTS
---------------------------------------------------------- Chapter 0:7

GAO provided Coast Guard officials with copies of a draft of this
report for their review and comment.  GAO met with Coast Guard
officials, including the Director of Resources, who generally
concurred with the information and recommendations contained in the
report.  However, the Coast Guard believed that the draft report did
not (1) thoroughly address the unique nature of its missions and
functions and the breadth of the services it provides with the budget
it has and (2) properly characterize the agency's rationale for its
reluctance to initiate substantive changes to its missions.  The
Coast Guard provided GAO with a number of other technical comments to
clarify portions of the report; these changes have been incorporated
into the body of the report as appropriate. 

GAO believes that the report adequately describes the specific nature
of the Coast Guard's missions and assets and acknowledges that the
Coast Guard has been asked to do more while dealing with a relatively
flat budget over the last several years.  Also, the report describes
in some detail the positive actions the agency has taken and is
taking to reduce costs and align itself with the administration's
priorities. 

Coast Guard officials indicated that because the Congress ultimately
decides the missions that the Coast Guard should perform, the agency
has not initiated any mission-related changes.  Language has been
added to the report to better reflect the Coast Guard's position on
this matter.  However, the fact that the Coast Guard provides the
public with valuable and in many cases vital services should not
prevent the agency from critically examining its functions to see if
other cost-effective alternatives are available to achieve its
missions, as other fiscally constrained organizations have had to do. 
By reexamining its missions, the Coast Guard can position itself to
provide relevant and timely information as the Congress conducts its
budget deliberations.  Also, the agency can validate the need for and
the scope of its missions and functions before embarking on an
aggressive program to modernize its aging assets. 


INTRODUCTION
============================================================ Chapter 1

Balancing the budget--a goal that the Congress and the administration
have agreed in principle to meet by fiscal year 2002--will require
the federal government to find ways to dramatically reduce spending. 
Reducing spending to the degree required for a balanced budget will
necessitate many difficult decisions.  This report focuses on the
efforts taken by one agency--the U.S.  Coast Guard--to prepare for
making such decisions.  Reductions in the Coast Guard's budget have a
potentially far-reaching effect on the public, which looks to the
Coast Guard for such services as rescuing people at sea, enforcing
marine pollution laws, and ensuring safe operations in the nation's
ports.  The Chairman and Ranking Minority Member of the Subcommittee
on Coast Guard and Maritime Transportation, House Committee on
Transportation and Infrastructure, asked us to conduct this study as
a way of helping evaluate how the Coast Guard might best cope with
such fiscal constraints. 


   THE COAST GUARD HAS A
   MULTIFACETED LIST OF MISSIONS
   AND RESPONSIBILITIES
---------------------------------------------------------- Chapter 1:1

As an agency of the Department of Transportation (DOT), the Coast
Guard carries out a variety of activities as the agency primarily
responsible for providing many maritime services and enforcing
related laws and regulations.  Its staff and equipment are involved
in four main missions:  (1) maritime law enforcement, (2) marine
environmental protection, (3) national security, and (4) maritime
safety.  These missions are supported by seven operating programs, as
shown in figure 1.1.  Some of these program responsibilities, such as
enforcing U.S.  fisheries laws and overseeing statutory requirements
stemming from the Exxon Valdez oil spill in Alaska's Prince William
Sound, have been added or augmented by the Congress in recent years. 

   Figure 1.1:  Basic Program
   Areas of the Coast Guard

   (See figure in printed
   edition.)


   SERVICES ARE PROVIDED THROUGH
   MANY LOCATIONS AND FACILITIES
---------------------------------------------------------- Chapter 1:2

As an organization that is part of the armed services, the Coast
Guard has both military and civilian positions.\1 At the end of
fiscal year 1996, the agency had about 43,000 total full-time
positions--about 37,000 military and about 6,000 civilian.  The Coast
Guard has about 7,800 reservists who support the national military
strategy and provide additional operational support and surge
capacity during emergencies, such as natural disasters.  Also, about
34,000 volunteer auxiliary personnel assist in a wide range of
activities ranging from search and rescue to boating safety
education.\2

The Coast Guard is headed by a Commandant, who serves a 4-year term. 
The agency's organizational structure contains several tiers; most of
the agency's services are provided through a number of small boat
stations, air stations, marine safety offices, and other facilities
and assets located in coastal areas, at sea, and near certain other
waterways like the Great Lakes.  Figure 1.2 shows this structure. 

   Figure 1.2:  Overview of the
   Coast Guard's Operational
   Structure for Achieving Its
   Missions

   (See figure in printed
   edition.)


--------------------
\1 The Coast Guard is a military service that was officially
established in 1915 (P.L.  No.  239; 38 Stat.  800-802) as part of
the Treasury Department.  In 1967, the Coast Guard was transferred
from the Treasury Department to the newly created Department of
Transportation (P.L.  89-670; 80 Stat.  931) because its primary
civil functions relate to transportation and marine safety.  Upon
declaration of war or when directed to do so by the President, the
Coast Guard operates as a service of the Navy. 

\2 Recently, the Congress extended the role that auxiliary personnel
can play in supporting all of the Coast Guard's missions except for
law enforcement and military operations. 


   THE COAST GUARD'S BUDGET
   TRENDS, FISCAL YEARS 1993-98
---------------------------------------------------------- Chapter 1:3

The Coast Guard's budget for fiscal year 1997 is about $3.84 billion. 
Operating expenses account for about 68 percent of this total, pay
for military retirees accounts for 16 percent, and acquisition,
construction, and improvements (AC&I) accounts for 10 percent. 
Within the operating expenses category, about 62 percent of the
expenditures, or $1.62 billion, are for salaries and associated
employee costs; the remaining portion cover all other operations
expenses, such as rent, communications, and materials. 

The Coast Guard also prepared estimates of how total operating costs
were allocated among its seven major program areas.\3 As figure 1.3
shows, the enforcement of laws and treaties was the program area with
the largest estimated share of operations expenditures. 

   Figure 1.3:  Major Categories
   in the Coast Guard's Budget,
   Fiscal Year 1997

   (See figure in printed
   edition.)

The Coast Guard's budgets have remained relatively flat over the past
5 years.  During fiscal years 1993-97, the total budget rose from
$3.65 billion to $3.84 billion, or about 1 percent per year in actual
dollars.  (See table 1.1.) The President's proposed budget for the
Coast Guard in fiscal year 1998 is $3.98 billion, an increase of $137
million in actual dollars, or about 3.6 percent from the previous
year.  The requested increase is mainly for increased drug
interdiction efforts, pay increases and other employee-related
programs, and mandatory increases for retirees. 



                                        Table 1.1
                         
                          Major Categories in the Coast Guard's
                               Budget, Fiscal Years 1993-98

                                  (Dollars in millions)

                                                                                     1998
                                                                               (requested
Fiscal year              1993        1994        1995        1996        1997           )
-----------------  ----------  ----------  ----------  ----------  ----------  ----------
Operating              $2,561      $2,588      $2,625      $2,576      $2,618      $2,740
 expenses
Pay for retired           520         549         563         580         612         646
 military
 personnel
Acquisition,              340         312         321         362         375         370
 construction,
 and improvements
Other                     228         218         193         214         236         221
=========================================================================================
Total\a                $3,649      $3,666      $3,701      $3,731      $3,840      $3,977
-----------------------------------------------------------------------------------------
\a Because of rounding, totals may differ from the sum of the four
categories. 

The Coast Guard's funds come mainly from three sources--the
Department of the Treasury's General Fund, trust funds, and transfers
from the Department of Defense (DOD).\4 (See table 1.2.) Most of the
Coast Guard's funding is appropriated from the general fund, but
since 1982, significant amounts--ranging from $6 million to $490
million--have also been transferred from DOD appropriations.  The
purpose of these transfers has been to fund national security
functions, AC&I projects, and military pay raises.  The Coast Guard
also receives moneys from various trust funds.  The Oil Spill
Liability Trust Fund, which was established after the Exxon Valdez
oil spill, has been funded by a 5-cent tax on each barrel of oil
produced domestically or imported and is used to pay for oil
pollution prevention and cleanup responsibilities by various federal
agencies.\5 The Boat Safety Account of the Aquatic Resources Trust
Fund is funded by taxes on motorboat fuels, sport-fishing equipment,
and import duties on tackle, yachts, pleasure craft, and small engine
fuel and is used to pay for a national recreational boating safety
program. 



                                        Table 1.2
                         
                           Major Sources of Funds for the Coast
                           Guard's Budget, Fiscal Years 1993-98

                                  (Dollars in millions)

                                                                                     1998
                                                                               (requested
Fiscal years             1993        1994        1995        1996        1997           )
-----------------  ----------  ----------  ----------  ----------  ----------  ----------
General Fund
-----------------------------------------------------------------------------------------
Amounts                $3,154      $3,467      $3,517      $3,269      $3,385      $3,512
 appropriated
 directly to
 Coast Guard
Amounts                   303          22          11         300         300         300
 transferred from
 Department of
 Defense

Trust funds
-----------------------------------------------------------------------------------------
Oil Spill                 122         105         116         121         110         110
 Liability Trust
 Fund
Aquatic Resources          70          72          58          50          45          55
 Trust Fund
=========================================================================================
Total\a                $3,649      $3,666      $3,701      $3,731      $3,840      $3,977
-----------------------------------------------------------------------------------------
\a Because of rounding, totals may differ from the sum of the
categories. 


--------------------
\3 The Coast Guard's accounting system does not accumulate costs by
program area; instead, the agency has developed algorithms to
allocate operating costs among its seven key program areas. 

\4 General fund accounts for receipts and expenditures are composed
of all federal money not allocated to any other fund accounts. 
Receipts come from taxes, customs duties, and miscellaneous sources. 
General fund expenditures represent amounts appropriated by law for
the general support of the federal government.  Trust funds are used
to collect and distribute money designated by law for a specific
purpose or program. 

\5 The authority to collect this tax expired on December 31, 1994. 


   OBJECTIVES, SCOPE, AND
   METHODOLOGY
---------------------------------------------------------- Chapter 1:4

The Chairman and Ranking Minority Member of the Subcommittee on Coast
Guard and Maritime Transportation, House Committee on Transportation
and Infrastructure, asked us to study how the Coast Guard was
preparing to address the fiscal constraints and other budgetary
pressures that it may face in the future.  In consultation with their
offices, we established three main questions to address in our
review: 

  What is the extent of the gap between the funding needed to
     maintain the Coast Guard's current level of services and the
     funding that the Office of Management and Budget (OMB) has
     targeted for the agency through fiscal year 2002? 

  What is the Coast Guard's strategy for addressing this gap, and is
     the strategy adequate? 

  What additional actions, if any, would help close the gap? 

To identify the projected gap between the estimated costs to maintain
the Coast Guard's current services and the budget targets set for the
Coast Guard by OMB, we used OMB's February 1997 budget targets and
current services estimates, which were the latest available at the
time of our review.  We examined how the deficit reduction targets
might be affected by economic conditions and other factors.  We
attempted to verify OMB's methodology for developing its estimates;
however, OMB officials did not respond to our requests for
information.  Also, we reviewed the Coast Guard's budget documents
and interviewed Coast Guard managers regarding the factors that have
an impact on the gap. 

To determine the adequacy of the Coast Guard's strategy for
addressing fiscal constraints, we interviewed program managers,
strategic planners, and the Director of Resources.  We reviewed
numerous Coast Guard planning documents, including the Commandant's
Direction, the Commandant's Executive Business Plan, and the
Commandant's instructions on planning and programming.  We reviewed
applicable statutory and legal citations and other documents that
described the agency's roles and responsibilities and the
multi-mission nature of its functions.  We interviewed Coast Guard
officials and reviewed the Coast Guard's records to identify the
extent of cost-saving measures already implemented by the agency but
not included in OMB's estimates; however, we did not verify the
accuracy of the agency's savings estimates.  We reviewed the Coast
Guard's streamlining documents and other documents on cost savings
attributable to technology improvements.  We also examined how the
estimates for meeting current missions might be affected by the need
to replace aging, inefficient, or outdated ships and other capital
items.  We reviewed the agency's most recent Capital Investment Plan
(Dec.  1996); however, we did not verify the accuracy of or attempt
to validate its estimates for future acquisition needs.  Finally, we
visited several Coast Guard units, including the Pacific Area and
District 11 Offices, the Petaluma and Yorktown Training Centers,
Activity Command-Baltimore, Activity Command-San Diego, Integrated
Support Center-Alameda, and the Coast Guard Academy. 

To determine what kinds of additional actions might be taken to
address the gap, we first reviewed the efforts of other agencies
faced with a need to substantially reduce their budgets.  Such
efforts have been cataloged and analyzed in deficit reduction and
strategic- planning studies conducted by us and others.  This gave us
a frame of reference for analyzing specific actions.  For the actions
themselves, we turned to a body of studies that already exists on the
Coast Guard's operations.  We conducted a literature search to
identify major studies that have been conducted by DOT, the Coast
Guard, the National Performance Review, ourselves, and others.  We
developed a list of 23 studies, choosing studies that (1) were
completed during the last 15 years and covered a broad range of Coast
Guard issues or (2) were completed in the last 5 years and covered
more narrowly focused issues, such as aids to navigation and ice
breaking.  Also, we included only reports that contained potential
budget reduction options and recommendations.  (See app.  I for a
complete list of the outside studies that we included and app.  II
for GAO studies we included.) The 23 studies are not intended to be
an exhaustive list; rather, they represent budget reduction options
that have been offered during the time periods specified.  We
summarized cost-saving recommendations from these 23 studies and
asked the Coast Guard about the current status of the
recommendations; for those options that had not been implemented, we
asked the agency to discuss the reasons why they had not been carried
out.  (See app.  II for a complete list of these recommendations.) We
did not intend the list to be a set of actions that the Coast Guard
should take, but rather a list of options that might merit
consideration.  We supplemented the Coast Guard's response as needed
with interviews and other follow-up work. 

We provided the Coast Guard with a draft of this report for review
and comment.  The Coast Guard's comments and our evaluation are
presented in chapter 4. 

Our work was performed from July 1996 through April 1997 in
accordance with generally accepted government auditing standards. 


BALANCED BUDGET EFFORT PLACES
SUBSTANTIAL PRESSURE ON THE COAST
GUARD'S BUDGET
============================================================ Chapter 2

Deficit reduction efforts will create substantial pressure on the
Coast Guard's budget in the coming years.  OMB has proposed freezing
most elements of the Coast Guard's budget through fiscal year 2002. 
Because of the loss of purchasing power brought on by higher costs
for such things as salaries and fuel, this freeze translates into
cutting each year's operations budget by an estimated $90 million
over the previous year's amount.  The freeze also means that a
substantial portion of the amount that the agency believes it needs
to replace and modernize aging ships, aircraft, and facilities will
remain unmet. 


