[Senate Hearing 109-1096]
[From the U.S. Government Publishing Office]
S. Hrg. 109-1096
THE COAST GUARD'S REVISED DEEPWATER IMPLEMENTATION PLAN
=======================================================================
HEARING
before the
SUBCOMMITTEE ON FISHERIES AND THE COAST GUARD
OF THE
COMMITTEE ON COMMERCE,
SCIENCE, AND TRANSPORTATION
UNITED STATES SENATE
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
__________
JUNE 21, 2005
__________
Printed for the use of the Committee on Commerce, Science, and
Transportation
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SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
TED STEVENS, Alaska, Chairman
JOHN McCAIN, Arizona DANIEL K. INOUYE, Hawaii, Co-
CONRAD BURNS, Montana Chairman
TRENT LOTT, Mississippi JOHN D. ROCKEFELLER IV, West
KAY BAILEY HUTCHISON, Texas Virginia
OLYMPIA J. SNOWE, Maine JOHN F. KERRY, Massachusetts
GORDON H. SMITH, Oregon BYRON L. DORGAN, North Dakota
JOHN ENSIGN, Nevada BARBARA BOXER, California
GEORGE ALLEN, Virginia BILL NELSON, Florida
JOHN E. SUNUNU, New Hampshire MARIA CANTWELL, Washington
JIM DeMINT, South Carolina FRANK R. LAUTENBERG, New Jersey
DAVID VITTER, Louisiana E. BENJAMIN NELSON, Nebraska
MARK PRYOR, Arkansas
Lisa J. Sutherland, Republican Staff Director
Christine Drager Kurth, Republican Deputy Staff Director
David Russell, Republican Chief Counsel
Margaret L. Cummisky, Democratic Staff Director and Chief Counsel
Samuel E. Whitehorn, Democratic Deputy Staff Director and General
Counsel
Lila Harper Helms, Democratic Policy Director
------
SUBCOMMITTEE ON FISHERIES AND THE COAST GUARD
OLYMPIA J. SNOWE, Maine, Chairman
TED STEVENS, Alaska MARIA CANTWELL, Washington,
TRENT LOTT, Mississippi Ranking
GORDON H. SMITH, Oregon DANIEL K. INOUYE, Hawaii
JOHN E. SUNUNU, New Hampshire JOHN F. KERRY, Massachusetts
DAVID VITTER, Louisiana FRANK R. LAUTENBERG, New Jersey
C O N T E N T S
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Page
Hearing held on June 21, 2005.................................... 1
Statement of Senator Cantwell.................................... 7
Prepared statement........................................... 7
Statement of Senator Inouye...................................... 6
Prepared statement........................................... 6
Statement of Senator Snowe....................................... 1
Prepared statement........................................... 3
Statement of Senator Stevens..................................... 6
Witnesses
Collins, Admiral Thomas H., Commandant, U.S. Coast Guard;
Accompanied by Rear Admiral Pat Stillman....................... 8
Prepared statement........................................... 10
O'Rourke, Ronald, Specialist in National Defense, Congressional
Research Service............................................... 38
Prepared statement........................................... 40
Wrightson, Margaret T., Director, Homeland Security and Justice,
U.S. Government Accountability Office.......................... 19
Prepared statement........................................... 22
Appendix
Response to written questions submitted to Admiral Thomas H.
Collins by:....................................................
Hon. Maria Cantwell.......................................... 68
Hon. Daniel K. Inouye........................................ 66
Hon. Olympia J. Snowe........................................ 63
Response to written questions submitted to Ronald O'Rourke by:...
Hon. Maria Cantwell.......................................... 88
Hon. Daniel K. Inouye........................................ 86
Hon. Olympia J. Snowe........................................ 83
Response to written questions submitted to Margaret T. Wrightson
by:............................................................
Hon. Maria Cantwell.......................................... 80
Hon. Daniel K. Inouye........................................ 78
Hon. Olympia J. Snowe........................................ 74
THE COAST GUARD'S REVISED DEEPWATER IMPLEMENTATION PLAN
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TUESDAY, JUNE 21, 2005
U.S. Senate,
Subcommittee on Fisheries and the Coast Guard,
Committee on Commerce, Science, and Transportation,
Washington, DC.
The Committee met, pursuant to notice, at 10:15 a.m. in
room SR-253, Russell Senate Office Building, Hon. Olympia J.
Snowe, Chairman of the Subcommittee, presiding.
OPENING STATEMENT OF HON. OLYMPIA J. SNOWE,
U.S. SENATOR FROM MAINE
Senator Snowe. This hearing will come to order.
Admiral Collins and Ms. Wrightson, and Mr. O'Rourke, I want
to thank each of you for testifying at this critical hearing on
the Coast Guard's revised Deepwater Implementation Plan.
I called for this hearing today to further examine the plan
recently released by the Coast Guard revising how it will
implement its Fleet Recapitalization Modernization Project,
known as Deepwater. Congress outlined the actual requirements
for this report in the Department of Homeland Security
Appropriations Act for Fiscal Year 2005. I applaud the Coast
Guard for this--for an enormous record of success across the
board, whether it's in its homeland- or non-homeland-security
missions.
And my hearing today is going to focus, essentially, on the
question of whether or not the service is going to be able to
carry out the enormous achievements and successes, long into
the future, that has been experienced by the Coast Guard. And
Deepwater is the future of the Coast Guard. Without the
advanced assets and capabilities that this program will
provide, our mariners and coastal communities will watch the
benefits this service provides slowly erode. The Nation cannot
afford to lose or reduce the on-water presence of this vital
agency, so now is the time for Congress and the Administration
to renew its commitment to properly fund and ensure the Coast
Guard--that it's capable of doing all that we ask it to do.
When the Congress called for this report, we intended to
have the Coast Guard evaluate its needs and requirements in a
post-9/11 environment. The original Deepwater proposal was
developed prior to the 9/11 catastrophic events. As we delved
into this revised plan, however, it becomes glaringly obvious
that it does not meet the needs of a post-9/11 threat
environment.
I am deeply disturbed by this stunning reversal of the
Coast Guard when I study the figures, and compare the number of
ships and planes that the service originally desired to what
this revised plan recommends. For example, despite a massive
increase in the Coast Guard's homeland-security mission, this
report does not propose increasing the number of ships
patrolling our shores. Even more disturbing, is the total
number of cutters could be less than what was originally
planned, as displayed in this chart here that, I believe, gives
a strong indication of what this revised plan would do,
compared to the request and the recommendations pre-9/11. These
figures, in my opinion, are not capable of meeting the
significant increases in mission responsibilities that the
Congress has assigned to this service. There is no logical
methodology that would reach these same conclusions, that I am
aware of. All of the studies, both the RAND Center and the
Center for Naval Analysis, indicate much higher numbers for
surface and aviation assets are needed. Simply put, the role of
the Coast Guard in defending our Nation has increased
exponentially, and its available resources should reflect this
reality. And even though the numbers in the same categories
show an increase in its numbers being procured, it must be
pointed out that these numbers are much higher due to the use
of refitted legacy assets, most of which are being refitted,
and not new assets.
The Coast Guard will tell us today that the assets they are
planning on purchasing will have greater capabilities than the
original Deepwater ones; therefore, the argument is that the
Coast Guard does not require as many vessels and aircraft
because of the new capabilities. While the new capabilities and
technologies are essential to accomplishing the service's
mission, they're a poor substitute for actual on-water
presence. Capacity is the most important capability of all.
Capability is not the limiting factor for success. The number
of ships is what's limiting the performance. There is no
substitute for having these assets on the water. No question.
It helps to establish an increased enforcement presence for the
mariner.
Another aspect of this report I find equally disturbing is
the absence of the word acceleration. I, frankly, find it
shocking that the Coast Guard did not evaluate ways to shorten
and expedite the timeframe for acquiring Deepwater assets.
Again, the acceleration of this project, in my opinion and the
opinion of so many others in Congress, is desperately required,
as the service legacy assets are breaking at a significantly
higher rate than anticipated. Operational mishaps have
increased, along with unanticipated maintenance days. This
equates to ships being tied to the pier for extensive periods
of time, not being underway in the water patrolling our coasts.
The Coast Guard is losing the equivalent of two major cutters
each year in lost patrols.
I emphasize security, as well, because, again, accelerating
the timetable would give American taxpayers a Coast Guard
capable of meeting its vital security missions. We're not
talking about theoretical threats in a distant future. We're
talking about dangers that have become a reality in this new
threat environment, this new normalcy. And this Nation requires
a Coast Guard that can respond to current and emerging threats.
I refer you to the second chart, on the performance-gap
analysis. It demonstrates the actual--in the gray line, the
actual legacy degradation; the purple line is the proposed
solution in this revised implementation plan of the Coast
Guard; and then you see the post-9/11 Coast Guard mission
demands, at the higher line, and what it's going to require,
showing the red line, to close that gap. And it continues to be
a growing and significant gap. We are talking about a post-9/11
environment, and yet that gap is growing wider and wider, even
under the Coast Guard's revised plan.
The Coast Guard should no longer have to say, ``We can do
more with less.'' We have heard that consistently before this
Committee, time and again. Frankly, I think it's a phrase that
we ought to remove from the vocabulary. I well recall a past
Commandant saying that, ``Doing more with less will evolve into
doing everything with nothing.'' Obviously, we all refuse to
accept that philosophy and that rationale.
But, Admiral Collins, it clearly does rely on the Congress
and the Administration--and, obviously, you--in providing the
necessary resources to the men and women who deserve quality
assets, because they perform life-saving missions each and
every day, both in the non-homeland- and homeland-security
responsibilities and obligations, as you well know. So, we need
to get to a common understanding and consensus of how we are
going to bridge this gap under the new proposed plan that you
are submitting to the Congress. Frankly, I have some serious
concerns about that, and we need to explore some of those
issues here today, because I see us just extending this
recapitalization program further and further out into the
future. We are talking 20-25 years. And we are going to have to
put more investments into the legacy assets that are aging. I
think we are going to compound some very serious problems. So,
we are obviously looking forward to your testimony here this
morning.
Ms. Wrightson, thank you, as well, for being here. You
certainly contribute enormously to this discussion in helping
the Coast Guard to meet its responsibilities and
recommendations based on your invaluable insights.
And, Mr. O'Rourke, thank you, because you have also
contributed measurably in shaping and debating national
policies affecting our national defense, our homeland security,
and shipbuilding programs, as well.
And I want to thank each and every one of you for being
here--and Admiral Stillman, as well--thank you for being here
to provide support on a number of issues.
[The prepared statement of Senator Snowe follows:]
Prepared Statement of Hon. Olympia J. Snowe, U.S. Senator from Maine
We have an urgent Coast Guard matter at hand that now demands our
attention. Admiral Collins, Ms. Wrightson, and Mr. O'Rourke, I'd like
to thank each of you for testifying at this critical hearing on the
Coast Guard's Revised Deepwater Implementation Plan.
I also want to thank my fellow Committee Members for attending this
morning and demonstrating their commitment to the future of the United
States Coast Guard. For years and years, this Committee has watched
this military service attempt to do more with less, and this
unsustainable pattern has caught up with us.
We are here today because this Committee, and this Nation, must
understand the dire situation in which the Coast Guard now finds
itself, regarding its ``Deepwater'' recapitalization plan. Eight years
ago, Deepwater was conceived in the knowledge that the Coast Guard's
aging vessels and aircraft needed to be modernized, and they proposed
to do this over a 20-year timeline. At the time, we thought this would
be sufficient.
But then on September 11, 2001, everything changed. Everything,
that is, except for the Coast Guard's assessment of how Deepwater would
help them meet the new terrorist threats facing our nation. The Coast
Guard recently issued a report that, shockingly, says it actually needs
fewer ships, planes, and helicopters than before 9/11.
That violation of common sense is at the crux of today's hearing.
This committee must expose the heart of the contradictions before us,
and help the Coast Guard immediately correct its course. If we let the
Administration continue with this way of thinking, the foundations of
Deepwater will continue to crumble before our eyes.
I am sure that Admiral Collins will testify that--as always--his
men and women can ``get by'' with what the Administration has
requested. As admirable as that stance is, however, the cold hard truth
remains that the Coast Guard is experiencing a record number of
casualties and mishaps like never seen before, and it is simply
becoming unsafe for our young men and women to serve aboard these aging
assets. Catastrophic engine failures and main space casualties have
risen at an alarming rate in the fleet.
Because my colleagues and I were alarmed to see this chronic
downward spiral of asset failures, we directed the Coast Guard to
report on how it can reverse this trend. In the Department of Homeland
Security Appropriations Act for FY 2005, as part of our oversight for
the largest Coast Guard acquisition in history, we called for this
report. We knew that the original Deepwater plan was outdated, since it
was developed before September 11, 2001. We intended to have the Coast
Guard evaluate its operational and asset requirements in a post-9/11
environment--in which we have significantly greater knowledge of
terrorist attacks and other threats.
As we delve into this new plan for revising Deepwater, however, it
becomes glaringly obvious that it does not meet the demands of a post-
9/11 world. I am stunned and disheartened to learn that the
Administration tells us that this service may not require as many ships
in the water and airframes in the sky. They try to justify this by
saying that the Deepwater assets will have ``greater capabilities''
than those in the original Deepwater plan. Therefore, the Coast Guard
says it does not need as many assets. While I agree that new
technologies are essential to accomplishing the service's missions,
such capabilities simply do not substitute for actual on-the-water
presence. Capacity is the most important capability of all.
When I study the figures in this report, and compare the number of
assets that the service originally called for to what this revised plan
says, I am overtaken by total disbelief to see the Coast Guard wants
fewer ships and aircraft. And that is relying more and more on simply
upgrading its legacy assets, at a time when these old assets are
failing more frequently. Phrase it however you would like . . . or
cushion the numbers to create the illusion of having more . . . but
nothing will substitute for the fact that our Nation requires more new
assets--along with more capabilities--in the water and in the air. And
we must utilize those assets now.
Allow me to elaborate. Despite a massive increase in the Coast
Guard's homeland security mission, this report does not propose
increasing the number of ships patrolling our shores. Even more
disturbing--the total number of cutters could be less than what was
originally planned. The National Security Cutter went from 6 to a range
of 6-8, the Offshore Patrol Cutter remained the same (this is the
workhorse of the fleet), and the Fast Response Cutter went from 58 to a
range of 43-58. These figures are not capable of meeting the expanded
mission responsibilities that Congress has assigned to the service.
Simply put, the role of the Coast Guard in defending our Nation has
increased exponentially, and its available resources should reflect
this reality.
Another aspect of this report I find equally disturbing is the
total absence of the word acceleration. I find it shocking that the
Coast Guard did not evaluate ways to shorten the time frame for
acquiring Deepwater assets. Completing Deepwater on a 10 or 15-year
timeline, would not only offer a cost savings of up to $4 billion over
the life the program, it also gives the American taxpayers a Coast
Guard capable of meeting its vital security missions, sooner rather
than later. The Coast even conducted its own acceleration feasibility
study and stated that acceleration was possible, it saved billions of
dollars, and it provided thousands of more operational mission hours.
I emphasize security, because we are not talking about theoretical
threats in some far-off land . . . the dangers are a reality that we
risk facing every day. Therefore, as the GAO rightly noted, we need to
focus on how well this service is actually performing in its multiple
missions. This graph, which the Coast Guard provided, illustrates the
gaps in performance that the service is experiencing. This clearly
shows the inadequacy of the proposed Deepwater solution in closing the
performance gap as a result of the severe degradation of legacy assets.
Simply put, the ships and planes that have served the Coast Guard well
for so long can no longer absorb the pace of operations required to
secure this Nation in today's world.
Admiral Collins, having served as Chairman of this Fisheries and
Coast Guard Subcommittee for more than 8 years, I refuse to believe
this report reflects what you want for the young men and women serving
under you. I strongly believe the Coast Guard serves as a cornerstone
of our Department of Homeland Security . . . and cornerstones of our
national security should not be in the dilemma the Coast Guard now
finds itself.
But we would be mistaken to frame this hearing totally around
questions of national security, because the Coast Guard has been
uniquely positioned to perform a wide variety of missions critical to
our Nation's maritime needs. Last year alone, the Coast Guard responded
to more than 32,000 calls for assistance and saved nearly 5,500 lives.
These brave men and women prevented 376,000 pounds of marijuana and
cocaine from crossing our borders, stopped more than 11,000 illegal
migrants, conducted more than 4,500 fisheries boardings, and responded
to more than 24,000 pollution incidents.
The Coast Guard also aggressively defended our homeland as it
undertook more than 36,000 port security patrols, conducted 19,000
boardings, escorted more than 7,200 vessels, and maintained more than
115 security zones. The Coast Guard has reviewed and approved domestic
security plans for 9,580 vessel and 3,119 facilities, and they verified
security plan implementation on 8,100 foreign vessels.
We must all take note of these figures, because with the current
condition of its assets and the continued degradation of its ships and
planes, the Coast Guard will lose its ability to maintain this
impressive track record. For now, we can still applaud the Coast Guard
for its success, but my concern at this hearing focuses on the
service's ability to carry out these achievements and successes long
into the future.
And Deepwater is the future of the Coast Guard. Without the
advanced assets and capabilities that this program will provide, our
mariners and coastal communities will watch these benefits erode. The
Nation cannot afford to lose or reduce the on-the-water presence of
this vital agency . . . because if we do, more lives will be lost at
sea, that is the hard truth. Now is the time for Congress to renew our
commitment to properly fund and ensure the Coast Guard is capable of
doing all that we ask of it. It is time to turn words into action, so
that our Coast Guard is no longer the 40th oldest of 42 naval fleets in
the world, an embarrassing fact that I continue to state year after
year.
The Coast Guard should no longer have to say, ``we can do more with
less.'' It is time for us to remove that phrase from the Coast Guard's
vocabulary, once and for all. It is unfortunate that a quote I once
heard from a past Commandant is coming true today . . . that ``doing
more with less will evolve into doing everything with nothing.'' I
refuse to accept this statement, which undercuts the very core of our
homeland security.
Admiral Collins, our Nation relies upon the Coast Guard today more
than ever before. I intend to ensure you have the necessary resources
to carry out the agency's homeland security and traditional missions
now, and for the future. But I cannot give your men and women the
assets they require unless you tell us what the Coast Guard needs, not
what the Office of Management and Budget thinks the Coast Guard should
have based on its budget models. Let me remind you how the 2004 Coast
Guard Authorization Bill amended Section 93 of title 14 of the U.S.
Code: after informing the Secretary, the Coast Guard Commandant is
authorized to make recommendations to Congress as you consider
appropriate. Admiral, please use this law as we intended.
Ms. Wrightson, I want to welcome you again to the Senate and thank
you for all the service you have provided us in assisting the Coast
Guard in their endeavors. I look forward to your testimony today.
Mr. O'Rourke, I welcome you to our committee and look forward to
your testimony. I have read your recent report on the Coast Guard's
Deepwater Program and acknowledge your expertise in the national
defense, homeland security, and shipbuilding issues facing this Nation.
Again, welcome. I thank you all for appearing today.
Chairman Stevens?
STATEMENT OF HON. TED STEVENS,
U.S. SENATOR FROM ALASKA
The Chairman. Thank you very much.
I was just sitting here looking at that model and wondering
where we can hang it from. Not much room up here on this
committee table for that.
But I understand every word that the Chair has said. I
think that those of you at the table really have been magicians
in fitting in the requirements in the limited budget that's
been made available to you. So, I hope we'll all keep that in
mind--and even your request for the Fiscal Year 2006, you've
got--anticipated costs of maintaining legacy assets has eaten
up more than a quarter of your Deepwater funding. And we've
just got to understand that. It's the budget process, not the
planning process, that has led us to the position we're in. I
don't disagree with what Senator Snowe has said at all, but I
do think that it's the same thing we're facing in the services,
we're facing in many areas, because of the budget constraints
that we face right now, due to the deficit and the war, that
we've got to find some way to get through this period without
destroying the future of the Deepwater Program or of the
overall military services.
So, I look forward to your testimony, and I look forward to
working with Senator Snowe to try to find some way to start the
process of reducing this sort of eating away at the Deepwater
funding because of the increased costs of maintaining an aging
fleet.
Thank you very much.
Senator Snowe. Thank you, Mr. Chairman.
Co-Chair Inouye?
STATEMENT OF HON. DANIEL K. INOUYE,
U.S. SENATOR FROM HAWAII
Senator Inouye. Madam Chair, I thank you very much. And I
wish to associate myself with your opening remarks.
May I ask that my statement be made a part of the record?
Senator Snowe. Without objection, so ordered.
[The prepared statement of Senator Inouye follows:]
Prepared Statement of Hon. Daniel K. Inouye, U.S. Senator from Hawaii
We have waited a long time for the revised Deepwater Plan and I
look forward to discussing it with our esteemed witnesses.
The Deepwater Program is integral to the evolution of the Coast
Guard in our post-9/11 world. This revised plan is the first time we
have been able to examine the Coast Guard's vision for the future.
Because of an aging fleet and expanded responsibilities, without the
Deepwater acquisition, the Coast Guard will soon be constrained to meet
its safety and security responsibilities.
There are a couple of key issues to consider. First, it is vital
that we help the Coast Guard move forward with Deepwater in a timely
manner.
Second, we need to know why the 20-year revised plan has a notable
reduction in the number of key assets being requested. I am concerned
that reducing the number of requested cutters in the face of increased
need may lead to problems down the road as we rely more heavily on
legacy assets.
I understand that many assets will have new communications and
intelligence capabilities, which should act as ``force multipliers.''
However, even the best of such systems need a threshold level of
physical presence to be effective.
Third, I am told that no simulation has yet been run using the
precise mix of assets and capabilities actually provided in the revised
plan. Thus, we do not know if the plan will meet the needs.
Fourth, I have concerns regarding the oversight and management of
the Deepwater project. The only other major government program using a
Lead System Integrator Approach, the Army's Future Combat System, is
being reevaluated due to concerns with oversight and conflicts of
interest.
I look forward to hearing today about the Coast Guard's efforts to
deal with these issues.
Senator Snowe. Ranking Member, Senator Cantwell?
STATEMENT OF HON. MARIA CANTWELL,
U.S. SENATOR FROM WASHINGTON
Senator Cantwell. Thank you, Chairwoman Snowe, for holding
this important Committee hearing and discussing the Deepwater
Program of the Coast Guard.
We, obviously, do rely on the Coast Guard for many
important services, including fisheries enforcement,
icebreaking, and search and rescue. And, obviously, the Coast
Guard's mission, when it comes to the expanding homeland-
security needs that we've been outlining as a nation, has
resulted in a 25 percent increase in responsibility which seems
to further that Coast Guard long-time motto of ``do more with
less.'' So, I am sure that if anybody can do it, the Coast
Guard can, yet the creativity and ingenuity that's going into
the designing of this system-by-system approach is commendable
and the acquisition and revitalization of these legacy assets
is very, very challenging. So, I share some of my colleagues'
concerns, both on the issues of acceleration, but also on the
issues that the GAO has raised in recommendations about
improvement and performance and the prime responsibilities for
accountability to the outside organizations that are involved
in integrating these.
So, I look forward to today's hearing to hear about how you
are integrating those GAO recommendations and what we need to
do to make sure that we are addressing some of these challenges
on capability as we consider acceleration of Deepwater. If
we're going to continue to discuss acceleration, how do we have
the increased capability that goes with this particular plan?
So, I look forward, Madam Chairwoman, to the testimony of
the panelists. And I want to make sure that I mention that I do
believe that it's important to look at the oversight
recommendations by GAO.
So, with that, Madam Chairwoman, thanks again for holding
this hearing, and I look forward to the testimony.
Prepared Statement of Hon. Maria Cantwell, U.S. Senator from Washington
Thank you Senator Snowe, for holding this very important hearing to
discuss the Coast Guard's Deepwater Program, and the revised plan that
it recently submitted to Congress.
The Deepwater Program--the Coast Guard's major recapitalization of
its some 90 cutters and 200 aircraft--was first conceived long before
the events of September 11, 2001. Even then, the Coast Guard realized
the need to significantly upgrade its assets, which include some of the
oldest vessels of any Coast Guard in the world.
After September 11, 2001, the Coast Guard's traditional missions of
law enforcement, maritime safety, drug interdiction and environmental
protection were expanded to include a much greater emphasis on homeland
security. With operations for homeland security increasing by about 25
percent, the Coast Guard's assets have been stretched to the limit.
Therefore, I am very pleased that the Coast Guard has finally provided
us with a new Deepwater plan that will achieve all of its missions,
including its homeland security missions.
However, I share the concerns of some of my fellow Senators about
several aspects of the Deepwater Program, and regarding the new plan in
particular.
First, the Coast Guard has not adequately demonstrated that the
increased capability of assets included in the new plan will compensate
for the plan's reduced capacity--particularly for the $19 million, 20-
year plan that I believe is the current ``going forward'' option. With
the increased focus on homeland security, and the ever-present need for
the Coast Guard's work in the more traditional areas, it is unclear to
me that the Coast Guard can continue to achieve more with less.
Second, I am concerned that the Coast Guard has changed its plans
with respect to retiring certain older, ``legacy'' aircraft--its C-130
fixed-wing airplane and its HH-60 helicopter, which it now intends to
retain.
The Coast Guard's has already experienced difficulties that it had
not predicted, with resultant cost increases, in upgrading its old HH-
65 helicopters and 110, cutters. I wonder if the decision to backtrack
on purchasing new assets for these two classes of aircraft was
performance driven, or if rather, it was driven largely through
budgetary concerns.
Finally, I am concerned about whether the Coast Guard is doing all
that it should to ensure proper management and oversight of this long-
term contract.
The Government Accountability Office (GAO) has long-raised its
concerns regarding the Coast Guard's decision to use a non-standard
contract structure. In a 2004 report, GAO found problems with the lack
of incentives for keeping costs down under this approach--where the
prime contractor makes all ``make or buy'' decisions without the
competition required of traditional procurement models.
It also found serious shortfalls in the Coast Guard's internal
oversight of the program. While I recognize the progress the Coast
Guard has made in implementing these recommendations, nine of the
eleven recommendations remain unmet according to the GAO.
I wonder if even these recommendations go far enough, given that
the Deepwater Program could last for as long as 25 years under a single
prime contractor. My colleague, Senator McCain, recently raised similar
concerns with an Army program--the Future Combat System. In that case,
following investigation, the Army returned to a more traditional
contract format with improved transparency and oversight of the
program.
Admiral Collins, I look forward to your testimony today on the
Coast Guard's revised Deepwater plan, and hope that my concerns will be
addressed. I also look forward to the testimony of Ms. Wrightson of
GAO, and of Mr. O'Rourke of the Congressional Research Service, and
hope that they will have some recommendations on how management of this
major program can be improved, for the benefit of the Coast Guard, and
for the benefit of the American people.
Finally, I thank our Chairwoman, Senator Snowe, once again, for
holding this hearing today.
Senator Snowe. Thank you, Senator Cantwell.
Admiral Collins, you may begin. Welcome.
STATEMENT OF ADMIRAL THOMAS H. COLLINS,
COMMANDANT, U.S. COAST GUARD;
ACCOMPANIED BY REAR ADMIRAL PAT STILLMAN
Admiral Collins. Well, good morning, distinguished members
of the Committee and Madam Chairman. It's a great pleasure for
me to be with you here today to address the issues of our
Deepwater Program.
The Deepwater Program continues the recapitalization of our
cutters, our boats and aircraft, and supports the
infrastructure to reverse the declining readiness trends and
improve the critical operational capabilities and readiness
that you've mentioned in your opening comments.
Importantly, it--we are convinced that the system-of-
systems approach is the right approach. It will create an
interoperable systems of capability that are really force
multipliers together. The sum is greater than the individual
parts. It will help us identify and intercept threats well
before they reach the shore.
Our revised Deepwater Acquisition and Implementation Plan
is a performance-based--and I stress that--performance-based
and goal-driven roadmap with identified phases, timelines, and
target completion dates that will enable us to ensure that our
cutters and aircraft are equipped with the right systems, the
right capabilities to operate successfully in the post-9/11
environment.
The enhanced capabilities are in the areas of C4ISR,
airborne use-of-force, force-protection system, long-range
surveillance and strategic lift, and CBRN protection. And these
enhanced capabilities are absolutely critical to ensuring the
maritime security of America and its $750 billion maritime
transportation system. The added capabilities will allow us to
leverage our assets far beyond the current fleet operational
output. New upgraded interoperable C4ISR capabilities, for
example, along with airborne use-of-force, will help fuse
tracking, surveillance/detection, and classification
information into relevant, usable common operating pictures
that operational commanders can deploy to execute their
missions more effectively.
These same Deepwater assets and capabilities are integral
to the Coast Guard's ability to perform its missions of ports,
waterways, and coastal security, migrant and drug interdiction,
as well as fisheries enforcement and search and rescue.
For example, C4ISR--command, control, communications,
computers, intelligence, surveillance, and reconnaissance--
these upgrades to our current cutters, as well as the airborne
use-of-force capabilities, enabled cutter crews from the
GALLATIN, from the RUSH, and the THETIS, to collectively seize
more than 33,900 pounds of cocaine last year. Cutter GALLATIN,
alone, seized more than 24,000 pounds of cocaine, worth $768
million. And, overall, we seized 240,000 pound of cocaine last
year, an all-time record by 100,000 pounds. These achievements
are a true testament to the value of Deepwater communication
upgrades and enhancements. Their installations on these aging
legacy cutters played a significant role in the success here in
this particular mission.
We are pleased with the performance enhancements realized
to date, and we look, with great anticipation, to the
productivity enhancements that will be realized in the future,
when new construction and Deepwater assets containing even more
robust capabilities come into the service later in this decade.
In essence, the President's budget--2006 budget for the
Integrated Deepwater System--takes aim on transforming the
Coast Guard and stemming the decay of declining readiness
trends. It includes the proper mix of legacy systems,
enhancements, conversions, sustainment, and platform or system
replacement to ensure an effective transition from legacy
systems to new systems over an extended period. This is the
balance we have to continue to work, the balance between legacy
investment and new-system investment. It's critical to
maintaining the right level of operational capability now--we
have to operate now--and over the entire period of the
transformation that I've referenced.
The Coast Guard's Deepwater Implementation Plan, and the
2006 budget, in particular, is about placing the--it is about
placing the right tools in the very capable hands of Coast
Guard men and women. And they have shown, time and time again,
they know just what to do with it when we get this right. They
deserve nothing less than our continued support, and we will
give it to them.
Thank you for the opportunity to testify today, and I'll be
happy to answer questions at the appropriate time.
Thank you.
[The prepared statement of Admiral Collins follows:]
Prepared Statement of Admiral Thomas H. Collins, Commandant,
U.S. Coast Guard; Accompanied by Rear Admiral Pat Stillman
Introduction
Good morning Mr. Chairman and distinguished members of the
Subcommittee. It is a pleasure to have an opportunity to appear before
you to discuss the Coast Guard's Integrated Deepwater System and the
positive impact it will have on the Coast Guard's ability to secure
America's maritime borders, aid persons in distress, facilitate the
safe and efficient flow of commerce, and respond to the expeditionary
requirements of U.S. combatant commanders.
On September 10, 2001, our primary maritime focus was on the safe
and efficient use of America's waterways. Since 9/11, we have made
great progress in securing America's waterways, while continuing to
facilitate the safe and efficient flow of commerce. There is no doubt
that work remains, but there is also no doubt that we continue to
improve maritime homeland security each and every day--thanks in large
part to the continued strong budgetary support of the Administration,
and Congress, and certainly this Committee.
The Integrated Deepwater System--the centerpiece for the Coast
Guard's transformation and my top capital priority--plays an absolutely
critical role in building a more ready and capable 21st century Coast
Guard equal to the challenging tasks we face today and anticipate
tomorrow.
The Deepwater team's government-industry partnership achieved many
program milestones during 2004 and strengthened Deepwater's foundation
by incorporating far-reaching program and contract-management
improvements in accordance with recommendations from the Government
Accountability Office.
With the strong support of the Department of Homeland Security
(DHS), the Administration, and Congress we are positioned to play an
even greater role in reducing the future risk of a terrorist event
against the homeland. During the past 2 years, we have modernized
select legacy assets to operate more effectively until replaced by
Deepwater assets. Through the revision of the Integrated Deepwater
System mission needs statement and implementation plan we have
established requirements for improved capabilities on converted or new
Deepwater platforms that are necessary for the Coast Guard to perform
its full range of post-9/11 missions.
The revised plan, based on a comprehensive performance-gap
analysis, updates the original pre-9/11 Deepwater Program by modifying
the original assets that would have been delivered to incorporate
improved post-9/11 capabilities; retaining, upgrading, and converting
aviation legacy assets as part of the final asset mix; and adjusting
the program's overall asset delivery schedule to maximize operational
effectiveness. The Revised Implementation Plan ensures Deepwater
cutters and aircraft will be equipped with the right systems and
capabilities (summarized below) to operate successfully in the post-9/
11 threat environment. These enhanced capabilities are absolutely
critical to ensuring the maritime security of America and its $750
billion maritime transportation system:
Interoperable network-centric command-and-control system
(essential for maritime domain awareness);
Increased speed and integrated weapons systems on select
cutters;
Helicopter airborne use-of-force and vertical insertion and
delivery;
Improved fixed-wing aircraft long-range surveillance and
transport;
Enhanced anti-terrorist and force protection; and
Detection-and-defense systems for chemical, biological, and
radiological threats.
Deepwater's revised implementation plan is paramount in addressing
the goals that Secretary Chertoff has established to integrate
intelligence and operations across DHS using a rigorous risk-based
framework for decisionmaking.
Deepwater cutters and aircraft equipped with these capabilities
will be leveraged far beyond the operational limitations of original
Deepwater assets due to recent advancements in maritime domain
awareness, intelligence, and homeland security partnerships. These
advancements, combined with enhanced Deepwater capabilities, will
enable the Coast Guard to close existing operational shortfalls so it
may execute its full range of homeland security and national-defense
missions far more effectively, reduce risk in the maritime domain, and
improve the safety and readiness of all platforms. The revised plan
also provides for the progressive sustainment, modernization, and
conversion of aging legacy assets as Coast Guard transitions to a
recapitalized fleet.
It is estimated the revised Deepwater long-term acquisition will
cost between $19 billion and $24 billion over a period of 20 to 25
years. Because Deepwater is a performance-based acquisition, the
revised plan projects a range of assets for the final force levels of
two classes of cutters and some aircraft. As stated in the revised
implementation plan, the final number of assets will, at a minimum, be
sufficient to meet Department of Homeland Security and Coast Guard
long-range performance goals.