   BALANCED BUDGET EFFORTS SIGNAL
   SUBSTANTIAL REDUCTIONS IN
   FEDERAL EXPENDITURES
---------------------------------------------------------- Chapter 2:1

In 1996, the Congress and the President reached an agreement in
principle to achieve a balanced federal budget by fiscal year 2002. 
In fiscal year 1996, the federal government had a budget of about
$1.6 trillion and a deficit that according to the Congressional
Budget Office (CBO), was about $107 billion.  Unless actions are
taken to reduce expenditure levels or increase revenues, the deficit
is expected to rise to $188 billion by fiscal year 2002.  The
President's fiscal year 1998 budget document acknowledges that
achieving a balanced budget will mean that agencies no longer can
rely on more funding each year, and for the foreseeable future, their
resources will be constrained. 

OMB is the lead agency for developing the administration's estimates
of future budget gaps between an agency's anticipated needs and
available funding caused by efforts to balance the federal budget. 
OMB develops and periodically updates its estimate of an agency's
potential gap by making two separate determinations--(1) how much
money the agency would need to provide its current level of services
in future years and (2) how much money it can expect to receive as
its share of the federal budget.  (See fig.  2.1.) The gap, if any,
is the degree to which the cost of services exceeds the agency's
budget target. 

   Figure 2.1:  Relationship of
   Budget Target, Projected Cost
   of Services, and Budget Gap

   (See figure in printed
   edition.)

To develop its estimate of the agency's future costs for providing
services, OMB begins with a baseline amount for services currently
provided by the agency and adjusts it for inflation.  To develop its
estimate of the agency's budget target, OMB takes two main factors
into account--(1) total federal revenues and expenditures and (2) the
fiscal priority for the agency's programs.  Estimates of federal
revenues and expenditures are based on a variety of assumptions about
how the economy will perform during the period.  The administration's
fiscal priorities take into account the position of the agency's
programs relative to other federal programs.  As a result, the effect
of budget reductions is not necessarily uniform across federal
agencies.  Funding for some agencies may increase, while funding for
others may be reduced. 

Accompanying the effort to balance the budget are statutory limits on
total discretionary spending that have been in effect since fiscal
year 1991.\1 These limits have placed a general freeze on total
discretionary spending since 1993.\2 CBO estimates that under current
assumptions about the economy, extending a freeze of total
discretionary spending at the fiscal year 1998 level without changing
other budget policies would still leave a projected deficit in fiscal
year 2002 of about $101 billion.  CBO estimates that the President's
budget strategy would fall $69 billion short of balancing the budget
unless alternative policies are implemented. 

Budget forecasts are subject to considerable fluctuation.  One major
reason for this is the effect of varying assumptions about how the
economy will perform.  OMB's overall estimate for balancing the
federal budget is contingent on numerous economic and policy
assumptions about such matters as the gross domestic product, the
unemployment rate, inflation, and interest rates.  One example of the
effect of changing these assumptions is that lowering the anticipated
rate of growth in the gross domestic product by 1 percent and raising
the unemployment rate by one-half percent each year would cause the
projected cumulative federal deficit to increase by $143 billion by
fiscal year 2002.  Estimates of overall economic performance can have
a direct effect on individual agency's budget targets because the
economy's strength affects how much revenue the federal government is
likely to take in and the funds it will need to expend. 

Budget targets for individual agencies are also subject to change as
policymakers consider trade-offs involved in reducing funds for some
agencies more than others.  These policy trade-offs occur both as the
President considers initial budget submissions from agencies and
makes final decisions on the amount to request for each agency from
the Congress and as the Congress considers these requests and makes
decisions about them.  OMB's documents make it clear that balancing
the budget will require difficult decisions about what the federal
government should do and what other levels of government or the
private sector should more appropriately do. 


--------------------
\1 Discretionary spending refers to outlays controllable through the
congressional appropriation process.  In contrast, mandatory
spending, which includes outlays for entitlement programs such as
food stamps, Medicare, and veterans' pensions, is controlled by the
Congress indirectly by defining eligibility and setting the benefits
or payment rules rather than directly going through the appropriation
process. 

\2 The Budget Enforcement Act of 1990 established limits on
discretionary spending through 1995.  The Omnibus Budget
Reconciliation Act of 1993 revised and extended those limits through
1998.  OMB prepares the calculations and estimates used to adjust and
enforce those limits. 


   PROJECTED GAP FOR THE COAST
   GUARD APPROACHES $500 MILLION
   BY FISCAL YEAR 2002
---------------------------------------------------------- Chapter 2:2

Under OMB's projections, the Coast Guard faces a budget gap of about
$131 million in fiscal year 1999, cumulatively rising to $493 million
by fiscal year 2002.  (See fig.  2.2.) OMB's projections are that
during this period, the cost of providing the Coast Guard's services
at the requested levels for fiscal year 1998 will rise from $4.154
billion to $4.622 billion.  The Coast Guard's budget target would
remain much flatter, rising from $4.023 billion to $4.129 billion. 
The gap reflects the degree to which the budget target does not fund
services at requested levels for fiscal year 1998. 

   Figure 2.2:  Projected Costs,
   Budget Targets, and Gaps in the
   Coast Guard's Budget, Fiscal
   Years 1999-2002

   (See figure in printed
   edition.)

OMB's budget targets call for capping the Coast Guard's expenditures
in most discretionary spending categories at the requested levels for
fiscal year 1998 throughout fiscal 1999-2002, with no adjustments for
inflation.  These caps would not apply to the largest category of the
Coast Guard's budget that is subject to mandatory increases--the
expenditure for pay for retired military personnel.  The cost of this
mandatory increase is reflected in the slight increase in the Coast
Guard's total budget targets during the period (from $4.023 billion
to $4.129 billion).  For discretionary categories, the levels at
which spending would be frozen are as follows: 

  Operating expenses:  $2.74 billion. 

  Other operations-related spending:  $141 million.  This category
     includes certain activities, such as environmental compliance
     and restoration and reserve training, which also have their own
     accounts in the Coast Guard's budget. 

  Acquisition, construction, and improvements:  $370 million.  This
     category covers the Coast Guard's capital needs for replacing or
     renovating vessels, aircraft, and facilities. 

A freeze affects operations and capital needs spending in markedly
different ways. 


      SPENDING FREEZE FOR
      OPERATIONS WOULD REQUIRE
      CUTS IN ACTIVITIES
-------------------------------------------------------- Chapter 2:2.1

For operations, a freeze in expenditure levels translates into the
need to make budget cuts.  Operating expenses and related activities
that have their own budget accounts constitute about 74 percent of
the Coast Guard's budget.  These expenses include such things as
salaries and benefits, fuel and supplies, maintenance, training, and
administrative overhead.  As OMB's methodology for operations needs
acknowledges, the cost of providing the same level of operations
activity rises from one year to the next.  This occurs because many
of these costs increase from inflation.  If no money is received to
cover the additional cost of providing the same level of operations,
cost savings must somehow be achieved to cover the loss in purchasing
power. 

By fiscal year 2002, the Coast Guard will have to cut a total of $363
million--an average of about $90 million each year--from operating
expenditures and related activities.  The Coast Guard believes that
it can partially offset these cuts through management efficiencies,
the termination of one-time costs, and improvements in technology. 
While these offsets will help address OMB's budget targets, the Coast
Guard will still need to identify about $43 million to $51 million in
savings each year, according to Coast Guard officials.  Among the
alternatives for making such cuts are finding ways to provide the
same levels of services, but just more efficiently, or actually
reducing the level of services provided.\3


--------------------
\3 See chapter 4 for a discussion of these and other alternatives. 


      A SPENDING FREEZE FOR
      CAPITAL EXPENDITURES WOULD
      LIKELY PUT THE COAST GUARD
      FURTHER BEHIND IN REPLACING
      AGING EQUIPMENT
-------------------------------------------------------- Chapter 2:2.2

For capital needs, a freeze in expenditures translates into a
potential funding requirement for increased expenditures in the
future.  Unlike freezing operations, freezing the expenditure level
for capital needs does not necessarily translate into the need to
make direct and immediate cuts in activity levels.  For example, if
the Coast Guard is not able to replace or upgrade an aging cutter,
the activity associated with this equipment may still continue unless
the equipment is so old or ineffective that it can no longer be used
at all.  However, the unmet need to upgrade or replace assets still
remains; at some point, equipment will have to be replaced or
modernized.  Deferring these expenditures can represent a funding
dilemma, in that, future budgets may not be able to accommodate all
of the acquisition and capital improvement projects that the agency
believes cannot be put off any longer.  A deferral can also represent
a source of increased expenditures for operations because of the
higher maintenance costs associated with aging equipment.  The
continued use of aging equipment may also place other limitations on
the level of services that can be provided. 

The Coast Guard has indicated that it is facing a period in which the
level of replacement and renovation activity may need to be
accelerated.  The agency's December 1996 Capital Investment Plan
discusses a "bow wave" of deferred out-year funding needs to replace
or renovate an aging fleet of vessels, aircraft, and shoreside
facilities.  The Coast Guard is currently revising its estimates of
this need.  The Coast Guard acknowledges that estimates in its
December 1996 plan do not reflect the current budget climate;
therefore, it is revising its latest capital plan and expects to have
an interim plan completed by July 1997. 

The estimate that the Coast Guard develops is likely to be greater
than the capital needs included in OMB's budget targets, which freeze
capital spending at $370 million.  As table 2.1 shows, the $370
million target is already below OMB's estimates of capital needs,
which are based mainly on adjusting the amount upward to account for
inflation.  The target is even further below the Coast Guard's
December 1996 estimates, which generally are based on a one-for-one
replacement of obsolete equipment.  These estimates, also shown in
table 2.1, indicate that capital requirements will rise to more than
$1.2 billion by fiscal year 2001.  The Coast Guard estimates that its
capital spending will need to rise to even higher levels in fiscal
years 2003-08. 



                               Table 2.1
                
                 Comparison of Coast Guard's and OMB's
                Estimates of Capital Needs, Fiscal Years
                               1999-2002

                         (Dollars in millions)

Source of capital needs
estimate                            1999      2000      2001      2002
------------------------------  --------  --------  --------  --------
Coast Guard's estimates issued      $768      $872     1,258    $1,162
 in December 1996 (based
 generally on a one-for-one
 replacement need for all
 aging equipment and
 facilities)
OMB's budget projection (based       395       478       488       500
 on its estimates of funding
 needed to maintain current
 services)
OMB's budget target for actual       370       370       370       370
 capital needs spending
----------------------------------------------------------------------
It is important to emphasize that there may be a substantial
difference between the December 1996 estimates and those that will be
issued by July 1997 relative to the time frames for replacing or
upgrading capital assets.  The Commandant has indicated that the July
1997 estimates would, among other things, "provide a basis for a
recapitalization strategy which is more aligned with probable funding
levels." These estimates will also reflect additional consideration
of how technology breakthroughs and other factors might reduce
capital needs.  For example, newly acquired buoy tenders are more
efficient than the ships they replaced, which substantially reduces
the need for one-to-one replacement.  Similarly, the Coast Guard's
Deepwater Mission Analysis Report, completed in 1995, cited a number
of technological improvements, such as greater use of satellite
vessel tracking, that could mitigate the need for replacing capital
assets.\4


--------------------
\4 A fuller discussion of these alternatives can be found in chapter
4. 


   CONCLUSIONS
---------------------------------------------------------- Chapter 2:3

Although deficit reduction efforts will create substantial pressure
on the Coast Guard's budget in the coming years, it is not possible
at this point to say how great that pressure will be.  This is mainly
because OMB's budget targets are subject to change and the Coast
Guard is still developing its plans for replacing aging equipment and
facilities.  If current budget targets hold, however, they point to
the likely need for the Coast Guard to (1) find ways to cut operating
expenses throughout fiscal years 1999-2002 and (2) develop ways to
deal with being unable to meet part of its capital replacement needs. 
Such possibilities accent the need for the Coast Guard to have a
sound budget reduction strategy that provides for the orderly
consideration of alternatives for dealing with potential budget gaps
and a responsive, data-based approach for deciding what kinds of
spending changes to make. 


MAGNITUDE OF LIKELY CUTS HAS
SPURRED THE COAST GUARD TO BEGIN
DEVELOPING ALTERNATIVE APPROACHES
============================================================ Chapter 3

Although the Coast Guard is in the process of completing the largest
cost-reduction effort in its recent history, these efforts pale in
comparison to the fiscal challenge it may face in the next several
years.  The Coast Guard expects that its most recent plan for
streamlining operations, which required several years to study and
put in place, will result in net savings of about $77 million in
operating costs by fiscal year 1999.  But the budget targets
established by OMB call for cuts in operating expenditures that are
more than four times this amount by fiscal year 2002.  In recent
months, Coast Guard managers have acknowledged that new and improved
planning and budgeting processes are needed to deal with future
fiscal challenges.  They have begun work on several actions that may
help address the prospect of continued reductions.  However, most of
these actions are just getting under way.  As a result, it is too
early to determine whether the actions will result in decisions that
will allow the Coast Guard to meet budget targets. 


   THE COAST GUARD HAS JUST
   CARRIED OUT THE MOST SEVERE
   CUTS IN ITS RECENT HISTORY
---------------------------------------------------------- Chapter 3:1

Starting in fiscal year 1994, the Coast Guard entered a period of
fiscal austerity that it had not experienced in recent history.\1 In
August 1994, the Commandant set a 4-year course for the Coast Guard
that centered on eight goals, two of which have particular relevance
to cost cutting and Coast Guard operations:  (1) meeting cost
reduction goals with no reduction to essential services and (2)
achieving efficiencies through improved technology.  These goals were
the guiding principles that the Coast Guard's staff used to translate
budget-cutting and management reform requirements into action. 


--------------------
\1 The Coast Guard's cost reduction efforts were part of a larger
movement to reduce the size of the federal government.  In 1993, the
President endorsed a recommendation by the National Performance
Review to reduce the federal workforce by 252,000 positions.  In
March 1994, the Federal Workforce Restructuring Act (P.L.  103-226,
108 Stat.  111) required federal agencies to reduce their workforce
by 272,900 full time equivalent positions during fiscal years
1994-99. 


      ACTIONS TO STREAMLINE
      ACTIVITIES HAVE RESULTED IN
      SIGNIFICANT SAVINGS
-------------------------------------------------------- Chapter 3:1.1

The Coast Guard has made significant progress in meeting the
Commandant's goal of cutting costs with no reduction in essential
services.  Through these efforts, the Coast Guard has cut costs by
$343 million and reduced the size of its workforce by over 3,500
personnel to a level that is smaller than at any time in the last 30
years.\2 While doing so, the Coast Guard has continued to provide
services in its major areas of responsibility, including search and
rescue, law enforcement, and enforcement of maritime laws and
regulations. 