Since we provided Congress with the revised Deepwater
Implementation Plan in March, we have had a very constructive
engagement with House and Senate oversight committees. We have now
provided the Congress with details on the revised plan's asset delivery
schedules over the life of the program. We fully appreciate the role
Congress plays in providing for a 21st century Coast Guard and its need
for more detailed information upon which to make informed decisions.
Nearly 3 years ago, President Bush said, ``The U.S. Government has
no more important mission than protecting the homeland from future
terrorist attacks.'' The revised Deepwater Implementation Plan
represents a significant investment in ensuring Coast Guard mission
performance now and in the future. In short, it will result in a Coast
Guard possessing the 21st Century technologies necessary to safeguard
the Nation, protect our citizens, and reduce the risk of a terrorist
attack against the Nation originating in the maritime domain. I look
forward to further discussing this major milestone with you this
morning.
The Coast Guard's 2006 budget includes $966 million for Deepwater,
a 33 percent increase over last year's appropriation. This investment
will make important contributions to the DHS strategic goals of
improving threat awareness, prevention and protection against terrorist
attacks, and response and recovery should they occur.
The Deepwater budget's increased asset funding for 2006 will yield
essential system-wide capabilities for our maritime homeland security
mission and sustain operational effectiveness in all of the Coast
Guard's military, multi-mission, and maritime responsibilities.
Deepwater aligns completely with my overarching budget goals to: (1)
recapitalize the Coast Guard, (2) implement the Maritime Strategy for
Homeland Security, and (3) enhance mission performance.
Reducing Maritime Risk
Today's global maritime safety and security environment demands a
new level of operations specifically directed against terrorism without
degrading other critical maritime safety and security missions. Most
importantly, the Coast Guard must implement the improved Deepwater
capabilities identified in our revised implementation plan if we are to
mitigate maritime security risks successfully in the post-
9/11 world.
Secretary of Homeland Security Chertoff has emphasized that the
three variables of threat, vulnerability, and consequence serve as the
appropriate model for assessing risk and deciding on the protective
measures we undertake as a nation. This is a framework quite familiar
to Coast Guard men and women who perform multiple missions in our
Nation's ports, waterways, coastal areas, and on the high seas. In
terms of threat, vulnerability, and consequence there are few more
valuable targets than the U.S. maritime transportation system:
Threat: While the 9/11 Commission notes the continuing
threat against our aviation system, it also states that
``opportunities to do harm are as great, or greater, in
maritime or surface transportation.''
Vulnerability: The maritime transportation system annually
accommodates 6.5 million cruise ship passengers, 51,000 port
calls by over 7,500 foreign ships, at more than 360 commercial
ports spread out over 95,000 miles of coastline. The vastness
of this system and its widespread and diverse critical
infrastructure leave the Nation vulnerable to terrorist acts
within our ports, waterways, and coastal zones, as well as
exploitation of maritime commerce as a means of transporting
terrorists and their weapons.
Consequence: Contributing nearly $750 billion to U.S. gross
domestic product annually and handling 95 percent of all
overseas trade each year, the value of the U.S. maritime domain
and the consequence of any significant attack cannot be
understated. Independent analysis and recent experiences on 9/
11 and the West Coast dock workers strike demonstrates an
economic impact of a forced closure of U.S. ports for a period
of only 8 days in excess of $58 billion to the U.S. economy.
The 9/11 Commission also drew a strong linkage between improved
defenses with the government's ability to reduce the risk of a
terrorist attack--a linkage that relates directly to the imperative to
recapitalize the Coast Guard through an increasingly capable Deepwater
system of systems. The Commission reported:
``Our report shows that the terrorists analyze defenses. They
plan accordingly. Defenses cannot achieve perfect safety. They
make targets harder to attack successfully, and they deter
attacks by making capture more likely. Just increasing the
attacker's odds of failure may make the difference between a
plan attempted, or a plan discarded. The enemy also may have to
develop more elaborate plans, thereby increasing the danger of
exposure or defeat. Protective measures also prepare for the
attacks that may get through, containing the damage and saving
lives.''
Since 9/11, the President, DHS, and the Coast Guard have made
significant strides to secure our homeland by instituting these types
of protective measures to help deter attacks in the maritime domain.
However, maritime safety and security gaps remain. These gaps present
risks that must be reduced.
The Coast Guard guides its efforts by implementing policies,
seeking resources, and deploying capabilities through the lens of the
national Maritime Security Strategy. However, continued risk reduction
is contingent upon Coast Guard capability, capacity, and readiness.
Without these basic building blocks, implementation of maritime
security strategies will not be sustainable. With that in mind, my
highest priority for the Coast Guard's 2006 budget is to continue to
recapitalize the Coast Guard as a necessary foundation to implementing
the maritime security strategy, as well as ensuring we continually
enhance mission performance across the entire suite of Coast Guard
mission requirements.
Recapitalizing the Coast Guard is the foundation of our ability to
continue improving maritime security while facilitating the flow of
commerce. It is on this foundation that the 2006 budget continues to
build out Coast Guard Deepwater capabilities necessary to reduce risk
and implement the national maritime strategy for homeland security--
today, tomorrow, and into the future.
The 2006 Deepwater budget continues the recapitalization of our
cutters, boats, aircraft and support infrastructure to reverse
declining readiness trends and provide critical operational
capabilities to meet today's maritime security and safety threats. As
detailed in the National Strategy for Homeland Security, this remains a
critical need in protecting the homeland.
Recapitalize the Coast Guard
Despite spending increasing amounts to maintain operational assets,
the Coast Guard is experiencing a continuing decline in fleet
readiness. Legacy cutters are now operating free of major equipment
casualties (equipment failures that significantly impact mission
performance) less than 50 percent of the time, despite the investment
per operational day increasing by over 50 percent over the last 6
years. The resulting ``readiness gap'' negatively impacts both the
quantity and quality of Coast Guard ``presence''--critical to our
ability to accomplish all missions.
Readiness Declining
The majority of the Coast Guard's operational assets, designed for
the threat environment of the 1960s and 1970s, will soon reach the end
of their anticipated service lives resulting in rising operating and
maintenance costs, reduced mission effectiveness, unnecessary risks.
Listed below are some specific examples highlighting alarming system
failure rates, increased maintenance requirements, and the subsequent
impact on mission effectiveness:
HH-65 helicopter in-flight engine power losses occurred at a
rate of 329 mishaps per 100,000 flight hours in Fiscal Year
2004. This is up from a Fiscal Year 2003 rate of 63 mishaps per
100,000 flight hours. The engine-loss rate has resulted in
flight and operational restrictions and high levels of risk to
our aircrews. Re-engining the HH-65 will remain the Coast
Guard's highest legacy asset priority until complete. We
greatly appreciate Congress' support in correcting this
critical safety and reliability issue, including transferring
an additional $40 million into Deepwater to accelerate this re-
engining effort in Fiscal Year 2005. The 2006 budget requests
$133 million to complete re-engining of the remaining
operational HH-65s.
The 110-foot patrol boat fleet has experienced 23 hull
breaches, or openings in the hull from corrosion, requiring
emergency dry docks. The resultant loss in operational days
poses unacceptable risks to our personnel. By the end of 2005,
the Coast Guard will have taken delivery of eight reconfigured
123-foot patrol boats, which are upgraded 110-foot patrol boats
designed to sustain this cutter class until replacement with
the Integrated Deepwater System's Fast Response Cutter.
Last month, I directed that Deepwater's conversion of 110-ft.
patrol boats be terminated at eight hulls for several reasons.
First, the pre-9/11 design for the 123-foot patrol boats did
not provide needed homeland security capabilities called for in
the revised Deepwater mission need statement. Second, the
advanced deterioration of the 110-foot patrol boat hulls,
increased costs associated with conversion and technical
difficulties were also significant parts of this decision.
Several steps have been taken to mitigate the near-term
operational impact of this termination. For the long term, the
Coast Guard has advanced the design and construction of the new
Fast Response Cutter by a full decade. The revised Deepwater
Implementation Plan builds improved post-9/11 capabilities into
this cutter's design and delivers it far sooner than originally
planned.
Our high and medium endurance cutters are experiencing sub-
system failures due to old and unserviceable systems. The 378-
foot high endurance fleet averages one main space casualty,
with potential to escalate to main space fire, on every patrol.
Three out of a total class of 12 ships have recently missed
operations due to unscheduled maintenance required to repair
failing sub-systems. The total number of unscheduled
maintenance days for the major cutter (medium and high
endurance cutters) fleet has increased from 85 days in Fiscal
Year 1999 to 358 days in Fiscal Year 2004 (over a 400 percent
increase over Fiscal Year 1999). This loss of operational
cutter days in 2004 equates to losing two major cutters, or 5
percent of our major fleet for an entire year. The 2006 budget
includes funding for six mission effectiveness projects to help
sustain the medium endurance cutter fleet, and funds
construction of the third National Security Cutter, the
replacement for the Coast Guard's high endurance cutter class.
These same Deepwater assets are integral to the Coast Guard's
ability to perform its missions of ports, waterways, and coastal
security; migrant- and drug-interdiction operations; fisheries
enforcement, and search and rescue. In 2004, Deepwater legacy assets
made invaluable contributions to America's maritime security and
safety:
Operation ABLE SENTRY blanketed the coastline of Haiti with
legacy Coast Guard Deepwater assets, which interdicted more
than 1,000 illegal migrants during this operation and deterred
many thousand more from taking to sea in unsafe boats.
The 378-foot Coast Guard cutter GALLATIN, and its Airborne-
Use-of-Force- (AUF) capable helicopter seized more than 24,000
pounds of cocaine worth an estimated $768 million and detained
27 suspected smugglers in the span of 7 weeks. The GALLATIN's
commanding officer has indicated that the secure-communications
improvements made by the Deepwater Program were key to this
effort.
The Coast Guard's aging Deepwater cutters and aircraft
patrolled over 28,000 hours in direct support of maritime
homeland security missions. 110-foot patrol boats alone
patrolled 13,000 hours supporting port and coastal security
missions including, cruise ship escorts, critical
infrastructure protection, and countless security boardings.
Working in conjunction with the U.S. Secret Service during
the national political conventions, 270-foot medium endurance
cutters and 110-foot patrol boats provided maritime security,
enforced security zones, and served as command and control
platforms coordinating maritime traffic. Deepwater aircraft,
equipped with the AUF package, provided air security and
conducted maritime security patrols.
Deepwater's modernization and recapitalization of the Coast Guard
includes efforts to sustain these legacy assets to continue to perform
the Coast Guard's missions while replacement assets are being acquired.
These sustainment and in some cases upgrading efforts are already
beginning to yield results at sea:
On February 13, the crew of the 123-foot cutter MATAGORDA,
on its first operational patrol following a major conversion as
part of the Coast Guard's Deepwater Program, played an
instrumental role in intercepting a smuggler's boat attempting
to bring 25 Cuban migrants into the country illegally.
MATAGORDA, outfitted with a more capable command-and-control
system during its recent Deepwater upgrade, assumed the role of
on-scene commander in the Florida Straits to coordinate the
interdiction effort. After a long chase the smuggling boat was
safely stopped two miles south of the Dry Tortugas. The
smugglers were turned over to Customs and Border Protection
officials, and all of the migrants were repatriated to Bahia de
Cabanas, Cuba, on February 14.
Late last year, crews on the Coast Guard cutters GALLATIN,
RUSH, and THETIS collectively seized more than 33,949 pounds of
cocaine during law-enforcement deployments--continuing the
Coast Guard's record-setting pace established during Fiscal
Year 2004 when 240,518 pounds of cocaine were seized
(shattering the previous record of 139,000 pounds interdicted
in 2001). Deepwater communication upgrades and previous
enhancements installed on these aging legacy cutters played a
major role in their success, because the operations involved
multiple cutters, Federal agencies, and foreign countries--
mandating seamless connectivity and high levels of
interoperability between all participants.
In each of these recent operations, the Deepwater Program's C4ISR
(command, control, communications, computers, intelligence,
surveillance, and reconnaissance) upgrades allowed cutter crews to
maintain a common operational picture and higher levels of maritime
domain awareness (MDA). The upgrades included provisions for first-time
use of a classified Local Area Network and the Secure Internet Protocol
Router Network (SIPRNET), which commanding officers attribute to
``revolutionizing their world of work'' because it affords crew access
to real-time intelligence information and Department of Defense
satellite imagery during current operations, as well as increased speed
and size of transmission through compressed bandwidth capability.
As gratifying as these early demonstrations of the efficacy of the
Deepwater Program's acquisition strategy may be, they are but a
harbinger of what the future holds when new-construction Deepwater
assets possessing more robust capabilities begin to enter service later
this decade.
The President's Fiscal Year 2006 budget for the Integrated
Deepwater System takes aim on reversing the Coast Guard's declining
readiness trends and transforming the Coast Guard. The budget's level
of investment in the Integrated Deepwater System provides the Coast
Guard with the capability and capacity essential to meet our Nation's
maritime homeland security needs; providing a layered defense
throughout ports, waterways, coastal regions and extending far
offshore, as well as sustaining other mission area efforts, such as
search and rescue and living marine resources. Specifically, the Fiscal
Year 2006 President's budget requests $966 million for the Integrated
Deepwater System to:
Continue acquisition of Eagle Eye tiltrotor Vertical-
Takeoff-and-Landing Unmanned Aerial Vehicles (VUAVs), including
mission sensor packages and ground control technology;
Complete re-engining of all operational HH-65 helicopters;
Complete service-life extension, avionics, and radar
upgrades for HH-60 helicopters and HC-130H aircraft;
Procure long-lead material for and production of the third
National Security Cutter (NSC);
Complete design and procurement of long-lead material for
the first Offshore Patrol Cutter (OPC);
Conduct testing and evaluation of the first Fast Response
Cutter (FRC);
Complete mission effectiveness projects on six Medium
Endurance Cutters (WMECs) to sustain these cutters until they
can be replaced with the OPC; and
Continue innovative, interoperable network-centric C4ISR
system upgrades to improve maritime domain awareness and
provide a common operational picture.
Funding included for legacy asset sustainment projects, such as HH-
65 re-engining and WMEC mission effectiveness projects, is critical to
sustain capabilities today, while the acquisition of new and enhanced
Deepwater assets will ensure the Coast Guard has the right capabilities
tomorrow.
Revised Post-9/11 Deepwater Implementation Plan
The events of September 11, 2001, have changed the performance
requirements for Coast Guard people and the assets they use. The
original Deepwater system designed for September 10, 2001, simply could
not do all that would be required of it after September 11, 2001.
The Coast Guard began to adjust Deepwater shortly after the
contract was awarded in June 2002 by modifying the capabilities
required of the first major new asset, the NSC. These changes are
included in the current updated baseline and will enable the first NSC,
now slated for delivery in 2007, to conduct maritime homeland security
missions.
In March, together with Secretary and Mrs. Chertoff, I participated
in the keel-laying ceremony for our first NSC. Mrs. Chertoff, the
cutter's sponsor, noted that she looked forward to the day when
American families can rest a little easier knowing that the men and
women of the Coast Guard are conducting missions up and down the coasts
of our Nation in this fine ship. I agree wholeheartedly.
The keel laying for the first hull in our new class of NSCs marked
a significant milestone in the Integrated Deepwater System's
transformation of the Coast Guard for our 21st-century missions. Like
other Deepwater cutters, aircraft, and systems, the NSC will play a
major role in safeguarding the maritime security of our Nation for many
years to come.
Along with the immediate changes to the NSC's design
specifications, DHS and the Coast Guard recognized the need to conduct
a thorough review of the plans for all Deepwater assets. Changes to the
national strategic security environment after 9/11 necessitated
modifications to the Deepwater Program focused on defeating terrorist
threats, addressing contemporary mission demands, and satisfying
current and emergent operational priorities.
The revised Integrated Deepwater System mission need statement and
implementation plan were developed following a comprehensive, year-long
analysis of the Coast Guard's post-9/11 mission requirements.
Capability
The revised plan addresses the Coast Guard's dual challenges of
legacy-asset deterioration and performance gaps by enhancing the
performance of selected Deepwater assets through added capabilities and
conversions, including C4ISR systems; adjusting the implementation
schedule and mix of individual assets over the life of the program; and
providing necessary balance over the life of the program based on the
DHS strategic goals, current and emerging mission requirements, and the
need to provide for a high-quality workplace for Coast Guard men and
women.
The revised Deepwater Implementation Plan updates the original plan
by: (1) modifying the original assets that would have been delivered by
the Deepwater project to incorporate design requirements for improved
post-9/11 capabilities; (2) retaining, upgrading, and converting
aviation legacy assets (C-130s, H-60s, H-65s) as part of the final
asset mix; and (3) adjusting the program's overall asset delivery
schedule (e.g., advancing delivery of the FRC and OPC by ten and 5
years respectively) to maximize operational effectiveness.
Specific operational enhancements contained in the revised
Integrated Deepwater Systems implementation plan include:
An innovative, integrated network-centric C4ISR system to
harness the power of an interoperable network to enhance
performance in all mission areas, improve MDA, and provide a
common operational picture--key to Coast Guard leading the
inter-agency effort to know and respond to maritime conditions,
anomalies, vulnerabilities, and threats. Improvements to C4ISR
enable earlier awareness of events through the more effective
gathering and fusing of terrorism-related information,
analysis, coordination, response--all critical to detecting,
deterring, and defeating terrorist attacks. Upgrades to
Deepwater surface assets, for example, contribute directly to
improved intelligence collection and fusion through a
sophisticated Shipboard Sensitive Compartmentalized Information
Facility (S/SCIF), sensors, and increased data-exchange
bandwidth;
Improved maritime-security capabilities such as increased
speed and integrated weapons systems on selected Deepwater
cutters essential to higher levels of maritime homeland
security during a terrorist attack, opposed boardings, and
other high-risk operations;
Airborne use-of-force and vertical insertion and delivery
capabilities to allow helicopters to provide warning and/or
disabling fire, and to deploy, deliver, and recover boarding
teams safely and more effectively;
Improved fixed-wing aircraft long-range surveillance to
increase MDA and reduce maritime patrol aircraft shortfalls in
operating hours; organic Coast Guard air transport capability
will enable deployment of Maritime Safety and Security Teams
and National Strike Force teams for faster, more effective
response;
Improved capabilities for anti-terrorist/force protection on
select Deepwater assets with all-weather self-defense and the
ability to protect high-value assets; assets will have the
capability to engage terrorists with higher assurance of
survivability and continued mission capability; and
Improved asset capabilities for detection and defense for
chemical-biological-radiological (CBR) threats--essential to
survival and continued operations during a CBR attack involving
a weapon of mass destruction.
These are ``must-have'' capabilities in today's threat environment
and the Nation would be remiss to build out a Coast Guard without them.
Consider the 96 hour advanced notice of arrival requirement for vessels
arriving in U.S. ports--just one of the many improvements to maritime
security resulting from the landmark Maritime Transportation Act of
2002. This reporting requirement enables the Coast Guard to identify
threats before they enter our ports where they can do the most harm.
The revised post-9/11 capabilities listed above enable the Coast Guard
to respond quickly and forcefully to neutralize these threats before
they enter our Nation's ports, waterways and coastal areas.
The revised implementation plan maximizes existing capabilities by
calling for the conversion of H-60 and H-65 airframes to serve as
multi-mission helicopters. Again, this is a prudent and reasonable
investment decision reflecting the many years of experience we have
operating and maintaining these aircraft.
The rigorous periodic depot-level maintenance process addresses
corrosion and technology obsolescence issues on a recurring basis. When
these helicopters are converted, the airframes will be taken apart down
to the structural-component level based on a standard maintenance
cycle. In addition to planned technical upgrades, strict specifications
govern the requirement for refurbishment or replacement of aircraft
components.
Deepwater's original implementation plan proposed by ICGS
recognized the Coast Guard's ability to sustain aircraft indefinitely
provided sufficient funding was available for necessary maintenance,
repairs, and periodic system upgrades. In the original plan, the H-65
was selected for the final Deepwater force structure as a multimission
cutter helicopter (MCH), and the H-60 was to be retained through at
least 2022. Under the new plan both helicopters have been selected for
the final Deepwater force structure.
The H-65 re-engining is well underway, setting the stage for the
additional upgrades identified in the revised implementation plan.
Earlier this month, Coast Guard Air Station Atlantic City, NJ, accepted
its fifth re-engined aircraft, and one was delivered to Coast Guard Air
Station Savannah, GA.
Capacity
The Deepwater system's performance-based acquisition strategy
allows the Coast Guard to respond to changing conditions and threats,
and provides a vehicle for capability and schedule adjustments over the
life of the program--maximizing value and performance through
technology refreshment and innovation. For example, capability
improvements incorporated at both the asset and system level in the
revised implementation plan resulted in adjusting the original mix of
some platforms. Owing to planned increases in C-130 aircraft for long-
range surveillance and transport, for example, it is possible to adjust
the number of CASA CN-235 aircraft (MRS) originally planned for the
program.
Similarly, the AB-139 helicopter, originally proposed by Integrated
Coast Guard Systems (ICGS) as a notional future platform, was
determined not to possess the endurance and power necessary to meet
post-9/11 requirements such as the need to transport six-member
boarding teams, plus equipment, for vertical insertions to ships at
ranges up to 200 nautical miles from a cutter or shore station; it also
did not meet other requirements associated with airborne use-of-force
and operating in known icing conditions. Existing Coast Guard H-60
helicopters are capable of meeting these requirements and also have a
mature logistics and training base in the armed forces that we may
leverage.
The flexibility inherent in Deepwater's acquisition will enable the
Coast Guard to adjust the final mix of selected platforms as overall
system-of-systems capability improvements are generated by, for
example, significant improvements to the program's system for C4ISR or
Unmanned Aerial Vehicle technology.
Legitimate questions have been raised regarding our decision to
project a range for the numbers of some assets--the system's capacity--
when the Deepwater acquisition is completed some 20 to 25 years from
now under current funding projections.
It is very difficult to predict today, with precise accuracy, what
the optimum mix of Deepwater assets will be 15, 20, or 25 years from
now. For that reason, our long-range projection for the acquisition
depicts a range of numbers for five of our 11 Deepwater assets. From
its inception, Deepwater has been a performance-based program. The
final mix of assets and fleet size will be based on assessments of our
threat environment, mission requirements, the actual performance of
each asset, and the overall Deepwater system of systems' performance.
This approach is both consistent with our long-range acquisition
strategy and reflects good stewardship of the taxpayer's dollars.
A more complete explanation of the Deepwater acquisition strategy
helps to explain the rationale behind the projected range of asset
numbers. In short, more capable assets will be able to do a great deal
more than those reflected in the pre-9/11 Deepwater construct--just as
modern power tools and materials enable a carpenter to build a home in
a shorter amount of time than the days when hand saws and hammers were
the norm.
We believe our plan to incorporate improved post-9/11 operational
capabilities on all major surface and aviation platforms will reap
significant system-wide performance improvements that will have a
bearing on capacity requirements. In the world of C4ISR, for example,
we have already seen how command-and-control upgrades to our legacy
cutters serve as a force multiplier to generate impressive dividends in
operational effectiveness and efficiency. Armed with earlier, more
accurate, and continuously streamed intelligence and operational data
to maintain a common operating picture, commanders can employ their
assets far more effectively than in the past.
The Coast Guard faces the same resource constraints as every other
Federal agency today, and it would be a breach of responsible
stewardship to acquire additional capacity if a smaller force is able
to satisfy our long-term performance goals. We will not know the answer
to that question for a number of years. Deepwater's final number and
mix of assets will, at a minimum, be sufficient to meet DHS and Coast
Guard long-term performance goals. The program's alternative
acquisition schedules provide far more meaningful vehicles for
assessing the program's current and future direction.
For this reason, our emphasis to identify and incorporate the
correct design requirements for the many improved capabilities needed
to perform the Coast Guard's post-9/11 missions is the correct priority
at this point in the Deepwater acquisition. We will have many years to
adjust Deepwater's final capacity based on the system's actual
performance, changes to mission requirements, and the future threat
environment.
A Year of Achievement
As part of our efforts to enhance mission performance, it is
appropriate to acknowledge that Deepwater's Coast Guard-industry team
marked numerous important milestones during 2004. Beyond the past
year's success story of C4ISR upgrades to legacy cutters, Deepwater's
C4ISR shore-side upgrade was completed in 2004, at the Communications
Area Master Station Pacific (CAMSPAC) facility at Point Reyes, Calif.
The first shore-based IDS communications upgrade was completed in 2003
at Communications Area Master Station Atlantic (CAMSLANT).
As I discussed, we laid the keel for our first NSC in late March.
The contract for that cutter was awarded just last June to Integrated
Coast Guard Systems (ICGS, a joint venture between Lockheed Martin and
Northrop Grumman). The Coast Guard's contract for the second cutter in
the class was awarded to ICGS in early January. Northrop Grumman Ship
Systems is leading the production effort, with Lockheed Martin
responsible for the design, manufacture, and integration of the
cutter's systems for C4ISR. From start-up to keel laying in a little
less than 2 years, this is an impressive achievement.
Also last June, the Coast Guard awarded a contract to ICGS to begin
the design and final requirements work for the OPC, Deepwater's medium-
sized cutter. The design and final requirements for the third class of
Deepwater cutters, the FRC, also will move forward smartly in 2005.
There also was steady progress in Deepwater's modernization and
recapitalization of Coast Guard aviation assets last year. For example,
the first production re-engined HH-65 helicopter incorporating
Deepwater upgrades completed its test flights successfully in September
and entered full operational service at Aviation Training Center,
Mobile, Alabama, in early October. We are evaluating the feasibility of
opening a second production line to allow the Coast Guard to accelerate
this critical upgrade on our HH-65s, mindful of their reputation as the
``workhorse of the fleet.''
Similar progress is evident in the recapitalization of the Coast
Guard's fixed-wing aircraft inventory. In 2003, the Coast Guard awarded
a contract to ICGS for concept and technology development of our new
maritime patrol aircraft. Initial contracts between Lockheed Martin and
EADS CASA are for the procurement of three CN-235-300M medium-range
surveillance maritime patrol aircraft. Delivery is scheduled for 2007
following configuration for Coast Guard missions. The contract also
includes an option for spare parts and integrated logistic support, as
well as an option for five additional aircraft. The CN-235-300M
completed a successful preliminary design review in December.
Deepwater's Eagle Eye tiltrotor VUAV successfully completed its
preliminary design review last March and underwent its critical design
review in January 2005.
These milestones also illustrate the Deepwater Program's important
industrial-base ramifications. Shipbuilding, aviation, and information
technology systems come to mind immediately, but it is worth noting
that Lockheed Martin and Northrop Grumman, joint partners in Integrated
Coast Guard Systems (ICGS), have contracts with companies producing
supplies or conducting work for the IDS program in 41 states.
National Fleet
Deepwater's recapitalization of the Coast Guard also plays a key
enabling role in providing the means to achieve the national fleet
policy's goals for interoperable Coast Guard and Navy assets. The
policy is in place to ensure our two services work together to
synchronize our multi-mission platforms, infrastructure, and personnel
to provide the highest level of naval and maritime capability for the
Nation's investment. This, of course, is absolutely essential if we are
to obtain the highest levels of operational effectiveness in maritime
homeland security and homeland defense operations, as well as in the
performance of our national-defense responsibilities providing
expeditionary support to U.S. joint combatant commanders around the
world.
Admiral Clark, the Chief of Naval Operations, has said that the
global war on terrorism's heightened requirement for improved homeland
defense and maritime security has produced a Navy-Coast Guard
partnership unlike anything the sea services have experienced in many
years. Partnership with the Navy and the Department of Defense allows
an effective two-way flow of capability to meet both expeditionary and
domestic security imperatives--all very much in the national interest.
A number of initiatives are in motion to advance the national fleet
concept following my senior-level talks with Admiral Clark last
November. Deepwater's contribution to national fleet policy objectives
will only increase as the Program continues to gain momentum during the
years ahead.
The Deepwater Program is actively working with the Littoral Combat
Ship (LCS) program at a functional level on small boat launch and
recovery, weapons and combat systems, and mission modules. We are
exploring other collaborative opportunities with the Naval Air Systems
Command and the Marine Corps Systems Command.
The revised Deepwater Implementation Plan directly supports this
inter-agency collaboration with the Navy. The plan's provisions for
more capable Coast Guard cutters, aircraft, patrol boats, and C4ISR
systems will enable us to achieve the national fleet policy's call for
the highest level of naval and maritime operational integration for
improved maritime security.
Assistant Secretary of Defense for Homeland Security, Paul McHale,
recently emphasized this compelling requirement. ``It is in the
maritime domain that I believe we have our single greatest opportunity
to enhance our domestic U.S. security,'' he said. ``We must achieve, in
short, complete synchronization of Coast Guard and Navy capabilities.''
Program Management
Deepwater also has made steady progress implementing
recommendations from the Government Accountability Office (GAO) to
improve program management and oversight. Last year, GAO identified 13
items of concern in two separate audit reports. The Deepwater Program
has worked diligently and successfully to address them.
Since its March 2004 report was issued, we have updated GAO
regularly on the implementation of these improvements through four
detailed reports, six overall program briefings, and multiple on-site
meetings regarding specific topic areas, and four briefs, including a
day-long conference in January. We have taken specific actions to
improve program management efforts to measure and evaluate cost,
schedule, and performance; improve communications, and to encourage
future cost control through rigorous competition.
In short, the Coast Guard has embraced the GAO's recommendations.
Eleven recommendations were grouped by three categories: program
management, contractor accountability, and cost controls through
competition. GAO has closed two of the eleven recommendations as
completed by the Coast Guard, and we anticipate further closures and
satisfactory progress during the weeks ahead. These GAO closure actions
and Coast Guard progress reports document the work the Coast Guard has
done to comply with the GAO recommendations. Two recommendations of the
13 total, contained in a second separate audit report, addressed
updating the Deepwater acquisition schedule. The Coast Guard complied
with this request as part of the Fiscal Year 2006 budget process.
To improve program management, we have restructured Deepwater's
Integrated Product Teams (IPTs) to comport with GAO best practices,
improved electronic information sharing systems, stabilized the
workforce through human capital improvements, and standardized
information flow from the program to field units to facilitate delivery
of, and transition to upgraded Deepwater legacy platforms.
Regarding contractor accountability, the Coast Guard has refined
the ICGS performance criteria to standardize input and increase the
objectivity of annual assessments. To continually monitor contractor
performance, the Coast Guard employs a ``balanced score card'' and an
earned value-management system (both of which are considered ``industry
best practices'').
To ensure cost control through competition, the Coast Guard reviews
the competition of ICGS subcontracts through periodic evaluations.
Additionally, ICGS has agreed to notify the Coast Guard prior to
deviating from the accepted contract proposal if they decide to execute
work in-house above $10 million that was proposed to be subcontracted
by a company other than the ICGS prime contractor.
The Coast Guard welcomed the GAO's recommendations last year. We
viewed them as an independent review of IDS contract-management
practices. During her testimony to the Senate last month on the
Deepwater Program, I was gratified to hear Ms. Margaret Wrightson,
GAO's Director for Homeland Security and Justice Issues, describe the
Coast Guard's response to her agency's review of our Deepwater Program
as a ``constructive engagement'' on the issues. I share Ms. Wrightson's
assessment and remain committed to the success of what I judge is a
collaborative, complementary effort.
We fully recognize that GAO still sees the potential for our
contracting approach to pose a number of inherent risks that, left
unaddressed, could lead to increased costs and schedule adjustments in
the Deepwater Program, but I restate today the Coast Guard's unwavering
commitment to good stewardship. The Deepwater-industry team is a
developing organization fully committed to continuous process
improvement, the adoption of best-business practices, and an open frame
of reference leading to continued refinement of its acquisition
strategy and business plan.
We take our stewardship seriously, and we will achieve program
success through performance measures and accountability. Simply stated,
the GAO is making active contributions to help us successfully execute
this critical Deepwater Program.
Conclusion
I appreciate your strong support of the Deepwater Program over the
past several years in providing the Coast Guard with the tools
necessary to meet our multi-mission and military demands and to fight
the Global War on Terrorism. I am extremely proud of our Coast Guard's
accomplishments since 9/11 as we strive to increase maritime homeland
security while continuing to perform a myriad of critical maritime
safety functions.
Funding requested for the Deepwater Program will positively impact
our ability to deliver the maritime safety and security America demands
and deserves by focusing resources toward our three critical
priorities: recapitalize the Coast Guard, implement the Maritime
Strategy for Homeland Security, and enhance mission performance.
The revised Deepwater Implementation Plan's progressive
modernization and recapitalization will provide improved, critically
needed capabilities that are fundamental to the Coast Guard's ability
to deliver required levels of operational excellence necessary for the
security of the Nation and the safety of our citizens.
Thank your for the opportunity to testify before you today on the
Deepwater Program. I will be happy to answer any questions you may
have.
Senator Snowe. Thank you.
Ms. Wrightson?
STATEMENT OF MARGARET T. WRIGHTSON, DIRECTOR,
HOMELAND SECURITY AND JUSTICE,
U.S. GOVERNMENT ACCOUNTABILITY OFFICE
Ms. Wrightson. Thank you. I'm pleased to be here today to
discuss Deepwater Program implementation, focusing on the
results of our work for this Subcommittee on the condition----
The Chairman. Would you pull that mike up a little, please?
Ms. Wrightson. A little--OK. Can you get it there? Have I--
OK. I'll start over.
I'm pleased to be here today to discuss Deepwater Program
implementation, focusing on the results of our work for this
Subcommittee on the condition of the Coast Guard's legacy
Deepwater assets, actions the Coast Guard has taken to maintain
these assets, and on the management challenges the Coast Guard
faces in acquiring replacements.
The bottom line of our work to date is this; the costly and
important Deepwater Program will continue to carry substantial
risk, and, therefore, need constant monitoring and management
attention to successfully accomplish its goals of maximizing
effectiveness, minimizing total ownership costs, and satisfying
the assets' users. The substantial revisions to the Coast
Guard's mission needs statement and its Deepwater
Implementation Plan, as well as recent funding uncertainties,
are the latest evidence of the complexity and challenges the
Coast Guard faces.
With respect to the risks, our work has identified three
main points:
First, the need to replace or upgrade deteriorating legacy
assets is considerable. While the Coast Guard lacks measures
that clearly demonstrate how this deterioration affects its
ability to perform missions, it is clear that Deepwater legacy
assets are insufficient in the post-9/11 environment.
Second, although the need to replace and upgrade assets is
strong, the acquisition management and oversight risks we have
identified will likely increase under a more aggressive
acquisition schedule. The cost increases, schedule slippages,
and project cancellations that have occurred so far are warning
signs. We will continue to work with the Coast Guard to
determine how best to manage these risks so that Deepwater
missions can be accomplished in the most cost-effective way,
going forward.
Third, there are signs that, as the Deepwater Program moves
ahead, the Coast Guard will continue to report additional
problems with existing assets. Some of these problems, such as
those of the 378-foot cutters, are included in the compendium
the Coast Guard uses to set sustainment priorities and plan
budgets, but have not yet been funded, because they pertain to
assets that are first to be replaced. However, projects such as
these to address problems that, may be today or on the horizon,
nevertheless, are likely going to be needed.
Turning to some of the very important details--and I'm
going to try and shorten my statement, in the interest of time
here--our analysis of the most recent 5 years shows that the
condition of the assets generally declined during the period,
but the available condition measures do not demonstrate that
rate of decline to be as fast or clear cut as the Coast Guard
has asserted. Also, not all assets showed similar downward
trends. We believe the trends, however, should be viewed with
deep caution. While there is no systematic quantitative
evidence sufficient to demonstrate that we're headed for a
train wreck here, this does not mean that the assets are in
good condition or have been performing their missions safely,
reliably, and at levels that meet or exceed Coast Guard
standards. Rather, evidence from our site visits showed aging
and obsolete systems and equipment as a major cause of the
reduction in mission capabilities for a number of Deepwater
legacy aircraft and cutters.
Turning to the Coast Guard efforts to address the problems
with their assets. Beginning in 2002, the Coast Guard has
annually issued a compendium consolidating information needed
to make planning and budgeting decisions regarding maintenance
and upgrades. Also, and very significantly, Coast Guard crews
have been spending increasingly more time between missions to
prepare for the next deployment. Such efforts are likely to
help prevent a more rapid decline in the condition of the
assets, but it is important to note that, even with increasing
amounts of maintenance, these assets are still losing mission
capabilities due to equipment and system failures.
In reality, our work suggests that simply working harder
may not be enough. In this regard, the Coast Guard has recently
begun to develop a strategy, known as CAMS, to better
prioritize the projects needed to upgrade legacy assets in
order to achieve the greatest overall mix of capabilities that
maximizes performance across missions. Although it is too soon
to assess the effectiveness of this strategy, we regard it as a
good-faith effort toward more knowledge-based budgeting for
legacy asset sustainment.
In addition to this effort at the operational level, the
Coast Guard's Pacific Area Command has recognized that a
different approach to maintaining and sustaining its 378-foot
cutters may be needed, in light of the slippage in dates for
its replacement. As a first step, command officials have
launched an initiative applying new business principles to the
problem, including ensuring that operation and maintenance
staff work closely together to determine priorities and
accepting the proposition that, with constrained funding, not
all cutters will be fully capable to perform all types of
missions. The PAC approach has potential; but, as the
Commander, himself, told us, it is likely there will be needed
an infusion of funding, no matter what.
With respect to the challenges the Coast Guard faces to
replace or upgrade its legacy assets, as you know, Madam
Chairman and others, from the outset, we have expressed concern
about the risks involved in the Coast Guard's approach. Last
year, we reported that, well into the second year, key
components needed to manage the program and oversee the
contractor had not been effectively implemented. The Coast
Guard also had not updated its master schedule, and costs were
rising above original estimates. More recently, we have seen
slippages in the national security cutter and emergency
acceleration, such as for the HH-65. Unobligated balances are
growing. We have also seen at least one instance of a serious
performance problem, this being hull breaches on the first
converted 123-foot patrol boats.
We have made numerous recommendations to improve the
program's management and oversight, and the Coast Guard has
agreed with nearly all of them, and they have made progress.
However, management issues remain, that I'd be happy to
discuss, that may take some time to fully address.
Additionally, there is uncertainty around the mission needs
statement and the implementation plan, which, at the end of the
day, is based on models and assumptions, rather than facts, and
we'll need some time to see if it will play out.
Finally, there are uncertainties around Deepwater funding.
When the program began, we expressed the concern that this
program would need stable funding over the 20-year period. In 4
years, funding has not stabilized. If funding does not
stabilize at whatever level you all decide, that will increase
the risk to the program.
And since I've hit a red light, I'm going to thank you very
much and look forward to your questions.
[The prepared statement of Ms. Wrightson follows:]
Prepared Statement of Margaret T. Wrightson, Director, Homeland
Security and Justice, U.S. Government Accountability Office
Madame Chairwoman and Members of the Subcommittee:
I am pleased to be here today to discuss our preliminary
observations on the condition of Deepwater legacy assets; \1\ actions
the Coast Guard has taken to maintain, upgrade, and better manage these
assets; and management challenges the Coast Guard faces in acquiring
replacements for them. Deepwater legacy assets consist mainly of
aircraft and cutters capable of operating further out to sea, but
missions may begin at ports, waterways, and coasts and extend seaward
to wherever the Coast Guard is required to take action. The Coast Guard
uses these assets to perform a variety of missions, such as
interdicting illicit drug shipments or attempted landings by illegal
aliens, rescuing mariners in difficulty at sea, protecting important
fishing grounds, and responding to marine pollution. After the events
of September 11, 2001, these missions were expanded to include a
greater emphasis on ports, waterways, and coastal security. The Coast
Guard's expanded responsibilities caused changes in how the Deepwater
legacy assets are used--for example, in conducting more security
patrols--and they also created a need to make adjustments in mission
requirements for assets that would be updated or built as part of the
long-term acquisition program.
Many Deepwater legacy assets are at or approaching the end of their
estimated service lives. In 2002, the Coast Guard began a multiyear
Integrated Deepwater System acquisition program to replace or modernize
the legacy assets. The Coast Guard's new implementation plan estimates
the cost for the Deepwater Program at $19 billion to $24 billion. From
Fiscal Years 2002 through 2005, the Coast Guard was appropriated nearly
$2.2 billion for the Deepwater Program. This amount included close to
$1.3 billion for new acquisitions and $460.5 million for upgrades of
the legacy assets. Further, because the Coast Guard must continue to
operate the Deepwater legacy assets until the new assets are acquired,
the Coast Guard has spent close to $594 million during Fiscal Years
2002 through 2004 to fund intermediate- and depot-level maintenance of
these assets.\2\
The Administration is requesting $966 million for the Deepwater
Program for Fiscal Year 2006--$242 million more than Congress
appropriated for the program last year. Part of this request ($239.5
million) is for maintenance and upgrades to some Deepwater legacy
assets and is predicated, in part, on the Coast Guard's assertion that
its Deepwater legacy assets are ``failing at an unsustainable rate.''
Faced with this concern, the Coast Guard has studied options for
replacing Deepwater legacy assets more rapidly than initially planned
and thereby avoiding some of the costs that might be involved in
upgrading these assets sufficiently to keep them running for longer
periods. In the coming years, both the Coast Guard and Congress will
likely be considering the advisability of such changes in the program.
The House Appropriations Committee recently requested information
from the Coast Guard about its revised Deepwater Implementation Plan.
Because the Coast Guard was unable to present information that the
Committee deemed satisfactory, the Committee recommended reducing the
Coast Guard's Fiscal Year 2006 Deepwater budget request of $966 million
by nearly 50 percent. In late May, the Coast Guard submitted
documentation to the Committee in an effort to comply with it's
request. As of early June 2005, the Coast Guard's Fiscal Year 2006
appropriation was still pending.
My testimony today addresses three issues related to these
considerations:
Changes in the condition of Deepwater legacy assets during
Fiscal Years 2000 through 2004;
Actions the Coast Guard has taken to maintain, upgrade, and
better manage Deepwater legacy assets; and
Management challenges the Coast Guard faces in acquiring new
assets, especially if a more aggressive schedule is adopted.
My testimony is based on past and current work for this
subcommittee and other Congressional committees. Our current work
included analyzing data and condition measures \3\ used by the Coast
Guard for determining Deepwater legacy assets' condition,\4\ reviewing
Coast Guard actions to maintain and upgrade the legacy assets, meeting
with operations and maintenance staff covering each type of Deepwater
legacy aircraft and each class of Deepwater legacy cutter, assessing
the improvements the Coast Guard is making in its management of the
Deepwater acquisition. We will be following up this testimony with a
written report that will contain additional, detailed information
related to the condition of Deepwater legacy assets, and the actions
the Coast Guard is taking to maintain and upgrade them. As part of the
follow-on report, we will also further examine the Coast Guard's
management of the Deepwater Program and follow up on recommendations
made in a prior GAO report.\5\ Our work was carried out in accordance
with generally accepted governmental auditing standards.
In summary, our work thus far shows the following:
Coast Guard condition measures show that the Deepwater
legacy assets generally declined between Fiscal Years 2000 and
2004, but the Coast Guard's available condition measures are
inadequate to capture the full extent of the decline in the
condition of Deepwater assets with any degree of precision.
While there is no systematic, quantitative evidence sufficient
to demonstrate that Deepwater legacy assets are ``failing at an
unsustainable rate'' as the Coast Guard has asserted, this does
not mean that the assets are able to perform their missions
safely, reliably, and at levels that meet or exceed Coast Guard
standards. Evidence we gathered in ways other than reviewing
condition measures, such as interviewing Coast Guard operations
and maintenance staff, showed significant problems in a variety
of the assets' systems \6\ and equipment that will need to be
addressed if the assets are to continue performing their
missions at or near current levels until replacement assets
become operational. These problems are not necessarily
reflected in the condition measures. For example, the Coast
Guard's HH-65 helicopter consistently exceeded the Coast
Guard's primary condition measure during Fiscal Years 2000
through 2004, yet its engine is being replaced because it lacks
sufficient power to meet mission requirements. The Coast Guard
has acknowledged that it needs measures that more clearly
demonstrate the extent to which asset conditions affect mission
capabilities, but such measures have not yet been finalized or
implemented.
The Coast Guard has taken several types of actions to keep
existing assets operational, but these actions, while helpful,
may not fully address mission capability issues and may require
additional funding. The Coast Guard now compiles information
that can be used to better identify and prioritize the
maintenance or upgrade projects that need to be done to keep
existing assets operating. Coast Guard personnel, according to
evidence obtained during our site visits, are also performing
more maintenance on these assets than they have in the past--
for example, spending additional time on maintenance when
cutters are in port between deployments. These additional
maintenance efforts are likely helping to prevent a more rapid
decline in the condition of these assets, but it is important
to note that even so, cutters and aircraft are still losing
mission capabilities because of equipment and system failures.
The Coast Guard's Pacific Area Command, which is heavily
dependent on deteriorating 378-foot cutters, is attempting to
use new strategies to help sustain the operation of these
cutters through 2016, when they are currently scheduled to be
fully replaced with newer cutters. According to the Pacific
Area Commander, however, doing so is likely to require an
additional infusion of funds--something the Coast Guard has so
far not included in its budget requests or plans. Finally, in
an effort to address our recommendations for developing a more
proactive approach for prioritizing the maintenance and
capability enhancement projects needed on its legacy assets,
the Coast Guard is developing a new system for providing more
objective data on where to best spend budget dollars to achieve
the greatest enhancements in mission capabilities.
The Coast Guard's Fiscal Year 2006 budget request of $966
million for the Deepwater Program reflects significant
revisions to the program's requirements, capabilities, and
schedule in light of the homeland security mission. We have not
yet analyzed the likely cost and schedule impact of these
revisions. However, if a more aggressive acquisition schedule
is adopted, the Coast Guard would likely continue to face a
number of management challenges that have already affected its
ability to effectively administer the Deepwater Program. From
the outset, we have expressed concern about the risks involved
with the Coast Guard's acquisition strategy, which involves
relying on a prime contractor (or ``system integrator'') to
identify the assets needed, using tiers of subcontractors to
design and build the actual assets. Last year, we reported that
well into the contract's second year, key components needed to
manage the program and oversee the system integrator's
performance had not been effectively implemented. We made a
number of recommendations in the areas of program management,
contractor accountability, and cost control through
competition. While the Coast Guard agreed with nearly all of
these recommendations and has initiated actions to address
these problems, we remain concerned that the program still
carries major and inherent risks. Most of our recommendations
have not been fully addressed. Recent information shows
continued challenges in the areas of overall system
integration, cost and schedule management, and integrated
product teams, which consist of contractor and government
personnel and are the Coast Guard's principal tool for managing
the Deepwater Program. In our opinion, the uncertainties
associated with the proposed revisions to the Deepwater Program
only heighten these risks.
Background
As the lead Federal agency for maritime homeland security within
the Department of Homeland Security, the Coast Guard is responsible for
homeland and non-homeland security missions, including ensuring
security in ports and waterways and along coastlines, conducting search
and rescue missions, interdicting drug shipments and illegal aliens,
enforcing fisheries laws, and responding to reports of pollution. The
Deepwater fleet, which consists of 186 aircraft and 88 cutters of
various sizes and capabilities, plays a critical role in all of these
missions. As shown in table 1, the fleet includes fixed-wing aircraft,
helicopters, and cutters of varying lengths.
Table 1: Deepwater Legacy Aircraft and Cutter Fleets
(as of June 2005)
------------------------------------------------------------------------
Deepwater asset Number Description
------------------------------------------------------------------------
Aircraft
------------------------------------------------------------------------
HC-130 (long-range 27 This is the largest aircraft in the
surveillance Coast Guard's fleet. It has a planned
airplane) crew size of 7, a maximum speed of
290 knots, and an operating range of
2,600 nautical miles. The original
estimated service life of the HC-130
was 30 years or 40,000 flight hours.a
The in-service fleet average age for
the Coast Guard's HC-130H aircraft is
21.9 years.
------------------------------------------------------------------------
HU-25 (medium-range 23 This is the fastest aircraft in the
surveillance Coast Guard's fleet. It has a planned
airplane) crew size of 5, a maximum speed of
410 knots, and an operating range of
2,045 nautical miles. The original
estimated service life of the HU-25
was 20 years or 20,000 flights or
30,000 flight hours.a The in-service
fleet average age for the Coast
Guard's HU-25 aircraft is 22.1 years.
------------------------------------------------------------------------
HH-60 (medium-range 41 This helicopter has a planned crew
recovery helicopter) size of 4, a maximum speed of 160
knots, and a maximum range of 700
nautical miles. It is capable of
flying 300 miles offshore, remaining
on scene for 45 minutes, hoisting 6
people on board, and returning to its
point of origin. The original
estimated service life of the HH-60
was approximately 20 years or 10,000
flight hours.a The in-service fleet
average age for the Coast Guard's HH-
60 helicopters is 12.6 years.
------------------------------------------------------------------------
HH-65 (short-range 95 This helicopter has a planned crew
recovery helicopter) size of 3, a maximum speed of 165
knots, a maximum range of 400
nautical miles, and a maximum
endurance of 3.5 hours. It is capable
of flying 150 miles offshore. The
original estimated service life of
the HH-65 was 20 years.a The in-
service fleet average age for the
Coast Guard's HH-65 helicopters is
17.6 years.
------------------------------------------------------------------------
Cutters
------------------------------------------------------------------------
378-foot high- 12 This is the largest cutter in the
endurance cutter Coast Guard's Deepwater fleet. It has
a planned crew size of 167, a maximum
speed of 29 knots, and a cruising
range of 14,000 nautical miles. It
can support helicopter operations.
The estimated service life of the 378-
foot cutter is about 40 years. The
average age of the Coast Guard's 378-
foot cutters is 35.3 years.
------------------------------------------------------------------------
270-foot medium- 13 This cutter has a planned crew size of
endurance cutter 98, a maximum speed of 19.5 knots,
and a cruising range of 10,250
nautical miles. It can support
helicopter operations. The estimated
service life of the 270-foot cutter
is 30 years. The average age of the
Coast Guard's 270-foot cutters is
17.0 years.
------------------------------------------------------------------------
210-foot medium- 14 This cutter has a planned crew size of
endurance cutter 75, a maximum speed of 18 knots, and
a cruising range of 6,100 nautical
miles. It can support short-range
recovery helicopter operations. The
estimated service life of the 210-
foot cutter is from 43 to 49 years.
The average age of the Coast Guard's
210-foot cutters is 37.3 years.
------------------------------------------------------------------------
110-foot and 123-foot 49 The patrol boats have a planned crew
patrol boats size of 16 and a maximum speed of
29.5 knots. The 110-foot patrol boat
has a cruising range of between 3,300
and 3,500 nautical miles, and the 123-
foot patrol boat has a cruising range
of 3,180 nautical miles, depending on
the class of the patrol boat. The
estimated service life of the patrol
boats is from 14 to 20 years. The
average age of the Coast Guard's
patrol boats is 15.4 years.
------------------------------------------------------------------------
Source: Developed by GAO from U.S. Coast Guard data.
aBecause of scheduled depot-level maintenance and upgrades that the
Deepwater aircraft have received or will receive, the service lives
can be extended beyond the original estimated service lives. For the
HH-65 helicopter, a Coast Guard aviation official told us that the
aircraft had no original estimated service life in terms of flight
hours, but rather can continue to be operated as long as the structure
of the aircraft is sound.
Some Coast Guard Deepwater cutters were built in the 1960s.
Notwithstanding extensive overhauls and other upgrades, a number of the
cutters are nearing the end of their estimated service lives.
Similarly, while a number of the Deepwater legacy aircraft have
received upgrades in engines, operating systems, and sensor equipment
since they were originally built, they too have limitations in their
operating capabilities.
In 1996, the Coast Guard began developing what came to be known as
the Integrated Deepwater System acquisition program as its major effort
to replace or modernize these aircraft and cutters. This Deepwater
Program is designed to replace some assets--such as deteriorating
cutters--with new cutters and upgrade other assets--such as some types
of helicopters--so they can meet new performance requirements.\7\
The Deepwater Program represents a unique approach to a major
acquisition in that the Coast Guard is relying on a prime contractor--
the system integrator--to identify and deliver the assets needed to
meet a set of mission requirements the Coast Guard has specified.\8\ In
2002, the Coast Guard awarded a contract to Integrated Coast Guard
Systems (ICGS) as the system integrator for the Deepwater Program. ICGS
has two main subcontractors--Lockheed Martin and Northrop Grumman--that
in turn contract with other subcontractors. The resulting program is
designed to provide an improved, integrated system of aircraft,
cutters, and unmanned aerial vehicles to be linked effectively through
systems that provide command, control, communications, computer,
intelligence, surveillance, reconnaissance, and supporting logistics.
We have been reviewing the Deepwater Program for several years. In
recent reports we have pointed out difficulties the Coast Guard has
been having in managing the Deepwater Program and ensuring that the
acquisition schedule is up to date and on schedule.\9\
The existing schedule calls for acquisition of new assets under the
Coast Guard's Deepwater Program to occur over an approximately 20-year
period. By 2007, for example, the Coast Guard is to receive the first
National Security Cutter, which will have the capability to conduct
military missions related to homeland security. Plans call for 6 to 8
of these cutters to replace the 12 existing 378-foot cutters. However,
in order to carry out its mission effectively, the Coast Guard will
also need to keep all of the Deepwater legacy assets operational until
they can be replaced or upgraded.
Deepwater Legacy Assets Show General Decline in Condition, but Current
Measures Do Not Capture True Extent
Coast Guard condition measures show that the Deepwater legacy
assets generally declined between 2000 and 2004, but the Coast Guard's
available condition measures are inadequate to capture the full extent
of the decline in the condition of Deepwater assets with any degree of
precision. Other evidence we gathered, such as information from
discussions with maintenance personnel, point to conditions that may be
more severe than the available measures indicate. The Coast Guard
acknowledges that it needs better condition measures but has not yet
finalized or implemented such measures.
Coast Guard's Condition Measures Show General Decline in Deepwater
Assets, With Some Fluctuations
During Fiscal Years 2000 through 2004, the Coast Guard's various
condition measures show a general decline, although there were year-to-
year fluctuations (see table 2). For Deepwater legacy aircraft, a key
summary measure of the condition--the availability index (the
percentage of time aircraft are available to perform their missions)--
showed that except for the HU-25 medium-range surveillance aircraft,
the assets continued to perform close to or above fleet availability
standards over the 5-year period. In contrast, other condition measures
for aircraft, such as cost-per-flight-hour and labor hours per flight
hour, generally reflected some deterioration. For cutters, a key
summary measure of condition--percent of time free of major casualties
\10\--fluctuated but generally remained well below target levels. The
number of major casualties generally rose from Fiscal Years 2000
through 2003, and then dropped slightly in Fiscal Year 2004.\11\
Table 2: Synopsis of Deepwater Legacy Assets' Condition
------------------------------------------------------------------------
Deepwater legacy asset Synopsis of general asset condition
------------------------------------------------------------------------
HC-130 aircraft The percentage of time the HC-130 fleet
was available to perform missions
nearly met or exceeded the Coast
Guard's target level during Fiscal
Years 2000 through 2003, but dropped
below the target level in Fiscal Year
2004.
HU-25 aircraft The percentage of time the HU-25 fleet
was available to perform missions
varied from year to year, but was
consistently below the Coast Guard's
target level during Fiscal Years 2000
through 2004.
HH-60 aircraft The percentage of time the HH-60 fleet
was available to perform missions met
or was just below the Coast Guard's
target level during Fiscal Years 2000
though 2004.
HH-65 aircraft The percentage of time the HH-65 fleet
was available to perform missions
consistently exceeded the Coast
Guard's target level during Fiscal
Years 2000 through 2004.
378-foot high-endurance cutters The percentage of time the 378-foot
cutter fleet has operated free of
deficiencies in mission-essential
equipment remained substantially below
the Coast Guard's target level during
Fiscal Years 2000 through 2004.
270-foot and 210-foot medium- The percentage of time the 210-foot and
endurance cutters 270-foot cutter fleets have operated
free of deficiencies in mission-
essential equipment was well below the
Coast Guard's target level during
Fiscal Years 2000 through 2004, but
showed slight improvement in Fiscal
Year 2004.
110-foot and 123-foot patrol The percentage of time the patrol boat
boats a fleet has operated free of
deficiencies in mission-essential
equipment was below, but near the
Coast Guard's target level during
Fiscal Years 2000 and 2001, but
declined in more recent years.
------------------------------------------------------------------------
Source: GAO analysis of data provided by the U.S. Coast Guard.
a Data on the 123-foot patrol boats were not compiled until Fiscal Year
2004. That year's data were added to the 110-foot patrol boat data to
arrive at totals for the patrol boat fleet.
Another, albeit less direct, measure of an asset's condition is
deferred maintenance--the amount of scheduled maintenance that must be
postponed on an asset in order to pay for unscheduled repairs. Such
deferrals can occur when the Coast Guard does not have enough money to
absorb unexpected maintenance expenditures and still perform all of its
scheduled maintenance, thus creating a backlog. For example, in Spring
2004, while on a counter-drug mission, the 210-foot cutter Active
experienced problems in the condition of its flight deck that were to
be corrected during its scheduled depot-level maintenance. However,
because of a shortage of maintenance funds, the maintenance was
deferred and the flight deck not repaired. As a result, the cutter lost
50 percent of its patrol time, since the required support helicopters
could not take off from or land on it.
As table 3 shows, deferred maintenance does not show a clear
pattern across all classes of Deepwater legacy assets. For the
Deepwater legacy aircraft, the overall amount of estimated deferred
maintenance increased each year during Fiscal Years 2002 through 2004,
from $12.3 million to about $24.6 million. However, most of the
increase came for one type of asset, the HH-60 helicopter, and the
increase came mainly from shortening the interval between scheduled
depot-level maintenance from 60 months to 48 months--thereby increasing
the scheduled maintenance workload--and not from having to divert money
to deal with unscheduled maintenance. For the Deepwater cutters, the
amount of estimated deferred maintenance increased from Fiscal Year
2002 to 2003, but then dropped significantly in Fiscal Year 2004. The
decrease in Fiscal Year 2004 came mainly because: (1) the Coast Guard
ceased maintenance on an icebreaker, thus freeing up some maintenance
funds; and (2) the Coast Guard also received additional operational and
maintenance funding, allowing it to deal with both scheduled and
unscheduled maintenance. Thus, the drop in the estimate of deferred
maintenance costs for Fiscal Year 2004 is not necessarily an indicator
that the condition of the legacy assets was improving; it could result
from the Coast Guard having more money to address the maintenance
needs.
Table 3: Estimated Costs for Deferred Maintenance of Deepwater Legacy
Aircraft and Cutters, Fiscal Years 2002-2004
------------------------------------------------------------------------
Fiscal year Fiscal year Fiscal year
Deepwater asset 2002 2003 2004
------------------------------------------------------------------------
HC-130 $4,691,000 $7,016,000 $5,737,000
HU-25 0 $201,000 0
HH-60 $7,630,000 $9,436,000 $18,824,000
HH-65 0 0 0
------------------------------------------------------------------------
Subtotal for aircraft $12,321,000 $16,653,000 $24,561,000
------------------------------------------------------------------------
378-foot cutters $2,556,000 $8,135,000 $3,000,000
270-foot cutters $2,070,000 $870,000 0
210-foot cutters $786,000 $1,137,000 0
110-foot patrol boats $1,618,000 $1,961,000 $500,000
------------------------------------------------------------------------
Subtotal for cutters $7,030,000 $12,103,000 $3,500,000
========================================================================
Total for all Deepwater $19,351,000 $28,756,000 $28,061,000
legacy assets
------------------------------------------------------------------------
Source: U.S. Coast Guard.
Note: The Coast Guard estimates the cost for aircraft deferred
maintenance by multiplying a percentage of average depot maintenance
costs by the number of aircraft overdue for depot maintenance
overhauls, plus the annual cost for extension inspections each year.
The Coast Guard generally does not track deferred maintenance costs by
cutter class, but compiled these data at GAO's request for Fiscal
Years 2002 through 2004. The Coast Guard estimated the costs of only
the planned cutter maintenance that had to be deferred to the
following year and not the amount of maintenance that should have been
conducted and was not funded.
Current Condition Measures Not Robust Enough to Clearly Link Condition
With
Effect on Mission Capabilities
At the time we began our work, the Coast Guard's condition measures
were not sufficiently robust to systematically link assets' condition
with degradation in mission capabilities. As we discussed with Coast
Guard officials, without such condition measures, the extent and
severity of the decline in the existing Deepwater legacy assets and
their true condition cannot be fully determined. As a result, the
picture that emerges regarding the condition of the Deepwater legacy
assets based on current Coast Guard condition measures should be viewed
with some caution. While there is no systematic, quantitative evidence
sufficient to demonstrate that its Deepwater legacy assets are
``failing at an unsustainable rate'' as the Coast Guard has asserted,
this does not mean the assets are in good condition or have been
performing their missions safely, reliably and at levels that meet or
exceed Coast Guard standards. We identified two factors that need to be
considered to put these condition measures in proper context.
The first factor deals with limitations in the measures themselves.
Simply put, the Coast Guard's measures of asset condition do not fully
capture the extent of the problems. As such, they may understate the
decline in the legacy assets' condition. More specifically, Coast Guard
measures focus on events, such as flight mishaps or equipment
casualties, but do not measure the extent to which these and other
incidents degrade mission capabilities. Here are two examples in which
the Coast Guard's current measures are not sufficiently robust to
systematically capture degradation in mission capabilities:
The surface search radar system on the HC-130 long-range
surveillance aircraft, called the APS-137 radar, is subject to
frequent failures and is quickly becoming unsupportable,
according to Coast Guard staff with whom we met. Flight crews
use this radar to search for vessels in trouble and to monitor
ships for illegal activity, such as transporting illicit drugs
or illegal immigrants. When the radar fails, flight crews are
reduced to looking out the window for targets, greatly reducing
mission efficiency and effectiveness. A flight crew in Kodiak,
Alaska, described this situation as being ``like trying to
locate a boat looking through a straw.'' Mission capability
degradations such as these are not reflected in the Coast
Guard's current condition measures.
The 378-foot cutter JARVIS recently experienced a failure in
one of its two main gas turbines shortly after embarking on a
living marine resources and search and rescue mission. While
JARVIS was able to accomplish its given mission, albeit at
reduced speeds, this casualty rendered the cutter unable to
respond to any emergency request it might have received--but
did not in this case--to undertake a mission requiring higher
speeds, such as drug interdiction. The Coast Guard condition
measures are not robust enough to capture these distinctions in
mission capability.
The second factor that needs to be kept in mind is the compelling
nature of the other evidence we gathered apart from the Coast Guard's
condition measures. This evidence, gleaned from information collected
during our site visits and discussions with maintenance personnel,
indicated deteriorating and obsolete systems and equipment as a major
cause of the reduction in mission capabilities for a number of
Deepwater legacy aircraft and cutters. Such problems, however, are not
captured by the Coast Guard's condition measures. One example of this
involves the HH-65 short-range recovery helicopter. While this
helicopter consistently exceeded availability standards established by
the Coast Guard over the 5-year period we examined, it is currently
operating with underpowered engines that have become increasingly
subject to power failures. As a result, Coast Guard pilots employ a
number of work-arounds, such as dumping fuel or leaving the rescue
swimmer on scene if the load becomes too heavy. Further, because of
increasing safety and reliability problems, the Coast Guard has also
implemented a number of operational restrictions--such as not allowing
the helicopter to land on helipads--to safeguard crew and passengers
and prevent mishaps until all of the fleet's engines can be replaced.
The Coast Guard has recently recognized the need for improved
measures to more accurately capture data on the extent to which its
Deepwater legacy assets are degraded in their mission capabilities, but
as of April 2005, such measures had not yet been finalized or
implemented. Subsequent to our inquiries regarding the lack of
condition and mission capability measures, Coast Guard naval engineers
reported that they had begun developing a ``percent of time fully
mission capable'' measure to reflect the degree of mission capability,
as well as measures to track cutter readiness. We agree that measures
like this are needed--and as soon as possible. Further, current plans
call for the measure, if approved, to be used for cutters, but not for
aircraft. Consequently, even if this measure were to be implemented
across the Coast Guard, there would still be no measure to address
degradation in mission capabilities for aircraft. We will be exploring
this issue further in our follow-on report.
Actions To Maintain, Upgrade, and Better Manage Deepwater Legacy Assets
Are Under Way, but Condition Issues Remain
The Coast Guard has taken several actions to maintain, upgrade, and
better manage its Deepwater legacy assets. These include establishing a
compendium of information for making decisions regarding maintenance
and upgrades; performing more extensive maintenance between
deployments; applying new business rules and strategies, at the Pacific
Area Command, to better sustain the 378-foot high-endurance cutters
through 2016; and exploring additional strategies for prioritizing the
maintenance and capability enhancement projects needed on its legacy
assets in an effort to provide more objective data on where to best
spend budget dollars to achieve the greatest enhancements in mission
capabilities. These additional efforts are likely helping to prevent a
more rapid decline in the condition of these assets, but condition
problems continue, and the efforts will likely involve additional
costs.
Compendium of Needs Is Being Compiled and Used
Since 2002, the Coast Guard has annually issued a Systems
Integrated Near Term Support Strategy compendium. Among other things,
this compendium consolidates information needed to make planning and
budgeting decisions regarding maintenance and upgrades to sustain
legacy assets. Its purpose is to serve as a tool for senior Coast Guard
management in setting priorities and planning budgets. From this
strategic document, the Coast Guard has identified a number of upgrades
to improve the capabilities of the Deepwater legacy aircraft and
cutters. The most recent compendium (for Fiscal Year 2006) lists more
than $1 billion worth of upgrades to the Deepwater legacy assets. The
planned upgrades identified in the compendium that have been approved
and received initial funding account for an estimated $856 million the
Coast Guard anticipates it will need to complete those projects. The
approved upgrades for Deepwater legacy assets are shown in table 4.
Table 4: Approved Upgrades for Deepwater Legacy Aircraft and Cutters
------------------------------------------------------------------------
Synopsis of planned Estimated costs and
Deepwater asset upgrades timeframes of upgrades
------------------------------------------------------------------------
HC-130 aircraft The Coast Guard is The radar system
beginning to replace replacement is
aircraft's dated and projected to cost $78
difficult to support million and be
surface search radar completed in Fiscal
system. Year 2008. A total of
$9 million has been
allocated to date.
HH-60 aircraft The Coast Guard has begun The service life
a service life extension extension program is
plan and a replacement estimated to cost $16
of the avionics suite. million and be
completed by Fiscal
Year 2009. The avionics
replacement program is
projected to cost $121
million and be
completed by Fiscal
Year 2010. A total of
$32.8 million has been
allocated to date for
these upgrades.
HH-65 aircraft Serious safety and The Coast Guard plans to
reliability problems re-engine 84 HH-65
with the engine led the aircraft at a projected
Coast Guard to place cost of $349 million,
operational restrictions now estimated to be
on the HH-65 fleet in completed by February
October 2003. 2007. A total of $160.7
million has been
allocated to date.
270-foot and 210- During Fiscal Year 2005 The MEP is projected to
foot medium- these cutters are to cost a total of $292
endurance cutters enter a legacy asset million and to be
sustainment project completed by Fiscal
known as the Mission Year 2015. The medium-
Effectiveness Program endurance cutters will
(MEP) aimed at ultimately be replaced
increasing their service by the offshore patrol
lives until their cutter. A total of
replacement by a new $12.5 million has been
cutter. The MEP includes allocated to date.
upgrading major
engineering subsystems
such as evaporators,
sewage systems, and
gyrocompasses.
------------------------------------------------------------------------
Total $856 million total
needed to fund these
projects, of which $215
million has been
allocated to date.
------------------------------------------------------------------------
Source: GAO analysis of data provided by the U.S. Coast Guard.
Note: While no funds have been allocated for upgrades to the HU-25
aircraft, the 378-foot cutters, or the 110-foot and 123-foot patrol
boats, since all of these Deepwater legacy assets are scheduled to be
replaced, each of these assets has upgrades listed in the Systems
Integrated Near Term Support Strategy compendium. The HU-25 aircraft
has an engine replacement project estimated to cost $78.1 million; the
378-foot cutter has an MEP estimated to cost $137.8 million; and the
patrol boats have three projects--replacement of the fin stabilizer
system that is estimated to cost $10.4 million, an MEP that is
estimated to cost $162 million, and replacement of the ship service
generators that is estimated to cost $20.7 million. If the Coast Guard
were to request funding for all of these sustainment projects, it
would cost an additional $409 million.
Among the projects already begun is the re-engining of the HH-65
helicopters to increase the helicopter's power and capabilities. The
Coast Guard is also upgrading several other aviation systems in an
effort to improve aircraft capabilities. Enhancements are also planned
for certain classes of Deepwater cutters. For example, during this
Fiscal Year, the Coast Guard is to begin a maintenance effectiveness
project on the 210-foot and 270-foot cutters. This project includes
replacing major engineering subsystems with the goal of extending the
cutters' service lives until their replacement by the Offshore Patrol
Cutter. Of the $856 million total estimated costs needed for the
planned upgrades to the Deepwater legacy assets listed above, $215
million has been allocated through Fiscal Year 2005 and the Coast Guard
has requested another $217.3 million in its Fiscal Year 2006 budget.