The Coast Guard has achieved these savings in two phases.  The first
phase occurred during fiscal years 1994-96, when the Coast Guard
developed a multiyear budget strategy that cut costs and reduced the
size of its organization.  Overall, the agency's actions taken during
this phase reduced costs by approximately $266 million by (1)
eliminating more than 2,600 positions from its regular workforce and
2,500 positions from its reserve forces, (2) decommissioning 18 older
cutters, and (3) relocating aircraft and removing 17 multi-mission
aircraft from service. 

While the savings achieved during phase one were significant, the
Coast Guard found that they would not be enough to meet OMB's budget
targets in place beyond fiscal year 1996.  As a result, in fiscal
year 1996, the Coast Guard entered a second phase of its downsizing
effort and developed the National Plan for Streamlining, which
concentrated on reducing the Coast Guard's overhead and support
structure.  The plan identified four areas that would undergo
streamlining actions:  (1) headquarters, (2) area and district
offices, (3) Governors Island in upper New York Bay, and (4)
information management and research and development.  (See table
3.1.) The plan also included a training component that addressed the
headquarters' management structure for training, key training
processes, and the field training delivery organization.  The Coast
Guard plans to fully implement its streamlining plans by fiscal year
1999; it estimates that net savings of about $77 million a year will
be realized through reductions in these areas and that most of the
savings will be realized in fiscal years 1997 and 1998. 



                                        Table 3.1
                         
                          Summary of the Coast Guard's "National
                                  Plan for Streamlining"

Streamlining area              Actions taken or being implemented
-----------------------------  ----------------------------------------------------------
Streamline headquarters        The Coast Guard reduced the number of staff in
                               headquarters by 300, consolidated 11 offices into 7, and
                               relocated 300 other staff to field units.

Streamline area and district   The Coast Guard reduced the number of districts from 10 to
offices                        9 by merging two district offices. It also merged its two
                               area offices with adjacent district offices, while
                               retaining the functions of the districts. Four prototype
                               activity commands were established to assess the potential
                               for improved coordination and capability among Coast Guard
                               units (groups, air stations, marine safety offices). The
                               Coast Guard also created 12 units from existing support
                               centers and other locations to consolidate personnel,
                               finance, and other support services.

Close Governor's Island        The Coast Guard is reducing staff by 500 and relocating
                               about 1,700 staff and two high-endurance cutters to other
                               locations.

Streamline other support       The Coast Guard will create "centers of excellence" by
functions                      reducing the number of electronics, communications, and
                               information support facilities by at least one;
                               restructuring the research and development program; and
                               consolidating military and civilian personnel services
                               into one unit.
-----------------------------------------------------------------------------------------

--------------------
\2 The Coast Guard's $343 million savings estimate is in constant
fiscal year 1998 dollars and reflects an annual upward adjustment of
2.5 percent for inflation.  Also, about $105 million of the $343
million in savings came from budget cuts initiated by the Congress. 


      TECHNOLOGY IMPROVEMENTS ARE
      EXPECTED TO ADD FURTHER
      SAVINGS
-------------------------------------------------------- Chapter 3:1.2

The Coast Guard is also using new capital improvements to achieve
operating efficiencies.  For example, it plans to replace 37 buoy
tenders with 30 new vessels.  According to the Coast Guard, the new
ships will require about 500 fewer crew members, and the reduced
number of ships will also have reduced operating costs of about $14
million each year when all of the new buoy tenders are deployed.  For
the most part, however, detailed savings estimates for technology
improvements have not been developed.  The issue of savings from
these projects will be discussed more fully in chapter 4. 


   FUTURE DECISIONS TO CUT COSTS
   WILL BE EVEN MORE DIFFICULT
   THAN PRIOR COST-CUTTING EFFORTS
---------------------------------------------------------- Chapter 3:2

The Coast Guard's past success at cost reductions, while notable,
provides a sobering perspective for the continued austerity forecast
by OMB.  The future budget environment outlined by OMB's budget
targets shows that the savings the Coast Guard has achieved with its
current streamlining effort are relatively small when compared with
the effort required in the future.  To meet OMB's targets, required
operational cuts would be about $363 million by fiscal year
2002--more than a four-fold increase over the net savings the Coast
Guard expects to achieve through its National Plan for Streamlining. 
While OMB's targets are subject to change, DOT's Budget Director
indicated that the Department's agencies are expected to manage their
programs and activities to meet the targets.  If the current OMB
targets remain essentially unchanged through fiscal year 2002, the
reductions--and the consequent need to find savings--would be
substantial. 

Future cost-cutting efforts could translate into even more difficult
and painful budget-cutting decisions than the ones made in the past
because the Coast Guard has already taken a number of streamlining
steps that are often the first to be used by organizations, such as
trimming overhead.  During hearings on the Coast Guard's fiscal year
1997 budget, for example, the Commandant said that funding levels
were not sufficient to sustain the agency's normal pace of operations
over time.  This is resulting in the deferral of normal maintenance
and cutbacks in prevention activities, factors that will eventually
lead to compromises in safety and increased costs, according to the
Commandant.  In a February 1997 memorandum to agency managers, the
Coast Guard's Chief of Staff also acknowledged the formidable fiscal
challenge that the agency faces over the next 4 years and told his
program mangers that "a concerted effort, involving all program
staffs, will be required to develop a strategy to meet the flat line
requirements for fiscal years 1999 through 2002." He said that the
Coast Guard's "savings locker"--those savings opportunities not
already achieved under past initiatives--is largely depleted.  These
conditions frame the environment in which the Coast Guard could
operate--a climate in which a smaller resource base could place
unprecedented pressure on the Coast Guard's budget. 


   THE COAST GUARD HAS BEGUN
   ACTIONS DESIGNED TO ADDRESS
   LOOMING FISCAL DIFFICULTIES
---------------------------------------------------------- Chapter 3:3

During the course of our review, the Coast Guard began several
actions designed to address the tight fiscal environment that it will
likely face in the next 4 years.  These actions are strongly
intertwined with performance-based concepts embodied in the
Government Performance and Results Act (GPRA) (P.L.  103-62). 
Enacted in 1993, GPRA calls for agencies to measure and manage their
operations with a greater focus on results rather than on staffing
and activity levels.  The Coast Guard has taken action to comply with
GPRA's principles and requirements.  In its fiscal year 1998 budget
proposal, the Coast Guard has set forth 5 strategic goals and 23
performance goals and is developing ways to measure progress toward
achieving them.\3 According to Coast Guard officials, the agency is
attempting to apply the same results-oriented approach as it
evaluates alternatives for addressing budget constraints. 

The Coast Guard's efforts have centered on several key initiatives: 
a revised budgeting and planning process that places greater emphasis
on cutting costs and linking resources to a program's performance, a
new mechanism for focusing senior management's attention on such
alternatives, and a new capital-planning approach designed more
specifically with current funding limitations in mind.  The Coast
Guard expects that these actions will be closely linked in various
ways.  For example, the Coast Guard expects the capital plan to
include information that is generated from the revised budgeting
process and to identify potential cost-saving strategies.  These
actions are still largely in their infancy; by the time the actions
are completed and the new systems are in place, the Coast Guard will
already be developing its fiscal year 2000 budget proposal. 
Therefore, it is too early to tell whether the new initiatives will
be sufficient or developed in time to meet OMB's budget targets. 


--------------------
\3 GPRA requires agencies to develop a strategic plan by the end of
fiscal year 1997 and a performance plan beginning in fiscal year
1999.  The strategic plan focuses on broader goals, while the
performance plan focuses on objectives and measurable goals. 


      REVISED BUDGETING PROCESS
      PLACES GREATER FOCUS ON
      DEVELOPING COST-SAVING
      ALTERNATIVES
-------------------------------------------------------- Chapter 3:3.1

In November 1996, the Coast Guard's Chief of Staff issued a
memorandum outlining a new budget and planning process for building
the Coast Guard's fiscal year 1999 budget.  The new process aims to
strengthen the link between resources and a program's performance. 
This guidance is the first in a series of new guidance that will
redefine the Coast Guard's future budgeting and planning process. 

Among the features of this new approach, one that has particular
relevance for addressing budget gaps in the next few years is an
emphasis on business plans--documents that will act as planning and
budgeting tools for the fiscal year 1999 budget.  Ultimately, the
revised plans could translate into cost-saving actions that address
OMB's budget targets.  For example, the Coast Guard's guidance calls
for managers to identify how services can be provided with fewer
resources.  Coast Guard officials indicated that the underlying
premise of the plans will be to provide information on how programs
will find potential economies by innovation or other means. 

Considerable work remains to be done in putting this new system in
place.  The Coast Guard does not expect the system to be fully
implemented until 1998.  Initial drafts of the revised business plans
were scheduled to be completed in mid-1997.  Because revised business
plans were not available for our review, we are not in a position to
comment on how effective they are likely to be in addressing budget
targets.  Additional guidance has been or will be issued on a number
of other key processes that affect resource allocation decisions. 

Until the new planning and budgeting system is fully developed, the
agency's top management is emphasizing a number of measures--that
have been used in the past--to address OMB's budget targets over the
next 4 years.  For example, the Chief of Staff urged program managers
to examine opportunities within their areas of responsibility to
identify savings.  Another method that the Coast Guard will continue
to use to assess potential budget reduction options, at least as an
interim measure, is its determinations process.  The agency has used
this process in the past as a way for top management to suggest
specific areas that program managers should examine each year for
potential savings opportunities.  For example, the fiscal year 1998
determinations set out a list of potential areas for study that
included (1) identifying locations that might be candidates for
consolidation, (2) developing and implementing a reorganization plan
for the Coast Guard's research and development efforts, and (3)
studying the potential use of civilian rather that military personnel
to fill marine inspector positions.  According to the Coast Guard's
Chief of Staff, the determinations process may be replaced as the new
planning and budgeting system is developed. 


      SENIOR MANAGEMENT GROUP
      PROVIDES OPPORTUNITY TO
      GUIDE BUDGET PROCESS AND
      FOCUS ON BUDGET TARGETS
-------------------------------------------------------- Chapter 3:3.2

In September 1996, the Coast Guard formed a new management group,
called the Senior Management Team, to help, among other things,
refine the Coast Guard's planning and budgeting process and to ensure
that the Coast Guard "epitomizes the best in quality management
practices and performance." According to Coast Guard managers, the
new Senior Management Team will be responsible for developing the
Coast Guard's strategy for meeting OMB's targets and will help
institutionalize the Coast Guard's capability to deal with these
targets.  The team, composed of senior managers including the Chief
of Staff and the Director of Resources, aims to identify strategic
business goals and the highest priority business processes that are
candidates for improvement. 

So far, the team's efforts have focused on only a part of its broad
mandate.  The team has developed a format for the revised business
plans and chartered several groups to examine ways that headquarters
can streamline internal processes to reflect lowered staff levels. 
For example, these groups have studied the process for responding to
requests for information under the Freedom of Information Act and the
process for reviewing and approving key Coast Guard documents, such
as business plans and the agency's capital plan.  Also, the team will
decide on how to implement recommendations from the study groups. 


      NEW CAPITAL-PLANNING PROCESS
      INTENDED TO FOCUS ON
      SCALED-DOWN BUDGET REALITIES
-------------------------------------------------------- Chapter 3:3.3

The Coast Guard's capital-planning process has been based on
determining replacement and renovation needs irrespective of probable
funding levels.  This has produced estimates that were based heavily
on one-for-one replacement of equipment and facilities according to
established life-cycle schedules.  Coast Guard officials decided that
another approach was needed--one that would be more aligned with
probable levels of funding and a shift toward outcome-oriented
operations.  This movement is consistent with renewed emphasis by OMB
on the manner in which agencies plan for the acquisition of their
capital assets.  In December 1996, OMB issued draft guidance
suggesting that among other things, agencies link capital assets to
their contribution to program outcomes--the framework outlined by
GPRA. 

The development of the new capital plan is just getting under way,
and Coast Guard officials expect that the development of the new plan
will take at least 2 years.  Since the initial guidance for
developing the plan was issued in January 1997, full development of
the plan may not occur until early 1999. 


   CONCLUSIONS
---------------------------------------------------------- Chapter 3:4

The Coast Guard has recognized that future budget targets may
continue to require aggressive cost-cutting activity.  The actions
that the Coast Guard has begun in recent months to strengthen its
budget and planning process appear helpful in meeting this challenge,
in that they hold promise for (1) focusing on ways to achieve
specific performance-related outcomes, (2) providing for the
comparative evaluation of cost-saving strategies by top management,
and (3) developing capital plans that are more closely related to the
reality of limited funding.  However, much remains to be done to
translate these actions into a specific plan and a fully functioning
strategy to meet OMB's targets, and the Coast Guard acknowledges that
some actions will take 2 years to put in place.  By the time its new
system is fully in place, the Coast Guard will be already working on
its budget request for fiscal year 2000.  This means that the steps
that the agency takes in the interim will be of critical importance
in identifying and evaluating cost-cutting options. 


ACTIONS NEEDED ON SEVERAL FRONTS
TO BETTER PREPARE FOR BUDGET
CONTINGENCIES
============================================================ Chapter 4

Whether the Coast Guard's current budget strategy can deal
effectively with future deficit- reduction targets remains an open
question.  Key elements of the strategy are still being developed,
and the magnitude of the gap beyond fiscal year 1998 remains somewhat
uncertain.  However, as the Coast Guard continues to work out its
budget-reduction strategy, three areas appear to merit particular
attention. 

  Identifying the extent of likely savings from current or planned
     cost-saving measures.  Coast Guard planners currently have a
     number of cost-saving steps in various stages of implementation,
     but the dollar impact of many of these steps remains largely
     unclear.  The Coast Guard does not, therefore, appear to be in a
     good position to know the degree to which these steps would
     close future funding gaps. 

  Developing approaches for addressing controversial cost-saving
     efficiency options.  So far, the Coast Guard's cost-saving
     efficiencies (such as consolidating units) generally have not
     been controversial.  However, if future cuts are sizable, the
     Coast Guard may need to consider efficiency-related steps that
     could (1) call for considerable change in the Coast Guard's
     operating culture (such as lengthening rotational periods) or
     (2) stir public opposition (such as closing operating units that
     provide services or economic benefits to local communities). 
     Fully addressing such options may require developing new study
     approaches or new implementation strategies. 

  Being prepared to consider other options besides those related to
     operating efficiency.  By design, the Coast Guard's strategy
     remains centered on cutting costs through greater efficiency. 
     If future cuts cannot be accommodated in this manner, it will be
     necessary for the Coast Guard to readily and quickly consider
     other alternatives, such as changes in the services the Coast
     Guard provides. 


   A FRAMEWORK FOR ADDRESSING
   BUDGET-REDUCTION EFFORTS
---------------------------------------------------------- Chapter 4:1

As a starting point for discussing further Coast Guard actions, it
may be helpful to present a framework that highlights the basic
choices that agencies face as they address budget cuts.  In recent
years, as the federal government has struggled increasingly with
deficit-reduction issues, we have conducted a number of reviews
examining how public and private sector organizations cope with
downsizing, change, and related issues.\1 Some organizations faced
with these challenges have been able to achieve significant cost
reductions while improving performance and service delivery at the
same time.  They have done so by fundamentally rethinking their
mission, strategic goals, lines of business (products and services),
and customer needs and by making changes where necessary. 