The remaining estimated costs of $423.7 million would have to be funded
beyond Fiscal Year 2006.
Increasing Amounts of Maintenance Are Being Performed, but Loss of
Mission
Capabilities Continues
Coast Guard personnel consistently reported to us that crew members
have to spend increasingly more time between missions to prepare for
the next deployment. For example, to prevent further corrosion-related
problems, air station maintenance personnel at the locations we visited
said they have instituted additional measures, such as washing and
applying fluid film to the aircraft prior to each deployment. Similar
accounts were told by personnel working on cutters. For example,
officers of the 270-foot cutter Northland told us that because of dated
equipment and the deteriorating condition of its piping and other
subsystems, crew members have to spend increasingly more time and
resources while in port to prepare for their next deployment. While we
could not verify these increases in time and resources because the
Coast Guard does not capture data on these additional maintenance
efforts, the need for increasing amounts of maintenance was a message
we consistently heard from the operations and maintenance personnel
with whom we met.
Such efforts are likely helping to prevent a more rapid decline in
the condition of these Deepwater legacy assets, but it is important to
note that even with the increasing amounts of maintenance, these assets
are still losing mission capabilities because of deteriorating
equipment and system failures. For example, in Fiscal Year 2004, one
378-foot cutter lost 98 counterdrug mission days because of a number of
patrol-ending casualties--including the loss of ability to raise and
lower boats and run major electrical equipment--requiring $1.2 million
in emergency maintenance. Another 378-foot cutter lost 27 counterdrug
mission days in the Fall of 2004, when it required emergency dry-dock
maintenance because of hydraulic oil leaking into the reduction gear.
New Initiative for Maintaining 378-Foot Cutters Is Under Way
One effort is under way at the Coast Guard's Pacific Area Command
to improve maintenance practices for the 378-foot cutters.\12\ Pacific
Area Command officials have recognized that a different approach to
maintaining and sustaining legacy cutters may be needed and, as a first
step, they have undertaken an initiative applying what they refer to as
``new business rules and strategies'' to better maintain the 378-foot
high-endurance cutters through 2016. Under the original Deepwater
proposal, the final 378-foot cutter was to be decommissioned in 2013,
but by 2005, that date had slipped to 2016. To help keep these cutters
running through this date, Pacific Area Command officials are applying
such rules and strategies as: (1) ensuring that operations and
maintenance staffs work closely together to determine priorities, (2)
recognizing that maintaining or enhancing cutter capabilities will
involve trade-off determinations, and (3) accepting the proposition
that with limited funding not all cutters will be fully capable to
perform all types of missions. Pacific Area Command officials believe
that in combination, these principles and strategies will result in
more cost-effective maintenance and resource allocation decisions--
recognizing that difficult decisions will still have to be made to
balance maintenance and operations.
The Pacific Area Command's new initiative has the potential for
assisting the Coast Guard in making more informed choices regarding the
best use of their resources, but the approach will likely require that
the Coast Guard allocate additional maintenance funds. In particular,
the Pacific Area Commander told us that in order for the 378-foot
cutters to be properly maintained until their replacements become
operational; the Coast Guard will have to provide additional funding
for sustaining the 378-foot cutters. So far, the Coast Guard's budget
plans or requests do not address this potential need.
Coast Guard Is Developing a Strategy To Better Prioritize Upgrades and
Maximize Asset Capabilities
In the past, we have recommended that the Coast Guard develop a
long-term strategy to set and assess levels of mission performance.\13\
We found this was an important step for the Coast Guard to take because
it links mission performance levels to measurable outputs and goals so
that the Coast Guard can better decide how limited budget dollars
should be spent. The Coast Guard has recently begun to apply the
principles behind such a strategy to (1) better prioritize the projects
needed to upgrade legacy assets that will be part of the Deepwater
Program and (2) obtain the greatest overall mix of capabilities for its
assets within its budget in order to maximize mission performance. The
tool it is developing is called the Capital Asset Management Strategy
(CAMS).
CAMS, once fully implemented, is expected to help the Coast Guard
to better manage its assets by linking funding decisions to asset
condition. Unlike the Coast Guard's current compendium, CAMS is
designed to provide analyses on the capability trade-offs for upgrades
and maintenance projects across asset classes, thereby allowing the
Coast Guard to determine which combination of projects will provide the
most capability for the dollars invested. For example, when trying to
decide among potential project upgrades such as a HC-130 weather radar
replacement, an HH-65 sliding cabin door replacement, or a 110-foot
patrol boat fin stabilizer replacement, CAMS, once fully implemented,
could provide the program managers with a recommended mix of project
upgrades that would achieve the greatest capability enhancements based
on the available budget.
CAMS analyses are to be based on legacy asset condition and
readiness data, asset retirement and replacement timelines, asset
degradation estimates, project production rates, cost data, and mission
utility rankings. Mission utility rankings will grade an asset's
importance to specific missions, such as search and rescue or
counterdrug operations. Rankings may also be assigned to an asset's
critical subsystems, or may be altered based on an asset's geographic
location. For example, a 378-foot cutter may be critical to the success
of fisheries patrols in the Pacific, but may not be as important for
alien/migrant interdiction operations in the Caribbean. In addition,
the Coast Guard plans to rank its missions based on their relative
importance.\14\ Each of these elements is to form the basis for
recommendations regarding which combination of upgrade and maintenance
projects will provide the greatest enhancements to fleet capabilities.
CAMS recommendations are not intended to be a replacement for the
budget development process, but rather are to augment the information
currently provided to decision-makers and be reviewed by several
internal Coast Guard officials before final funding decisions are made.
Further, in order to prevent user ``gaming''--making assumptions in
such a way as to assure a positive recommendation or outcome for a
particular project--the Coast Guard is developing a series of job aids,
manuals and training courses to ensure data consistency.
Coast Guard officials expect to have the CAMS fully implemented by
September 2005 and intend to use it while developing the Coast Guard's
Fiscal Year 2008 budget submission. Although it is too soon to assess
the effectiveness of CAMS, we view this approach as a good faith effort
toward knowledge-based budgeting for legacy asset sustainment.
Management Challenges Faced in Acquiring New Assets Remain
Significant
Since the inception of the Deepwater Program, we have expressed
concerns about the degree of risk in the acquisition approach and the
Coast Guard's ability to manage and oversee the program. Last year, we
reported that, well into the contract's second year, key components
needed to manage the program and oversee the system integrator's
performance had not been effectively implemented.\15\ We also reported
that the degree to which the program was on track could not be
determined, because the Coast Guard was not updating its schedule.\16\
We detailed needed improvements in a number of areas, shown in table 5.
These concerns have a direct bearing on any consideration to increase
the program's pace. Because the Coast Guard was having difficulty
managing the Deepwater Program at the pace it had anticipated,
increasing the pace by attempting to speed the acquisition would only
complicate the problem.
The Coast Guard agreed with nearly all of our recommendations and
has made progress in implementing some of them. In most cases, however,
while actions are under way, management challenges remain that are
likely to take some time to fully address.
Improvement of Program Management and Contractor Oversight Is Mixed
We have seen mixed success in the Coast Guard's efforts to improve
management of the program and contractor oversight. All four areas of
concern--improving integrated project teams (IPT), ensuring adequate
staff for the program, planning for human capital requirements for
field units receiving new assets, and updating the program's schedule--
have yet to be fully addressed.
Strengthening Integrated Product Teams
Although the Deepwater Program has made some efforts to improve the
effectiveness of IPTs, we continue to see evidence that more
improvements are needed for the teams to do their jobs effectively.
These teams, the Coast Guard's primary tool for managing the program
and overseeing the contractor, are generally chaired by a subcontractor
representative and consist of members from subcontractors and the Coast
Guard. The teams are responsible for overall program planning and
management, asset integration, and overseeing delivery of specific
Deepwater assets. Since our March 2004 report, the teams have been
restructured, and 20 teams have charters setting forth their purpose,
authority, and performance goals. And new, entry-level training is
being provided to team members.
Despite this progress, however, the needed changes are not yet
sufficiently in place. A recent assessment by the Coast Guard of the
system integrator's performance found that roles and responsibilities
in some teams continue to be unclear. Decisionmaking is to a large
extent stovepiped, and some teams still lack adequate authority to make
decisions within their realm of responsibility. One source of
difficulty for some team members has been the fact that each of the two
major subcontractors has used its own databases and processes to manage
different segments of the program. Decisions on air assets are made by
Lockheed Martin, while decisions regarding surface assets are made by
Northrop Grumman. This approach can lessen the likelihood that a
``system of systems'' outcome will be achieved. Officials told us that
more attention is being paid to taking a system-wide approach and that
the Coast Guard has emphasized the need to ensure that the two major
subcontractors integrate their management systems.
Ensuring Adequate Staffing for the Deepwater Program
The Coast Guard has taken steps to more fully staff the Deepwater
Program, with mixed effects. In February 2005, the Deepwater Program
executive officer approved a revised human capital plan. The plan
emphasizes workforce planning, including determining needed knowledge,
skills, and abilities and developing ways to leverage institutional
knowledge as staff rotate out of the program. This analysis is intended
to help determine what gaps exist between needed skills and existing
skills and to develop a plan to bridge these gaps. The Coast Guard has
also taken some short-term steps to improve Deepwater Program staffing,
hiring contractors to assist with program support functions, shifting
some positions from military to civilian to mitigate turnover risk, and
identifying hard-to-fill positions and developing recruitment plans
specifically for them. Finally, the Deepwater Program and the Coast
Guard's acquisition branch have begun using an automated system for
forecasting military rotation cycles, a step Deepwater officials
believe will help with long-range strategic workforce planning and
analysis.
Despite these actions, however, vacancies remain in the program,
and some metrics that may have highlighted the need for more stability
in the program's staff have been removed from the new human capital
plan. As of January 2005, 244 positions were assigned to the program,
but only 206 of these were filled, a 16 percent vacancy rate. A year
ago, 209 staff were assigned to the program. Further, the new human
capital plan removes a performance goal that measured the percentage of
billets filled at any given time. Coast Guard officials acknowledged
that the prior plan's goal of a 95 percent or higher fill rate was
unduly optimistic and was a poor measure of the Coast Guard's ability
to meet its hiring goals. For example, billets for military personnel
who plan to rotate into the program in the summer are created at the
beginning of the budget year, leading the metric to count those
positions as vacant from the beginning of the budget year until summer.
Other performance metrics that were included in the prior plan to
measure progress in human capital issues have also been removed. For
example, to help ensure that incoming personnel received acquisition
training and on-the-job training, a billet was included in the prior
plan to serve as a floating training position that replacement
personnel could use for a year before the departure of military
incumbents. This position was never funded, and the new plan removes
the billet.
Improving Communication With Personnel Who Will Use the New Assets
The Coast Guard recognizes the critical need to inform the
operators who are to use the Deepwater assets of progress in the
program, and officials stated that, on the basis of our
recommendations, they have made a number of improvements in this area.
A November 2004 analysis of the Deepwater Program's communication
process, conducted in coordination with the National Graduate School,
found that the communication and feedback processes were inadequate.
Emphasis has now been placed on outreach to field personnel, with a
multi-pronged approach involving customer surveys, face-to-face
meetings, and presentations. We have not yet evaluated the
effectiveness of the new approach.
Human capital requirements for the Deepwater Program--such as crew
numbers and schedules, training, and support personnel--will have an
increasing impact on the program's ability to meet its goals as the
pace at which assets are delivered to field units picks up. Recent
assessments by Coast Guard performance monitors show this to be an area
of concern.\17\ Coast Guard officials have expressed concern about
whether the system integrator is appropriately considering human
capital in systems engineering decisions. The system integrator is
required to develop a workforce management plan for Deepwater, as well
as ``human factors engineering'' plans for each Deepwater asset and for
the overall system of systems. The Coast Guard rejected the
contractor's workforce management plan and several of the proposed
human factors engineering plans as being inadequate. The rejections
were due, in part, to the lack of an established and integrated system-
level engineering approach that shows how issues relating to human
capabilities and limitations of actually performing with the system
will be approached. One performance monitor noted that, as of late
2004, requirements for staffing and training of maintenance facilities
and organizations had yet to be determined. According to the Coast
Guard, emphasis on a contractor's approach to addressing human capital
considerations is necessary to ensure that Deepwater goals are met,
especially as they pertain to operational effectiveness and total
ownership cost.
Updating the Acquisition Schedule
The Coast Guard has recently undertaken efforts to update the
original 2002 Deepwater acquisition schedule--an action that we
suggested in our June 2004 report.\18\ The original schedule had
milestone dates showing when work on an asset would begin and when
delivery would be expected, as well as the integrated schedules of
critical linkages between assets, but we found that the Coast Guard was
not maintaining an updated and integrated version of the schedule.\19\
As a result, the Coast Guard could not demonstrate whether individual
components and assets were being integrated and delivered on schedule
and in critical sequence. As recently as October 2004, Deepwater
performance monitors likewise expressed concern that the Coast Guard
lacked adequate visibility into the program's status and that lack of
visibility into the schedules for component-level items prevented
reliable forecasting and risk analysis. The Coast Guard has since taken
steps to update the outdated schedule and has indicated that it plans
to continue to update the schedule each month for internal management
purposes and semiannually to support its budget planning efforts. We
think this is an important step toward improving the Coast Guard's
management of the program because it provides a more tangible picture
of progress as well as a baseline for holding contractors accountable.
We will continue to work closely with the Coast Guard to ensure
progress is made and to monitor how risks are mitigated.
Procedures for Ensuring System Integrator Accountability Are More
Rigorous, but Concerns Remain
We have seen progress in terms of the rigor with which the Coast
Guard is periodically assessing the system integrator's performance,
but concerns remain about the broader issues of accountability for
achieving the overarching goals of minimizing total ownership costs and
maximizing operational effectiveness.
Improving Criteria for Assessing Performance
Improvements continue to be made to the criteria for assessing the
system integrator's performance. In March 2004, we reported that the
process for assessing performance against specific contract tasks
lacked rigor. The criteria for doing so have since been revised to more
clearly reflect those that are objective, (that is, measured through
automated tools against established metrics), and those that are
subjective, meaning the narrative comments by Coast Guard performance
monitors. Weights have been assigned to each set of evaluation factors,
and the Coast Guard continues to refine the distribution of the weights
to reach an appropriate balance between automated results and the
eyewitness observations of the performance monitors. Coast Guard
officials told us that they have also provided additional guidance and
training to performance monitors. We found that efforts have been made
to improve the consistency of the format used for their input in
assessments of the system integrator's performance. Coast Guard
officials said that they are continuing to make improvements to ensure
that performance monitors' relevant observations are appropriately
considered in making award fee determinations.
It is important to note that although performance monitor comments
are considered subjective, they are valuable inputs to assessing the
system integrator's performance, particularly when they are tied to
measurable outcomes. It will be necessary for the Coast Guard to
continue refining the award fee factors as the program progresses. In
some cases, we noted that the performance monitors' assessments
differed vastly from the results of automated, data-driven assessments.
For example, while schedule management is discussed in the Coast
Guard's most recent assessment of the system integrator's performance
as a major area of challenge and risk, the objective measure showed 100
percent compliance in this area. Another metric assesses the extent to
which integrated product teams consider the impact of their decisions
on the overall cost and effectiveness of the Deepwater Program.
Performance monitors reported that because system-level guidance had
not been provided to the teams responsible for specific assets, they
had a limited ability to see the whole picture and understand the
impact of decisions on total ownership costs and operational
effectiveness. However, the automated measure was again 100 percent
compliance. Coast Guard officials said that, in some cases, the data-
driven metrics do not accurately reflect the contractor's performance.
For the next award fee assessment, Deepwater officials plan to revise
the metrics and place more weight on the performance monitors' input,
while ensuring that it is based on measurable outcomes.
Holding the System Integrator Accountable for Effectiveness of Project
Teams
Changes have been made to the award fee metrics that place
additional emphasis on the system integrator's responsibility for
making integrated project teams effective. Award fee criteria now
incorporate specific aspects of how the integrator is managing the
program, including administration, management commitment,
collaboration, training, and empowerment of these teams. However, as
discussed above, concerns remain about whether the teams are
effectively accomplishing their goals.
Evaluation of Operational Effectiveness and Total Ownership Cost
While the Coast Guard has developed models to measure the system
integrator's performance in operational effectiveness and total
ownership costs, concrete results have not yet emerged. Minimizing
total ownership costs and maximizing operational effectiveness are two
of the overarching goals of the Deepwater Program. The system
integrator's performance in these two areas will be a critical piece of
information when the Coast Guard makes a decision about whether to
award the contractor the first contract option period of 5 years.
Initial decisionmaking is to start next year.
With regard to the operational effectiveness of the program,
measuring the system integrator's impact has yielded limited results to
date because few of the new assets are operational. The Coast Guard has
developed modeling capabilities to simulate the effect of the new
capabilities on its ability to meet its missions. However, until
additional assets become operational, progress toward this goal will be
difficult to determine.
With regard to total ownership costs, the Coast Guard does not plan
to implement our recommendation. It has not adhered to its original
plan, set forth in the Deepwater Program management plan, of
establishing as its baseline, a cost not to exceed the dollar value of
replacing the assets under a traditional approach (e.g., on an asset-
by-asset basis rather than a system-of-systems approach). Although a
cost baseline consistent with the program management plan's approach
was initially established, this number has not been re-baselined, as
has the system integrator's cost estimate baseline, and is not being
used to evaluate the contractor's progress in holding total ownership
costs down. In practice, the baseline being used to measure total
ownership cost is the system integrator's own cost estimate. As we
reported in March 2004, we believe that measuring the system
integrator's cost growth compared with its own cost proposal will tell
the government nothing about whether it is gaining efficiencies by
turning to the system of systems concept.
Establishing Criteria and Documenting Changes to the Baseline
Coast Guard officials stated that the contract total ownership cost
and operational effectiveness baseline is adjusted based on approved
decision memorandums from the Agency Acquisition Executive, the Vice
Commandant of the Coast Guard.
Coast Guard Has Taken Steps To Hold the System Integrator Accountable
for
Competition
The Coast Guard reported taking steps to address our
recommendations concerning cost control through competition. Our
recommendations pertained to competition among second-tier suppliers
and notification of ``make'' decisions. \20\
Competition among second-tier suppliers. Coast Guard
officials told us that in making the decision about whether to
award the first contract option, the government will
specifically examine the system integrator's ability to control
costs by assessing the degree to which competition is fostered
at the major subcontractor level. The evaluation will consider
the subcontractors' project management structure and processes
to control costs, as well as how market surveys of similar
assets and major subsystems are implemented. The Coast Guard is
focusing its attention on those areas that were priced after
the initial competition for the Deepwater contract was
completed, such as the HH-65 re-engining and the C-130J
missionization. \21\ For example, a new process implemented for
the C-130J missionization was a requirement for competition in
subcontracting and government approval of all subcontracts
exceeding $2 million in order for the Coast Guard to monitor
the integrator's competition efforts.
Notification of make decisions. According to the Federal
Acquisition Regulation, the prime contractor is responsible for
managing contract performance, including planning, placing, and
administering subcontracts as necessary to ensure the lowest
overall cost and technical risk to the government. When ``make-
or-buy programs'' are required, the government may reserve the
right to review and agree on the contractor's make-or-buy
program when necessary to ensure negotiation of reasonable
contract prices, among other things. We recommended that the
Coast Guard be notified of make decisions over $5 million in
order to facilitate controlling costs through competition. We
suggested the $5 million threshold because Lockheed Martin, one
of the major subcontractors, considers that amount to be the
threshold for considering its suppliers major. The Coast Guard
has asked the system integrator, on a voluntary basis, to
provide notification 1 week in advance of a make decision of
$10 million or more based on the criteria in the Federal
Acquisition Regulation. \22\ According to Coast Guard
officials, to date, no make decision has exceeded $10 million
since the request was made. The details implementing this
recommendation have not yet been worked out, such as
specifically who in the Coast Guard will monitor the
subcontractors' make decisions to ensure that the voluntary
agreement is complied with.
Concluding Observations
Our work to date suggests the costly and important Deepwater
Program will need constant monitoring and management attention to
successfully accomplish its goals. In this respect, we identified three
points that should be kept in mind in considering how to proceed with
the program.
First, the need to replace or upgrade deteriorating legacy
assets is considerable. While the Coast Guard is making
progress on developing (1) measures that better demonstrate how
the deteriorating condition of the legacy assets impact on
mission capabilities and (2) a strategy to better prioritize
upgrades and maximize capabilities, it is clear that the
Deepwater legacy assets are insufficient for meeting all of the
Coast Guard's missions.
Second, although the need to replace and upgrade assets is
strong, there still are major risks in the Coast Guard's
acquisition approach. The cost increases and schedule slippages
that have already occurred are warning signs. We will continue
to work with the Coast Guard to determine how best to manage
these risks so that the Deepwater missions can be accomplished
in the most cost-effective way.
Third, there are signs that as the Deepwater Program moves
ahead, the Coast Guard will continue to report more problems
with sustaining existing assets, together with the attendant
need for additional infusions of funding to deal with them.
Some of these problems, such as those on the 378-foot cutters,
are included in the compendium the Coast Guard uses to set
sustainment priorities and plan budgets, but the Coast Guard
has not allocated funds because the problems pertain to assets
that are among the first to be replaced. However, projects to
address these problems are nevertheless likely to be needed. We
will continue to work with the Coast Guard to determine if
there is a more systematic and comprehensive approach to
keeping the Congress abreast of the potential bill for
sustaining these assets.
Mr. Chairman and members of the Subcommittee, this completes my
prepared statement. I would be happy to respond to any questions that
you or other Members of the Subcommittee may have at this time.
Acknowledgements
Other individuals making key contributions to this testimony
include Steven Calvo, Jerry Clark, Christopher Conrad, Adam Couvillion,
Michele Fejfar, Geoffrey Hamilton, Julie Leetch, Michele Mackin,
Christopher Miller, Stan Stenersen, and Linda Kay Willard.
ENDNOTES
\1\ For purposes of this testimony, we use the term ``legacy
assets'' to refer to the existing fleet of Deepwater aircraft and
cutters. These legacy assets include the HC-130H, HU-25, HH-60, and HH-
65 aircraft and the 378-foot high-endurance cutters, the 210-foot and
270-foot medium-endurance cutters, and the 110-foot and 123-foot patrol
boats. We did not include the 213-foot ACUSHNET, the 230-foot STORIS,
or the 282-foot ALEX HALEY, as part of our analyses of the Deepwater
legacy assets because they are one-of-a-kind vessels.
\2\ Intermediate-level and depot-level maintenance include repairs
and upgrades that are too time-consuming or complicated to be performed
at the unit level. For aircraft, this would include repairing,
overhauling, or rebuilding parts, components, and end items and
emergency manufacturing of unavailable parts. For cutters,
intermediate- and depot-level maintenance would include preventive or
corrective maintenance, as well as a major overhaul or complete rebuild
of parts, assemblies, and end items; as well as major hull repairs,
general modifications, and testing.
\3\ To assess the reliability of the Coast Guard's data and
condition measures, we questioned knowledgeable officials and reviewed
existing documentation about the data and the systems that produced the
data. We determined that the data were sufficiently reliable for the
purposes of this testimony.
\4\ In assessing the condition of Deepwater aircraft and cutters
for this testimony, we analyzed what Coast Guard officials told us were
the best available condition measures. For Deepwater aircraft, we
reviewed the availability index (percentage of time aircraft were
available to complete missions), cost per flight hour, labor hours per
flight hour, programmed flight hours per year, scheduled versus
unscheduled maintenance expenditures, and estimated deferred
maintenance. For cutters, we reviewed the number of major casualties,
the percent of time free of major casualties, scheduled versus
unscheduled maintenance, and estimated deferred maintenance. We also
reviewed data on mishaps and the dispatch reliability index for
aircraft, and lost cutter days and unscheduled maintenance days for
cutters. We did not use data on these measures, though, because the
data were either not relevant to our analysis, incomplete, not
available for the entire time period covered by our review, or not
sufficiently reliable for our purposes.
\5\ GAO, Contract Management: Coast Guard's Deepwater Program Needs
Increased Attention to Management and Contractor Oversight, GAO-04-380
(Washington, D.C.: March 9, 2004).
\6\ For purposes of this testimony, we use the term ``systems'' to
include all the electrical; mechanical; heating, ventilation, and air
conditioning; and other systems on the Deepwater assets.
\7\ Current plans call for the Coast Guard to replace all of its
Deepwater legacy cutters and patrol boats, beginning with the 378-foot
cutters. The Coast Guard also plans to replace the HU-25 aircraft, but
will upgrade the existing HC-130 aircraft and HH-60 and HH-65
helicopters to extend their service lives.
\8\ The mission requirements include such things as the ability to
(1) respond to 90 percent of all distress incidents within 2 hours; (2)
detect and track targets of any material such that the probability of
detection is at least 90 percent for small targets, such as a person in
the water or a single-engine civil aircraft; and (3) respond to
National Emergency Response Operations within 48 hours.
\9\ See GAO, Coast Guard: Deepwater Program Acquisition Schedule
Update Needed, GAO-04-695 (Washington, D.C.: June 14, 2004); Coast
Guard: Key Management and Budget Challenges for Fiscal Year 2005 and
Beyond, GAO-04-636T (Washington, D.C.: April 7, 2004); and GAO-04-380.
\10\ A casualty is a deficiency in mission-essential equipment; a
major casualty causes the major degradation or loss of at least one
primary mission.
\11\ However, major casualties for the 378-foot high-endurance
cutters continued to increase in 2004.
\12\ The Pacific Area Command is responsible for operations
covering 74 million square miles, ranging from South America, north to
the Arctic Circle and west to the Far East.
\13\ GAO, Coast Guard: Comprehensive Blueprint Needed to Balance
and Monitor Resource Use and Measure; GAO, Coast Guard: Strategy Needed
for Setting and Monitoring Levels of Effort for All Missions (GAO-03-
155, Washington, D.C.: November 12, 2002).
\14\ A mission's relative importance will be determined by Coast
Guard operational decisionmakers. These determinations will not be
static, but rather will be reviewed and revised to reflect changing
priorities.
\15\ GAO-04-380.
\16\ GAO-04-695.
\17\ Performance monitors are contracting officers' technical
representatives, who represent the contracting officer in monitoring
the contractor's performance.
\18\ GAO-04-695.
\19\ Not maintaining a current and integrated schedule lessens the
Coast Guard's ability to monitor the system integrator's performance
and take early action to resolve risks that could become problems
later. Maintaining such a schedule is an industry best practice; the
Department of Defense is required to do so in order to be able to
report any breaches in cost, schedule, or performance targets.
\20\ A ``make item'' means an item or work effort to be produced or
performed by the prime contractor or its affiliates, subsidiaries, or
divisions.
\21\ The C-130J missionization, planned for the Coast Guard's six
C-130J aircraft, is intended to modify and install mission-essential
equipment to convert the aircraft into C-130J long-range surveillance
maritime patrol aircraft.
\22\ Federal Acquisition Regulation Sec. 15.407-2, ``Make or Buy
Programs.''
Senator Snowe. Thank you very much, Ms. Wrightson.
Mr. O'Rourke? Thank you.
STATEMENT OF RONALD O'ROURKE, SPECIALIST IN NATIONAL DEFENSE,
CONGRESSIONAL RESEARCH SERVICE
Mr. O'Rourke. Madam Chair, distinguished Members of the
Subcommittee, it's an honor to be here today to talk about the
Deepwater Program.
The Coast Guard believes the revised Deepwater force is the
highest-performing force that can be acquired for $19 to $24
billion, and that it would generate much more performance than
the baseline force. The Coast Guard also states, however, that
the revised force might not have enough capacity to perform
certain operations that might be of interest to policymakers.
Specifically, the revised force might not have enough capacity
to perform certain Level 2 operations, which include achieving
an increased degree of maritime domain awareness and
maintaining two cutters in the Bering Sea. The revised force
almost certainly would not have enough capacity to perform
certain Level 3 operations, which include operations for fully
achieving long-term FY 05-FY 09 Government Performance and
Results Act goals. And the revised force wouldn't have enough
capacity to perform what can be called Level 4 operations,
which include certain fisheries enforcement and counterdrug
operations.
Potential oversight questions include the following:
First, Why was the revised force optimized within a cost of
$19 to $24 billion?
Second, Why wasn't it, instead, optimized to fully meet the
long-term GPRA goals at lowest cost?
Third, What are the potential operational risks of not
having enough capacity for doing things like achieving a Level
2 degree of maritime-domain awareness, or maintaining two
cutters in the Bering Sea, or fully meeting the long-term GPRA
goals?
And, fourth, What would be the composition and cost of an
optimized force that could perform all operations up through
Level 2, or Level 3, or Level 4?
Supporters of the two shipyards that build the Navy's
larger surface combatants are concerned there might not be
enough work over the next several years to adequately support
both of them. Accelerating procurement of Deepwater cutters
could help support these yards while reducing total Deepwater
acquisition costs. Accelerating procurement of these cutters
might not increase the Coast Guard's Deepwater management
burdens, and might actually reduce them, as long as design work
is completed before procurement is accelerated. Procuring four
or five large and medium Deepwater cutters per year, rather
than the currently planned one to three cutters per year, could
provide about as much shipyard work as procuring one of the
Navy's planned DD(X) destroyers per year.
Some DOD officials have recently said that the Navy's new
Littoral Combat Ship, or LCS, might be suitable, not just for
its originally stated missions, but for homeland defense
operations that Deepwater cutters, in some cases, might also be
capable of performing. Although the revised Deepwater plan does
not substantially increase the planned number of cutters, the
Navy, this year, has substantially increased the planned number
of LCSs.
This raises a question about whether the Coast Guard and
Navy have a common view on the division of responsibilities for
conducting ship-based homeland defense and homeland security
operations, and whether the two services have adequately
coordinated the numerical requirements for the two groups of
ships.
Until April 29 of this year, Deepwater cost and schedule
information available to Congress appears to have been much
less detailed than information made available to Congress in
February or March of each year on comparable Defense
acquisition programs. The Congressional defense committees
considered not just the delivery, but the timely delivery,
early in the budget review season, of detailed cost and
schedule information, as necessary for ensuring adequate
program oversight.
This raises a question of whether the Coast Guard should be
more explicitly required to provide Congress, in February or
March, rather than late April or late May, with the same kind
of detailed cost and schedule information that DOD provides to
Congress in February or March on its major acquisition
programs.
Last, the Deepwater Program and the Army's Future Combat
System, or FCS Program, are both large system-of-systems
acquisition programs for acquiring multiple types of equipment
that are to operate in a networked environment. And both
programs are being executed for the government by an industry
entity acting as lead integrator. This approach appears to be a
first for both services. Due partly to concerns over this
approach, the Army program has been a recent focus of
Congressional oversight, and the Army recently restructured the
business aspects of the FCS program to strengthen the Army's
arrangements for managing it.
The broad similarities in the Deepwater and FCS
acquisitions strategies raise potential oversight questions
regarding how the Coast Guard's arrangements for managing the
Deepwater Program compare to the Army's arrangements for
managing the FCS Program, and whether the two services have
instituted a process for sharing ideas on how to better manage
the two programs.
Madam Chair, this concludes my opening statement, and I'll
be pleased to respond to any questions the Subcommittee might
have.
[The prepared statement of Mr. O'Rourke follows:]
Prepared Statement of Ronald O'Rourke, Specialist in National Defense,
Congressional Research Service
Madam Chair, Senator Cantwell, distinguished members of the
Subcommittee, thank you for the opportunity to appear before you to
discuss issues relating to the Coast Guard's revised Deepwater
Implementation Plan. My testimony will focus on the following:
the level of overall mission performance that would be
achieved under the revised implementation plan;
the option of accelerating and possibly expanding
procurement of Deepwater National Security Cutters (NSCs) and
Offshore Patrol Cutters (OPCs);
the relationship between Deepwater cutters and the Navy's
planned Littoral Combat Ship (LCS) for homeland security/
homeland defense operations;
the timeliness of delivery to Congress of detailed Deepwater
cost and schedule information, and potential implications for
Congressional oversight of the Deepwater Program; and
the acquisition strategy for the Deepwater Program and
potential implications for government management of the
program.
Mission Performance Under Revised Implementation Plan \1\
Deepwater Capability and Capacity Levels
In discussing the revised Deepwater Implementation Plan, the Coast
Guard uses ``capability'' to refer to the kinds of tasks that
individual Deepwater platforms (ships and aircraft) will be equipped to
perform, and ``capacity'' to refer to the numbers of platforms that
will be available for performing these tasks. The Deepwater force's
overall mission performance, the Coast Guard says, will be a product of
its capability and capacity. Differing combinations of capability and
capacity, the Coast Guard says, would result in differing levels of
overall mission performance.
The Coast Guard has identified the following Deepwater capability
and capacity levels.
Capability Levels
Baseline (or Increment 0), which is the capability of
platforms as proposed under the original Deepwater plan;
Increment I, the lowest-cost addition to the baseline, which
the Coast Guard describes as the minimal additional
capabilities needed to begin aligning the Deepwater platforms
with Department of Homeland Security (DHS) goals;
Increment II, the middle-cost addition to the baseline,
which the Coast Guard describes as adding a larger amount of
homeland security-related capabilities to a larger fraction of
the platforms; and
Increment III, the highest-cost addition to the baseline,
which the Coast Guard describes as the changes that would fully
align Deepwater platforms with DHS goals, but would still not
meet the new Deepwater Program System Performance
Specifications (SPS v2.0).
Capacity Levels
Baseline (or Level 0), which the Coast Guard describes as
the force levels sufficient to perform Coast Guard missions at
1998 (i.e., pre-Deepwater) levels;
Level 1, which the Coast Guard describes as the Baseline
plus additional forces for performing the additional port,
waterways, and coastal security operations that were added
after 9/11;
Level 2, which the Coast Guard describes as Level 1 plus
additional forces for:
-- achieving an increased degree of maritime domain awareness
(MDA);
-- maintaining continuous presence of two cutters (i.e., 2.0
presence) in the Bering Sea; and
-- performing additional air interdiction operations; \2\
Level 3, which the Coast Guard describes as Level 2 plus
additional forces for achieving long-term (FY 2005-FY 2009)
Government Performance and Results Act (GPRA) goals; and
Level 4, which the Coast Guard describes as Level 3 plus
additional forces for:
-- conducting fisheries enforcement in certain areas where
fisheries enforcement is not currently performed; and
-- performing additional counter-drug operations, should the
Department of Defense (DOD) reduce its efforts in this area so
as to make DOD resources available for other DOD missions.\3\
Level 4, the Coast Guard says, is the level that RAND used in its
2004 report on the Deepwater Program. The RAND report calculated force
levels that would be required for fully performing both traditional
Deepwater missions and emerging (i.e., post-9/11) Deepwater
responsibilities.\4\
Force Recommended Under Revised Implementation Plan
Figure 1 below, which was created by CRS on the basis of
consultations with the Coast Guard, depicts in graphic form the Coast
Guard's view of the combinations of capability and capacity recommended
under the revised implementation plan, under the originally planned
Deepwater force, and in the 2004 RAND report.
As can be seen in the figure, the Coast Guard states that the force
recommended under the revised implementation plan falls between
Increments 2 and 3 in terms of capability, and between Levels 1 and 2
in terms of capacity. In comparison, the Coast Guard states, the
originally planned Deepwater force and the force recommended in the
2004 RAND report used platforms with baseline-level capabilities. In
terms of capacity, the originally planned Deepwater force was between
Baseline and Level 1, the Coast Guard states, while the force in the
force in the 2004 RAND report was at Level 4.
While the number of platforms in the revised implementation plan is
not obviously higher than the number in the originally planned
Deepwater force, the Coast Guard believes that the value of networking,
superior knowledge, and better tools (i.e., equipment) on the platforms
will permit the revised Deepwater force to achieve a higher level of
capacity per platform than the originally planned Deepwater force. In
this sense, the Coast Guard's revised implementation plan is implicitly
arguing, in a reversal of the old force-planning aphorism, that
``quality has a quantity all its own.''
A Force Optimized Within a Certain Resource Level
The Coast Guard believes that the force recommended under the
revised implementation plan represents the highest-performing
combination of capability and capacity with a total acquisition cost of
$19 billion to $24 billion. The recommended force, in other words, can
be viewed as one that the Coast Guard believes has been optimized for
overall mission performance within a total acquisition resource level
of $19 billion to $24 billion.
As shown by the sloped lines in Figure 2 below, Deepwater forces
consisting of other combinations of capability and capacity could be
acquired for a total acquisition cost of $19 billion to $24 billion.
The slope of the lines in the figure is notional and is intended only
to illustrate the general principle that, within a certain total
acquisition cost, capability and capacity can be traded against one
another. The Coast Guard believes, based on its analysis, that other
capability-capacity combinations lying along these lines would result
lower levels of overall mission performance than its recommended force.
Forces with total acquisition costs lower or higher than $19
billion to $24 billion would lie along sloped lines that would be
shifted to the left and right, respectively, of the lines in Figure 2.
Performance of the Revised Force
Although the Coast Guard states that the Deepwater force
recommended under the revised implementation plan would generate much
more overall mission performance than the originally planned force, and
would be able to meet certain DHS and Coast Guard long-range
performance goals, the Coast Guard also stated to CRS that the revised
Deepwater force:
might not have enough capacity for performing certain
operations included in Level 2;
almost certainly would not have enough capacity for
performing certain operations included in Level 3, which
includes operations for fully achieving long-term (FY 2005-FY
2009) Government Performance and Results Act (GPRA) goals; and
would not have enough capacity for performing certain
operations included in Level 4.
Potential Oversight Questions for Congress
Potential oversight questions for Congress arising out of this
discussion include the following:
Why was a range of $19 billion to $24 billion, rather than
some lower or higher figure, used as the acquisition cost range
within which to optimize the revised Deepwater force?
Rather than optimizing the force to achieve the highest
possible performance within an acquisition cost of $19 billion
to $24 billion, why was the force not optimized to fully meet
the long-term (FY 2005-FY 2009) GPRA goals at the lowest cost?
What are the potential operational risks of not having
enough capacity for certain operations included in Levels 2, 3,
and 4? What are the operational potential risks, in other
words, of not having enough capacity to:
-- achieve a Level 2 degree of maritime domain awareness?
-- maintain a 2.0 cutter presence in the Bering Sea?
-- conduct Level 2 air interdiction operations not conducted by
other agencies?
-- conduct Level 3 operations needed to fully meet the long-
term (FY 2005-FY 2009) GPRA goals?
-- conduct Level 4 fisheries enforcement and counter-drug
operations?
What would be the most cost-effective combination of
capability and capacity that could perform all Level 2
operations (or all Level 3 operations, or all Level 4
operations)? What would be the composition of this force in
terms of platform types, platform numbers, and platform
features? What would be the acquisition cost of this force?
Accelerating and Possibly Expanding NSC/OPC Procurement
Congressional Interest
There has been interest in Congress since 2002 in the idea of
accelerating Deepwater procurement so as to compress the program's
acquisition period from 20 or more years to as little as 10 years.\5\
Supporters of accelerating Deepwater procurement argue that it would
reduce total Deepwater acquisition costs and more rapidly increase
Coast Guard capabilities toward post-9/11 requirements.
Surface Combatant Industrial Base
As discussed in CRS reports on the Deepwater Program and Navy ship-
acquisition programs, accelerating procurement of Deepwater National
Security Cutters (NSCs) and Offshore Patrol Cutters (OPCs) could help
support the two shipyards that have built the Navy's larger surface
combatants in recent years--General Dynamics' Bath Iron Works (GD/BIW)
of Bath, ME, and Northrop Grumman's Ingalls Shipyard of Pascagoula, MS,
which forms part of Northrop Grumman Ship Systems (NGSS).\6\
GD/BIW and Ingalls currently face some uncertainties regarding the
amount of Navy surface combatant construction work they will receive
over the next several years. The FY 2006-FY 2011 Future Years Defense
Plan (FYDP) reduces planned DD(X) destroyer procurement to one per year
in FY 2007-FY 2011. In addition, the Navy is interested in changing the
shipyard portion of the acquisition strategy for the DD(X) program.\7\
Estimated DD(X) procurement costs, moreover, have recently increased
significantly, raising questions about the DD(X) program's prospective
affordability and cost effectiveness. These developments have
heightened concerns among supporters of GD/BIW and Ingalls regarding
the futures of the two yards.
Potential Annual Rates and Total Procurement Quantities
Ship deliveries as shown in the revised Deepwater Implementation
Plan suggest that the plan would procure National Security Cutters
(NSCs) at a rate of one per year over the next few years, and Offshore
Patrol Cutters (OPCs) at a rate of one per year starting a few years
from now, growing to two or three per year a few years after that. It
appears that a combined NSC-OPC procurement rate of three ships per
year is reached around the end of this decade or early in the next
decade, depending on which funding plan is pursued, and that in almost
all cases, the three ships procured each year are all OPCs.
Although the shipyard skill mix for building NSCs and OPCs is
somewhat different from the shipyard skill mix for building DD(X)s,
based on their light-ship displacements, procuring a total of four or
five NSCs and OPCs per year might provide about as much total shipyard
work as procuring one DD(X) per year. The Coast Guard currently
estimates that, in FY 2002 dollars, NSCs will cost about $277 million
each to procure (or somewhat more if the design is expanded to include
certain additional equipment), and that OPCs would cost an average of
about $200 million each to procure. The Navy currently estimates that
in FY 2002 dollars, follow-on DD(X)s would cost roughly $2.1 billion
each to procure. Using these figures, procuring four or five NSCs and
OPCs per year would cost roughly half as much as procuring one DD(X)
per year.
If the scope of the Deepwater Program is expanded to include a
higher level of capacity, the total number of NSCs and OPCs might
increase. The 2004 RAND report recommended a Deepwater Force with Level
4 capacity that included, among other things, 44 NSCs and 46 OPCs. As
shown earlier in Figure 1, however, the RAND analysis used Deepwater
platforms equipped with a Baseline-level of capability. The force
levels recommended under the Coast Guard's revised implementation plan
suggest that, if Deepwater platforms are equipped with a level of
capability equivalent to Increment II or III, then a Deepwater force
with Level 4 capacity might include substantially fewer than 44 NSCs
and 46 OPCs, and that a Level 3 or Level 2 force would include even
smaller numbers.
Even so, an optimized Deepwater force with increased unit
capability and Level 3 or -4 capacity would likely include more than
the total of 31 to 33 larger cutters (6 to 8 NSCs and 25 OPCs) that are
included in the revised implementation plan. Since differences in
recommended ship numbers between the revised plan and the 2004 RAND
report are more dramatic for NSCs than they are for OPCs, increasing
the Deepwater Program to an optimized force with Level 3 or Level 4
capacity might increase the number of NSCs more dramatically than the
number of OPCs. An optimized Deepwater force with increased unit
capability and Level 2 capacity might include slightly more than 31 to
33 cutters.
Management Burden of Cutter Acceleration
Accelerating the entire Deepwater Program could increase the Coast
Guard's burden in managing the large and complex Deepwater Program, and
thereby increase program risk. Accelerating procurement of NSCs and
OPCs only, however, might not materially increase the Coast Guard's
management burden--provided that design work on each class of cutter
was completed before procurement of that class was accelerated--because
NSCs and OPCs are to incorporate proven rather than developmental
systems and because the Coast Guard already plans to overlap
procurement of the two classes.
Indeed, accelerating NSC and OPC procurement might actually reduce
the Coast Guard's Deepwater management burden by eliminating more
quickly the management challenges associated with maintaining legacy
cutters, and by shortening the period during which the Coast Guard
would have to manage NSC and OPC procurement.
Summary of Potential Advantages and Disadvantages
Potential Advantages. Potential advantages of accelerating and
possibly expanding procurement of NSCs and OPCs include the following:
reducing NSC and OPC unit procurement costs by achieving
better production economies of scale (i.e., more economic rates
of production);
more quickly replacing the high operation and support (O&S)
costs of legacy cutters with the lower O&S costs of new
cutters;
more quickly increasing the Coast Guard's capabilities
toward post-9/11 requirements;
more quickly eliminating the management burdens associated
with maintaining legacy cutters and supervising procurement of
the new cutters; and
providing additional work for GD/BIW and Ingalls during a
period of uncertain Navy surface combatant construction work.
Potential Disadvantages. Potential disadvantages of accelerating
and possibly expanding procurement of NSCs and OPCs include the
following:
increased annual funding requirements for the next several
years for procurement of NSCs and OPCs, which could require, in
a situation of constrained funding, offsetting reductions in
annual funding for procurement of other Deepwater assets, other
Coast Guard priorities, or other DHS priorities;
a shorter procurement time period to learn about better
technologies and incorporate them into cutters that have not
yet been built;
increased shipyard (as opposed to Coast Guard) management
burdens associated with supervising a larger number of workers
involved in building NSCs and OPCs;
increased Coast Guard management burdens associated with
training crews for the new cutters; and
a more compressed cutter retirement period (i.e., bloc
obsolescence) years from now, when the new Deepwater cutters
reach the ends of their service lives, possibly requiring a
similarly compressed procurement period at that point to
replace the retiring ships.
Navy LCSs vs. Coast Guard Cutters for Homeland Defense
The Littoral Combat Ship (LCS) is a planned new Navy surface
combatant. The Navy announced the start of the LCS program in November
2001 as part of a larger restructuring of its surface combatant
acquisition efforts. The LCS is to be a small, fast ship that would use
modular ``plug-and-fight'' mission payload packages, including unmanned
vehicles (UVs).
The LCS, with a full load displacement of 2,500 to 3,000 tons, is
to be close in size to the 3,200-ton OPC. Navy officials in the early
stages of the LCS program said that the LCS might prove suitable as the
basis for the OPC design, but the Coast Guard did not adopt this
approach, apparently in part because of the LCS's cost. The Navy wants
each LCS to cost no more than $220 million to procure, exclusive of its
modular mission packages, while the OPC, as mentioned earlier, is to
cost an average of about $200 million, including all of its built-in
mission equipment.
The Navy's primary intended missions for the LCS are countering
enemy mines, submarines, and fast attack craft (i.e., ``swarm boats'')
in heavily contested littoral (near-shore) waters. Secondary LCS
missions, also to be performed in littoral waters, include
intelligence, surveillance, and reconnaissance (ISR); maritime
intercept; special operations forces (SOF) support; and logistics
support for movement of personnel and supplies.
In recent months, some DOD and Navy officials have stated that the
LCS might also be suitable for homeland defense operations.\8\ Such
missions, however, might also be performed by NSCs, OPCs, and other
Deepwater assets.
Navy officials earlier spoke about building a total of perhaps 30
to 60 LCSs. A March 2005 report to the Congressional defense committees
on potential future Navy force levels, however, shows a potential total
force level of 63 to 82 LCSs.\9\ The Chief of Naval Operations has
spoken of the possibility of building a total of 75 to 100 LCSs.\10\
Navy statements about the LCS's possible suitability for homeland
defense, and the recent apparent increase in the Navy's planned number
of LCSs, raise several potential oversight questions for Congress,
including the following:
Do the Coast Guard and Navy have a common view on the
division of responsibilities between Navy LCSs and Coast Guard
NSCs, OPCs, and other Deepwater assets for performing homeland
defense and homeland security missions? Have the two services
adequately coordinated their plans for procuring assets that
can perform homeland defense and homeland security missions,
consistent with the Navy-Coast Guard National Fleet policy
statement? \11\
Does the Coast Guard believe that the LCS would be better
than NSCs, OPCs, or other Deepwater assets for performing
certain homeland defense and homeland security missions? If so,
which ones, and why? If the Coast Guard believes the LCS would
be better for performing these missions, should the revised
Deepwater plan be amended to include the procurement of LCSs
for the Coast Guard?
Was the Coast Guard's revised Deepwater Implementation Plan
influenced by an awareness that the Navy might be interested in
using the LCS for homeland defense missions, and if so, in what
way was the plan influenced?
What role, if any, did the homeland defense mission play in
the Navy's decision to increase the planned procurement
quantity of LCSs from a range of 30 to 60, to a range of 63 to
82 (or possibly 75 to 100)?
Timeliness of Detailed Cost and Schedule Information
The Deepwater Program is comparable in terms of total acquisition
cost, complexity, and lengthy period of acquisition to major DOD
acquisition programs. Until the submission to Congress on April 29,
2005, of the Deepwater supplement to the Coast Guard's FY 2006
budget,\12\ however, information available to Congress on the cost and
procurement schedule of the Deepwater Program, particularly for years
beyond FY 2006, appears to have been much less detailed and complete
than information that is normally made available to Congress in
February or March of each year on the costs and procurement schedules
of typical DOD ship or aircraft acquisition programs.
For DOD acquisition programs, information on the costs and
procurement schedules of major acquisition programs for the Fiscal Year
under consideration and the next four or 5 years (e.g., FY 2006 and FY
2007-FY 2011, respectively) is presented in detail in the Future Years
Defense Plan (FYDP) and extensive supporting budget-justification
documents. This information is usually submitted each year soon after
the initial submission of the top-line DOD budget in early February.
The defense committees of Congress consider this detailed information
on costs and procurement schedules necessary, even critical, to
ensuring adequate Congressional oversight of these programs. Receiving
this detailed information in February or March permits the defense
committees to review it in depth in preparing for their budget-review
hearings in February, March, and early April. Receiving it in late
April, after most or all of these hearings are usually concluded, would
significantly reduce its value in supporting the defense committees'
oversight and markup activities.
In past years, when planned Coast Guard acquisition programs were
not of the scale and complexity contemplated in the Deepwater Program,
the absence until late April of detailed future-year cost and
procurement schedule information may have had only a limited effect on
Congress' ability to conduct effective oversight of Coast Guard
acquisition efforts. With the advent of the Deepwater Program, however,
the absence of this kind of detailed information until late April
raises the following potential issues for Congress:
If the submission to Congress in February or March of
detailed, multi-year information on costs and procurement
schedules of major DOD acquisition programs is considered
necessary, even critical, to ensuring adequate Congressional
oversight of these DOD programs, why would the submission to
Congress in February or March of detailed, multiyear
information on costs and procurement schedules of the Deepwater
Program or other large Coast Guard (or DHS) acquisition
programs not be necessary or critical to ensure adequate
oversight of these Coast Guard (or DHS) programs?
If, for the Deepwater Program, Congress lacks, until late
April, the kind of detailed, multiyear information on costs and
procurement schedules that is typically made available to
Congress in February or March for major DOD acquisition
programs, how might this affect Congress' ability to consider
potential adjustments to the Deepwater Program that could
affect procurement schedules and funding requirements in future
years?
Should the Coast Guard (or DHS) be required, for the
Deepwater Program or other major acquisition efforts, to
provide Congress in February or March with the same kind of
detailed, multiyear information on costs and procurement
schedules that DOD provides to Congress in February or March
for its major acquisition programs?
Should the Coast Guard be given more autonomy to share with
Congress detailed information on costs and procurement
schedules for the Deepwater Program or other acquisition
programs?
Deepwater Acquisition Strategy
The Government Accountability Office (GAO) has testified and
reported several times on the Deepwater Program's acquisition strategy
and the issues this strategy raises regarding Coast Guard management of
the program.
In addition to this work, it can be noted that the Deepwater
acquisition strategy appears similar in certain basic respects to the
acquisition strategy for the Army's Future Combat System (FCS), which
aims at acquiring an integrated collection of manned and unmanned
ground vehicles, air vehicles, sensors, and munitions for the Army.\13\
In particular, the Deepwater and FCS programs are both large, system-
of-systems acquisition programs for acquiring multiple types of
equipment that are to operate in a networked environment, and both
programs are being executed for the government by an industry entity
acting as the prime contractor and system integrator. For the Deepwater
Program, the prime contractor and system integrator is Integrated Coast
Guard Systems (ICGS), a business entity jointly owned by Northrop
Grumman and Lockheed Martin, while for the FCS program, the lead system
integrator (LSI) is Boeing and Science Applications International
Corporation (SAIC). Using a private-sector lead integrator to execute a
large, system-of-systems acquisition program appears to be a first for
both services.
Using a private-sector lead integrator to execute a large, system-
of-systems acquisition program offers potential advantages for the
government in terms of taking full advantage of the lead integrator's
knowledge of available technologies and integration approaches, and
giving the lead integrator flexibility to make tradeoffs between
individual systems so as to optimize the government's investment at the
overall, system-of-systems level. As a consequence of these potential
advantages, some observers believe that the lead-integrator approach
may offer a potential model for future system-of-systems acquisition
efforts by DHS, DOD, or other executive branch departments.
Other observers, while acknowledging these potential benefits, are
concerned that relying on a private-sector lead integrator to execute a
large, system-of-systems acquisition program can also create one or
more of the following risks for the government:
Cost control and overall system optimization might be
reduced because the lead integrator, in deciding who should
provide various parts of the system, might not always employ
full and open competition between potential supplier firms, or
might sometimes face a conflict of interest in assessing bids
from its own subsidiaries against those made by other firms.
Cost control and innovation might be reduced because the
lead integrator, as the incumbent on a large, complex effort,
might face little or no real risk of losing the contract in any
subsequent competition, and might reject innovations offered by
outside firms that could threaten the lead integrator's chosen
approach to the problem.
The government's visibility into program costs and tradeoffs
might be inadequate, and the government's in-house capacity for
making independent assessments concerning the program might
atrophy, possibly making the government overly dependent on
information from the lead integrator for tracking, assessing,
or making key decisions about the program.
Due in part to concerns over its acquisition strategy, the FCS
program, in recent months, has been a matter of oversight concern in
Congress.\14\ On April 5, 2005, the Army announced that it was
restructuring the business aspects of the FCS program. The
restructuring included, among other things, the following actions
intended to strengthen the Army's management of the program:
The Secretary of the Army and the Chief of Staff of the Army
will conduct an indepth review of the program at least three
times a year.
The Secretary and the Chief of Staff will serve as the lead
Army officials for all major changes to the program.
The Army will establish an Army Modular Force Integration
Office to ensure that FCS technologies are incorporated into
the Army as soon as they are ready, and to integrate and
coordinate the FCS program with evolving Army warfighting
doctrine and the Army's emerging global communication and
information infrastructure. The new office will be overseen by
the Acting Under Secretary of the Army and the Vice Chief of
Staff of the Army.
As an additional oversight measure, the Army Audit Agency,
the Army Science Board, and an outside panel of advisors will
conduct periodic independent assessments of program cost,
schedule, and technical viability.\15\
As points of comparison with the last of the above actions by the
Army, the Coast Guard, has done, or is doing, the following:
During the source-selection phase of the Deepwater Program,
the Coast Guard used an Independent Analysis Government
Contractor (or IAGC, staffed originally by the MITRE
Corporation and later by Booz Allen Hamilton) to provide the
Coast Guard with independent assessments of the bids submitted
by the three industry teams that competed for the right to
become the Deepwater Program prime contractor. The IAGC was
stood down following the completion of source selection.\16\
During the source-selection phase and on two subsequent
occasions (including, most recently, during the analysis that
led to the revised implementation plan), the Coast Guard turned
to the Logistics Management Institute (LMI) for independent
cost estimates relating to the Deepwater Program.\17\
In early 2004, the Coast Guard used MITRE to perform an
independent assessment of the process the Coast Guard had
developed for performing the Performance Gap Analysis (PGA)
that eventually led to the revised Deepwater Implementation
Plan.\18\
As of late-April 2005, a third-party assessment of the use
of competition by ICGS was in progress.\19\
The broad similarities between the Deepwater and FCS acquisition
strategies, and the Army's recent actions to strengthen its management
of the FCS program, raise the following potential oversight questions
for Congress:
How do the Coast Guard's arrangements for managing the
Deepwater Program compare to the Army's arrangements, as
recently restructured, for managing the FCS program?
Are the Army's arrangements for managing the FCS program
stronger in some ways than the Coast Guard's arrangements for
managing the Deepwater Program, and if so, should the Coast
Guard consider adopting the stronger Army measures?
How does the Coast Guard compare to the Army in terms of in-
house acquisition-management and system-integration expertise?
Does the Coast Guard have enough in-house system-integration
expertise to conduct complete and fully independent assessments
of ICGS decisions and recommendations regarding the Deepwater
Program's system-integration approach?
Should the Coast Guard establish a standing independent
organization--perhaps similar to the Deepwater source-selection
IAGC (but permanent in nature), or to the Army's outside board
of advisors for the FCS program--to provide periodic and
ongoing assessments of ICGS decisions and recommendations
regarding the Deepwater Program, including decisions relating
to the program's system-integration approach, or to solicit and
assess, on an ongoing basis, proposed innovations for the
Deepwater Program, particularly from firms outside the ICGS
team?
Have the Coast Guard and Army established a regular process
for sharing with each other their experiences in managing the
Deepwater and FCS programs, and for trading ideas for improving
their management of the programs? If not, would the Coast Guard
and Army benefit from establishing such a process?
Madam Chair, Senator Cantwell, distinguished Members of the
Subcommittee, this concludes my testimony. Thank you again for the
opportunity to appear before you to discuss these issues. I will be
pleased to respond to any questions you might have.
ENDNOTES
\1\ This section is based largely on an April 28, 2005, Coast Guard
briefing to CRS and follow-on April 29, 2005, telephone discussion with
CRS, on the performance gap analysis and force structure determination
process underlying the revised Deepwater Implementation Plan, and on
supporting documents provided by the Coast Guard to CRS.
\2\ Coast Guard officials stated that the Bureau of Immigration and
Customs Enforcement (ICE) is, for the time being, performing the fixed-
wing portion of these operations.
\3\ The briefing materials used by the Coast Guard for its April
28, 2005, briefing to CRS show an unlabeled capacity level beyond Level
3 that fits the description provided here. Coast Guard officials agreed
at the briefing that, for purposes of this discussion, this capacity
level could be called Level 4.
\4\ John Birkler et al., The U.S. Coast Guard's Deepwater Force
Modernization Plan, Can It Be Accelerated? Will It Meet Changing
Security Needs? RAND Corporation, Santa Monica (CA), 2004. See
especially Table 4-2 on page 70.
\5\ For example, Section 888(i) of H.R. 5005/P.L. 107-296 of
November 25, 5 2002, the bill that established DHS, required a report
to Congress on feasibility and potential implications for cost,
capability, readiness, and operational efficiency of compressing
Deepwater procurement from 20 years to 10 years.
\6\ See CRS Report RS21059, Navy DD(X) and CG(X) Programs:
Background and Issues for Congress, by Ronald O'Rourke; CRS Report
RL32109, Navy DD(X), CG(X), and LCS Ship Acquisition Programs:
Oversight Issues and Options for Congress, by Ronald O'Rourke; and
RS21019, Coast Guard Deepwater Program: Background and Issues for
Congress, by Ronald O'Rourke.
\7\ Until recently, the DD(X) was being developed by a national
industry team lead by NGSS and Raytheon. The team also included GD/BIW
as well as Lockheed Martin, Boeing, and several other companies. Under
the Navy's DD(X) acquisition strategy of record, which was approved by
DOD in February 2004, the first DD(X) would be built by NGSS, the
second DD(X) would be built GD/BIW, and contracts for building the
first six DD(X)s would be equally divided between NGSS and GD/BIW.
In February 2005, Navy officials announced that they would seek
approval from DOD to instead hold a one-time, winner-take-all
competition between NGSS and GD/BIW to build all DD(X)s. On April 20,
2005, DOD deferred this proposal as premature, but agreed to a Navy
proposal to separate the DD(X) system-development and software-
development contracts from the DD(X) detailed-design effort. Section
1019 of the Emergency Supplemental Appropriations Act for 2005 (H.R.
1268/P.L. 109-13 of May 11, 2005) effectively prohibits a winner-take-
all competition to build all DD(X)s. The provision does not prohibit
the Navy from shifting to a new DD(X) acquisition strategy that somehow
involves a second shipyard, even if that involvement were limited, for
example, to building only one ship in the DD(X) program.
On May 25, 2005, the Navy announced that, in light of Section 1019,
it wants to shift to a DD(X) acquisition strategy under which two
DD(X)s would be procured in FY 2007, with one to be designed and built
by NGSS and the other by GD/BIW. Each ship might be split-funded (i.e.,
incrementally funded) in FY 2007 and FY 2008. The two yards might then
compete for the right to build all subsequent DD(X)s, in which case
this strategy could be viewed, at that point, as a ``winner-takes-all-
remaining-ships'' approach.
\8\ See, for example, John T. Bennett, ``Defense Officials Say
Littoral Combat Ships Could Defend U.S. Shores,'' Inside the Pentagon,
October 21, 2004.
\9\ For more on the LCS program, see RS21305, Navy Littoral Combat
Ship (LCS): Background and Issues for Congress, by Ronald O'Rourke, and
CRS Report 32109, op cit.
\10\ A recent press article stated that Admiral Vernon Clark, the
Chief of Naval Operations, is ``absolutely convinced'' there will be
``a rush to [build] 50,'' and then a move to construct another 25 or 50
ships. ``I think well see more than'' just 50 or 60 of the vessels, he
said in an interview.
(Dave Ahearn, ``CNO Clark Sees LCS Fleet Of 75-100 Ships,''
Defense Today, June 3, 2005: 1-3. Bracketed word as in the
article.)
An earlier article stated that in a January 2005 speech at the
annual Surface Navy Association symposium,
the CNO acknowledged that ``the navy is not correctly balanced
and optimised for the world of the future, and . . . faces a
three-decade-long effort to fully reform its forces to
accommodate national security needs such as anti-terrorism and
homeland security.''
``This is going to be a dramatically different navy,'' Adm
Clark concluded. ``I expect to have 50 to 75, maybe even 100
LCSs out there. Why? Because I think that's the kind of
platform you're going to need for the world that we're living
in.''
(Scott C. Truver, ``Transformation: A Bridge Too Far,'' Jane's Navy
International, March 2005: 24-26, 28-31. Ellipsis as in the article.)
\11\ The National Fleet policy statement is a joint Navy-Coast
Guard document first signed in 1998 and updated in 2002 that commits
the two services to coordinate their activities in several areas,
including acquisition. Among other things, the document commits each
service ``to build a National Fleet of multi-mission surface
combatants, major cutters, patrol boats, and aircraft to maximize our
effectiveness across all naval and maritime missions.''
\12\ U.S. Coast Guard, Budget Estimates, Fiscal Year 2006,
Integrated Deepwater System. 50 pp. Page ii of the document states that
it is a supplement to the Coast Guard's FY 2006 budget submission. The
Coast Guard submitted this document to Congress on April 29, 2005, and
provided CRS a copy on May 3, 2005. The Coast Guard submitted to
Congress another document containing additional information on May 31,
2005, and provided CRS a copy on June 15, 2005.
\13\ For more on the FCS program, see CRS Report RL32888, The
Army's Future Combat System (FCS): Background and Issues for Congress,
by Andrew Feickert.
\14\ See, for example, Jen DiMascio, ``McCain Questions Army
Leaders About FCS Contracting Agreement,'' Inside the Army, March 21,
2004; Jonathan Karp and Andy Pasztor, ``Army Program Run By Boeing
Faces Challenge By Sen. McCain,'' Wall Street Journal, March 15, 2005:
4. See also John Liang, ``Wynne: LSI Concept Working Well For Army's
Future Combat System,'' InsideDefense.com, February 13, 2005; Scott
Nance, ``Army Likely To Increase Use Of Systems Integration
Contractors,'' Defense Today, January 10, 2005: 1, 2; Dave Ahearn,
``Boeing Doesn't Eclipse Army Oversight Of FCS: General,'' Defense
Today, October 27, 2004.
\15\ U.S. Army News Release, ``Army Announces Business
Restructuring of the FCS Program,'' April 5, 2005. [http://
www4.army.mil/ocpa/print.php?story_
id_key=7125] See also Jen DiMascio, ``Army Announces Future Combat
System Contract Restructuring,'' Inside the Army, April 11, 2005; and
Jonathan Karp and Andy Pasztor, ``About-Face: Army's Decision On Boeing
Changes Philosophy,'' Wall Street Journal, April 6, 2005.
\16\ Source: Telephone consultation with Deepwater Program office,
May 3, 2005.
\17\ Ibid.
\18\ MITRE Corporation, Independent Assessment of U.S. Coast Guard
Deepwater Performance Gap Analysis Process, McLean (VA), 2004. (Version
1.0, March 30, 2004, MITRE Center for Enterprise Modernization, McLean,
Virginia) A copy of this report was provided to CRS by the Coast Guard
during the April 28, 2005 briefing.
\19\ U.S. Coast Guard. Oversight and Management of the Coast
Guard's Integrated Deepwater System, Washington, 2005. (Rear Adm.
Patrick M. Stillman, USCG, Program Executive Officer, Integrated
Deepwater System, U.S. Coast Guard Headquarters, Washington, D.C., 27
April 2005) p. 5.
Senator Snowe. Thank you. Thank you all very much.
Admiral Collins, in just, you know, evaluating this plan,
getting back to the original question as to why the Coast Guard
would be recommending a decreasing number of ships from the
pre-9/11 plan to the post-9/11 plan. On what basis is that
recommendation made?
Admiral Collins. Actually, it's--of course, the new
implementation plan is a range that is recommended, and the
range from--as you can see, the numbers are very, very close to
what the pre-9/11 numbers were. So, the--from my perspective,
the default setting, going in here, is the high-end of the
range, and should be tempered by actual performance that we
continue to examine and model. We're underway with the fourth
level of a--or performance gap analysis will--the very--all the
specific numbers now in that range will be modeled, through the
course of this summer and into the fall, to simulate and gain
detailed numbers on the operational effectiveness of the
specific implementation plan in the respective ranges.
Our emphasis in 2006 is to get the capability part right,
as a priority. It's very, very important, in this phase of this
systems-of-systems, to get the lineup correct, and lineup in
terms of what--when do we introduce what platform, on what set
of capabilities? How to get that right is a matter of priority
as we go and design, and so forth, the systems. Where we are in
time mandates that we do that as a matter of priority. That's
where we put--that's where we put our priorities this year. And
I'm very, very pleased that we did get a new mission needs
statement approved in the Department, a new mission needs
statement approved in the White House, and a strong receptivity
on the Hill, in terms of these capabilities.
So, that's been our priority. We will temper the capacity
part, the numbers part, for the duration of the project. And I
see that as a dynamic process, not as a static process. If we
find that the promised performance enhancements of this new
enhanced system-by-system that we're developing doesn't pan
out, then we're going to have to adjust those numbers. But I
see it as a dynamic process, not as a point estimate in time,
but something you temper with modeling and actual performance
after the systems get delivered. And we will continue to do
that, and that's our full intent.
Senator Snowe. Well, my concern is the fact that, in terms
of the numbers here, that the primary investments are made,
and, obviously, retrofitting current assets, aging assets, and
not really making a request for new and additional assets. I do
not think that it reflects reality, to be honest with you. I
have always been told--and I used to chair the Sea Power
Subcommittee, that quantity was a quality of its own. And I
know Mr. O'Rourke said in his statement, that this is turning
it on its head here now, that it's quality is a quantity all of
its own. And I know in this environment and what you are
requested to do each and every day, I just do not see how this
is going to bear out, in terms of realistic demands on the
Coast Guard.
Admiral Collins. Let me just make a--if I could, Madam
Chairman, just a point in clarification on the money invested
in legacy systems. The type of investment we're making in the
legacy system, the nature of the investment, is crucial here,
because if you look at the total amount of money that we're
investing in legacy systems in 2006, under the President's
request, the vast preponderance of that is not for sustainment.
The vast preponderance of that is conversion, and it's to take
the assets and make them Deepwater assets. So, that's a long-
term investment that'll pay off in the 40-year framework. The
true maintenance/sustainment part is only--is mostly focused on
the surface fleet. And in the case of the 2006 budget, it's
$37.5 million, what we call a mission-effectiveness program.
So, the real focus put the Band-Aids on the systems and keep
them running--is $37.5. The enhancement part is all the rest of
that money, $133 million of which, alone, is for the new
engines on the helicopter, and that's the Deepwater investment.
Senator Snowe. Well, I am going to disagree on the
fundamental premise, on the issue of capacity versus
capabilities. I just think that the demand is much greater on
Coast Guard, and particularly in the homeland-security area,
and, obviously, in the traditional missions of the Coast Guard.
I understand, on the conversions and enhancing performance--I
mean, I think we all understand that. But the fact that you're
diminishing the numbers here is what concerns me in this
environment. If you were requesting that pre-9/11, and now
we're saying, ``Well, we can do more with less''--I know we're
refitting, I know we're converting, but you're still sustaining
the legacy assets in maintenance is drawing 25 percent of the
Deepwater Program currently. And that will only get worse over
time.