The framework we developed for making such reassessments and
translating them into budget-cutting proposals calls for agencies to
reexamine their operations and capital needs from three different
perspectives, as follows: 

  Operating efficiency:  Can services be delivered at lower cost by
     changing the way they are structured, delivered, or managed? 

  Program missions and objectives:  What services should the agency
     continue to provide? 

  Targeting of resources:  Who should receive these services?\2

The first perspective, improving efficiency, focuses on delivery
methods and performance.  As earlier chapters explained, the Coast
Guard's cost-reduction efforts have focused almost exclusively on
this perspective.  For example, the Commandant's directive for the
Coast Guard's streamlining initiative called for an approach "with no
reduction in essential services." Coast Guard officials reiterated
that this approach will remain at the center of their attempts to
deal with future budget targets as they put new elements of their
budget strategy in place. 

The second perspective, reexamining missions and objectives, is
designed to avoid those situations in which budget reductions are
made only through repeated incremental cuts to the budgets of an
agency's programs or activities.  Without a thorough reexamination of
the agency's objectives, such an approach can eventually yield an
overextended agency trying to do too much with too little.  An
assessment from this perspective involves reconsidering the intended
purpose of a program or activity, the conditions under which it
continues to operate, and its cost-effectiveness. 

The third perspective, the targeting of resources, is designed to
ensure that an agency remains up-to-date in ascertaining who needs
the agency's services and to what degree they need them.  When first
authorizing new programs, the Congress defines the intended audience
for any program or service on some perception of eligibility or need. 
As time passes and conditions change, these definitions could benefit
from periodic review and, where necessary, revision to better target
limited resources.  Considering changes in distribution formulas,
eligibility rules, and fees and charges could form the basis for such
improved targeting. 

Our observations in this chapter are not meant to suggest that the
Coast Guard's current emphasis on only the first strategy cannot
succeed.  However, as we have pointed out, future budget targets may
tax the Coast Guard's budget-cutting skills much more severely than
past targets have.  In our view, this means that the Coast Guard's
approach must be nimble--that is, the Coast Guard must be able to
quickly assess whether its strategy is likely to be sufficient and
must be capable of adapting it if circumstances warrant. 


--------------------
\1 See, for example, Managing for Results:  State Experiences Provide
Insight for Federal Management Reforms (GAO/GGD-95-22, Dec.  21,
1994), Managing for Results:  Experiences Abroad Suggest Insights for
Federal Management Reforms (GAO/GGD-95-120, May 2, 1995), and
Government Reform:  Goal Setting and Performance
(GAO/AIMD/GGD-95-130R, Mar.  27, 1995). 

\2 For more information about this framework, see Addressing the
Deficit:  Budgetary Implications of Selected GAO Work for Fiscal Year
1998 (GAO/OCG-97-2, Mar.  14, 1997). 


   ASCERTAINING THE DOLLAR IMPACT
   OF ACTIONS UNDER WAY OR PLANNED
---------------------------------------------------------- Chapter 4:2

Coast Guard officials were optimistic that steps recently undertaken
or planned would yield substantial savings to offset future funding
gaps.  However, agency officials do not appear to have a very clear
picture of the extent of these savings, particularly on a
year-by-year basis.  While we did not attempt to conduct a
comprehensive review of all measures under way or planned, we did ask
for information about cost savings for a number of specific
initiatives.  We found that although these actions could entail
considerable savings, Coast Guard officials were not able to fully
quantify the annual savings involved and/or did not have clear
indications of when the savings could occur.  For example: 

  The fleet logistics system project, expected to be fully in place
     by 2000, provides automated data and decision support tools to
     manage vessel inventories more efficiently and cost effectively. 
     The Coast Guard estimated savings of $900,000 for fiscal year
     1998 and $100 million over the life of the project but has not
     developed annual savings estimates for the next few years, when
     the impact of deficit reduction is expected to be the greatest. 
     A Coast Guard official said that year-by-year estimates could be
     developed. 

  Under the motor lifeboat acquisition project, which is already
     under way, the Coast Guard expects to replace 100 boats with a
     lesser number, resulting in less personnel, maintenance, and
     other costs.  A Coast Guard official said that savings have not
     been quantified at this time because the exact number of boats
     to be procured is not certain.  The official said, however, that
     a range of estimated savings could be calculated. 

  The HC-130 engine conversion project replaces old, inefficient
     aircraft engines with new, fuel-efficient engines.  The Coast
     Guard estimates that it will save $797,000 in fiscal year 1998
     and $1.3 million a year once all the engines are converted. 
     While the Coast Guard has not estimated the year-by-year savings
     that will occur as the project is being phased in, a Coast Guard
     official said such estimates could be made. 

  The Coast Guard is conducting a pilot program that provides vessel
     owners/operators with options on how their vessels can be
     inspected.  Instead of being inspected only by the Coast Guard,
     pilot program vessels can now be inspected by third-party
     organizations or qualified company personnel, with the Coast
     Guard's oversight.  The delegation of these functions may allow
     Coast Guard personnel to perform other high-priority marine
     safety tasks.  This pilot program was started in 1995 and
     originally was expected to be completed by the summer of 1996,
     according to a Coast Guard official.  Estimates of savings are
     still not available. 

If such year-by-year estimates can be developed, they would help
provide the Coast Guard with a clearer indication of whether it can
meet future budget targets with an efficiency-only approach.  This
would give earlier warning to the Coast Guard about whether it needs
to broaden its efforts.  A Coast Guard official responsible for
overseeing capital budget issues said that the Coast Guard is
considering developing such year-by-year estimates for savings
expected from capital projects.  It would seem beneficial to identify
year-by-year estimates for operations-related initiatives as well. 

We acknowledge that some things are beyond the Coast Guard's ability
to project.  For example, the Coast Guard has just begun the process
to replace its high- and medium- endurance cutters.  It is too early
to estimate savings at this time because the acquisition process has
just begun.  However, making savings estimates for more mature
projects should be easier. 


   EXPANDING THE RANGE OF
   EFFICIENCY-RELATED OPTIONS FOR
   CONSIDERATION
---------------------------------------------------------- Chapter 4:3

The Coast Guard acknowledges that because it has already undertaken
an ambitious streamlining effort, finding additional efficiencies
will be an increasingly difficult task.  As an indication of whether
additional efficiency options are possible, we examined cost-saving
options identified in a wide range of studies conducted on the Coast
Guard.  From among the various studies conducted since 1981, we
focused on 23 reviews conducted by such organizations and entities as
the Congress, the National Performance Review, DOT, GAO, and the
Coast Guard itself.  (See app.  I for a list of these studies.) We
found a number of efficiency-related recommendations that had not
been implemented.  Several of these recommendations are discussed
below, and a full listing is in appendix II. 

A number of the options that have not been implemented pose
considerable challenges for the Coast Guard, in that, agency
officials have either (1) been opposed to taking the recommended
steps or slow in implementing them or (2) encountered considerable
external opposition in attempting to do so.  Of the examples we
discuss below in more detail, two (rotational policies and
civilian/military mix) illustrate the first challenge, and one
(consolidating search and rescue stations) illustrates the second
challenge.  We also found a few support-related, potentially
controversial options that the Coast Guard considered but elected not
to use in earlier cost-cutting efforts.  The final example below
(consolidating training centers) is one such option because of
possible public opposition to closure actions. 

Our discussion of these examples, as well as our longer list, is not
intended as an endorsement of these options.  Deciding to implement
any of them would require careful attention and perhaps additional
information.  We selected these examples for discussion because they
illustrate the kinds of issues that often surfaced in considering
additional efficiency-related options. 


      LENGTHENING PERSONNEL
      ROTATIONS
-------------------------------------------------------- Chapter 4:3.1

The Coast Guard periodically rotates all but a few of its military
personnel from assignment to assignment.  Officers and enlisted
personnel generally change assignments every 2 to 4 years.  Costs to
rotate staff are over $60 million annually, not counting costs such
as moving time and preparing over 19,000 rotation orders annually.\3
Studies performed in the early 1980s by DOT and the National Advisory
Committee on Oceans and Atmosphere questioned whether the Coast Guard
should increase the length of time between rotations or even
eliminate rotations for certain types of activities.  The studies
pointed out that besides saving money, such a change could help
counter the undesirable effects of frequent rotation on the
continuity of operations and ability to build expertise and knowledge
in certain areas. 

The Coast Guard has not substantially changed the overall lengths of
tours for its military personnel since the time of these studies. 
However, in recent years, the Coast Guard has lengthened rotation
policies in some areas on a case-by-case-basis and also made efforts
to reduce relocation costs.  For example, Coast Guard officials said
that in 1995, duty tours were lengthened by about 1 year for certain
enlisted personnel (at the rank of E-4 and E-5), except those
assigned to vessels.  The Coast Guard also implemented a policy in
1993 that allows military personnel to stay in the same geographic
area for up to 7 years if the stay meets the agency's needs.  The
Coast Guard was not able to provide information on the number of
personnel affected by these two initiatives or the savings that
resulted.  The Coast Guard also has made efforts to reduce the
logistical costs of rotations, such as obtaining better contracts
with moving companies and transferring personnel closer to their
former location. 

Coast Guard officials said that they are reluctant to make further
changes to the agency's rotation policies; officials believe that
they have developed optimum tour lengths that should not be revised. 
They said that changing current practices would have several
undesirable effects, including the potential adverse effects on
multi-mission capabilities, a reduced opportunity to command a
variety of units or vessels, and the concern about assigning
personnel to undesirable locations for extended periods.  The Coast
Guard, however, was not able to provide us with any studies or other
data to support these contentions or demonstrate that these factors
would adversely affect the agency's overall effectiveness in
performing its missions or serving the public.  The Coast Guard
currently plans no formal study of this issue. 


--------------------
\3 The Coast Guard estimates that as much as one-third of the
rotation costs are "mandatory" because of transfers for training,
retirements, and other factors. 


      CIVILIAN/MILITARY MIX OF
      COAST GUARD PERSONNEL
-------------------------------------------------------- Chapter 4:3.2

In addition to its 37,000 military personnel, the Coast Guard has
about 6,000 civilians.  Studies performed in the early 1980s by the
Congress, DOT, and the National Advisory Committee on Oceans and
Atmosphere questioned whether some military positions should be
civilian instead to reduce costs and provide greater stability of the
workforce.  Overall, the Coast Guard has estimated that it costs
about $15,000 more to compensate military personnel than comparable
civilians.  This differential is consistent with our recent studies
on this issue in DOD, where we recently reported that DOD could save
about $15,000 annually for certain military support positions that it
reprogrammed to civilian positions.\4

The Coast Guard maintains that military personnel provide a more
front-line, rapid response capability in the operational environment
than do civilian personnel.  The agency also pointed out that
governmentwide mandates are currently requiring the Coast Guard to
reduce--not increase--the civilian workforce.  However, in 1993, the
House Committee on Appropriations directed the Coast Guard to
initiate a comprehensive review to determine what agencywide military
positions should be reprogrammed to civilian positions.  A Coast
Guard official told us that the review, which was to be completed by
the end of 1996, has been delayed because of other priorities.  He
added that he was not certain of when it will be completed and that
to become a priority, it may require upper management's attention. 
Upper management officials later told us that they expect this study
to be completed by mid-1997; at that time, the Coast Guard will
identify the potential for converting current military positions to
civilian and estimate the resultant savings. 


--------------------
\4 DOD Force Mix Issues:  Converting Some Support Officer Positions
to Civilian Status Could Save Money (GAO/NSIAD-97-15, Oct.  23, 1996)
and DOD Force Mix Issues:  Greater Reliance on Civilians in Support
Roles Could Provide Significant Benefits (GAO/NSIAD-95-5, Oct.  19,
1994). 


      CONSOLIDATING SEARCH AND
      RESCUE STATIONS
-------------------------------------------------------- Chapter 4:3.3

One example of an option that has proven controversial with the
public at large is consolidating locations from which search and
rescue services are provided.  The Coast Guard currently maintains
185 small boat stations (some established as early as 1884) with
1,569 small boats and 230 larger boats and cutters and 29 air
stations with 163 aircraft.  The Coast Guard has several times
proposed consolidating some of these facilities as a cost-cutting
move.  For example, in 1995, the Coast Guard proposed closing 23
small boat stations to save $6 million in facility and personnel
costs, reduce personnel needs by 115 positions, and generate
additional revenues by selling the unneeded properties. 

These proposals have generated controversy because of concern that
search and rescue services may be affected.  For its part, the Coast
Guard maintains that proposed closures would not affect the agency's
ability to respond to needed search and rescue efforts within its
established response time criteria.  To address concerns about the
reliability of such proposals, the Coast Guard developed a decision
process that we evaluated in earlier work and found to be formal,
consistent, well documented, and based on relevant criteria and the
best data available.\5 Coast Guard officials acknowledge, however,
that despite such assurances, closures may be difficult because
people feel safer having a station nearby.  The Congress declined to
approve the proposed 1995 closures. 

Opposition to closing other types of federal facilities has required
the development of new implementation approaches.  For several years,
recommendations for DOD base closings had to be formulated by an
independent Base Closure and Realignment Commission.  National
Aeronautics and Space Administration and DOD officials, who are
jointly studying ways to consolidate facilities such as laboratories,
have concluded that they may need to use a similar process, and the
same kind of problem may also be facing the Department of State in
determining office locations to close.\6


--------------------
\5 Coast Guard:  Improved Process Exists to Evaluate Changes to Small
Boat Stations (GAO/RCED-94-147, Apr.  1, 1994). 

\6 NASA Infrastructure:  Challenges to Achieving Reductions and
Efficiencies (GAO/NSIAD-96-187, Sept.  9, 1996) and State Department: 
Options for Addressing Possible Budget Reductions (GAO/NSIAD-96-124,
Aug.  29, 1996). 


      CONSOLIDATING TRAINING
      CENTERS
-------------------------------------------------------- Chapter 4:3.4

The consolidation of training centers is an example of a potentially
controversial support-related efficiency option that the Coast Guard
considered but rejected in earlier cost-cutting efforts.  If the
Coast Guard is faced with the need to make further reductions,
however, consolidation represents a potential place to look for
savings.  The Coast Guard spends about $300 million a year on
training, much of which is provided at seven training centers across
the country.  A study conducted in conjunction with the Coast Guard's
streamlining efforts recommended closing one of these centers (at
Petaluma, Calif.), to save an estimated $15 million a year.  Although
the Coast Guard adopted many of the study's other recommendations, it
decided not to close the training center at Petaluma.  One reason was
that closing Petaluma would require one-time construction and other
costs of about $29 million for additional facilities at centers to
which Petaluma's responsibilities would be transferred (Cape May,
N.J., and Yorktown, Va.).  Coast Guard officials also cited the need
to keep the current training infrastructure in place so that training
could be a source of strength and stability during the period when
other streamlining initiatives would cause a great deal of
organizational realignment.  Like small boat stations, closing
Petaluma or other training centers could encounter political and
public opposition, especially in light of the number of DOD base
closures in California in recent years.  In a recent congressional
hearing, the Commandant said that closing Petaluma would lead to a
public outcry because of the local community's dependence on the
Coast Guard. 


   DEVELOPING A BROADER
   COST-REDUCTION STRATEGY THAT
   ADDRESSES MISSIONS AND PROGRAM
   BENEFICIARIES
---------------------------------------------------------- Chapter 4:4

If the strategy of concentrating on efficiency options proves
insufficient, the Coast Guard will need to turn to one or both of the
other perspectives in the budget framework--reevaluating its missions
and objectives and reevaluating the targeting of resources.  This
broader approach is in keeping with OMB's December 1996 draft
guidance suggesting that agencies determine whether they must
undertake a function because no alternative private-sector or
governmental source can more efficiently perform it or whether
performance objectives could be met through user fees or
regulations.\7 To a limited extent, the Coast Guard has already taken
actions on some measures in this regard. 

To provide some indication of whether cost-saving options related to
these perspectives would be readily available for consideration--and
if so, what kinds of issues would likely surface in considering
them--we again turned to our group of 23 previous studies.  After
eliminating options that were no longer relevant, 17 remaining
options could be classified as reflecting these two perspectives. 
Several of these options are discussed below, and a full listing is
in appendix II.  Once again, our discussion of these examples, as
well as our longer list, is intended to illustrate the kinds of
options that might be considered and is not an endorsement of any
particular option. 


--------------------
\7 Capital Programming Guide, 12.10.96 Draft (Office of Management
and Budget, Dec.  1996). 


      EXAMPLES OF REEXAMINING
      MISSIONS AND OBJECTIVES
-------------------------------------------------------- Chapter 4:4.1

It has been about 15 years since a comprehensive study of the Coast
Guard's roles and missions has been published.  Since the early
1980s, four such reviews have been completed--the first, by DOT; the
second, by the House Committee on Transportation and Infrastructure
(the Coast Guard's House oversight committee); the third, by the
Congressional Research Service on behalf of the Senate Committee on
Commerce, Science and Transportation; and the fourth, by the National
Advisory Committee on Oceans and Atmosphere.  While many conditions
have changed over the past 15 years, the stated purposes of these
studies emphasize some of the same themes that seem important to
revisit today--the danger of becoming overextended, the importance of
reevaluating the need for each mission, and the value of analyzing
who should perform the mission if it is worth continuing. 

In June 1996, the Coast Guard contracted with the Center for Naval
Analyses to conduct a comprehensive analysis of its missions;
however, the focus of the analysis is long-term and it is unlikely to
assist with short-term budget reduction needs.  Instead, the study's
purpose is to review current and future trends that will affect the
nature and importance of the Coast Guard's roles and missions, the
future direction that those trends imply, and ways in which these
future directions translate into operating approaches for the agency. 
The study's long-term perspective focuses on what the agency may look
like in 2020, but does not consider short-term budgetary constraints,
resource allocation factors, or organizational structures.  Coast
Guard officials acknowledge these limitations but believe the study's
longer-term focus is important for ensuring that short-term decisions
do not conflict with long-term strategies. 

The lack of a comprehensive mission analysis is not the only reason
why no reductions in Coast Guard missions have occurred in recent
years.  Coast Guard officials indicated that because the Congress
ultimately decides the missions the Coast Guard should perform, the
agency has not initiated any mission-related changes.  Moreover, the
Coast Guard does not view itself as having the legal authority to
eliminate or significantly change many of them.  Instead, Coast Guard
officials believe that this type of action is a policy decision that
rests with the Congress and the American public.  However, we did
identify mission areas in which the Coast Guard is making efforts to
reassess its program standards and the scope of its activities.  One
area, inspecting private aids to navigation, is an example of a
reassessment that might be termed "at the margin"--that is, it
assumes that the Coast Guard should still keep the mission but may
find another approach for performing it.  The second area, operating
vessel traffic service systems, demonstrates a more fundamental,
in-depth examination of whether the Coast Guard needs to provide a
service at all. 


         NEW INSPECTION PROCESS
         FOR PRIVATE AIDS TO
         NAVIGATION
------------------------------------------------------ Chapter 4:4.1.1

Until recently, the Coast Guard has included in its program standard
for this mission area a requirement to inspect all private aids to
navigation.  These short-range aids to navigation include such items
as buoys or lights that provide mariners with information.  Many of
these aids are owned and operated by the Coast Guard; however, almost
49,000 aids are owned and operated by individuals and organizations
other than the Coast Guard.  The inspection of these aids annually
requires the time and resources of active duty or auxiliary personnel
to ensure that they are operating properly and are in the correct
location.  According to the Coast Guard's program managers, limited
resources, affecting the program's ability to meet this mission
standard as well as others, encouraged them to reconsider how they
performed this inspection process.  As a result, the Coast Guard is
initiating a new self-inspection process that allows the owners of
private aids to inspect their own aids and provide the Coast Guard
with documentation of that inspection for review.  The Coast Guard
expects to have this new process operational by mid-1997 and plans to
utilize any gained staff time or resources to meet other program
standards in this mission area. 


         NEW ALTERNATIVES FOR
         OPERATING VESSEL TRAFFIC
         SERVICE SYSTEMS
------------------------------------------------------ Chapter 4:4.1.2

The Coast Guard has recently begun to reexamine how it will carry out
its vessel traffic service (VTS) function.  Currently, the Coast
Guard owns VTS systems in eight ports around the United States and
operates them at an annual cost of about $20 million.  The purpose of
these systems is to improve the safe and efficient movement of marine
vessels in and around ports and to protect the environment by
monitoring vessel traffic information, assessing the information, and
passing it along to mariners.  Until recently, the Coast Guard held
the position that operating VTS systems is "an inherently
governmental function" and had proposed constructing a network of VTS
systems to be operated by the Coast Guard in up to 17 ports at an
estimated capital cost of $260 million to $310 million.  However, the
Congress decided not to fund this proposal and instead directed the
Coast Guard to reconsider how this function could be performed. 

The Coast Guard's new approach is a more fundamental reexamination,
on a port-by-port basis, of what VTS services may be needed, if any,
and who best can provide them.  According to Coast Guard officials,
this reexamination is being done in consultation with local community
stakeholders to ensure that their wants and needs are addressed in
the proposal developed for each port location.  Coast Guard officials
said they are willing to consider a range of options--from a fully
private VTS facility to a fully Coast Guard-operated VTS
facility--depending on each port's needs.\8 Savings associated with
this new approach are as yet unknown and could vary depending upon
the decisions reached in each port location.  However, the
alternatives selected are likely to involve considerably less expense
than the previously estimated $260 million to $310 million necessary
for the Coast Guard to build its originally planned VTS system. 

The VTS mission example comes closer to the type of comprehensive
evaluation that could reveal alternative approaches for conducting
missions deemed necessary while also identifying those missions that
may be unnecessary or less critical than others.  This type of
information would certainly be valuable to the Coast Guard if it
faces deep budget cuts in the future, and it would also be crucial to
ensure that the Coast Guard's anticipated capital asset needs are
justified on the basis of sound assumptions.  The Coast Guard's major
acquisition process includes a requirement to conduct a mission
analysis for each capital project.  However, this analysis begins
with the assumption that the mission is valid and analyzes the
resources needed to perform it rather than evaluating the more
fundamental questions of whether the mission is needed, and if so,
who should conduct it.  Performing these latter analyses could
further prevent the agency from acquiring capital assets for missions
that it may not continue to perform. 

Although the Coast Guard would, for the most part, be unable to
unilaterally implement decisions that would eliminate or
significantly curtail many of its missions, no statutory language
prohibits agency officials from conducting such reviews and
identifying necessary legislative actions.  With this type of
information available, the Congress would then be better prepared to
make these decisions if needed. 


--------------------
\8 For example, if a location frequently requires the use of Captain
of the Port authority, then this location might require a Coast
Guard-operated or jointly operated (Coast Guard and private entity)
VTS system to accommodate the need for this special Coast Guard
authority (that cannot be delegated to another entity).  However, in
other ports, where Captain of the Port authority may be seldom used,
the likelihood that a private entity would operate the VTS system is
greater. 


      EXAMPLES OF REEVALUATING
      RELATIONSHIP WITH USERS
-------------------------------------------------------- Chapter 4:4.2

Beneficiary-related recommendations from previous studies have
focused on implementing user fees for Coast Guard services.  User
fees are charges assessed for government services and for the sale or
use of government goods or resources.  Some of the Coast Guard's
activities such as law enforcement and defense operations generally
are not candidates for user fees because they are considered public
services--actions that benefit the general public and not just a
discrete user group.  However, a number of other Coast Guard missions
provide identifiable beneficiaries with individual benefits, and
under the law, users can be charged for them.\9 In recent years, the
Congress has directed that user fees be placed on a number of Coast
Guard functions.  These include marine licensing, certification of
registry, and merchant mariner documentation (1993); vessel
documentation (1994); and the renewal of merchant mariner documents
and inspection or examination of U.S.  and foreign commercial vessels
(1995).  The collections for these user fees was over $20 million in
fiscal year 1996. 

Although the Coast Guard is authorized to implement user fees on its
own, it has been reluctant to do so.  Coast Guard officials stated
that deciding to impose such fees is a policy question that should be
addressed by policymakers at higher levels within DOT, the
administration, or the Congress.  If policymakers decide that such
fees should be charged, the Coast Guard's position is that it then
becomes the agency's responsibility to address implementation and
evaluation issues.  Coast Guard officials stated that all three of
these decision factors (policy, implementation, and evaluation)
should be included in the review of a potential fee to ensure that
the broad-reaching effects of imposing a user fee on a service are
adequately considered. 

A number of the studies we reviewed contained proposals to implement
user fees on various Coast Guard functions; however, past history
indicates that user fee proposals sometimes create considerable
controversy.  Groups affected by the fees may feel that their taxes
already represent sufficient moneys to cover the costs of providing a
function and that singling out a function for additional charge is
unfair.  Here are two examples of such controversy.  The first
involves a user fee that was imposed but subsequently rescinded; the
other is a fee that recently has been proposed by the administration
and is likely to be controversial.  A related issue, also discussed
below, is the extent to which the Coast Guard is able to make use of
any fees that are charged. 


--------------------
\9 Title 31, section 9701, of the U.S.  Code authorizes federal
agencies to charge fees for services or benefits provided for
specific beneficiaries.  OMB's Circular A-25 implements this
authority by prescribing guidelines for imposing charges on users of
the government's services. 


         RECREATIONAL VESSEL FEE
------------------------------------------------------ Chapter 4:4.2.1

In 1991, the Coast Guard began charging recreational boat owners a
fee to partially offset the costs of programs, such as search and
rescue, boating safety, and aids to navigation.  The annual fee,
which applied to all boats 16 feet and over, operating where the
Coast Guard was present, ranged from $25 to $100, depending on the
vessel's length.  The fee met with strong opposition from the
recreational boating community, and according to the Coast Guard, was
difficult to enforce.  Legislation rescinded parts of the fee for
fiscal years 1993 and 1994 and the remainder of the fee for fiscal
1995.  During the short period when this fee was collected, it
generated over $60 million in revenue, most of which was deposited in
the Treasury's general fund. 


         DOMESTIC ICE-BREAKING FEE
------------------------------------------------------ Chapter 4:4.2.2

The Coast Guard conducts ice breaking on the Great Lakes, the St. 
Lawrence Seaway, and the northeast coast of the United States. 
Facilitating the safe navigation of vessels and the efficient
transport of commercial products and resources through such
ice-breaking services is critical to the nation's economy, according
to the Coast Guard.  While not taking issue with the importance of
domestic ice breaking, three studies we reviewed proposed that the
beneficiaries of such services share in the cost of providing
them.\10

The value of this service to industry can be considerable.  For
example, a 1995 study computed the value of ice-breaking benefits to
shippers in the Great Lakes Region (Ninth Coast Guard District) at
$78.1 million, on the basis of a 3-year average of net tons of
commodities shipped during the Great Lakes ice season.\11 According
to this study, the corresponding ice-breaking costs for the Coast
Guard in that region were $8.8 million. 

Industry representatives are not likely to support such a fee.  For
example, at a congressional hearing in 1996, Great Lakes port and
shipping representatives testified on the importance of the Coast
Guard's maintaining Great Lakes ice-breaking services, but none
offered user fees as a viable alternative to pay for these services. 
Although the law does not prohibit the Coast Guard from imposing a
fee, the 1995 study noted that doing so would require overcoming "the
traditional expectations of free (taxpayer supported) service."

Despite the potential controversy posed by this fee, the
administration is making renewed efforts to enact user fees for
domestic ice-breaking services.  Information in the administration's
fiscal year 1998 budget proposal indicates that legislation will be
proposed to assess and collect fees from commercial maritime carriers
to recover the Coast Guard's cost of providing domestic ice-breaking
services in the Great Lakes and the Northeast.  Fishing vessels and
recreational vessels would be exempt from the fee.  The
administration estimates that these fees, if approved, would become
effective in fiscal year 1999 and would produce $25 million annually. 


--------------------
\10 Six of the 23 past studies on the Coast Guard that we reviewed
contained recommendations for the Coast Guard to charge user fees for
services it provides.  Three of these studies specifically
recommended that the Coast Guard charge beneficiaries for the costs
of domestic ice-breaking services. 

\11 Analysis of Great Lakes Icebreaking Requirements, U.S. 
Department of Transportation, John A.  Volpe National Transportation
Systems Center (Cambridge, Mass., Mar.  1995). 


         EARMARKING OF USER FEES
------------------------------------------------------ Chapter 4:4.2.3

The potential for user fees to help the Coast Guard in reducing any
future budget gaps is tied directly to the issue of earmarking--that
is, allowing an agency to keep at least a portion of fees collected
to pay for providing the service.  Currently, the Coast Guard is not
allowed to keep fees collected; the revenues are sent to the
Treasury, and the agency is reimbursed for its collection costs
only.\12 Under these circumstances, according to Coast Guard
officials, the agency has had little incentive to propose new fees on
its own, since the agency receives no budgetary benefit from them and
often encounters public and political opposition to them. 
Furthermore, even though the agency may be reimbursed for its fee
collection efforts, agency officials said that funds received for
this often do not offset the costs incurred. 

The administration favors earmarking user fee proceeds for agencies,
in part as a means of providing agencies with an incentive to collect
fees and giving them a greater stake in the collection of receipts
important to their operations.  The fiscal year 1998 budget
submission contains a proposal that would directly align user fees
with the agency's operations being paid for by the fees, thereby
providing agencies with an incentive to support user fees.  Under
this proposal, a revised budget-scoring rule would also be used.\13
If the new scoring rule and the proposal to charge user fees for
domestic ice breaking are both approved by the Congress, the Coast
Guard would be allowed to use the fee proceeds to cover its costs for
ice-breaking services. 