Ms. Wrightson--and I would like to have you address this,
as well, Admiral Collins and Mr. O'Rourke--the issue of
acceleration. You know, which is worse? Being able--you know,
the degrading readiness of the Coast Guard's assets or trying
to grapple with the idea of acceleration that in--many of the
studies have indicated it will save taxpayers money. If you go
from a 10- to 15-year program, it'll save $4 billion.
Ms. Wrightson. I knew you'd ask the question, so I prepared
my response.
First, I want to agree with the Commandant that the
statistics that have been talked about, in terms of how much
money is actually going into sustained legacy assets that are
planned for replacement is now 3.9 percent of the requested
proposal. That is less than is going into management of the
contract. That's important.
In terms of acceleration, the real issue here is about
balancing the risks. There is no doubt that there could be cost
savings in a perfect world, where you could simply put another
asset on the water, or in the air. However, managing the risk,
going forward, is not a simple issue, and it won't--it doesn't
allow me a simple answer.
I want to say one thing that I think you would like to
hear, which is that if the Coast Guard were to--and if we're
able to--see a quick implementation over the year of our
recommendations, to the point where GAO would be able to close
those recommendations, then we would think there would be far
less risk to moving forward. That said, it also makes sense for
the Coast Guard to consider targeted accelerations of assets
that are proven and tested on the water, rather than just
putting money into the program and pushing every acquisition
forward. The former is a much less risky approach. So, for
example, it might for the NSC versus, say, putting it into all
the other assets all at once. So, that's a less risky approach
to the situation.
Senator Snowe. Mr. O'Rourke--thank you for that comment--
Mr. O'Rourke, what is your opinion on that?
Mr. O'Rourke. My testimony about accelerating is focused on
accelerating the procurement of the larger cutters in the
program, and I have focused on that because there is a linkage
between this issue and an issue concerning the Navy's surface
combatant industrial base.
When I testify on Navy shipbuilding issues, I try to
sensitize people to the option of looking to the Deepwater
Program as a way of helping to maintain the surface combatant
industrial base. And, in my work with people who work on Coast
Guard issues, I try and sensitize them to the fact that the
Deepwater Program can help maintain the Navy's shipbuilding
capacity in that area. I think each side needs to be sensitive
to how something on the other side can link into this.
My view is that, because these larger cutters are not
revolutionary designs--they are designs that will incorporate
well-understood hull forms and technologies--and because the
Coast Guard is not attempting something tremendously new with
these cutters, that the risk in accelerating them would not be
great, as long as you locked down the design of the ships
before you began accelerating them.
And, further, it might actually reduce the Coast Guard's
management burdens over time to accelerate the procurement of
these ships, once they're designs were stabilized, because you
would have less time involved in managing the procurement of
those ships, and because you would have a shorter period of
time during which you would have to devote management attention
to the sustainment of the older cutters.
Senator Snowe. Thank you.
Chairman Stevens?
The Chairman. It seems the CRS and GAO have the luxury of
accelerating when there's no money. I don't know if you realize
the President requested $66 million for Deepwater. The Senate
appropriations currently is at $906. The House is at $466. And
the House authorization is $1.4 billion. I think that the
responsibility for this modernization lies in the Congress, not
in the White House, not in the Coast Guard. I do believe so.
Admiral Collins, have you ever tried to work out a joint
procurement schedule with the Navy? Why do we have these two
ships that are so close together in size and function, and
being built by different specifications, different shipyards?
Industrial base is one thing, but do we need two industrial
bases?
Admiral Collins. We've been closely allied with the Navy on
the performance requirements of this whole program. When we
developed the performance specification for Deepwater, we did
it in conjunction with the Navy. We went to the Navy and asked
what their--we call it Navy--Naval operational requirements, we
need to embed in the performance contract. We did that.
But they're fundamentally two different missions--the
missions set. If you take a look at the Littoral Combat Ship,
for example, that's a premium on speed. It's a premium on
speed, in modular approach to their mission. We're--we have a
different mission dynamic. Ours is persistent presence for
interdiction, apprehension, prosecution, arrest. And we get the
speed, not through the platform; we get the speed through a--of
the system--the fast small boat, the fast helicopter, with the
ship. And we think that's a--for us, it's a better-value
proposition.
Speed costs a bunch of money. You buy a 45-knot ship, and
it's a very expensive ship. Our--the comparable ship to the
Littoral Combat Ship is our medium ship, the offshore patrol
cutter. It will be a much more affordable ship for the United
States Coast Guard, designed to cost $200 million. The Littoral
Combat Ship is a $200 to $300 million ship, before you put one
mission module on there. That's going to be pushing upward to
$400 million by the time it's through.
So, I think it's a better-value proposition for us. It's
built-in Navy requirements into it, so it can--it's
interoperable with the Navy. And we have, of course, a national
fleet policy statement that ensures that we manage and deploy
our ships synergistically. So, I think we've got the best
balance, Senator, on the mission, the requirement, and the
collaboration with the Navy under the present approach.
The Chairman. Good. I appreciate your answer. That
clarifies it.
Ms. Wrightson, what do you say about that answer?
Ms. Wrightson. I'm going to defer to the Coast Guard on
that. We haven't done an analysis of the relationship between
the Navy acquisition and the Coast Guard acquisition. Perhaps
Mr. O'Rourke wants to comment.
The Chairman. Mr. O'Rourke?
Mr. O'Rourke. I guess what I would say is that, on the
industrial base, the linkage is not with the Littoral Combat
Ship; it's with the Navy's DD(X) destroyer program. The Navy
has reduced planned procurement of that ship to one per year,
and there's concern about whether a one-per-year rate would be
enough to sustain the two yards that build the Navy's larger
surface combatant. So, from an industrial-base perspective, you
look at the DD(X) program and what might happen to that, and
use that to inform a decision on how Coast Guard procurement of
larger cutters might be able to help that situation.
The Chairman. Well, did CRS and GAO look at the problem the
Coast Guard has, in terms of the increasing cost of maintenance
of aging vessels, when there is no funding for replacement?
Mr. O'Rourke. I understand that in a situation of
constrained resources, if you were to accelerate cutter
procurement, you're going to have to get that money from
somewhere, and you're going to have to reduce something else to
do it. In the longer run, if you accelerate cutter procurement,
you will reduce the cost of those cutters through better
economies of scale, and you'll also reduce the legacy costs
associated with maintaining the older cutters sooner.
The Chairman. Are you implying that Congress ought to have
a BRAC process to tell the Coast Guard to shut down some of
these aging ships?
Mr. O'Rourke. I guess what I'm saying is that, in a
constrained funding environment, Congress will have to make
difficult choices, but they should at least understand what
some of their options are, and what the tradeoffs are involved
in those options.
The Chairman. Is one of the options to shut down some of
these old vessels that cost so much to maintain?
Mr. O'Rourke. The option I'm suggesting, that people at
least be aware of, is purchasing the cutters sooner, once their
design was locked down, getting a better price on them, and
saving money there, and also possibly saving money because
you're getting rid of the older cutters sooner, as a
consequence of getting the new cutters into service sooner.
The Chairman. Ms. Wrightson?
Ms. Wrightson. Yes, we attempted to do an analysis of
whether or not there would be cost savings to accelerate the
program, but it was--in the end of the day, the Coast Guard
really didn't have the data that we would need to look at it
from a systems-of-systems perspective. From an asset-by-asset
procurement, you probably could do that analysis, although it
still is an open question as to whether we would have the data
for it.
I want to make two points about the acceleration. You
can't--when you think about whether or not you should
accelerate, it's not just about the impact on the industrial
base, although that certainly is important. You also ask--have
to ask about risks. And one that hasn't been mentioned is human
systems engineering. You know, we already recognize that as a
major risk, and that's the people aspect of Deepwater. So,
there's training, operations, and maintenance----
The Chairman. Stop right there, ma'am. I want to hear
Admiral Collins----
Ms. Wrightson. Sure.
The Chairman.--and my time's already up. What do you say
about that, Admiral?
Admiral Collins. Sir, about--of course, I bristle at the
thought of laying up ships without replacement, Senator,
because that just exacerbates further our capacity issue. I
mean, we have ships that--particularly up in your great State
of Alaska, elderly ships holding up the----
The Chairman. They're almost as old as I am, Admiral.
Admiral Collins. Sir, they're mature. We call them mature
cutters.
[Laughter.]
Admiral Collins. But to retire them without replacement
is--would be a huge impact on our readiness and our mission
accomplishment, so----
The Chairman. That's the answer I expected. You don't have
that option.
Admiral Collins. No, sir. I think the--what we're doing is
trying to invest prudently in the current systems to keep them
at the readiness level they are, and then to move as quickly as
affordability issues and budget constraints and everything else
would allow us to do.
Example: the Fast Response Cutter. We----
The Chairman. I'm out of time. Thanks.
Admiral Collins. Yes, sir.
The Chairman. Yes, go ahead.
Admiral Collins. Sir, we've advanced that from--that's
originally a 2017 entry into the fleet--we've moved that up
from--to 2007. That is--because why? Because that is one of the
legacy systems that are old and tired, wearing out, and we've
got to get on with that. We also advanced, by 5 years, the
design of the medium cutter--originally, like, a 2012 type of
thing, and we're designing that as we speak. So, we've taken an
asset-by-asset look, and say, ``What are the old tired ones?
What are the ones we have to advance?'' So, we--part of the
implementation plan was moving those two systems forward, and
we had to make some tradeoffs because of affordability and
budget constraint. We had to move some of the aircraft to the
right, to keep it in balance. So, that's our dilemma, Senator.
The Chairman. In view of the generosity of the Chairman, do
you want to finish, Ms. Wrightson?
Ms. Wrightson. If I could. The--I agree with what the
Commandant has said about the cutters, the decision to take a
look at those and to, sort of, target your risks in order to
make sure that the assets that you're investing in are the ones
you need the most. That makes sense.
The human systems engineering point I was going to make is
an important one, because, right now, what we're seeing, that
is a growing risk in the Deepwater Program. It's the people
side of this program. And, currently, even the Coast Guard is
dissatisfied with ICGS there. So, going forward, when we look
at the mission needs statement in this coming year, and analyze
it, and when we look at the management of the program, we're
going to focus on this issue, as well as others related to the
adequacy and sufficiency of the MNS plan to see if it really
does the things the Coast Guard's going to need. So--and you've
requested us to do that.
Thank you.
Senator Snowe. Thank you.
Co-Chair Inouye?
Senator Inouye. Admiral Collins, at the present time you
have in your inventory 91 legacy cutters, is that correct?
Admiral Collins. Depending on--it's over 200 if you include
patrol boats and the whole fleet, Senator.
Senator Inouye. But the big ones?
Admiral Collins. The big ones, the--yes, that's the
approximate number. Yes.
Senator Inouye. How many did you have on 9/11?
Admiral Collins. I think that a side-by-side comparison,
I'll have to provide for the record. It----
Senator Inouye. About the same, isn't it? No increase.
Admiral Collins. No, we're not increasing over the pre-9/11
levels. There are even less assets than the pre-9/11 levels.
And our whole acquisition strategy is not a one-for-one
replacement; it's looking at the performance of the system, is
our approach.
Senator Inouye. And your legacy cutters are the oldest
vessels now floating?
Admiral Collins. Of 41 nations, Senator, that have
comparable coast guards or navies, we rank 39th oldest out of
41. Philippines and Mexico are the only nations that have older
fleets.
Senator Inouye. Should we be proud of that?
Admiral Collins. No, sir.
Senator Inouye. Now, as to legacy aircraft, do we have more
since 9/11, or do we have less?
Admiral Collins. Our implementation plan, if you look at
the numbers prior to 9/11--this is the HU-25, the C-130, the
helicopter, the two helicopters we have--it's about the same in
our revised plan, at the upper limit--about the same number,
and we're just replacing some with a different type. And
including--if I might add--and including unmanned airborne
vehicles to the mix, so it actually enhances the overall
surveillance capability of the fleet.
Senator Inouye. So, you have some of the oldest vessels
floating on this globe, plus no increase in aircraft, but yet
you've had an increase in assignments, your wartime assignments
in the Gulf and surrounding waters have not diminished?
Admiral Collins. Yes, sir.
Senator Inouye. Do you still think you can do it?
Admiral Collins. I think that we're going to have to keep
evaluating the numbers. And I think it'll be--as I mentioned
before, it'll be a dynamic process, year by year. We'll keep
modeling. We'll look at the performance. This should be a
performance-driven budget evolution that will allocate budget
based upon performance of the system. And, if it's inadequate--
they will continue to model, and we look forward to the GAO's
participation in that--continue to model, and if the
performance isn't right, I'll be the first one to push that
up--that range up to the right--you know, increase that--based
upon what we find, over time.
Senator Inouye. My last question. You've added 40,000
officers since 9/11. Is that correct?
Admiral Collins. No, we've added about--we've gone about
12.5 percent to a 47,000 total workforce, including about 7,000
civilians.
Senator Inouye. What are you doing with the increased
personnel if you have no ships?
Admiral Collins. Sir, the number--part of those--that
workforce growth was to go to new units that we've created.
Their focus is security. Example: maritime safety and security
teams. We created 13 of these teams around the country--70-
person active-duty, augmented with reservists. And they went--
the additional folks that we've got--the 12.5 percent force-
structure growth--went to building those units, brand-new
units, to give enhanced security capability to the Nation. And
we also added people to oversee the new port and vessel
security code that we put--regulation that the Maritime
Transportation Security Act called for. And we added over--
close to 500 people, if I have my numbers correct, to ensure
compliance with those new standards--security standards. So,
those are a couple of examples of where the new resource, the
new force structure, has gone.
Senator Inouye. At the rate we're progressing, when do you
think we'll have the tenth newest fleet in the world?
Admiral Collins. Again, sir, what will be the----
Senator Inouye. You said our fleet is the third oldest
fleet in the world. When will we have the tenth newest?
Admiral Collins. I don't know. I'll give you a--it depends
on the funding. I'll--this all revolves on the funding. And we
talk about the--my biggest challenge--take a look at the 2006
budget. Senator Stevens mentioned it. It's a reflection of the
cash-flow and stable funding. Right now, I have a House mark
that lopped off $466 million out of the President's request.
The President and OMB were--very strongly supported our revised
plan, to the tune of $966 million, substantial growth over
prior years. My challenge is support in the Hill. I've got--
when I get a mark like that in the House, and I--we didn't get
the President's request on the Senate side, either, although a
great--very favorable consideration on the Senate side; it's
much closer to the target. But that's the challenge, Senator. I
need to have at least the President's request. Prior to, even,
the implementation plan being changed, up and through, like,
2005, we were, cumulatively, down over $200 million from what
the baseline capital funding for Deepwater was.
So, we've been continually shorted in this program. The
marks that we have currently for 2006, both in the House and
the Senate, cause me great concern that this project, if we
don't recover from those kind of marks, will implode. This
acquisition strategy in this project will implode.
So, I guess it's--you know, you--first, you keep the ship
from sinking, you know, in terms of a damage control, and we've
got to stop the hemorrhaging here, from the budget
perspective--that's my greatest challenge, sir.
Capacity issue certainly is a relevant issue. We've got to
keep hammering away what the right number is. Capacity is
high--capability--getting the capability right--that means
getting the ship designs right--is a real priority. But, also,
getting the budget flow right. And that's what I'm really
concerned about, sir.
Senator Inouye. I thank you very much, Admiral.
Thank you, Madam Chair.
Senator Snowe. Thank you.
Senator Cantwell?
Senator Cantwell. Thank you, Madam Chair. I know there's a
vote on, so I will try to be brief.
Admiral, the Coast Guard did a series of analyses of
different levels of performance and capability based on
different levels of investment. But I think those were all done
prior to submitting this particular plan. Is that correct? This
plan doesn't have an accurate assessment of what these
capabilities will actually produce?
Admiral Collins. We did--we've done a series of--phases of
studies in modeling--phase one, two, and three. And they first
looked at gaps, and they ranked gaps, and they did--we've done
risk analysis. The last phase, or the fourth performance gap
assessment work--that's what we call it--will take a look at--
model the specific numbers in ranges that are reflected in the
current implementation plan. But all that work was supportive
of that implementation plan. It's just doing a simulation in
modeling on the specific numbers. Because those numbers have
danced around. As we've gone through the budget process,
they've danced a bit, you know, upon review after review. And
now we've, in the terms of this implementation plan, fixed
them, and we'll do with--the last refined operational
effectiveness modeling here with the specific numbers.
Senator Cantwell. And when can we expect that? Because,
obviously, our challenge here is to debate, with less
resources, what our capabilities really are and what capacity
we will get with this particular proposal. So, how can we get
that information so we can do a better job at oversight?
Admiral Collins. Let me ask Admiral Stillman, who is the
guy in the hot-seat managing the project, in the specifics on
what the timeline is on that last phase of the assessment.
Admiral Stillman. Senator, that will be done in August of
this year, as far as the campaign-level modeling. But I would
also add that there are different types of analysis models that
we're using. If you look at this particular system, and assess
the capability of the national security cutter, the ship in
production right now, compared to the 378-foot cutter that
sails out of Washington and other states, we will quadruple our
surveillance capability with respect to those platforms.
Senator Cantwell. I think what we want is an accurate
assessment, so we're all looking at the same set of numbers.
Admiral Stillman. You bet.
Senator Cantwell. We need accurate data, so that we can
then discuss whether we think issues of acceleration need to be
further considered, or whether we don't think they're wise. I
think that's the big mystery here, right? We want to see the
actual analysis of capability that goes with this particular
proposal that's been submitted.
Admiral Collins. But we would anticipate, Senator, by the
end of the summer, that, you know, we'd be able to provide you
that information. And, as I mentioned earlier in my testimony,
we see this as not a done deal. We'll continue to evaluate and
evaluate as this project matures and as we actually deliver the
asset and it's in actual operation. So, it's--I think this is a
never-ending journey. We continue to refine the information and
make the best assessments we possibly can.
Senator Cantwell. Can I ask another question? Because then
we're going to be out of time. The lead-system integrator
approach--which seems like the Army is the only other Armed
Service that uses that--is that really the best way to keep
cost controls in the system? And since the Army is backing away
from that approach, shouldn't the Coast Guard look differently
on that particular model of controlling costs?
Admiral Collins. Well, I--it's interesting. It's a common
question we get. I think, when we were initially going into
this, and we looked at the risks--and I think you've got to
look at risk and cost schedule and performance, all three of
those, and what are the greatest risks--we felt, after
extensive study and third-party oversight--we brought in
acquisition specialists--third-party private firms in to look
at it--the biggest--the most powerful risk mitigator--although
it's still high risk, this project--the biggest risk mitigator
was the systems integration. I can't imagine us trying to tie
all these assets together and do--be our own integrator. The
risks will go up dramatically, in terms of cost schedule and
performance. And every way we've looked at that, we've come to
that conclusion.
The early estimate would be another 15 percent, at least,
in cost that it would cost us to do individual procurements.
And then we wouldn't end up with a system of systems; we've end
up with individual things that may or may not be tied together.
So, we've looked at this since the mid-1990s, every which
way to Sunday. We've come back to the same conclusion, that the
systems integrator is the most----
Senator Cantwell. What would you say, Admiral, is unique
about the Coast Guard, then, juxtaposed to other parts of our
Armed Services, with respect to this approach?
Admiral Collins. I think one of the things that was unique,
that, Senator, all these assets were coming at the end of their
service life--i.e., reaching technological obsolescence at the
same time. And I don't think any other service had a full range
of its assets expiring at the same time. And so, this lent
itself, clearly, to that approach. And our capacity to manage,
you know, 15-16 individual contracts was beyond the scope of
our organization.
Senator Cantwell. Thank you, Admiral.
Senator Snowe. Thank you, Senator Cantwell.
And I'll just ask a final question, and then I'll close out
the hearing, because we have a luncheon at the White House at
11:30.
But I just want to follow up on this issue, because
obviously, the Congress bears responsibility, as well, in terms
of the funding. And, obviously, the House has its issues,
seeking more information from the Coast Guard with respect to
the recent cut, at least from what I've read. I hope that that
will be honored so that we can get that squared away and bring
it back up to a higher level. But, second, what is driving this
process? In the end, I think we all understand, it's being
driven on a theoretical budgetary model that is being,
obviously, galvanized by the Office of Management and Budget.
And that's what we have to deal with here today. I have no
doubt that if we were to put forward a proposal that provides
significantly more funding, we would still be facing and
discussing the same challenges that we are here today. It's the
focus of this hearing. Because I know all of the analysis
that's been done, whether it's the RAND study or the Center for
Naval Analysis, even your own internal performance-gap
analysis, when I look at the contrasting plans internally, and
the numbers, you obviously were proposing a higher number. I
don't have any doubt that you would have proposed a higher
number, given what your service is facing in the challenges
each and every day.
So, that's what we're dealing with here. It's a number
that's driven by the Office of Management and Budget. And,
obviously, Congress has contributed to that with the erratic
nature and inconsistent levels of funding year to year. But it
is a problem that we must address and grapple with, both on our
end, as well as, obviously, down at the other end, as well.
Pennsylvania Avenue, when it comes to these issues--I mean,
this is the reality. We can postpone the reality, but the
reality is going to continue to exist, at great cost to this
country, and great cost to the men and women who have to serve
in these aging assets. It speaks volumes. The Coast Guard is 40
out of 42 of the oldest naval fleets in the world. That is not
going to get better over time; it's going to get worse.
And so, we obviously have our part to do, in our role and
our responsibility, but I just think that it would be a major
omission here if we didn't discuss what's driving this, as
well. Because I don't know that anybody has asked, ultimately,
in all the bases, all the studies--internally, externally, and
otherwise--suggesting that we should have a decreased number of
assets in this moment in time in our Nation's history.
So, I hope we all understand that. I look at the numbers of
your own Deepwater force-structure studies and the issues that
Ron O'Rourke raised, as well, in his analysis, where you should
be in that spectrum, and what will happen as a result of not
being in that spectrum--and so, that's what we have to grapple
with. We're all going to play this numbers game. And
unfortunately, you bear the brunt, as well, and that's what
we--I think, we have to deal with here. What can we do? My
colleagues have to recognize that responsibility, as well. So,
I think, the Office of Management and Budget, that is what is
really driving this revised implementation plan. And I think we
all have to know what the consequences are.
Admiral Collins. Clearly, the President's request was--
coming forward in 2006, was a function of our participation in
the Department of Homeland Security, participation in OMB. We
all have perspective on this requirement, and, obviously, it
was a joint effort to come to the conclusions we did, relative
to the level.
Let me say--let me say this, that I'm extraordinarily
pleased that we were able to submit a budget at a $966 million
level. That was a huge breakthrough for us. And, I tell you----
Senator Snowe. It could have been worse----
Admiral Collins.--it----
Senator Snowe.--I understand that.
Admiral Collins.--it took a lot of work----
Senator Snowe. I understand.
Admiral Collins.--to get to that level.
Senator Snowe. I understand that.
Admiral Collins. And the other thing that--so, that's--that
reflects even--you know, it's strong support by OMB to support
that level. That was a huge thing for them to bite off on and
support that level for us. And it reflects their interest in
this program.
The other thing that was a major win, I think--and I know
you're as much interested in the capacity part as the
capability part; it's very, very obvious--but the--but to get
our capability enhancements reviewed and approved at the
departmental level and at OMB, I think, is a major, major
victory. That is a significant up-tick in the acquisitions
costs--you know, in terms of the range, the 20--up to $24
billion--$19 to $24----
Senator Snowe. Yes, 20 years from now, though.
Admiral Collins. Yes, I--well, everything--we'll----
Senator Snowe. I know.
Admiral Collins.--tackle one challenge at a time. But that
was a huge, huge----
Senator Snowe. Really.
Admiral Collins.--advance for this program. So, I'm very
pleased with the $966 million. I'm very pleased that we got the
capability part approved. And I hope--my next-biggest challenge
is to get the support in Congress for the President's request.
If we don't--I mean, that's challenge number uno right now--if
we don't, then all of these things are going to set back. For
example, just one example, one of the things in both the House
mark and the Senate mark was that they rescinded the money--
patrol-boat money. If that stays, then all the progress we've
made on replacing the Fast Response Cutter, advancing that from
2017 to the current time, is going to go right down the tube.
So, again, the priority is to get the capability right and get
the President's request, and then we can continue to examine
and evaluate the capacity part, and continue to get that right,
over time.
Senator Snowe. Well, I appreciate it. I wish we could
continue on this whole discussion, but I have to depart. My
time has expired in the vote. And so, lucky for you.
But, in any event, I appreciate that. We're going to have a
number of follow-up questions. And, also, on the whole issue of
targeting the acceleration and some of the assets that both Ms.
Wrightson and Mr. O'Rourke have also raised, I'd like to
evaluate that. And also, Mr. O'Rourke, what you're talking
about in the Littoral Combat Ship and the Deepwater assets,
what can we do, in that respect, to, sort of, integrate--
complement these programs, and so on? I think that's an
interesting question that we ought to continue to explore. And
I will work with Chairman Stevens, as well, on these issues.
But, suffice it to say we have significant challenges, and,
obviously, we assume responsibility, as well, you know, for
what we haven't done. But I just think that it requires both
branches of government to understand the enormous ramifications
if we defer this so far out into the future that will invite,
exponentially greater problems, without question. And we know
the anecdotal evidence that comes in, as you well do, Admiral
Collins, and our inability, because of these failing assets,
and what that does to jeopardize the men and women who have to
use these assets on a daily, life-threatening circumstance.
So, I thank you all. I thank you for your contributions.
I'm going to follow up with a number of questions on a number
of the issues that you have raised.
This hearing stands adjourned.
[Whereupon, at 11:25 a.m., the hearing was adjourned.]
A P P E N D I X
Response to Written Questions Submitted by Hon. Olympia J. Snowe to
Admiral Thomas H. Collins
Question 1. How will the Coast Guard maintain heightened operation
levels as well as surge response with fewer available assets as this
plan indicates?
Answer. The 25-year, $24 billion Revised Deepwater Implementation
Plan gives the Coast Guard greater capability than that planned in the
original Deepwater baseline plan. The end-state asset numbers reflected
in the revised plan represent a net increase in total force strength
above the original Deepwater baseline level with an additional 17
fixed-wing aircraft and 8 helicopters. Moreover, the revised plan
leverages improved capabilities on all assets to increase system-wide
surveillance, detection, identification, classification, and
prosecution. These capabilities enhance the Coast Guard's ability to
maintain heightened levels of operations and meet surge needs with
fewer assets than the Legacy system being retired. For example, a force
package composed of 1 National Security Cutter (NSC), 1 Multi-Mission
Cutter Helicopter (MCH), and 2 Vertical Unmanned Aerial Vehicles
(VUAVs) will be able to conduct surveillance over 56,000 square miles
compared to a current 378, High Endurance Cutter (WHEC) force package
which only covers about 13,500 square miles on a daily basis.
Furthermore, the NSC force package will be programmed to operate 230
days/year compared to 185 days/year for a 378, WHEC.
Question 2. Do you believe that acceleration of Deepwater is not
necessary, or simply not possible due to the amount of funding you
receive?
Answer. The Fiscal Year 2006 President's request of $966 million
for Deepwater makes a strong statement regarding the urgency of this
program by advancing critical elements such as HH-65 re-engining by 5
years, Fast Response Cutter development by 10 years, and OPC design and
materials procurement by 5 years while keeping essential NSC
construction on schedule.
Implementing the revised Deepwater plan, as submitted by the
Administration, will recapitalize and modernize the Coast Guard with
enhanced maritime safety and security capabilities necessary to ensure
operational success across all of our missions at a rate that balances
risk and affordability.
Question 3. What level of funding would have to be provided in
Fiscal Year 2006 to accelerate the revised Deepwater Program to a 15-
year completion date? Can you estimate what savings would be achieved
by accelerating the program to a 10-year timeline? 15-year?
Answer. Accelerating Deepwater to a 15-year completion date (from
the 2002 contract award) would require completion of the program
funding by 2016. Currently, the $24 billion acquisition cost is spread
out over 25 years. Approximately $2.18 billion has been expended in the
first 4 years of the acquisition. Spreading the remaining $21.8 billion
dollars over the period from Fiscal Year 2006 through 2016 would
require an average annual investment of $1.98 billion dollars beginning
in Fiscal Year 2006. Completion of the Deepwater Program on a 10-year
timeline would require its funding be completed by Fiscal Year 2011.
Given the complexity and number of assets involved in the Deepwater
system of systems acquisition, the Coast Guard does not believe the
program could be executed by 2011. Completing the system by 2016 (a 15-
year timeline) could be executed and would potentially yield savings.
The Coast Guard has conducted some informal assessments as to the
potential cost savings and cost avoidance if the acquisition was
completed sooner. To date, our assessments have identified the
following potential savings:
Contract Performance Management: If Deepwater were to be
completed sooner, total project cost of system integrator and
government contract management personnel would be reduced.
Additionally, a shorter contract term will lessen the number of
performance award fee determinations paid out contributing to
further future years savings. These award fees typically
average approximately $5 million, minus 10 percent, and will
undoubtedly grow with inflation and asset delivery in future
years.
Legacy Cutter Maintenance Costs: Legacy cutters could be
retired much sooner. Due to increasing age and continued high-
op tempo, legacy cutter maintenance costs have been increasing
at a rate much greater than estimated in our Deepwater pre-9/11
baseline planning. The early retirement of these assets will
stop these increasing costs sooner. It will also reverse the
trend of increasing lost days due to unscheduled maintenance to
repair casualties.
Legacy Asset Modernization and Service Life Extension: If
replacement assets were provided sooner, currently anticipated
service life extension projects such as 210-foot Medium
Endurance Cutter (WMEC) sustainment projects or aircraft
avionics upgrades would no longer be required.
Question 4. What are the cost estimates for legacy asset
sustainment in the coming years? Will it be more than 25 percent of the
Deepwater budget that is now requested?
Answer. The cost estimates for out-year legacy asset projects have
been provided to Congress in the Deepwater Fiscal Year 2006 Capital
Investment plan. The Coast Guard places Deepwater legacy asset
Acquisition, Construction, and Improvement (AC&I) maintenance projects
into three categories: sustainment, enhancement, and conversion. These
projects will amount to $1.945 billion, less than 8.25 percent of the
overall Deepwater acquisition cost and are further described below.
Sustainment projects are designed to maintain existing
legacy asset capabilities and ensure the reliability of these
assets until they are replaced by their Deepwater counterparts.
An example of a sustainment project is the Mission
Effectiveness Project planned for Coast Guard's 210-foot and
270-foot WMEC fleet, where obsolete and failing engineering
subsystems are being renewed. The Coast Guard's legacy asset
maintenance plan includes $338 million in sustainment projects,
or approximately 1.5 percent of the total Deepwater acquisition
cost.
Enhancement projects are designed to improve capabilities
onboard legacy assets in the interim before these assets are
replaced by their Deepwater counterpart, per the Revised
Deepwater Implementation Plan. An example of an enhancement
project is the upgrade of Command, Control, Communications,
Computer, Intelligence, Surveillance, and Reconnaissance
(C4ISR) equipment onboard WMECs and WHECs. The Coast Guard's
legacy asset maintenance plan includes $103 million in
enhancement projects, or less than half of 1 percent of the
total Deepwater acquisition cost.
Conversion projects are designed to renovate and upgrade
existing legacy assets to the point where they are incorporated
as part of the final Integrated Deepwater Solution (IDS) force
structure. An example of a conversion project is the ongoing
HH-60J avionics modernization project. The Coast Guard's legacy
asset maintenance plan includes $1.504 billion in conversion
projects. Legacy conversions total approximately 6.25 percent
of the overall Deepwater acquisition cost.
Question 5. How do you explain moving forward with Deepwater under
the onus of ``more capable'' versus ``more capacity''?
Answer. The answer is in the post-9/11 capabilities added to the
Deepwater System in the revised implementation plan. They include the
improved C4ISR, greater speed and stopping power, airborne use-of-
force, and intelligence capabilities Deepwater delivers. These
capabilities will enable the Coast Guard to put the right asset in the
right place at the right time for years to come. The Coast Guard has
already seen results with the use of these new capabilities recently
installed on legacy assets. For example, enhanced C4ISR capabilities
enable better use of intelligence, which when combined with airborne
use-of-force capabilities, is the primary reason the Coast Guard has
shattered drug interdiction records in recent years. These are revised
Deepwater capabilities in action; once they are installed in the new
Deepwater assets the Coast Guard will see similar performance across
all its mission areas. Having more capable assets is the first step to
increased performance.
More capable assets will be able to do a great deal more than those
reflected in the pre-9/11 Deepwater construct--just as modern power
tools and materials enable a carpenter to build a home in a shorter
amount of time than the days when hand saws and hammers were the norm.
Furthermore, our risk analysis indicates that the same capabilities
added for increased performance across all the missions are essential
for lowering the risk for a variety of the most consequential maritime
terrorist threat scenarios.
Question 6. When the 110-foot patrol boats were being delivered to
the Coast Guard, the Coast Guard established a pre-commissioning
facility in New Orleans to support the pre-commissioning crew during
its familiarization period prior to delivery of each cutter, as well as
after delivery of each cutter as each crew developed proficiency in
operating the cutter before transiting to homeport. The facility was
located relatively close to the construction shipyard so that warranty
items identified by the crew could be quickly resolved prior to the
cutter's departure for homeport. Naval Station Pascagoula seems ideally
situated to serve as such a facility for the Deepwater cutters being
constructed in Mississippi. Does the Coast Guard intend to establish a
similar facility for those cutters, and if so, would the Coast Guard
consider locating it at Naval Station Pascagoula?
Answer. The Coast Guard is establishing a Gulf Coast Primary Crew
Assembly Facility (PCAF) to support the training and on-site logistics
demands of the NSC and Offshore Patrol Cutter (OPC) pre-commissioning
crews. The initial PCAF crew of 6 military personnel will be operating
from contractor-provided spaces at Northrop-Grumman Ship Systems
Ingalls Shipyard in Pascagoula, MS, to support the NSC and OPC.
Question 7. Admiral Collins, in a previous response, you indicated
that the HH-65 helicopter re-engining program would send two helos to
Columbus, MS in FY05 and six helos there in FY06. However, Columbus has
the capacity to perform more conversions during those 2 years and the
Coast Guard plans to deliver 10 helos to ARSC during FY07.
Additionally, the total number of helos delivered to ARSC and Columbus
combined is planned to be 29 in FY05 and 51 in FY06. It seems to me
that the re-engining project could be completed faster if more helos
were sent to Columbus, especially in FY05. Why is this not being done?