One of the key issues to consider in deciding whether to earmark user
fees relates to oversight and accountability--that is, ensuring that
controls are in place so that the proceeds will be used prudently and
for purposes intended or deemed to be high priority.  For example, in
allowing the Food and Drug Administration to retain the proceeds from
user fees related to new drug applications from manufacturers, the
Congress set up specific controls on the use of these funds and
required that the agency make annual reports to the Congress on how
the funds were used.\14


--------------------
\12 In some circumstances, the Congress has allowed agencies to keep
the proceeds from user fees to finance programs.  For example, in
1997, the Congress authorized the National Park Service to conduct a
demonstration fee program that allows parks and other units to
collect new or increased admission and user fees and spend the new
revenue for park improvements. 

\13 "Scoring" is the process of estimating the budgetary effects of
pending and enacted legislation and comparing them with limits set in
the budget resolution or legislation.  Scoring involves tracking
data, such as budget authority, receipts, outlays, the surplus or
deficit, and the public debt limit.  According to the fiscal year
1998 Budget of the United States Government, the new scoring rule
proposed by the administration would (1) employ a definition of user
fees that is currently part of the House rules on jurisdiction, (2)
support the long-standing practice of authorizing user fees in
authorizing legislation, and (3) require that the fees be
appropriated before they could be spent. 

\14 See FDA User Fees:  Current Measures Not Sufficient for
Evaluating Effect on Public Health (GAO/PEMD-94-26, July 22, 1994). 


   CONCLUSIONS
---------------------------------------------------------- Chapter 4:5

The Coast Guard, like other federal agencies, has a daunting task
ahead.  If current predictions about the size of its funding gap hold
true, the Coast Guard is likely to face the task of identifying
budgetary savings far in excess of what it has been forced to
identify in recent years.  At the same time, the agency faces
pressures to find enough money to replace or modernize aging
equipment. 

We have no opinion regarding the level of resources needed by the
Coast Guard to carry out its responsibilities or on the advisability
of specific cost-cutting options.  However, we believe that the Coast
Guard's best opportunity to deal effectively with this task is first
to identify total expected annual savings from actions already taken
or planned.  Doing so would allow the Coast Guard to more readily
determine the extent to which it may need to seek even further
savings to meet future budget targets.  If additional savings are
needed, the Coast Guard could then expand the scope of its efforts to
examine additional efficiency-related actions and, if appropriate,
potential changes in the services it provides or the way in which
these services are funded.  Regarding user fees, we are not taking a
position on whether such fees, including the proposed domestic
ice-breaking user fees, should be established or if such fees should
be earmarked for the Coast Guard rather than returned to the
Treasury's general fund.  This is largely a policy question that the
Congress must ultimately decide after weighing a number of issues and
trade-offs. 

To a greater degree than with past cost-cutting efforts, future
efficiency-related options are likely to be controversial in some
way.  Some could be controversial within the Coast Guard itself
because the changes would involve a major shift in its organizational
culture.  Others could be controversial with the public because they
involve a real or perceived change in services or the closure of
facilities deemed important by nearby communities. 

Expanding budget-cutting options to include a reassessment of
missions or user fees is likely to involve controversy as well, given
past opposition to reductions in services and requirements to pay for
services.  Even so, given the uncertainty of future budget targets,
it is important for the Coast Guard to be prepared to make or suggest
changes in these areas.  This is especially relevant in light of the
substantial capital expenditures anticipated for replacing or
renovating aging equipment and facilities.  In a time of budget
austerity, it would be a double mistake to commit money to replace or
renovate equipment or facilities that may no longer be useful if
missions must be trimmed. 


   RECOMMENDATIONS
---------------------------------------------------------- Chapter 4:6

We recommend that the Secretary of Transportation direct the
Commandant of the Coast Guard to incorporate the following approaches
into the Coast Guard's strategy for confronting and managing possible
changes in the current budget climate: 

  To the maximum degree possible, quantify the anticipated
     year-by-year savings from actions already under way or planned,
     such as specifying the future savings realized by replacing old
     vessels with fewer new ones and implementing alternative vessel
     inspection methods. 

  Develop a more comprehensive strategy and corresponding plan for
     addressing impending budget targets, including systematically
     identifying and prioritizing alternatives that could be
     considered if future budget targets require additional spending
     reductions.  In so doing, the Coast Guard should give serious
     consideration to relevant but unimplemented recommendations from
     past studies and options identified in its recent National
     Streamlining Study.  The agency should also identify the
     legislative actions necessary to implement these alternatives. 
     Particularly in light of the large anticipated backlog of
     capital projects, the Coast Guard should consider including a
     reassessment of its missions and its relationship to user groups
     as part of this activity. 


   MATTERS FOR CONGRESSIONAL
   CONSIDERATION
---------------------------------------------------------- Chapter 4:7

If future funding levels require the Coast Guard to consider closing
operational units such as small boat stations, air stations, marine
safety offices, or training centers, the Congress may wish to
establish an independent panel to review potential agency facilities
closures in view of (1) the potential financial benefits, (2) the
impact on beneficiaries of services currently provided, and (3) the
potential opposition that inevitably accompanies consolidation and
closure decisions.  A panel much like the Defense Base Closure and
Realignment Commission established to review military installations
may be useful to address these issues. 

Also, if the Congress believes that potentially controversial issues
within the Coast Guard--such as changing military rotation policies
or converting more military positions to civilian positions--merit
further consideration, the Congress may wish to (1) direct the Coast
Guard to commission an outside study of these options or (2)
otherwise ensure either that the options are reviewed independently
or that the Coast Guard's studies of controversial internal issues
are validated by a third party. 


   AGENCY COMMENTS
---------------------------------------------------------- Chapter 4:8

We provided the Coast Guard with copies of a draft of this report for
its review and comment.  We met with Coast Guard officials, including
the Director of Resources, who generally concurred with the
information and recommendations contained in the report.  However,
the Coast Guard believed that the draft report did not (1) thoroughly
address the unique nature of the agency's missions and functions and
the breadth of the services that it provides with the budget it has
and (2) properly characterize the agency's rationale for its
reluctance to initiate substantive changes to its missions.  The
Coast Guard provided us with a number of other technical comments to
clarify portions of the report; these changes have been incorporated
into the body of the report as appropriate. 

We believe that the report adequately describes the specific nature
of the Coast Guard's missions and assets and acknowledges that the
Coast Guard has been asked to do more while dealing with a relatively
flat budget over the last several years.  Also, the report describes
in some detail the positive actions the agency has made and is making
to reduce costs and align itself with the administration's
priorities. 

Coast Guard officials indicated that because the Congress ultimately
decides the missions that the Coast Guard should perform, the agency
has not initiated any mission-related changes.  Language has been
added to the report to better reflect the Coast Guard's position on
this matter.  However, while we recognize that the Coast Guard
provides the public with valuable and in many cases vital services,
this should not prevent the agency from critically examining its
functions to see if other cost-effective alternatives are available
to achieve its missions, as other fiscally constrained organizations
have had to do.  By reexamining its missions, the Coast Guard can
position itself to provide relevant and timely information as the
Congress conducts its budget deliberations.  Also, the agency can
validate the need for and the scope of its missions and functions
before embarking on an aggressive program to modernize its aging
assets. 


LIST OF STUDIES WITH POTENTIAL
BUDGET-CUTTING RECOMMENDATIONS AND
OPTIONS FOR THE COAST GUARD
=========================================================== Appendix I

Title of study                 Description
-----------------------------  ----------------------------------------------------------
Broad-based reviews of the Coast Guard
-----------------------------------------------------------------------------------------
Semi-Paratus: The United       The Subcommittee on Coast Guard and Navigation, House
States Coast Guard,            Committee on Merchant Marine and Fisheries, conducted six
Nov. 1981                      hearings and issued a report on all of the Coast Guard's
                               programs on the basis of the belief that the gap between
                               the agency's resources and its responsibilities was
                               growing.

Coast Guard Roles and          The House Appropriations Committee directed that an
Missions,                      interagency task force study the Coast Guard's missions
Mar. 1982                      and functions. The study, which was intended to serve as
                               the impetus for the agency's planning process for the next
                               20 years, was undertaken to identify numerous functions
                               that could be eliminated, reduced in scope, or performed
                               by the private sector, public authorities, local or state
                               entities, or other federal agencies.

The U.S. Coast Guard,          The Senate Committee on Commerce, Science, and
Mar. 1982                      Transportation requested that the Congressional Research
                               Service prepare this report because of the Committee's
                               concern over expanded Coast Guard responsibilities and
                               continued budgetary constraints. The report is meant to be
                               an objective, in-depth analysis of the history of the
                               Coast Guard, its goals and missions, and options for the
                               future.

President's Private Sector     Because of growing budget deficits, President Reagan
Survey on Cost Control (Grace  established the Grace Commission, led by private sector
Commission),                   experts, and gave it a mandate to identify opportunities
1983                           for increased efficiency and reduced costs achievable by
                               executive and legislative action.

U.S. Coast Guard: Status,      Concerned that the Coast Guard's resources may not be
Problems, and Potential,       adequate to support its responsibilities, the National
Jan. 1983                      Advisory Committee on Oceans and Atmosphere examined and
                               highlighted possible efficiencies and alternative
                               approaches.

Creating a Government That     This federal governmentwide review examined cabinet-level
Works Better and Costs Less:   Departments and 10 agencies. The report contained numerous
A Report of the National       recommendations relevant to the Coast Guard.
Performance Review,
Sept. 1993

Deepwater Mission Analysis     This study, performed by the Coast Guard, reviews the
Report,                        Coast Guard's deepwater missions, both current and
Nov. 1995                      proposed, and projects the capabilities and corresponding
                               capital resources that may be required to effectively
                               carry out these responsibilities. The study covers likely
                               technology improvements that may affect the level of
                               resources needed and provides gross dollar estimates of
                               resources (vessels and aircraft) needed in the future.

Streamlining U.S. Coast Guard  This study, which stemmed in part from the President's
Organization & Training        mandate to improve efficiency in the federal government,
Infrastructure,                was chartered in 1994 by the Coast Guard's Chief of Staff
1996                           to identify opportunities to streamline the agency's
                               headquarters and field organization and training
                               infrastructure. Ultimately, it recommended major changes
                               to the agency's headquarters and field structure and to
                               enhance training.

GAO reports,                   Over the past 5 years, we have issued 10 reports and a
1990-96                        testimony to Congress identifying millions of dollars of
                               potential savings for the Coast Guard. The agency has
                               taken actions on most of the recommendations in these
                               reports. Open issues include funding for the VTS 2000
                               program and ensuring better inventory management of spare
                               parts.


Mission-specific studies of the Coast Guard
-----------------------------------------------------------------------------------------
Short Range Aids to            This report, based on a study performed by the Coast
Navigation Mission Analysis,   Guard, provides a general description of the short-range
Apr. 1994                      aids program and an overall plan for resource allocation
                               and replacement within the mission area.

Analysis of Required Fleet     This study, undertaken by the John A. Volpe National
Size and Private Sector Cost   Transportation Systems Center, discusses three areas: the
Comparisons for the USCG       optimum number of construction tenders needed, a
Inland Construction Tender     comparison of the Coast Guard's tender fleet construction
Fleet,                         costs with private costs, and the mission-related factors
May 1994                       that need to be considered before reducing the fleet's
                               size or contracting for the construction of fixed aids to
                               navigation.

Analysis of Great Lakes        This study, undertaken by the John A. Volpe National
Icebreaking Requirements,      Transportation Systems Center, examines the requirements
Mar. 1995                      for Great Lakes ice-breaking services and the feasible
                               alternatives for meeting those requirements.

Cost and Operational           This study, which was conducted by the Coast Guard and
Effectiveness Analysis for     outside experts, sought to review new technology and
Selected International Ice     management opportunities to improve international ice
Patrol Mission Alternatives,   patrol operations and identify selected management,
1995                           technology, and operating alternatives. The report
                               includes a cost analysis of various alternatives required
                               to meet current performance standards and an analysis of
                               the cost reimbursement system.
-----------------------------------------------------------------------------------------
Legend

USCG = U.S.  Coast Guard

VTS = Vessel Traffic Service


LIST OF POTENTIAL BUDGET-CUTTING
RECOMMENDATIONS AND OPTIONS CITED
FROM PAST STUDIES ON THE COAST
GUARD
========================================================== Appendix II

                                                                                  Framework           Implementation
Recommendation                                              Source                category\a          status                Estimated savings
----------------------------------------------------------  --------------------  ------------------  --------------------  -------------------------
General
-----------------------------------------------------------------------------------------------------------------------------------------------------
Where economically feasible, consolidate, at regional       GAO report, pp. 8     Efficiency          Partially             Partially quantified.
support centers, those cutter inventories that are located  and 9\b                                   implemented.          About $475,000 in savings
at individual onshore storage facilities, particularly                                                Integrated Support    have been achieved at
where several cutters from the same class are clustered or                                            Units (ISC) have      Group Miami Beach for
where the cutters' individual anchor storage facilities                                               been established,     110-foot patrol boats. A
are housed within a single building.                                                                  and the agency is     similar effort is under
                                                                                                      currently             way in Puerto Rico.
                                                                                                      identifying
                                                                                                      additional
                                                                                                      consolidation
                                                                                                      opportunities.

Consider closing or seasonally operating small boat and     GAO testimony,        Efficiency          Partially             Partially quantified.
air stations.                                               fiscal year 1996,                         implemented. To       Small boat station
                                                            pp. 4-6\c                                 comply with           releveling saved about
                                                                                                      congressional         $1.1 million; station
                                                                                                      intent, the Coast     closures would save about
                                                                                                      Guard would not       $4.9 million more if the
                                                                                                      close small boat or   full list were closed.
                                                                                                      air stations without  Air station savings are
                                                                                                      congressional         about $11.1 million for
                                                                                                      notification.         the Aviation
                                                                                                                            Restructuring and Air
                                                                                                                            Interdiction Reduction
                                                                                                                            Initiatives. The agency
                                                                                                                            plans to consolidate Cape
                                                                                                                            May and Brooklyn air
                                                                                                                            stations in fiscal year
                                                                                                                            1998. Savings are
                                                                                                                            expected in the fiscal
                                                                                                                            year 1999 budget.

Consider consolidating spare parts supply centers with      GAO testimony,        Efficiency          Not implemented.      A Coast Guard study
Department of Defense (DOD) centers.                        fiscal year 1996, p.                                            showed little if any
                                                            7\c                                                             savings.