Answer. In December 2004, to accelerate the HH-65 re-engining
project, the Coast Guard delivered a helicopter to Columbus, MS. With
its Deepwater contractor, Integrated Coast Guard Systems (ICGS), the
Coast Guard is examining the quality and suitability of this second re-
engining facility. The Columbus facility projects completing this first
re-engining in September 2005. This first job is currently 80 percent
complete. If the Columbus facility meets quality and suitability
requirements, the Coast Guard plans to fund a total of five helicopters
for conversion in Columbus with Fiscal Year 2005 funds and seven in
Fiscal Year 2006.
Along with awaiting the completion and assessment of the first
aircraft to be re-engined in Columbus, there are two other factors that
limit the rate at which re-engining can be accomplished. First, the
schedule for conversions is dependent on the availability of engines
and airframe kits. The manufacturer is producing these items as quickly
as possible. Second, removing more helicopters from service than called
for in the current schedule could jeopardize the Coast Guard's ability
to respond to operational missions. These two factors have been
carefully considered in developing an ambitious schedule to re-engine
all operational aircraft by February 2007.
Question 8. Admiral Collins, the Coast Guard and MariTEL Inc. have
been struggling to find a resolution to their seemingly conflicting
concerns: the Coast Guard wants to use the VHF-FM spectrum differently
than originally envisioned and MariTEL wants to retain enough useable
VHF-FM spectrum to develop a viable business. The difficulty in
achieving both objectives seems to be technological, in that their
respective uses of the VHF-FM spectrum present potential interference
problems with each other. MariTEL believes that a technological
solution to this interference problem that would enable both the Coast
Guard and MariTEL to fully develop this spectrum for their respective
purposes does not currently exist, but may be possible to develop. Does
the Coast Guard agree with this assessment?
Answer. The Coast Guard does not concur with this assessment.
The Coast Guard is not using the VHF-FM spectrum differently than
originally envisioned as the question assumes. The use of the VHF-FM
maritime spectrum has not changed since the Coast Guard originally
supported the designation of two VHF-FM channels for an Automatic
Identification System (AIS) by the International Telecommunications
Union World Radio Conference in 1997. Additionally, the Federal
Communications Commission set aside frequencies for AIS in 1998, before
MariTEL purchased VHF-FM frequencies at auction. While the Coast
Guard's designed use of the VHF-FM spectrum has not changed, the events
of September 11 and the subsequent adoption of the Maritime
Transportation Security Act of 2002 (MTSA) expedited the implementation
of AIS and expanded AIS carriage requirements.
With regard to a technological solution to potential interference
problems within the VHF-FM spectrum, confirmed by a study conducted by
the Department of Defense Joint Spectrum Center in February 2004, the
Coast Guard has identified readily available interference mitigation
techniques that would permit: (1) the mandated nationwide
implementation of AIS operations in accordance with the MTSA for
maritime safety and homeland security communications; and (2) the
development of the rest of the spectrum by MariTEL for commercial
maritime communication services.
______
Response to Written Questions Submitted by Hon. Daniel K. Inouye to
Admiral Thomas H. Collins
Question 1. The revised Deepwater plan lists a number of enhanced
capabilities that will be provided to the Coast Guard. Understandably,
most of these capabilities are aimed at the Coast Guard's security
mission. How will these new capabilities also help the Coast Guard
fulfill its non-security related missions, such as fisheries
enforcement?
Answer. The Coast Guard is acquiring a future fleet that is made up
of a balanced system consisting of the right blend of capability (the
individual ability of each asset) and capacity (the total number and
mix of assets). These capabilities are designed to enhance multi-
mission performance. Although our re-baselining effort focused on
homeland security missions, the capabilities selected for inclusion
into the system enhance performance in other critical mission areas
such as search and rescue, fisheries enforcement, and drug and migrant
interdiction. Fisheries enforcement, for example, will benefit from the
enhanced surveillance, detection, and classification capability built
into the NSC and OPC which will extend about four times the number of
square miles that a WHEC provides today.
Question 2. I am a bit concerned that the new plan reduces the
total number of assets, especially given the need for physical presence
in areas like the Western and Central Pacific. Being able to see and to
identify an illegal foreign fishing vessel with this cutting-edge
technology is all well and good, but how will the Coast Guard catch
them unless a cutter is out there too?
Answer. Though the Revised Deepwater Implementation plan provides
fewer major cutters than the current legacy Coast Guard fleet, it
provides 97 percent of the total number of current patrol days due to
increased operational efficiencies. The revised Deepwater plan also
provides 21 percent more fixed-wing aircraft and 18 percent more patrol
boats. Under this more efficient force structure, the increased numbers
of patrol boats assume more duties in the littoral waters and free
major cutters to patrol further offshore, such as in the Western and
Central Pacific.
Significantly improved intelligence gained from the new Deepwater
system including the use of Unmanned Aerial Vehicles (UAV), Automatic
Identification Systems (AIS) and common operation picture will enable
our new Deepwater assets to patrol much more efficiently and
effectively. These capabilities are true force multipliers and will
allow us to leverage our assets for far beyond the current fleet's
ability and capacity.
------------------------------------------------------------------------
Number
System Patrol Days/Hrs Assets Total
------------------------------------------------------------------------
Legacy Major Cutters 185 Days 42 7,770
Deepwater Major Cutters 230 Days 33 7,590
Legacy Patrol Boats 1900 Hrs 49 93,100
Deepwater Patrol Boats 3000 Hrs 58 174,000
Legacy Fixed-Wing 800 Hrs 48 38,400
Deepwater Fixed-Wing 800/1200 Hrs 58 60,800
------------------------------------------------------------------------
Question 3. Given all of the problems that the Coast Guard has
experienced with its two major legacy programs thus far, the HH-65
helicopters and the 110, cutter conversions, I am surprised to see that
the new plan would upgrade rather than replace 22 of your C-130
aircraft, and all of your HH-60 helicopters. (1) Why did the Coast
Guard make this significant change in the plan? (2) Is this really the
best decision in your opinion, in terms of long-term performance?
Answer. (1) The Coast Guard is confident that conversion of legacy
aviation assets to meet post-9/11 mission requirements today and in the
future will be the most operationally effective and affordable final
Deepwater solution. The Coast Guard agrees that the 123, project has
had problems, but would disagree with the characterization of HH-65s as
problematic. The HH-65 power and reliability has been a significant
problem in the past, but the HH-65 re-engining project is very much a
success. It is consistent with the original Deepwater MCH conversion
plan and has given the Coast Guard positive insight into successful
strategies for other aviation conversion projects. The first re-engined
HH-65 was flying within 8 months of initiation of the project. The
seven HH-65s delivered to date are performing as required and the
project is scheduled to be complete in February 2007 instead of the
projected date of July 2007. The success of the HH-65 re-engining was
one input used to make the decision to upgrade and convert C-130 and
HH-60 aircraft into Deepwater end-state assets. The 123, conversion was
a very different kind of project. Cutters and aircraft are designed to
different standards and specifications and are maintained in an
entirely different manner. Aircraft are enrolled in a very specific and
systematic maintenance program while cutters have a more flexible,
``on-condition'' based maintenance schedule. The 123, conversion
project involved major structural alterations with the addition of 13
feet to the hull. The MCH, like the other legacy aviation conversions,
is not receiving major structural alterations but will incorporate more
reliable, commercially available off-the-shelf engines, upgraded main
transmission, sensors, and avionics.
(2) Yes. The Coast Guard is confident that conversion of legacy
aviation assets will assure their long-term performance. The revised
Deepwater Implementation Plan calls for extending the service life of
Coast Guard HC-130s, HH-60s, and HH-65s in order to keep them in
service for 20+ more years. This service life extension is possible due
to the sound depot-level maintenance practices employed by the Coast
Guard's Aircraft Repair and Supply Center in Elizabeth City, NC. The
aircraft are taken down to bare metal and re-built every 4-6 years,
giving the airframes and many aircraft subsystems renewed service life.
Extended aircraft service life is not unique to the Coast Guard. The
Air Force fleet of B-52s began service in the 1940s and is currently
projected to remain in service through at least 2015.
Question 4. How can we be sure that the HH-60 and C-130 aircraft
will not have problems in the long run? The Air Force has found that
the older C-130J aircraft have cracks in the wing-boxes. And in
December 2004, during an attempted search and rescue of the fishing
vessel, the NORTHERN EDGE, 3 out of 4 of the Coast Guard's HH-60
helicopters were forced to return to Cape Cod Air Station due to
mechanical problems. Five of the NORTHERN EDGE crew member died. Did
the Coast Guard inspect its entire C-130 fleet prior to deciding to
keep them in use? Has the Coast Guard fully inspected all of its HH-60s
recently?
Answer. The Coast Guard's Aircraft Repair and Supply Center (ARSC)
performs routine Programmed Depot Maintenance (PDM) on all HH-65s, HH-
60s, and HU-25s. PDM is an intrusive corrosion inspection/structural
repair done every 48 months. The Coast Guard has also established
original equipment manufacturer support for all legacy airframes well
into the future.
As seen in the photos below, this ``routine'' aircraft maintenance
is extensive, involving stripping each aircraft to the ``green'' frame
and rebuilding it. Currently, contractor support is used to provide PDM
on the Service's HC-130Hs. ARSC is establishing organic HC-130H PDM
capability by Fiscal Year 2006.
In March 2005, the C-130 manufacturer, Lockheed Martin Aero (LMA),
changed the inspection guidelines for C-130 wing-boxes based on
cracking found in Air Force C-130s of about the same age as Coast Guard
C-130s. The wing-box problem is not unique to the Coast Guard, but
applies to all C-130s worldwide. As a result of flight hour
limitations/restrictions identified in LMA Service Bulletin (SB1), the
5 Coast Guard 1500 series airframes are limited to restricted
operations until they are properly inspected over the next 6 months.
The second service bulletin, overdue from LMA, will provide the non-
destructive inspection procedures for determining the condition of the
wing-box. The decision to keep HC-130Hs in use was made prior to LMA
SB1 notification. If the 1500 series center wing-boxes are found
undamaged, operating restrictions will likely be lifted. If serious
structural cracking is found during inspections, the Coast Guard will
have to make a decision on whether to refurbish the affected aircraft
at an approximate cost of $10M per aircraft to keep them in service for
another 25 years or remove them from service.
The HH-60J failed sorties on the NORTHERN EDGE search and rescue
case were associated with component failures. Each HH-60J failed sortie
was caused by a different component, and these specific component
failures are rare in the HH-60J fleet. One failure, a frozen fuel
selector, was the first time that problem had ever been encountered.
The entire HH-60J fleet is inspected daily through pre-flight/thru-
flight/post-flight inspections and preventive maintenance. The pre-
flight inspection is accomplished prior to the first flight of the day
and remains effective for 24 hours, provided no subsequent maintenance
has been performed. The pre-flight inspection consists of checking the
aircraft for flight preparedness by performing visual examinations and
operational tests to discover defects and maladjustments which, if not
corrected, could adversely affect safety or mission accomplishment.
Question 5. Why did the Coast Guard submit not one, but two
different funding scenarios for its revised Deepwater plan? Which one
do you really want?
Answer. The Coast Guard is going to use the $24B/25-Year Capital
Investment Plan (CIP).
The asset deployment schedule (a.k.a. table runner) for this plan
is attached. It shows the delivery timeline of the assets in the plan.
The delivery timeline lags behind the funding timeline shown in the
Capital Investment Plan based on design/construction schedules of the
individual assets. The table runner is a graphic description of the
current notional plan. The actual out-year delivery schedule is
predicated on funding availability and Coast Guard priorities. Future
Coast Guard budget submissions may include additional sustainment,
enhancement, and conversion projects within the AC&I account. This
account is subject to yearly availability of appropriations.
Question 6. Does the fact that the Coast Guard submitted a $24
billion plan mean that the $19 billion plan will not in fact allow the
Coast Guard to achieve its performance goals for all of its many
missions?
Answer. The Coast Guard is going to use the $24 billion/25-year CIP
plan.
Previously, the Coast Guard submitted a plan that delivered a range
of assets funded at between $19 billion and $24 billion. The $19
billion force level would only achieve Coast Guard performance goals if
the system actually out-performed projections. The $24 billion force
level assures a minimum threshold of performance as projected by models
used in the planning process.
Question 7. Why are both of the plans significantly more expensive
than the original projection of $17 billion for completion of the
program? Are all of the costs attributable to the new capabilities
Coast Guard would acquire?
Answer. The new plan is more expensive because it buys enhanced
post-9/11 capabilities. In addition, legacy asset sustainment projects
are funded in this plan at a higher rate than in the original plan, but
still amount to less than half of 1 percent of the overall acquisition
cost.
______
Response to Written Questions Submitted by Hon. Maria Cantwell to
Admiral Thomas H. Collins
Question 1. Will the new mix of capability and capacity of assets
ensure that the Coast Guard will be able to meet its performance goals
for all of its security and non-security missions?
Answer. Yes. The new mix of assets in our revised Deepwater
Implementation plan will enable the Coast Guard to meet its pre- and
post-9/11 mission requirements. Post-9/11 mission capabilities added
include:
Network-Centric C4ISR Interoperability
Maritime Security Capability
Helicopter Airborne Use of Force and Vertical Insertion and
Delivery
Additional Fixed-wing Aircraft
Anti-Terrorism/Force Protection
Chemical, Biological, Radiological (CBR) Detection and
Defense
Optimizing the Coast Guard's mission performance outcomes across
all the long-term goals was a key driver for selection of these
particular homeland security capability enhancements. Each capability
contributes across multiple missions.
Question 2. Which level of funding--$19 billion or $24 billion--is
needed for the Coast Guard to implement all of its missions? Does the
inclusion of a $24 billion plan mean that the $19 billion plan--$2
billion higher than the original cost estimate for Deepwater--will
somehow fall short?
Answer. The Coast Guard is going to use the $24 billion/25-year
CIP.
Previously, the Coast Guard submitted a plan that delivered a range
of assets funded at between $19 and $24 billion. The $19 billion force
level would achieve Coast Guard performance goals if the system
actually out-performed projections. The $24 billion force level assures
a minimum threshold of performance as projected by models used in the
planning process.
Question 3. What steps has the Coast Guard or ICGS taken to examine
other assets such as the Littoral Combat Ship that Navy is acquiring,
as an alternative to the cutters in the Deepwater Program? Could you
describe what kind of analysis was done to evaluate the benefits of
such alternatives as part of this revised plan?
Answer. There is a limited amount of operational overlap between
the Littoral Combat Ship (LCS) and the Deepwater Program. The Coast
Guard cutters in the Deepwater Program are multi-mission assets
designed to meet all the Coast Guard's homeland security and non-
homeland security missions. Just as the Coast Guard's statutory
authority differs greatly from the Navy's, so too do the tasks required
of the Deepwater cutters differ from LCS tasking. The diagram below
highlights some of these differences.
There is an overlap between Homeland Security (HLS) and Homeland
Defense (HLD) mission tasking that the Coast Guard fills because of its
law enforcement and military authority. The Coast Guard is uniquely
suited to ensure a seamless hand-off when necessary between HLS and HLD
tasking. To achieve this hand-off, all the Deepwater assets are
designed to be interoperable with DOD assets, and where appropriate,
have similar technologies to accomplish this tasking. As appropriate,
Deepwater assets are taking advantage of LCS design work.
To achieve this, the Coast Guard has been closely engaged with the
LCS program since its inception. Admiral Stillman, the Deepwater
Program Executive Officer, was a member of the evaluation board for the
LCS and the Coast Guard has a Memorandum of Understanding with the LCS
program office. The Coast Guard is partnering with the LCS where it
makes sense to do so. For example, Deepwater and the LCS project are
both contracting with Lockheed Martin for integration, and command and
control technology.
The Deepwater cutters are being designed with the requirements to
be interoperable with all Navy ships, not just the LCS. The Deepwater
Program has been jointly developing the MK110 57MM gun with the Navy's
LCS and DD(X) programs. Deepwater cutters are also expected to share a
common integrated combat management system with LCS. Additionally, both
programs are using vertical take-off and landing UAVs with a common
landing system, and are relying upon similar small boat stern launch
technology.
Question 4. Since you haven't yet completed the Performance Gap
Analysis on the fleet mixture contained in the revised Deepwater plan,
how can you be confident that you have achieved the proper mix of
capabilities and quantities of assets?
Answer. Though Part IV of the Performance Gap Analysis (PAG) study
has not been completed, sufficient information was provided by Parts I
through III to make a reasoned determination of the fleet mixture
needed in the revised Deepwater plan.
Part I of the PGA involved 40 operations, C4ISR and logistics
experts from around the Coast Guard, supported by Coast Guard and
industry operations research analysts. The team incorporated previous
bodies of work including the Deepwater studies from CNA and the
aviation studies, research from Brookings, and others. Using a variety
of force structure projection models, the PGA I team captured the
capability and capacity gaps of the 2002 baseline Deepwater proposal,
proposed a revised System Performance Specification that closed
capability gaps, and projected three candidate force structures to
close capacity gaps.
Part II of the PGA study assessed the Operational Effectiveness
(OpEff) of the three force structures developed by the PGA I process
using the Coast Guard's Deepwater Maritime Operational Effectiveness
Simulation (DMOES) campaign model. This modeling effort simulated PGA I
force structures with the same baseline capabilities as the 2002
baseline Deepwater proposal. The study concluded that, though the
larger force resulted in increased OpEff, capacity alone would not
maximize system-wide performance and that a proper balance of
capability and capacity would be required to ensure alignment of the
IDS with post-9/11 mission demand.
Concurrent with the PGA II process, the PGA team initiated an
effort to determine the new asset capabilities that would be required
to meet post-9/11 mission requirements. These capabilities have been
grouped into the following functional capabilities:
1. Network-Centric Command, Control, Communications, Computer,
Intelligence, Surveillance, and Reconnaissance (C4ISR)
Interoperability
2. Maritime Security Capabilities
3. Helicopter Airborne Use of Force and Vertical Insertion and
Delivery
4. Fixed-Wing Aircraft
5. Anti-Terrorism/Force Protection
6. CBR Detection and Defense
Part III of the PGA assessed and prioritized the application of
these capabilities on the Deepwater system. The PGA III effort
developed three increments of capability application and assessed their
impact on the system. The PGA III also developed a qualitative
description of the return on investment for the improved capabilities
across all mission sets. For example, the airborne use-of-force
capability yields significant positive results not only for the
homeland security mission but for traditional counter-drug and law
enforcement missions.
PGA I provided a force structure framework that PGA II and III
enhanced with the needed capabilities. These studies provided modeled
parameters from which the final force structure and capabilities in the
revised Deepwater Implementation Plan were interpolated. The PGA, like
any modeling analysis, is simply a tool for seasoned, experienced
decisionmakers. Leaders use models, but are not led by them alone. The
Coast Guard is confident that PGA IV, which will model the final force
structure with the final enhanced capabilities, will support the
decisions it made in the revised Deepwater Implementation Plan.
Question 5. Is it possible, given the needs for shore-based
facilities and personnel training, for the Coast Guard to implement its
entire Deepwater plan in a shorter time frame?
Answer. The Office of Management and Budget, the Department of
Homeland Security, the Government Accountability Office (GAO), non-
governmental third party reviewers like the RAND Corporation, and the
Coast Guard have reviewed the time to implement the Deepwater project.
There are various factors that limit the speed of build-out including
those noted in the question. The Coast Guard has concluded that the $24
billion over 25 years is the most appropriate time period.
Question 6. What new assets would be easiest to accelerate and
could be accelerated with the least risks in terms of the GAO concerns?
Answer. GAO's concerns were that accelerating several platforms
would require design and development efforts. These multiple,
simultaneous development efforts were assessed as overly risky. The
Coast Guard has advanced the scheduled delivery of the Fast Response
Cutter by 10 years and the OPC by 5 years. Selectively accelerating one
asset over another is not the most efficient implementing tactic for
Deepwater, and in fact, would not deliver the operating benefits
derived from Deepwater's System of systems design. To achieve improved
operations, assets must be acquired in concert with each other in order
to achieve the desired level of operational results and
interoperability of the IDS. For example, accelerating the NSC ahead of
the VUAV and MCH would result in delivery of an incomplete ``Force
Package'' and a NSC with decreased operational capability. This would
also result in a decrease to system performance.
Question 7. GAO has raised concerns about what acceleration would
mean in terms of program management. Do you share those concerns?
Answer. GAO's concerns were that accelerating several platforms
would require design and development efforts. These multiple,
simultaneous development efforts were assessed as overly risky. The
Coast Guard has advanced the scheduled delivery of the Fast Response
Cutter by 10 years and the OPC by 5 years. Developing these new major
assets while also developing and building the NSC and other assets
currently in development, is a major challenge and no doubt presents
risks. However, there are also significant risks to continuing to watch
the readiness of Coast Guard assets decline. The Coast guard will
continue making every effort to exercise due diligence and mitigate any
and all contracted risks.
Question 8. I'd like for all the witnesses to elaborate on this
question I posed to Admiral Collins during the hearing. The Army--the
only other Armed Service to use the ``Lead Systems Integrator''
approach--recently backed away from that approach in their Future
Combat Systems procurement due to concerns over lack of cost control.
These are similar to the concerns that GAO raised on the Deepwater
Program. (1) Are the Army's new arrangements for managing this contract
similar to those that the Coast Guard has in place? (2) Should the
Coast Guard use this approach to ensure that the costs are kept down?
Answer. (1) Currently, the Coast Guard relies upon ICGS for both
system integration and the supplier function. Were the Coast Guard to
serve as its own general contractor for the system, the work and the
risk for the Coast Guard would increase significantly. The Coast Guard
would not only have to ensure cost, schedule, and performance of the
integrator for multiple contracts, the Coast Guard would also have to
resolve differences between those contractors in order to achieve
systems integration. ICGS can leverage its industrial position and
long-standing relationships to shape the integrated solution and derive
savings in ways that the Coast Guard simply could not. ICGS manages
both the system integrator and general contractor role, effectively
reducing risk and making the overall acquisition more efficient. The
risk GAO refers to would not be resolved by a change in approach. That
risk can best be mitigated by meeting the challenge to shape the
existing partnership.
(2) The Coast Guard had a study conducted by an independent
Federally Funded Research and Development Center (FFRDC), Logistics
Management Institute (LMI) on pursuing Deepwater as a traditional asset
replacement acquisition where each asset was stove-piped. These are the
ten major projects I discussed. LMI found that in using a traditional
acquisition approach the projected government cost goal would be $62.9B
in FY 1998 dollars to replace Deepwater assets and that there would be
an estimated 15 percent cost avoidance by using the Deepwater system of
systems approach with a systems integrator. Even if the cost avoidance
is only 5 percent, the Coast Guard can put these savings to better use
in performing the mission instead of using the funds to hire a large
number of Federal employees to acquire Deepwater.
Question 9. Should the Coast Guard conduct an analysis of
alternatives to ensure the Deepwater Program is on the right track?
Answer. Consistent with departmental major acquisition guidance,
the Coast Guard conducted an assessment of alternatives prior to
awarding the contract to ICGS. This assessment was at the asset and
system levels. At the same time, the Coast Guard organized its
oversight of the Deepwater acquisition into three parts. The interplay
of these three organizational elements obviates the need for an
additional assessment of alternatives at this time.
The first element is the program organization, the Deepwater
Directorate, headed by the Program Executive Officer (PEO). The PEO is
the acquirer and is responsible for ensuring that the Deepwater
contract is efficiently ensuring that all cost, schedule and
performance parameters are being achieved. The PEO is also responsible
for the process by which ICGS is regularly evaluated and will be
evaluated for the award term recommendation of whether or not to retain
ICGS as the Deepwater contractor in future years.
The second Coast Guard organization element charged with overseeing
the Deepwater acquisition is the Deepwater sponsor organization. The
sponsor organization is independent of the PEO and represents the
operational customer who will ultimately use the Deepwater system to
achieve Coast Guard mission performance requirements. The sponsor
organization participates in the Deepwater enterprise at the asset and
system development level. At the asset level, the sponsor is
represented in the Integrated Product Teams, delivering operational
expertise to the shaping of each asset. At the system level, the
sponsor is represented in the overarching matrix team and other flag-
level Deepwater decisionmaking events. The sponsor prepared the
Deepwater Performance Gap Analysis and revised Mission Need Statement
reflecting post-9/11 mission requirements. At both the asset and the
system level, the sponsor challenges ICGS' proposed solutions and
offers alternatives to meet operational requirements.
The third Coast Guard organizational element that shapes Deepwater
acquisition is the Agency Acquisition Executive (AAE). The role of the
AAE is played by the Vice Commandant of the Coast Guard, the number two
person in the Coast Guard. The AAE reviews any major changes to the
Deepwater acquisition, like the extensive modification to the NSC, and
exercises senior leadership by serving as a final appeal authority when
the program and sponsor organizations differ over ICGS' proposed asset
and system level solutions.
The Coast Guard is actively engaged in the critical oversight of
ICGS from both a contract performance and an alternative solution
perspective. No ICGS decision is beyond scrutiny.
Question 10. How many of the issues GAO raised have been
successfully dealt with or ``Closed''? Why is it taking so long to
proceed with the other recommendations?
Answer. It is the Coast Guard's intent to close out all eleven
items in the GAO report. Three have been closed to date and significant
action has started on the other eight. The Coast Guard feels that all
the GAO findings and recommendations related to improving the Deepwater
Program are important and will continue to first resolve each issue and
mitigate the risk and then work with GAO to reach agreement that the
issue has been resolved and the identified risk has been sufficiently
mitigated.
Question 11. Should the Coast Guard use an independent entity to
help evaluate the decisions by the prime contractor, ICGS, (1) such as
decisions to purchase certain assets, or (2) decisions to build such
assets in-house rather than subcontract them to another company?
Answer. As the largest acquisition ever undertaken by the Coast
Guard, every dollar spent by the Deepwater acquisition is rigorously
overseen and internally challenged. Three internal Coast Guard
organizational elements exercise this governance and reflect the tight-
fisted ethos.
The first element is the program organization, the Deepwater
Directorate, headed by the PEO. The PEO is the acquirer and is
responsible for ensuring that the Deepwater contract is efficiently
executed by ensuring that all cost, schedule, and performance
parameters are being achieved, and that appropriate make-buy decisions
are made. This began early at the proposal development phase, when the
ICGS proposal was accepted with several major components (e.g., 123,
WPB conversions, CASA MPA, and VUAVs) of the ICGS solution were not
made by the ICGS' partners Lockheed Martin and Northrop Grumman. During
the execution phase the PEO has acted to ensure that ICGS' make or buy
decisions deliver the best value while meeting the performance
requirements. PEO oversight has been shaped by GAO best practices as
well as GAO audit recommendations.
The second Coast Guard organization element charged with overseeing
the Deepwater acquisition is the Deepwater sponsor organization. The
Sponsor organization is independent of the PEO and represents the
operational customer who will ultimately use the Deepwater system to
achieve Coast Guard mission performance requirements. The sponsor
organization participates in the Deepwater enterprise at the asset and
system development level. At the asset level, the sponsor is
represented in the integrated product teams delivering operational
expertise to the shaping of each asset. At the system level, the
sponsor is represented in the Overarching Matrix Team and other flag-
level Deepwater decisionmaking events. As the final customer, the
sponsor is an active watchdog of the Deepwater procurement interjecting
best-value judgments in each decision.
The third Coast Guard organizational element that shapes Deepwater
acquisition is the AAE. The role of the AAE is played by the Vice
Commandant of the Coast Guard, the number two person in the Coast
Guard. The AAE ensures that the funds appropriated for all Coast Guard
major acquisitions are spent wisely and exercises senior leadership by
serving as a final appeal authority when the program and sponsor
organizations differ over ICGS' proposed asset and system level
solutions.
The interplay of the PEO, the Sponsor, and the AAE bolstered by
GAO's constructive engagement ensure that limited Deepwater dollars are
wisely spent. It would be an unnecessary additional expense to hire an
independent entity to review ICGS' make-buy decisions.
Question 12. What is being done by ICGS and the Coast Guard to
improve competition for subcontracts?
Answer. Competition for subcontractors below the first tier of the
Integrated Coast Guard System partners, Lockheed-Martin and Northrop
Grumman, was provided during the award process of the Deepwater prime
contract. The principle of competition has been central to the
Deepwater Program since inception. The initial competition started with
four industry teams. From these four teams, there was a down-select to
three teams. Their proposals included who was designated to actually do
the task orders such as ICGS partners or the next level subcontractors,
with full cost and pricing data, for the first 5 years. Based on that
background, the GAO agreed with the Coast Guard that any deliveries
planned for the first 5 years met the criteria for full and open
competition. These included the 123, conversion, the NSC, the short
range prosecutor small boat, the long range interceptor small boat, the
HH-65 conversion to the MCH, VUAV, and maritime patrol aircraft.
The post-9/11 revised Deepwater Implementation Plan retains all of
those assets with the exception of the VRS helicopter; the
functionality of the VRS will be filled by the current HH-60 being
converted to a Deepwater end-state asset. Effectively, there are really
only three major assets where new competition will make a difference:
the OPC, FRC, and eventually the high altitude/high endurance UAV.
The Coast Guard has made provisions for ensuring that it manages
cost aggressively by using third-party independent cost estimates for
the OPC and FRC to ensure that cost remains paramount as these assets
are acquired. Given the phenomenal rate of technical advancements, the
Coast Guard will ensure that a full and open competition is conducted
to obtain high altitude/high endurance UAV services. Subcomponents of
the VUAV, such as the control system and radar, will also be competed.
The Coast Guard also recently conducted a third-party competition
review that included a review of the competitive procedures of the
purchasing and/or contracting departments both contractors had in place
and determined that these procedures were being followed. The Coast
Guard plans to conduct this review on a recurring basis. This review is
in addition to the regularly scheduled Defense Contract Audit Agency
monitoring of both major contractors purchasing and/or contracting
departments.
Given this background and Coast Guard actions to date, adequate
competition was ensured for the first 5 years and will be achieved in
the future for any Deepwater subcontracts.
Question 13. GAO recommended in its 2004 report last year, that the
Coast Guard should compare the growing total ownership costs of the
prime contractor's Deepwater solution against a neutral baseline of
what the costs would be in a traditional procurement. Instead, the
Coast Guard is measuring the actual costs against the prime
contractor's own original cost estimates. GAO states that ``measuring
the system integrator's cost growth compared with its own cost proposal
will tell the government nothing about whether it is gaining
efficiencies by turning to the `system of systems' concept.'' Why isn't
the Coast Guard following GAO's advice on this matter?
Answer. The Coast Guard had a study conducted by an independent
Federally Funded Research and Development Center (FFRDC), Logistics
Management Institute (LMI) on pursuing Deepwater as a traditional asset
replacement acquisition where each asset was obtained by a separate
major acquisition project and then traditional Coast Guard efforts were
employed to integrate these separate acquisitions. LMI reported that
using a traditional acquisition approach would have projected a
government cost of $62.9 billion in Fiscal Year 1998 dollars to replace
Deepwater assets. The system integrator's projected baseline for the
same period was $50.4 billion in Fiscal Year 1998 dollars.
Since the system integrator's cost was lower than a traditional
acquisition approach cost, the Coast Guard used it as a baseline. From
this baseline the Coast Guard projected the annual amount of Total
Ownership Cost (TOC) from 2002 to 2041 in Then-Year dollars. Along with
projecting the TOC, the Coast Guard measured the actual 2002 and 2003
TOC using a standard, repeatable methodology and the results are shown
below. The current trend is positive with the actual TOC being $200
million lower than the annual baseline amount in Fiscal Year 2002, and
$280 million lower in Fiscal Year 2003.
------------------------------------------------------------------------
Total Ownership Cost 2002 2003
------------------------------------------------------------------------
Annual Baseline $1.82 $2.13
Actual $1.62 $1.85
------------------------------------------------------------------------
Variation from Annual Baseline $0.20 $0.28
------------------------------------------------------------------------
In Billion ``Then-Year'' dollars
The Fiscal Year 2004 actual data is being prepared and will be
available by October 2005.
It is the Coast Guard's position that given the significantly lower
cost, $50.4B v. $62.9B, delivered by the LMI study that any updated
study of the same question would deliver a similar lower cost for a
system acquisition. Any further study of comparative TOC projections
would not be a good investment. Instead the Coast Guard focuses on
monitoring actual TOC.
Question 14. What kind of impacts are the maintenance issues on the
378-foot cutters having on mission performance and time at sea? What is
Coast Guard is doing to address these problems? If this issue is as
serious as it sounds, why did the replacement date slip from 2013 to
2016?
Answer. WHEC 378 maintenance issues are having an increasing
negative impact on mission performance. The percent of time free from a
deficiency in mission critical equipment which causes a major
degradation or loss of a primary mission decreased from 26 percent in
Fiscal Year 2003, to 7 percent in Fiscal Year 2004. Additionally,
unscheduled maintenance days (lost underway days) for the WHEC fleet
have increased from 49 in Fiscal Year 2003, to 229 in Fiscal Year 2004.
The Coast Guard has identified the top ten maintenance issues for
the WHEC 378 class. Repair strategies have been developed and funded
for six of these issues. Implementation plans are proceeding.
The original plan reflected the desire to decommission 378s as
rapidly as possible. The new plan reflects the desire to decommission
the 210s and 378s. The material condition of the different cutters in a
class varies. Effectively, the new plan saves the ``best'' of the 378s
for a couple years so that the ``worst'' of the 210 can be
decommissioned.
______
Response to Written Questions Submitted by Hon. Olympia J. Snowe to
Margaret T. Wrightson
Question 1. Have you investigated the progress that the Coast Guard
has made in addressing and implementing GAO's recommendations since the
release of the report?
Answer. In 2004, we reported that well into the contract's second
year, key components needed to manage the program and oversee the
system integrator's performance had not been effectively
implemented.\1\ We also reported that the degree to which the program
was on track could not be determined because the Coast Guard was not
updating its schedule.\2\ They are depicted in Table 5 of my prepared
statement (pg. 32 of this hearing).
---------------------------------------------------------------------------
\1\ GAO, Contract Management: Coast Guard's Deepwater Program Needs
Increased Attention to Management and Contractor Oversight, GAO-04-380
(Washington, D.C.).
\2\ GAO, Coast Guard: Deepwater Program Acquisition Schedule Update
Needed, GAO-04-695 (Washington, D.C.: June 14, 2004).
---------------------------------------------------------------------------
As of July 2005, we have seen mixed success in the Coast Guard's
effort to improve management of the program and contractor oversight.
Three of the recommendations--updating the Deepwater Integrated Master
Schedule, developing measurable award fee criteria consistent with
guidance from the Office of Federal Procurement Policy and
subcontractor notification to the Coast Guard of decisions over $5
million--have been fully addressed. The Coast Guard has made progress
on implementing most of the remaining recommendations, though we
continue to see evidence that more improvements are needed.