Downsize and reorganize the field command and control and   Streamlining U.S.     Efficiency          a. Partially          Quantified. Recurring
support structures, including the following:                Coast Guard                               implemented.          savings of $15 million-
                                                            Organization and                          Districts 5 and 11    $20 million are expected.
a. Reduce the number of districts from 10 to 7;             Training                                  were merged into
b. Eliminate or merge the two existing Maintenance and      Infrastructure,                           Atlantic and Pacific
Logistics Commands (MLC); and                               1994-1996                                 Areas, respectively;
c. Convert five large bases and seven support centers into                                            Districts 2 and 8
integrated support commands (ISCs) and transfer field                                                 were combined.
support functions formerly performed by district offices                                              b. Not implemented.
to the new ISCs.                                                                                      c. Implemented.
d. Eliminate districts to create a regional structure.                                                Twelve ISCs were
e. Create four prototype activities by combining a group,                                             created.
a Marine Safety Office, and in some cases, a vessel                                                   d. Not implemented.
traffic services operation and an air station into one                                                e. Implemented.
command.

Combine 11 headquarters support and program offices into a  Streamlining U.S.     Efficiency          Implemented. Eleven   Quantified. Recurring
smaller number of offices.                                  Coast Guard                               offices were          savings of $15 million-
                                                            Organization and                          combined into 7       $20 million are expected.
                                                            Training                                  operating units.
                                                            Infrastructure,
                                                            1994-1996

Close Governor's Island as a Coast Guard facility and       Streamlining U.S.     Efficiency          Partially             Quantified. Recurring
relocate Coast Guard resources.                             Coast Guard                               implemented.          savings of $30 million-
                                                            Organization and                          Resources are being   $35 million are expected.
                                                            Training                                  relocated from
                                                            Infrastructure,                           Governor's Island;
                                                            1994-1996                                 the move is expected
                                                                                                      to be completed by
                                                                                                      October 1997.

Create Centers of Excellence to downsize certain support    Streamlining U.S.     Efficiency          Partially             Quantified. Recurring
functions.                                                  Coast Guard                               implemented. Closure  savings of $3 million-$4
                                                            Organization and                          of the Electronics    million are expected.
                                                            Training                                  Engineering Center
                                                            Infrastructure,                           is expected in
                                                            1994-1996                                 fiscal year 1998.

Close or consolidate training centers; transfer leadership  Streamlining U.S.     Efficiency          Partially             Not quantified.
schools to the Coast Guard Academy.                         Coast Guard                               implemented.
                                                            Organization and                          Leadership schools
                                                            Training                                  were moved to the
                                                            Infrastructure,                           Academy, but no
                                                            1994-1996                                 training centers
                                                                                                      will close.


Because there is evidence that the Coast Guard's policy of  U.S. Coast Guard:     Efficiency          Not implemented.      Not quantified.
regularly rotating its military personnel has resulted in   Status, Problems,                         Under study.          Savings unknown.
diminished standards of service in certain programs,        and Potential, p. 29
substitute civilians in certain specialist roles.

Areas believed to be appropriate for civilians include
research and development, commercial vessel inspections,
aids to navigation work (especially on the western rivers
systems), and marine environmental response. Some
administrative and support functions also could be handled
partly by civilian personnel.

Implement, to the extent feasible, the multi-crewing and/   Coast Guard Roles     Efficiency          Partially             Partially quantified.
or personnel augmentation concepts currently being          and Missions, p. 188                      implemented.          Initial crewing study for
considered to increase the operational utilization of                                                 Under study.          cutters saved $1 million
cutters.                                                                                                                    in fiscal year 1996.
                                                                                                                            Additional savings are
                                                                                                                            unknown, pending
                                                                                                                            completion of a current
                                                                                                                            study.

Make the use of the current automated inventory control     GAO report, p. 8\b    Efficiency          Partially             Partially quantified.
program mandatory on all cutters that have sufficient                                                 implemented. The      The 1995 Medium Endurance
computer hardware and have not implemented CMplus,                                                    High Endurance        Cutter (270') inventory
consolidate and analyze inventory data for each class, and                                            Cutter inventory      releveling is completed;
redistribute excess parts from additional cutter classs as                                            releveling project    it enabled the
warranted.                                                                                            is in progress.       redistribution of $4.2
                                                                                                                            million in spare parts
                                                                                                                            and removal of $1.4
                                                                                                                            million in excess parts.

Determine the feasibility of increasing the operational     Deepwater Mission     Efficiency          Not implemented.      Not quantified.
availability of a major cutter from the standard 185 days   Analysis Report, p.                       Under study.          Savings unknown.
per year to 300 days per year.                              I-55

Conduct analyses on reliability, maintainability, and       Deepwater Mission     Efficiency          Not implemented.      Not quantified. Savings
availability of assets or develop life cycle cost models    Analysis Report, p.                       Under study. Results  unknown.
of assets to compare cost effectiveness of upgrading        II-3                                      are due in 1999 or
assets versus new acquisitions.                                                                       2000.

Investigate the feasibility of employing virtual reality    Deepwater Mission     Efficiency          Not implemented.      Not quantified. Too early
and other innovative training techniques in lieu of more    Analysis Report, p.                       Being evaluated.      to project.
traditional and time-intensive methods of training.         I-54

Conduct a review of the necessity of various time-          Deepwater Mission     Efficiency          Not implemented.      Not quantified. Too early
intensive training programs and exercises and their         Analysis Report, p.                       Will be evaluated in  to project.
required frequencies.                                       I-54                                      fiscal year 1998.

Develop and promulgate formal policies and procedures to    GAO report, p. 9\d    Efficiency          Partially             Partially quantified.
ensure that the Coast Guard's use of appropriated staffing                                            implemented.          The
funds is consistent with the agency's annual                                                                                agency's operating budget
appropriations acts and with the general principles                                                                         was cut by $4 million.
governing the proper use of all appropriations; use these
formal policies and procedures to analyze the agency's use
of staff and to more accurately reflect the actual need
for acquisition, construction, and improvement (AC&I)-
related staff; and apply the unobligated fiscal year 1992
AC&I personnel funds to reimburse the operating account.

Require that (1) units' Morale, Welfare, and Recreation     GAO report, pp. 8     Efficiency          Implemented.          Not quantified. Savings
program budgets are reviewed and approved by district and   and 9\e                                                         unknown.
headquarters offices and (2) regularly scheduled surveys
of personnel are conducted.

Improve its performance measures and use them in both the   GAO report, pp. 62    Efficiency          Implemented.          Not quantified. Savings
day-to-day management of programs and in higher-level       and 63\f                                                        unknown.
decision-making for planning, programming, and budgeting.

Revise definition of research and development, establish    GAO report, p. 8\g    Efficiency          Partially             Partially quantified. The
long-range plan, acquire management information system,                                               implemented.          program was cut by $2.5
and measure the impact of projects.                                                                                         million based on the
                                                                                                                            report.

Comply with the requirements in the Housing Manual by (1)   GAO report, p. 6\h    Efficiency          Implemented.          Partially quantified.
analyzing the local community's housing market and                                                                          One project costing $4.3
relating market availability to specific housing needs,                                                                     million was terminated.
(2) evaluating all housing alternatives and using complete
and comparable cost analyses, and (3) periodically
reassessing the need for housing.


Aids to navigation
-----------------------------------------------------------------------------------------------------------------------------------------------------
Assess, in accordance with OMB Circular A-76, the           Coast Guard Roles     Efficiency          Not implemented.      Quantified.
capability of the private sector to provide, maintain, and  and Missions, p.                          The Coast Guard       The study showed no clear
service short-range aids to navigation to determine if      60;U.S. Coast Guard:                      concluded that        cost benefits for
areas exist in which contracted services are more           Status, Problems,                         commercial servicing  commercial servicing of
advantageous to the government.                             and Potential, p.                         was not advantageous  the aids.
                                                            20; and Grace                             owing to factors
                                                            Commission,p. 252                         other than cost.

Charge a permit fee to cover the costs of approval and      Coast Guard Roles     Beneficiaries       Not implemented.      Not quantified.
inspection of private aids to navigation.                   and Missions, p. 60                                             Savings unknown. The
                                                            and U.S. Coast                                                  Coast Guard believes that
                                                            Guard: Status,                                                  the costs to administer
                                                            Problems, and                                                   the fee would exceed
                                                            Potential, p. 22                                                revenues.

Congress should work with the administration in order to    Semi-Paratus, p. 45   Efficiency          Not implemented.      Quantified.
examine carefully the possibility that at least some                                                                        Study results showed that
aspects of the Aids to Navigation mission might logically                                                                   there would be no
be more effectively operated through increased utilization                                                                  savings.
of civilian personnel.

Limit the agency's Bridge Administration Program to those   Coast Guard Roles     Roles and Missions  Not                   Not quantified.
waterways of major significance to interstate and foreign   and Missions, p. 81                       implemented.          Savings unknown.
commerce. Legislation should be enacted limiting the
extent of navigable waterways subject to federal bridge
jurisdiction.

Congress should work with the administration to examine     Semi-Paratus, pp. 45  Roles and Missions
carefully the possibility that at least some aspects of     and 53
the Aids to Navigation mission might logically be
transferred to other agencies of the government.
a. Congress should work with the administration to review
seriously the possibility of returning Bridge
Administration to the Army Corps of Engineers. There have
also been suggestions that the program might be relocated   a. The U.S. Coast                         a. Not implemented.   a. Not quantified.
in other agencies within DOT, such as the Federal Highway   Guard, 97th                                                     Savings unknown. The
Administration.                                             Congress, 2nd                                                   Coast Guard believes that
                                                            Session (Senate                                                 governmentwide costs
                                                            Committee on                                                    would increase.
                                                            Commerce, Science,
                                                            and Transportation),
                                                            p. 112

Fees for cost recovery on bridge permits should be          Coast Guard Roles     Beneficiaries       Not implemented. The  Not quantified.
provided; the cost of bridge alteration should be borne by  and Missions, p.                          Coast Guard believes  Savings unknown.
those who directly benefit, not by the federal government.  80,                                       that authorizing
                                                                                                      legislation would be
                                                            Semi-Paratus, p. 53                       required, since most
                                                                                                      bridge owners are
                                                                                                      public entities.

Reduce or end the agency's participation in the National    Deepwater Mission     Roles and Missions  Not implemented.      Not quantified. Savings
Data Buoy program.                                          Analysis Report, p.                                             unknown. The agency
                                                            I-52                                                            believes that
                                                                                                                            governmentwide costs may
                                                                                                                            increase.

As the new stern-loading buoy tenders are brought into      Analysis of Required  Efficiency          Partially             Quantified.
service and the oldest inland construction buoy tenders     Fleet Size and                            implemented.          When all study
(WLIC) are retired, begin a realignment of construction     Private Sector Cost                       The program is in     recommendations are
tender operating areas down to a configuration requiring    Comparisons for the                       process.              implemented, savings will
fewer WLICs.                                                USCG Inland                                                     total $5 million annually
                                                            Construction Tender                                             in operations and
                                                            Fleet, p. 45 and                                                maintenance costs and the
                                                            Short Range Aids to                                             agency expects to avoid
                                                            Navigation Mission                                              $30 million in AC&I
                                                            Analysis, pp. 25-                                               costs.
                                                            40.

Investigate contracting options for those situations where  Analysis of Required  Efficiency          Implemented.          Quantified. Cost savings
required construction levels are not sufficient to keep a   Fleet Size and                                                  included in above
construction tender fully employed on construction          Private Sector Cost                                             recommendation.
activities. This includes areas where no WLICs are          Comparisons for the
warranted and areas where WLICs are warranted but more      USCG Inland
than a whole number of tenders is called for.               Construction Tender
                                                            Fleet, p. 46

Capture the work performed by Coast Guard aids to           Analysis of Required  Efficiency          Partially             Not quantified. Savings
navigation resources more accurately.                       Fleet Size and                            implemented.          unknown.
                                                            Private Sector Cost
                                                            Comparisons for the
                                                            USCG Inland
                                                            Construction Tender
                                                            Fleet, p. 45


Enforcement of laws and treaties
-----------------------------------------------------------------------------------------------------------------------------------------------------
Develop and use performance measures relating to the        National Performance  Efficiency          Implemented.          Not quantified.
collection and analysis of enforcement data, communication  Review, p. 23                                                   Savings unknown.
with the industry, establishment of acceptable levels of
compliance, implementation of changes in enforcement
policy, and a systematic assessment of the results of the
changes. Specific areas of focus include increasing
enforcement efficiency and cost savings by developing an
optimum mix of cutter, aircraft, and small boat resource
hours and boarding the right vessels by defining the
profile of a "blatant violator" for each fishery or vessel
category.

The Coast Guard's role in drug law enforcement is           The U.S. Coast        Efficiency          Implemented.          Not quantified.
indispensable. However, many advocate a greater use of the  Guard, 97th                                                     Savings unknown.
U.S. Navy's resources in conducting this mission.           Congress, 2nd
                                                            Session (Senate
                                                            Committee on
                                                            Commerce, Science,
                                                            and Transportation),
                                                            p. 42

Reassess and reduce the agency's requirements for fishery   U.S. Coast Guard:     Efficiency          a. Not implemented.   Not quantified.
law enforcement assets, where practical, and cost-          Status, Problems,                         Being evaluated. The  Savings unknown.
effective alternatives exist:                               and Potential, p. 18  Roles and Missions  agency has
a. Fishing Vessel Transmit Terminals on foreign fishing                                               reservations about
vessels could replace some Coast Guard offshore aircraft                                              reducing off-shore
patrols.                                                                                              patrols in part
b. Dockside enforcement by the National Marine Fisheries                                              because of search
Service and the states should replace as many at-sea                                                  and rescue
boardings of domestic fishing vessels as possible.                                                    concerns.
                                                                                                      b. Implemented.

Changes in regulations could lessen the need for some on-   Deepwater Mission     Efficiency          Not implemented.      Not quantified. Savings
scene surveillance in some mission areas.                   Analysis Report, p.                       This is being         unknown.
                                                            I-53                                      evaluated in one
                                                                                                      mission area
                                                                                                      (fisheries
                                                                                                      enforcement).

Legislative changes and new alien migrant interdiction      Deepwater Mission     Roles and Missions  Not implemented. The  Not quantified. Too early
operation agreements with source countries could have an    Analysis Report, p.                       Coast Guard has not   to project.
effect on these operations (e.g., reduce the need for       I-53                                      formulated policy to
large cutters to transport migrants).                                                                 implement recently
                                                                                                      enacted legislation.

Improvements in surveillance could result in substantial    Deepwater Mission     Efficiency          Not implemented.      Not quantified.
cost savings and possibly result in the need for fewer      Analysis Report, p.                       Under study. Results  Savings unknown.
patrolling assets.                                          I-54                                      are due in 1999 or
                                                                                                      2000.

Identify potential efficiencies in mission performance      Deepwater Mission     Efficiency          Not implemented.      Not quantified.
from improvement in the detection and classification of     Analysis Report, p.                       Under study. Results  Savings unknown.
targets.                                                    I-55                                      are due in 1999 or
                                                                                                      2000.

Identify possible efficiencies in mission performance       Deepwater Mission     Efficiency          Not implemented.      Not quantified.
through improved radar and other all-weather sensors for    Analysis Report, p.                       Under study. Results  Savings unknown.
aircraft.                                                   I-55                                      are due in 1999 or
                                                                                                      2000.

Consider nonshipboard surveillance systems as force         Deepwater Mission     Efficiency          Not implemented.      Not quantified.
multipliers.                                                Analysis Report, p.                       Under study. Results  Savings unknown.
                                                            I-56                                      are due in 1999 or
                                                                                                      2000.

As a possible way to minimize surface assets, improve       Deepwater Mission     Efficiency          Not implemented.      Not quantified.
boarding party transfer and boat-launching systems.         Analysis Report, p.                       Under study. Results  Savings unknown.
                                                            I-56                                      are due in 1999 or
                                                                                                      2000.


Ice operations
-----------------------------------------------------------------------------------------------------------------------------------------------------
Congress and the administration should work together to     Semi-Paratus, p. 79   Roles and
carefully examine the need for domestic and polar ice                             Missions
breaking and the role that government and the private
sector should play in providing this service.

a. The Coast Guard should continue Marine Science
Activities only in those areas that
                                                            Coast Guard Roles
1. are in support of Coast Guard operating programs, such   and Missions, p.                          a. Implemented.       a. Not quantified.
as Search and Rescue and Marine Environmental Protection;   166                                                             Savings unknown.
2. are in ice-covered water requiring icebreakers and in
response to specific research agreements with other
agencies, including reimbursement;
3. are a cost-effective use of multi-mission resources,
such as weather data collection; and














                                                            Coast Guard Roles                                               b. Not quantified.
                                                            and Missions, p. 160                      b. Not implemented.   Too early to project.
                                                                                  Beneficiaries       Under study.

4. require unique Coast Guard capabilities, such as buoy
tenders and are reimbursed by other federal agencies and
are determined to be the most cost-effective alternative.

b. In the absence of a fee schedule, the Coast Guard
should not provide (domestic) ice-breaking services for
the marine industry except in such emergencies that can be
interpreted under the Coast Guard's search and rescue
mandate.

Have a private firm manage the International Ice Patrol's   IIP Cost and          Efficiency          Not implemented. The  Not quantified.
(IIP) mission under the Coast Guard's direction/            Operational                               agency believes that  Savings unknown.
supervision. The intent is that the private firm would      Effectiveness                             legislative action
provide or contract for all services and functions          Analysis Project                          and changes in
required to meet performance specifications developed by    Team, pp. II-6-7                          international treaty
the Coast Guard. With the exception of some communications                                            provisions would be
functions, no Coast Guard resources such as ships,                                                    required.
aircraft, and personnel that have traditionally been used
for IIP functions would be provided.

Greater cost efficiencies may be possible through the       Analysis of Great     Efficiency          Not implemented.      Not quantified. Too early
seasonal operation of the Mackinaw with a civilian crew,    Lakes Icebreaking                         This option will be   to project.
and the seasonal operation with military crews of the       Requirements,                             examined as part of
three other vessels that can be used for ice breaking       p. xv                                     future decisions on
                                                                                                      the procurement of
                                                                                                      ice-breaking vessels
                                                                                                      on the Great Lakes.

Charge specific beneficiaries for the costs of the Coast    Grace Commission, p.  Beneficiaries       a. Not implemented.   a. Not quantified.
Guard's ice-breaking services.                              250; Coast Guard                          Under study.          Too early to project.
                                                            Roles and Missions;
a. The Coast Guard should provide ice-breaking support in   pp. 150 and 160; and
domestic waters for routine facilitation of marine          U.S. Coast Guard:
commerce only under a user fee schedule.                    Status, Problems,
                                                            and Potential, p. 24
b. The Coast Guard should continue to operate all U.S.
polar icebreakers. The Coast Guard should be fully                                                                          b. Quantified.
reimbursed by benefitting agencies or organizations for                                               b. Partially          Collections totaled $3
all identifiable costs of operations not specifically                                                 implemented.          million in fiscal year
required for the Coast Guard's missions and on a pro rata                                             about                 1995.
basis for all costs of joint operations.


Marine environmental protection
-----------------------------------------------------------------------------------------------------------------------------------------------------
Continue to seek to identify, in consultation with          Semi-Paratus, p. 68   Roles and Missions
American Bureau of Shipping, National Cargo Bureau, other
federal agencies, and state and local governments, all
areas where the agency's current responsibilities may
safely and effectively be transferred or delegated to
others (including owners/operators' "designated"
inspectors).




                                                            The U.S. Coast
                                                            Guard, 97th                               a. Not implemented.   a. Not quantified.
                                                            Congress, 2nd                             A pilot project with  Savings unknown.
                                                            Session (Senate                           the state of
                                                            Committee on                              Minnesota is
                                                            Commerce, Science,                        planned.
                                                            and Transportation),
                                                            p. 80








                                                            Coast Guard Roles
                                                            and Missions, p.                                                b. Not quantified.
                                                            119                                       b. Partially          Savings unknown.
                                                                                                      implemented.

a. Some states might assume more responsibility for
pollution response and cleanup. Established contingency
plans already inventory states' cleanup capabilities. The
states might assume more responsibility for enforcing
Coast Guard-promulgated vessel design and operation
standards. The states currently have almost no role in
this area. A split program whereby the Coast Guard
promulgates nationally uniform regulations while the
states enforce such regulations might relieve operating
programs and Coast Guard personnel.
b. The Coast Guard should recognize and encourage third-
party personnel's,

facility owners, or state and local governments monitoring
of liquid and bulk cargo-loading operations at shore
facilities. It also should establish a plan to recognize
inspecting and surveying waterfront facilities by local
and state governments when they have a permit and a
facilities inspection plan that provides for an
appropriate level of safety.

If fees were charged for certain marine environmental       The U.S. Coast        Beneficiaries       Implemented.          Not quantified.
protection activities, significant savings might be         Guard, 97th                                                     Savings unknown.
realized in the operating program budget. Charges could be  Congress, 2nd
directed for pollution response to the responsible party    Session (Senate
and for the many preventive inspections made by the Coast   Committee on
Guard.                                                      Commerce, Science,
                                                            and Transportation),
                                                            p. 80

To increase knowledge of and experience with the program,   Coast Guard Roles     Efficiency          Partially             Not quantified.
the Coast Guard should continue to take steps to reduce     and Missions, pp.                         implemented.          Too early to project
personnel turnover by lengthening or eliminating the        100 and 150                               The potential for     savings.
rotation of military personnel assigned to Captain of the                                             civilianizing some
Port/Marine Safety Office units or by utilizing civilian                                              positions is under
personnel in inspection and investigation functions.                                                  study.

Target inspections: monitor inspectors performance, notify  GAO report, pp. 9     Efficiency          Implemented.          Not quantified. Savings
shippers of violations, and get Customs Service inspectors  and10\i                                                         unknown.
to assist.

Work with the Army Corps of Engineers to develop an         GAO report, p. 9\j    Efficiency          Implemented.          Not quantified. Savings
accurate inventory of abandoned vessels and their                                                                           unknown.
locations to facilitate the capability of both agencies to
address the problems posed by such vessels.


Marine safety
-----------------------------------------------------------------------------------------------------------------------------------------------------
Make all commercial vessel safety (CVS) functions, except   Coast Guard Roles     Beneficiaries       Implemented.          Not quantified.
investigations, the subject of direct or indirect user      and Missions, p. 101                                            Savings unknown.
fees in order to recover from the beneficiaries the full
cost of the functions to the government.

Continue the CVS program as a federal program assigned to   Coast Guard Roles     Roles and           Partially             Not quantified.
the Coast Guard with provision for maximum functional       and Missions, p. 100  Missions            implemented.          Too early to project.
performance by third-party organizations and owner/                                                   Pilot programs are
operator representatives.                                                                             in progress.


Initiate a review of rotation practices for CVS and the     Coast Guard Roles     Efficiency          Partially             Not quantified.
potential for civilian staffing to determine their impact   and Missions, p. 100                      implemented.          Too early to project.
on experience levels of assigned personnel.                 and U.S. Coast                            The potential for
                                                            Guard: Status,                            civilianizing some
                                                            Problems, and                             positions is under
                                                            Potential, p. 24                          study.

Discontinue the agency's involvement in establishing and    U.S. Coast Guard:     Roles and Missions  Not implemented.      Not quantified.
operating vessel traffic systems, and transfer systems      Status, Problems,                         A study is planned    Too early to project.
already in operation to private concerns or local           and Potential, p.                         for 1997.
authorities or close them. For those ports where a vessel   24;
traffic service (VTS) could be operated by a state or       Coast Guard Roles
local organization and that organization is willing to      and Missions, p.
assume responsibility, the operations should be turned      129; and Grace
over to the local authorities under the Coast Guard's       Commission, p. 252
general supervision.

For VTS systems operated by the federal government,         Coast Guard Roles     Beneficiaries       Not implemented.      Not quantified.
recover the costs of operating such systems from the        and Missions, p. 129                      A study is planned    Too early to project.
primary beneficiaries of the service through an                                                       for 1997.
appropriate user charge policy.

Provide the Congress with specific information on the       GAO report, p. 10\k   fficiency I         mplemented. N         ot quantified. Savings
Marine Safety Network's development and implementation,     E                                                               unknown.
including the extent of known and potential cost increases
and schedule delays.

Interact more closely with key stakeholders before making   GAO report, pp. 18    Efficiency          Not implemented.      Not quantified.
a final decision on the number of ports that will receive   and 19\l                                  Under study.          To early to project.
new VTS 2000 systems. Determine whether the safety
benefits of VTS 2000 can be achieved more inexpensively by
installing other VTS systems.


Search and rescue
-----------------------------------------------------------------------------------------------------------------------------------------------------
The Coast Guard should be reimbursed for search and rescue  Coast Guard Roles     Beneficiaries       Implemented, but      Quantified.
(SAR) activities through an indirect user fee system. At a  and Missions, p. 21                       Congress rescinded    The agency collected a
minimum, a fee should be levied to save property, under     and                                       the fee in fiscal     recreational vessel fee
both emergency and nonemergency conditions.                 U.S. Coast Guard:                         year 1995.            totaling $62.5 million
                                                            Status, Problems,                                               for fiscal years 1991-
                                                            and Potential, p. 13                                            94.

DOD aircraft should continue to be utilized in SAR          Coast Guard Roles     Roles and Missions  Implemented.          Not quantified.
missions to the maximum extent that they are available,     and Missions, p. 21                                             Savings unknown.
and states and local governments (e.g., local marine        and
police groups that are often located near SAR stations)     The U.S. Coast
should be encouraged to become actively involved in SAR. A  Guard, 97th
stronger coordination role for the Coast Guard, entailing   Congress, 2nd
the negotiation of agreements on areas of responsibility,   Session (Senate
                                                            Committee on
                                                            Commerce, Science,
                                                            and Transportation),
                                                            p. 183

certification of state and local SAR capabilities, and
provision for Coast Guard SAR coordinators to task state
and local agencies in specific SAR cases might enable the
Coast Guard to improve SAR performance without the need
for additional resources or with a smaller increment. The
Coast Guard should continue to respond to maritime SAR
cases but not attempt or plan its resource levels to
respond exclusively. Rather, the Coast Guard should
coordinate alternative resources to assist in coping with
the projected increase in SAR cases.

Identify nonemergency SAR response as a very low priority   U.S. Coast Guard:     Efficiency          Implemented.          Not quantified.
and generally respond only in areas--at times and under     Status, Problems,                                               Savings unknown.
conditions--when other help is not available. Positive      and Potential, p. 12
effects of such action would include the freeing of the
Coast Guard's resources for real emergency situations,
reducing the workload on station personnel, reducing the
use of federal resources for nonemergency services,
encouraging good boating practices, and encouraging the
development of private-sector towing services.

Reassess the policies, procedures, and implementation       National Performance  Efficiency          Partially             Quantified. Savings for
plans for emergency position indicating radio beacons       Review, p. 19                             implemented.          the Coast Guard are
(EPIRBs) and aviation emergency locator transmitters                                                                        $775,000 annually.
(ELTs). The gradual phase out of less effective, outmoded
equipment (121.5 MHz EPIRBs and ELTs) and the transition
to new 406 MHz EPIRBs and ELTs by 2005 would significantly
enhance the ability to locate parties in distress, thus
decreasing the length, risk, and cost of Coast Guard SAR
missions.
-----------------------------------------------------------------------------------------------------------------------------------------------------
\a For the purpose of this study, we have framed the recommendations
into three categorizes:  whether the recommendation's implementation
would constitute a major change in the Coast Guard's responsibilities
(roles and missions), whether implementation would require a
redefinition or refocusing of beneficiaries, or whether
implementation would improve efficiency and have no major impact on
the agency's responsibilities or beneficiaries. 

\b Coast Guard Cutters:  Actions Needed Now to Ensure Better
Management of Parts and Supplies (GAO/RCED-95-62, Jan.  24, 1995). 

\c Coast Guard:  Issues Related to the Fiscal Year 1996 Budget
Request (GAO/T-RCED-95-130, Mar.  13, 1995). 

\d Coast Guard:  Acquisition Program Staff Were Funded Improperly
(GAO/RCED-93-123, Apr.  27, 1993). 

\e Coast Guard:  Use of Appropriated Funds for the Morale, Welfare,
and Recreation Program (GAO/RCED-92-158, May 18, 1992). 

\f Coast Guard:  Reorganization Unlikely to Increase Resources or
Overall Effectiveness (GAO/RCED-90-132, July 12, 1990). 

\g Coast Guard:  Management of the Research, Development, Test and
Evaluation Program Needs Strengthening (GAO/RCED-93-157, May 25,
1993). 

\h Coast Guard:  Housing Acquisition Needs Have Not Been Adequately
Justified (GAO/RCED-92-159, May 19, 1992). 

\i Coast Guard:  Program to Inspect Intermodal Containers Carrying
Hazardous Materials Can Be Improved (GAO/RCED-94-139, Apr.  27,
1994). 

\j Coast Guard:  Abandoned Vessels Pollute Waterways and Cost
Millions to Clean Up and Remove (GAO/RCED-92-235, July 21, 1992). 

\k Coast Guard:  Progress in the Marine Safety Network, but Many
Uncertainties Remain (GAO/RCED-92-206, Aug.  28, 1992). 

\l Marine Safety:  Coast Guard Should Address Alternatives as It
Proceeds With VTS 2000 (GAO/RCED-96-83, Apr.  22, 1996). 


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================= Appendix III

Neil Asaba
Christine Bonham
Michelle Chang
Jay Cherlow
Steven Gazda
Laura Hamilton
David Hooper
Dawn Hoff
Allen Lomax
LuAnn Moy
Stan Stenersen
Randall Williamson


*** End of document. ***