Although the Coast Guard has been responsive to our concerns over
the past year, three issues remain highly significant and,
notwithstanding the progress we have seen thus far, likely will take
some time to resolve. These are: (1) the effectiveness of the Coast
Guard's primary tool for overseeing the system integrator (integrated
product teams); (2) the attention paid to the affect of programmatic
decisions on overall costs and capabilities (operational effectiveness
and total ownership cost); and (3) proper planning for transitioning
Coast Guard personnel to the new assets in terms of operations,
training, and logistics (human systems engineering).
Assessing the Coast Guard's performance in implementing the
remaining recommendations will be a focus of our follow-on review of
the Deepwater revised implementation plan that is to commence in August
2005. To that end, we are working on an audit plan to assess the
additional progress the Coast Guard has made and will report the
results on a timely basis to this Subcommittee and to the Coast Guard.
Question 2. Has the Coast Guard taken steps to hold the systems
integrator more accountable for the performance of and costs incurred
by subcontractors?
Answer. In 2004 we (GAO) made several recommendations to improve
procedures to hold the contractor more accountable for the performance
of and costs incurred by subcontractors. Of these, one recommendation
has been fully addressed--developing measurable award fee criteria--and
progress has been made on most of the remaining recommendations, such
as holding the contractor accountable for improved integrated product
team effectiveness and establishing criteria and documenting change to
the program baseline.
In terms of improving criteria for assessing performance, the Coast
Guard has fully addressed our recommendation by providing additional
rigor to the performance criteria used to measure contractor
performance to reflect those measures that are clearly objective and
those that are subjective, meaning the narrative comments by Coast
Guard performance monitors. Weights have been assigned to each set of
evaluation factors, and the Coast Guard continues to refine the
distribution of the weights to achieve an appropriate balance between
automated results and the eyewitness observations of the performance
monitors.
With regard to holding the system integrator accountable for
effectiveness of product teams, the Coast Guard has also made changes
to the award fee measures that place additional emphasis on the system
integrator's responsibility for making integrated product teams
effective. Award fee criteria now incorporate specific aspects of how
the integrator is managing the program, including administration,
management commitment, collaboration, training, and empowerment of
these teams. However, concerns remain about whether the teams are
effectively accomplishing their goals.
Further, concerns remain about the broader issues of accountability
for achieving the overarching goals of minimizing total ownership cost
and maximizing operational effectiveness. While the Coast Guard has
developed models to measure the system integrator's performance in
operational effectiveness and total ownership cost, concrete results
have not yet emerged. In terms of modeling operational effectiveness,
the Coast Guard's models are capable of simulating the effect of the
new asset capabilities on its ability to meets its missions; however,
until additional assets become operational, progress toward this goal
will be difficult to determine.
With regard to total ownership cost, the Coast Guard does not plan
to implement our recommendation. Despite concurring with it at the time
of our March 2004 report, the Coast Guard has not adhered to its
original plan, set forth in the Deepwater Program management plan, of
establishing as its baseline a cost not to exceed the dollar value of
replacing the assets under a traditional approach (e.g., on an asset-
by-asset basis rather than a system of systems approach). Although the
Coast Guard initially established a cost baseline consistent with the
program management plan's approach, the Coast Guard has not updated it
to reflect changes made to the system integrator's cost estimate
baseline, and therefore, is not being used to evaluate the contractor's
progress in holding down total ownership cost. As a result, the cost
baseline being used to measure total ownership cost is not the Coast
Guard's, but rather is the system integrator's own cost estimate. As we
reported in March 2004,\3\ we believe that measuring the system
integrator's cost growth compared with its own cost proposal will tell
the government nothing about whether it is gaining efficiencies by
turning to the system of systems concept rather than the traditional
asset-by-asset approach. Although the Deepwater Program has undergone a
number of alterations since the contract was awarded in 2002, the Coast
Guard has not studied whether the system of systems approach is still
more cost effective as opposed to a traditional acquisition approach.
Thus, the Coast Guard will lack this information as it prepares to
decide whether to award the first contract option beginning in June
2006.
---------------------------------------------------------------------------
\3\ GAO-04-380.
---------------------------------------------------------------------------
The Coast Guard has made progress in implementing our
recommendation to establish criteria and document changes to the
Deepwater Program baseline. Coast Guard officials stated that the
contract total ownership cost and operational effectiveness baseline is
adjusted based on approved decision memorandums from the Agency
Acquisition Executive, the Vice Commandant of the Coast Guard. Such
memorandums were originally approved by the Program Executive Officer
on a case-by-case basis. As we reported in March 2004,\4\ establishing
a solid baseline against which to measure progress in lowering total
ownership cost is critical to holding the contractor accountable.
---------------------------------------------------------------------------
\4\ GAO-04-380.
---------------------------------------------------------------------------
Assessing the Coast Guard's performance in continuing to implement
these recommendations will be a focus of our follow-on review of the
Deepwater revised implementation plan that is to commence in August
2005. To that end, we are working on an audit plan to assess the
additional progress the Coast Guard has made and will report the
results on a timely basis to this Subcommittee and to the Coast Guard.
Question 3. Is the systems integrator awarding subcontracts on a
competitive basis?
Answer. The Coast Guard has made progress in implementing our
recommendations aimed at ensuring adequate competition among
subcontractors. To that end, the Coast Guard reported that it is taking
steps concerning cost control through competition among second-tier
suppliers and notification of ``make'' decisions.\5\ While we have not
assessed the effectiveness of the Coast Guard's actions regarding
competition among second-tier suppliers, we are satisfied with its
efforts regarding notification of make decisions. It should be noted,
though, that we have not assessed the effectiveness of the following
actions.
---------------------------------------------------------------------------
\5\ A ``make item'' means an item or work effort to be produced or
performed by the prime contractor or its affiliates, subsidiaries, or
divisions.
---------------------------------------------------------------------------
Coast Guard officials told us that in making the decision about
whether to award the first contract option, the government will
specifically examine the system integrator's ability to control costs
by assessing the degree to which competition is fostered at the major
subcontractor level. The evaluation will consider the subcontractors'
project management structure and processes to control costs, as well as
how market surveys of similar assets and major subsystems are
implemented. The Coast Guard is focusing its attention on those areas
that were priced after the initial competition for the Deepwater
contract was completed, such as the HH-65 re-engining and the C-130J
missionization.\6\ For example, a new process implemented for the C-130
missionzation was a requirement for competition in subcontracting and
government approval of all subcontracts exceeding $2 million in order
for the Coast Guard to monitor the integrator's competition efforts.
---------------------------------------------------------------------------
\6\ The C-130J missionization, planned for the Coast Guard's six C-
130J aircraft, is intended to modify and install mission-essential
equipment to convert the aircraft into C-130J long-range surveillance
maritime patrol aircraft.
---------------------------------------------------------------------------
According to the Federal Acquisition Regulation, the prime
contractor is responsible for managing contract performance, including
planning, placing, and administering subcontracts as necessary to
ensure the lowest overall cost and technical risk to the government.
The Federal Acquisition Regulation further provides that when ``make-
or-buy programs'' are required, the government may reserve the right to
review and agree on the contractor's make-or-buy program when necessary
to ensure negotiation or reasonable contract prices, among other
things. We recommended that the Coast Guard be notified of make-or-buy
decisions over $5 million in order to facilitate controlling costs
through competition. We suggested the $5 million threshold because
Lockheed Martin, one of the major subcontractors, considers that amount
to be the threshold for considering its suppliers major. The Coast
Guard has asked the system integrator, on a voluntary basis, to provide
notification 1 week in advance of a make decision of $10 million or
more based on the criteria in the make-or-buy program provisions of the
Federal Acquisition Regulation. According to Coast Guard officials, to
date, no make decision has exceeded $10 million since the request was
made. While we are satisfied with the Coast Guard's progress on this
issue thus far, the details implementing this recommendation have not
yet been worked out, such as specifically who in the Coast Guard will
monitor the subcontractors' make decisions to ensure that the voluntary
agreement is complied with.
While these are important improvements in internal controls, it is
too soon to know whether they have resulted in adequate competition or
whether other actions may be needed. We will continue to monitor the
Coast Guard's progress in implementing this recommendation during our
pending review of the revised Deepwater Implementation Plan that is to
commence in August 2005. To that end, we are working on an audit plan
to assess the additional progress the Coast Guard has made and will
report the results on a timely basis to this Subcommittee and to the
Coast Guard.
Question 4. In GAO's opinion, which is the greater problem, the
documented rapid degradation of the Coast Guard's assets, or the
potential management problems with an accelerated Deepwater acquisition
schedule?
Answer. The question as posed is difficult to answer in general
because (1) the asset conditions vary with some being worse off than
others, (2) some new assets are further along on the acquisition
timeframe than others, and (3) acceleration does not necessarily
translate into a more efficient replacement strategy, particularly if
it results in performance problems or assets that when fielded do not
meet requirements. GAO would be far more comfortable with an
accelerated acquisition schedule if and when our recommendations are
implemented; we will review the Coast Guard's progress in implementing
these recommendations in the upcoming year. Perhaps the Coast Guard
could consider a less risky acceleration strategy using a targeted
approach that considers both the condition of particular assets and the
acquisition schedule for their replacements on a more integrated
schedule, as discussed below.
The current Deepwater fleet faces a number of well-documented
logistical and maintenance challenges, such as accelerated aging
through accumulated wear and tear and systems obsolescence, though the
extent of degradation varies among asset types. Much of the critical
equipment on many cutters, for example, is highly maintenance intensive
in the event of failure and becoming unsupportable. Potentially
compounding this problem is the fact that AC&I funding typically used
for major asset sustainment projects is now grouped in the same funding
stream as new Deepwater asset acquisition dollars, which forces these
legacy asset sustainment projects to ``compete'' with new Deepwater
acquisitions (or conversion into new Deepwater assets) for funding. In
addition, a substantial portion of legacy asset sustainment AC&I funds
in recent years have gone toward the re-engining of the HH-65
helicopter, leaving fewer funds available for other legacy asset
sustainment projects that might be needed.
Acceleration of the Deepwater acquisition schedule, of course,
poses its own set of challenges. Testing of the new assets is a
critical factor when considering acceleration; we feel that bringing a
few new assets online and having them fielded and tested before
considering accelerating their production would carry far less risk to
the program than accelerating untested, unproven assets. Also, though
the Coast Guard has made progress in implementing a number of our prior
recommendations regarding program management, GAO would feel more
confident about any possible acceleration if our recommendations were
implemented in full. We plan to engage in a constructive review of the
Coast Guard's progress in fully implementing our recommendations in the
upcoming year.
If the Coast Guard does consider accelerating its acquisition of
new assets, it could perhaps consider a less risky strategy using a
targeted approach that considers both the condition of particular
assets and the acquisition schedule for their replacements on a more
integrated schedule. For example, the National Security Cutter (NSC)
could be a target of opportunity for acceleration, since the condition
of the 378-foot high endurance cutter (which it is replacing) has been
particularly problematic. Once the first NSC is fully tested,
accelerating production of the remaining NSCs would pose little risk.
Question 5. In your opinion, does the Coast Guard have the
performance measures necessary to prioritize legacy asset maintenance/
repair needs and to weigh the costs and benefits of performing
continued maintenance versus the acceleration of new asset production?
Answer. We do not believe the Coast Guard currently has the
performance measures it needs to effectively weigh the costs and
benefits of performing continued maintenance versus the acceleration of
new asset production, but it is making progress in this area. Our
recent review of Coast Guard Deepwater legacy assets found that the
Coast Guard's available measures are inadequate to capture the full
extent of the decline in the condition of Deepwater assets with any
degree of precision and are insufficient for determining the impact on
mission capabilities. More specifically, the Coast Guard measures we
assessed focus on events, such as flight mishaps or equipment
casualties, but do not measure the extent to which these and other
incidents degrade mission capabilities. On the basis of our inquiries
and discussions, the Coast Guard has begun developing improved measures
to more accurately capture data on the extent to which its Deepwater
legacy assets' deteriorating condition affects mission capabilities. In
addition, the Coast Guard is developing a knowledge-based model to
provide more objective data on where to best spend budget dollars to
achieve the greatest enhancements in mission capabilities. These Coast
Guard efforts are described below.
To improve the performance measures for its Deepwater legacy
aircraft, the Coast Guard is working to improve its dispatch
reliability index measure, which provides causal information on
delayed, aborted, or canceled missions. The Coast Guard can use the
dispatch reliability index--in conjunction with data captured by unit-
level and depot-level maintenance staff--to determine which components
and systems are failing most frequently, and thus, causing degradation
in aircraft availability and mission performance. For its cutters,
Coast Guard naval engineers are finalizing a ``percent of time fully
mission capable'' measure. As part of this measure, the Coast Guard is
developing mission criticality codes, which would rank the degree of
importance of each piece of a cutter's equipment to each mission that
the cutter performs. These codes would then be linked to electronic
casualty reports for each cutter to provide the engineers and operators
with information on the impact that the equipment casualties would have
on each type of mission. This casualty report/mission criticality
linkage will then be factored into the calculation of the percent of
time fully mission capable measure for each cutter class and mission
type. Coast Guard officials could then review this measure to
determine, for example, the degree of capability that its 270-foot
medium endurance cutter fleet has to conduct search and rescue missions
at any given time. Because these measures have not been finalized or
fully implemented, we were unable to assess their effectiveness.
However, we view these tools as a positive step toward providing Coast
Guard decisionmakers with more detailed information on the primary
factors leading to mission degradation.
In addition to improving its performance measures, the Coast Guard
is also developing a knowledge-based model to (1) better prioritize the
projects needed to upgrade legacy assets that will be part of the
Deepwater Program and (2) obtain the greatest overall mix of
capabilities for its assets within its budget in order to maximize
mission performance. The tool it is developing is called the Capital
Asset Management Strategy (CAMS). Once fully implemented, CAMS is
designed to provide analyses on the capability trade-offs for upgrades
and maintenance projects across asset classes, thereby allowing the
Coast Guard to determine which combination of projects will provide the
most capability for the dollars invested. For example, when Coast Guard
officials are trying to decide among potential project upgrades such as
a HC-130 weather radar replacement, an HH-65 sliding cabin door
replacement, or a 110-foot patrol boat fin stabilizer replacement,
CAMS, once fully implemented, could provide the officials with a
recommended mix of project upgrades that would achieve the greatest
capability enhancements based on the available budget.
CAMS analyses are to be based on legacy asset condition and
readiness data, asset retirement and replacement timelines, asset
degradation estimates, project production rates, cost data, and mission
utility rankings. Mission utility rankings will grade an asset's
importance to specific missions, such as search and rescue or
counterdrug operations. Rankings may also be assigned to an asset's
critical subsystems or may be altered based on an asset's geographic
location. Each of these elements is to form the basis for
recommendations regarding which combination of upgrade and maintenance
projects will provide the greatest enhancements to fleet capabilities.
According to Coast Guard staff, CAMS recommendations are not a
replacement for the existing budget development process, but rather are
to augment and make more consistent the information currently provided
to decisionmakers. Because the recommendations are to be based, in
part, on user assumptions, CAMS recommendations are to be reviewed by
several internal Coast Guard officials before any final funding
requests are made. Further, in order to prevent user ``gaming''--making
assumptions in such a way as to ensure a positive recommendation or
outcome for a particular project--the Coast Guard is developing a
series of job aids, manuals, and training courses to ensure data
integrity and consistency.
Coast Guard officials expect to have the CAMS fully implemented by
September 2005 and intend to use it while developing the Coast Guard's
Fiscal Year 2008 budget submission. Although it is too soon to assess
the effectiveness of CAMS, we view this approach as a good faith effort
toward knowledge-based budgeting for legacy asset sustainment.
______
Response to Written Questions Submitted by Hon. Daniel K. Inouye to
Margaret T. Wrightson
Question 1. The revised Deepwater plan lists a number of enhanced
capabilities that will be provided to the Coast Guard. Understandably,
most of these capabilities are aimed at the Cost Guard's security
mission. How will these new capabilities also help the Coast Guard to
fulfill its non-security related missions, such as fisheries
enforcement?
Answer. GAO has not performed the audit work necessary to examine
the potential impact of the new asset requirements and capabilities as
outlined in the mission needs statement and revised implementation
plan. On the face of it, it is clear that many of these enhancements
are designed to provide the Coast Guard with increased capabilities for
its law enforcement and ports, waterways, and coastal security (PWCS)
missions. However, other enhancements, such as command, control,
communications, computer, intelligence, surveillance, reconnaissance
(C4ISR), and supporting logistics equipment would appear to also
benefit non-homeland security missions. Without a more detailed
analysis, it would be impossible for us to draw firm conclusions as to
how these new capabilities will differentially affect the Coast Guard's
various missions.
Question 2. I am a bit concerned that the new plan reduces the
total number of assets, especially given the need for physical presence
in areas like the Western and Central Pacific. Being able to see and it
identify an illegal foreign fishing vessel with this cutting-edge
technology is all well and good, but how will the Coast Guard catch
them unless a cutter is out there too?
Answer. As the Coast Guard has asserted, under the Deepwater plan,
the system of assets will have greater technological and surveillance
capabilities, which should result in greater performance of the system
as a whole. On the other hand, your point is a good one--in the final
analysis, getting ``steel on target'' is a necessary component of the
Coast Guard's various enforcement missions. Ultimately, it will be
difficult to tell what synergies will be realized by improved system
capabilities without seeing these new assets in operation.
Question 3. Given all of the problems that the Coast Guard has
experienced with its two major legacy programs thus far, the HH-65
helicopters and the 110-ft cutter conversions, I am surprised to see
that the new plan would upgrade rather than replace 22 of your C-130
aircraft, and all of your HH-60 helicopters. Why did the Coast Guard
make this significant change in the plan? Is this really the best
decision in your opinion, in terms of long-term performance?
Answer. We have not examined the Coast Guard's rationale for the
changes it has made to the program. As you know, as part of the review
we will conduct at the request of this Subcommittee, we will examine
capability and capacity issues under the revised implementation plan.
However, even after conducting such an analysis, the performance-based
``system of systems'' approach used in implementing the Deepwater plan
make it very difficult to draw conclusions regarding whether specific
assets provide the best value to the government. Since Deepwater is not
intended to be an asset-by-asset replacement, it is difficult if not
impossible to address the advisability of the replacement of each asset
type, since the performance of one would affect the performance of all.
Question 4. How can we be sure that the HH-60 and C-130 aircraft
will not have problems in the long-run? The Air Force has found that
the older C-130J aircraft have cracks in their wing-boxes. And in
December 2004, during an attempted search and rescue of the fishing
vessel, the NORTHERN EDGE, 3 out of 4 of the Coast Guard's HH-60
helicopters were forced to return to Cape Cod Air Station due to
mechanical problems. Five of the NORTHERN EDGE crew members died. Did
the Coast Guard inspect its entire C-130 fleet prior to deciding to
keep them in use? Has the Coast Guard fully inspected all of its HH-60s
recently?
Answer. It would be impossible to know with complete assurance
whether these assets will encounter problems in the long run, although
the Air Force's findings are indeed troubling. Neither GAO nor the
Department of Homeland Security's Office of Inspector General has
reviewed the incident in question.
We defer to the Coast Guard regarding their inspection procedures
for HC-130 and HH-60 aircraft.
Question 5. Does the fact that the Coast Guard submitted a $24
billion plan mean that the $19 billion plan will not in fact allow the
Coast Guard to achieve its performance goals for all of its many
missions?
Answer. While we have not assessed the Deepwater revised
implementation plan, according to Coast Guard documents, the two cost
estimates reflect potential differences in funding streams, time-lines
(20 to 25 years), and potentially capacity. According to the Coast
Guard, they are modeling the plans to determine their affect on
potential performance. They intend to refine their models and update
performance projections based on the lessons learned from real world
operations as Deepwater assets and capabilities are introduced.
The Deepwater revised implementation plan will be a focus of our
follow-on review that is to commence in August 2005. To that end, we
are working on an audit plan that will assess the revised
implementation plan and will report the results on a timely basis to
this subcommittee and to the Coast Guard.
Question 6. Why are both of the plans significantly more expensive
than the original projection of $17 billion for completion of the
program? Are all of the costs attributable to the new capabilities
Coast Guard would acquire?
Answer. We have not conducted the work needed to properly respond
to this question. That said, this will be a focus of our upcoming
review of the revised implementation plan scheduled to commence in
August 2005. We are currently working on an audit plan that will assess
the revised implementation plan and will report the results on a timely
basis to this subcommittee and to the Coast Guard.
______
Response to Written Questions Submitted by Hon. Maria Cantwell to
Margaret T. Wrightson
Question 1. Will the new mix of capability and capacity of assets
ensure that the Coast Guard will be able to meet its performance goals
for all of its security and non-security missions?
Answer. We have not yet performed the audit work necessary to
answer this question. However, this question will be a focus of our
follow-on review of the Deepwater revised implementation plan that is
to commence in August 2005. To that end, we will report the results of
our work on a timely basis to this Subcommittee and to the Coast Guard.
Question 2. Which level of funding--$19 billion or $24 billion--is
needed for the Coast Guard to implement all of its missions? Does the
inclusion of a $24 billion plan mean that the $19 billion plan--$2
billion higher than the original cost estimate for Deepwater--will
somehow fall short?
Answer. While we have not assessed the Deepwater revised
implementation plan, according to Coast Guard documents, the two cost
estimates reflect potential differences in funding streams, time-lines
(20 to 25 years), and potentially capacity. According to the Coast
Guard, they are modeling the plans to determine their affect on
potential performance. They intend to refine their models and update
performance projections based on the lessons learned from real world
operations as Deepwater assets and capabilities are introduced.
The Deepwater revised implementation plan will be a focus of our
follow-on review that is to commence in August 2005. To that end, we
are working on an audit plan that will assess the revised
implementation plan and will report the results on a timely basis to
this subcommittee and to the Coast Guard.
Question 3. What steps, if any, should the Coast Guard or ICGS take
to examine other assets such as the Littoral Combat Ship that Navy is
acquiring, as an alternative to the cutters in the Deepwater Program?
Answer. Certainly, as we have said in other GAO reports, the Coast
Guard will need to exploit its partnerships with other Federal agencies
in order to fulfill is missions as efficiently and economically as
possible. To that end, according to Coast Guard documents, the Navy and
the Coast Guard have formed a working group specifically designed to
ensure close coordination and cooperation between the two programs.
Specifically, the working group is intended to identify common
technologies, systems, and processes critical to both the Navy's
Littoral Combat Ship (LCS) and the Deepwater Program's National
Security Cutter (NSC), medium endurance cutter (MEC), and patrol boat
developments, and to recommend those areas that will benefit both
programs through a cooperative organization, business, and/or technical
approach to the program sponsors.
While we have not examined the extent of the coordination or
cooperation between the two programs, the Coast Guard will need to
exploit its partnerships with other Federal agencies in order to
fulfill its missions as efficiently and economically as possible.
Certainly, as we have said in the past, it makes eminent good sense to
engage in such efforts.
Question 4. Is it possible, given the needs for shore-based
facilities and personnel training, for the Coast Guard to implement its
entire Deepwater plan in a shorter time frame?
Answer. The question is not whether it is possible, but how well an
acceleration of the program could be executed. Increasing the pace of
the acceleration does not increase its likelihood of success and can
inject a great deal of additional risk into the program. As stated in
testimony, although the Coast Guard is making progress on a number of
our recommendations, some recommendations, will take time to resolve.
The least well-developed aspect of the Deepwater Program may be its
planning for the transition of Coast Guard personnel to the new assets,
particularly in terms of operations, training, and logistics. The risk
of a measured, targeted acceleration could lessen the risk were the
Coast Guard to demonstrate full and appropriate integration between
this aspect of the Deepwater Program coupled with the stable
acquisition of hard assets.
Question 5. What new assets would be easiest to accelerate, and
could be accelerated with the least risks in terms of the GAO concerns?
Answer. If the Coast Guard does consider accelerating its
acquisition of new assets, it could perhaps consider a less risky
strategy using a targeted approach that considers both the condition of
particular legacy assets and the acquisition schedule for their
replacements on a more integrated schedule. For example, the National
Security Cutter (NSC) could be a target of opportunity for
acceleration, since the condition of the 378-foot high endurance cutter
(which it is replacing) has been particularly problematic. Once the
first NSC has been delivered and is fully tested, accelerating
production of the remaining NSCs could pose little risk. That said, in
order to avoid injecting additional risk into a targeted acceleration
plan, the Coast Guard would have to ensure that proper planning and
necessary actions for transitioning personnel to the new assets on an
accelerated scale are implemented.
Question 6. I'd like for all the witnesses to elaborate on this
question I posed to Admiral Collins during the hearing. The Army--the
only other Armed Service to use the ``Lead Systems Integrator''
approach--recently backed away from that approach in their Future
Combat Systems procurement due to concerns over lack of cost control.
These are similar to the concerns that GAO raised on the Deepwater
Program. Are the Army's new arrangements for managing this contract
similar to those that the Coast Guard has in place? Should the Coast
Guard use this approach to ensure that the costs are kept down?
Answer. We have not carried out the analysis on the developments
within the Army's Future Combat Systems program, and how similar
actions may be applied to the Coast Guard's Deepwater Program, required
to answer this question.
We are continuing to monitor and assess the Coast Guard's progress
on implementing our recommendations from our recent reports pertaining
to Deepwater Program management issues, as it will be a focus of our
follow-on review of the Deepwater revised implementation plan that is
to commence in August 2005.\1\ To that end, we are working on an audit
plan to assess the additional progress the Coast Guard has made and
will report the results on a timely basis to this subcommittee and to
the Coast Guard.
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\1\ GAO, Contract Management: Coast Guard's Deepwater Program Needs
Increased Attention to Management and Contractor Oversight, GAO-04-380
(Washington, D.C., March 7, 2004) and GAO, Coast Guard: Deepwater
Program Acquisition Schedule Update Needed, GAO-04-695 (Washington,
D.C.: June 14, 2004).
Question 7. Should the Coast Guard conduct an analysis of
alternatives to ensure the Deepwater Program is on the right track?
Answer. The Department of Defense requires an analysis of
alternatives at major milestone decisions for all major defense
acquisition programs. Analyses of alternatives (AOA) are an important
element of the defense acquisition process. An AOA is an analytical
comparison of the operational effectiveness, suitability, and life-
cycle cost of alternatives that satisfy established capability needs.
While an AOA is usually required at Milestone B (which usually
represents the first major funding commitment to the acquisition
program), the AOA is used to justify the rationale for formal
initiation of the acquisition program. An AOA normally is not required
at Milestone C (prior to low-rate initial production) unless
significant changes to threats, costs, or technology have occurred, or
the analysis is otherwise deemed necessary by the Milestone Decision
Authority.
We have not performed the audit work necessary to adequately answer
this question as it pertains specifically to the Deepwater Program.
That said, this will be a focus of our follow-on review that is to
commence in August 2005.
Question 8. How many of the issues GAO raised has been successfully
dealt with or ``Closed''? Why is it taking so long to proceed with the
other recommendations?
Answer. In 2004, we reported that well into the contract's second
year, key components needed to manage the program and oversee the
system integrator's performance had not been effectively
implemented.\2\ We also reported that the degree to which the program
was on track could not be determined because the Coast Guard was not
updating its schedule.\3\ We made a series of recommendations that are
depicted in Table 5 of my prepared statement (pg. 32 of this hearing).
---------------------------------------------------------------------------
\2\ GAO-04-380.
\3\ GAO-04-695.
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As of July 2005, we have seen mixed success in the Coast Guard's
effort to improve management of the program and contractor oversight.
Three of the recommendations--updating the Deepwater Integrated Master
Schedule, developing measurable award fee criteria consistent with
guidance from the Office of Federal Procurement Policy and
subcontractor notification to the Coast Guard of decisions over $5
million--have been fully addressed. The Coast Guard has made progress
on implementing most of the remaining recommendations, though we
continue to see evidence that more improvements are needed.
Although the Coast Guard has been responsive to our concerns over
the past year, three issues remain highly significant and,
notwithstanding the progress we have seen thus far, likely will take
some time to resolve. These are: (1) the effectiveness of the Coast
Guard's primary tool for overseeing the system integrator (integrated
product teams); (2) the attention paid to the affect of programmatic
decisions on overall costs and capabilities (operational effectiveness
and total ownership cost); and (3) proper planning for transitioning
Coast Guard personnel to the new assets in terms of operations,
training, and logistics (human systems engineering).
Assessing the Coast Guard's performance in implementing the
remaining recommendations will be a focus of our follow-on review of
the Deepwater revised implementation plan that is to commence in August
2005. To that end, we are working on an audit plan to assess the
additional progress the Coast Guard has made and will report the
results on a timely basis to this Subcommittee and to the Coast Guard.
With regard to your question as to why it is taking so long for the
Coast Guard to implement these recommendations, we would defer to the
Coast Guard for a proper response.
Question 9. Should the Coast Guard use an independent entity to
help evaluate the decisions by the prime contractor, ICGS, such as
decisions to purchase certain assets, or decisions to build such assets
in-house rather than subcontract them to another company?
Answer. GAO's general approach to assessing acquisition oversight
issues is to comment on the adequacy of an agency's processes,
procedures, and internal controls. GAO has not examined whether the
independent entity is needed to help evaluate decisions or what
standards or criteria would be applied.
Question 10. What is being done by ICGS and the Coast Guard to
improve competition for subcontracts?
Answer. The Coast Guard has made progress in implementing our
recommendations aimed at ensuring adequate competition among
subcontractors. To that end, the Coast Guard reported that it is taking
steps concerning cost control through competition among second-tier
suppliers and notification of ``make'' decisions.\4\ While we have not
assessed the effectiveness of the Coast Guard's actions regarding
competition among second-tier suppliers, we are satisfied with its
efforts regarding notification of make decisions. It should be noted,
though, that we have not assessed the effectiveness of the following
actions.
---------------------------------------------------------------------------
\4\ A ``make item'' means an item or work effort to be produced or
performed by the prime contractor or its affiliates, subsidiaries, or
divisions.
---------------------------------------------------------------------------
Coast Guard officials told us that in making the decision about
whether to award the first contract option, the government will
specifically examine the system integrator's ability to control costs
by assessing the degree to which competition is fostered at the major
subcontractor level. The evaluation will consider the subcontractors'
project management structure and processes to control costs, as well as
how market surveys of similar assets and major subsystems are
implemented. The Coast Guard is focusing its attention on those areas
that were priced after the initial competition for the Deepwater
contract was completed, such as the HH-65 re-engining and the C-130J
missionization.\5\ For example, a new process implemented for the C-130
missionzation was a requirement for competition in subcontracting and
government approval of all subcontracts exceeding $2 million in order
for the Coast Guard to monitor the integrator's competition efforts.
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\5\ The C-130J missionization, planned for the Coast Guard's six C-
130J aircraft, is intended to modify and install mission-essential
equipment to convert the aircraft into C-130J long-range surveillance
maritime patrol aircraft.
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According to the Federal Acquisition Regulation, the prime
contractor is responsible for managing contract performance, including
planning, placing, and administering subcontracts as necessary to
ensure the lowest overall cost and technical risk to the government.
The Federal Acquisition Regulation further provides that when ``make-
or-buy programs'' are required, the government may reserve the right to
review and agree on the contractor's make-or-buy program when necessary
to ensure negotiation or reasonable contract prices, among other
things. We recommended that the Coast Guard be notified of make-or-buy
decisions over $5 million in order to facilitate controlling costs
through competition. We suggested the $5 million threshold because
Lockheed Martin, one of the major subcontractors, considers that amount
to be the threshold for considering its suppliers major. The Coast
Guard has asked the system integrator, on a voluntary basis, to provide
notification 1 week in advance of a make decision of $10 million or
more based on the criteria in the make-or-buy program provisions of the
Federal Acquisition Regulation. According to Coast Guard officials, to
date, no make decision has exceeded $10 million since the request was
made. While we are satisfied with the Coast Guard's progress on this
issue thus far, the details implementing this recommendation have not
yet been worked out, such as specifically who in the Coast Guard will
monitor the subcontractors' make decisions to ensure that the voluntary
agreement is complied with.
While these are important improvements in internal controls, it is
too soon to know whether they have resulted in adequate competition or
whether other actions may be needed. We will continue to monitor the
Coast Guard's progress in implementing this recommendation during our
pending review of the revised Deepwater Implementation Plan that is to
commence in August 2005. To that end, we are working on an audit plan
to assess the additional progress the Coast Guard has made and will
report the results on a timely basis to this Subcommittee and to the
Coast Guard.
______
Response to Written Questions Submitted by Hon. Olympia J. Snowe to
Ronald O'Rourke
Question 1. Is there replication within Deepwater and the LCS
program that can be avoided in hopes of acquiring a cost savings to the
Nation?
Answer. Although the Navy's Littoral Combat Ship (LCS) was
originally justified primarily in connection with performing certain
missions in enemy littoral (near-shore) waters overseas, some DOD and
Navy officials in recent months have stated that the LCS might also be
suitable for homeland defense operations. The Navy in recent months has
also increased the total number of LCSs that it wants to build, from an
earlier potential range of 30 to 60 to a new potential range of 63 to
82. The Chief of Naval Operations has spoken of the possibility of
building 75 to 100.
The Navy has not explained in detail why its desired number of LCSs
has increased in recent months. The absence of such a detailed
explanation, combined with statements concerning the potential
suitability of the LCS for homeland defense operations, raise the
possibility that homeland defense operations form part of the Navy's
basis for increasing its desired number of LCSs.
Since the homeland defense operations that the Navy has in mind for
the LCS might also be performed by Deepwater assets such as National
Security Cutters (NSCs) and Offshore Patrol Cutters (OPCs), these
recent developments concerning the LCS program raise the question of
whether the Navy and Coast Guard have adequately coordinated their
force structure (i.e., numerical) requirements for LCSs and Deepwater
assets such as NSCs and OPCs.
When asked about coordination between the LCS and Deepwater
Programs, Navy and Coast Guard officials have generally responded by
noting how the two services have worked to ensure that LCSs and
Deepwater cutters will take maximum advantage of opportunities for
using common technologies and components. This is not the same,
however, as coordinating the force structure requirements for the two
programs. It also does not address the question of whether the homeland
defense operations the Navy has in mind for the LCS could be performed
more cost effectively by LCSs or by Deepwater assets such as NSCs and
OPCs.
Potential questions that arise out of this situation, particularly
for those who follow the Coast Guard and the Deepwater Program, include
the following:
Is the Navy, as part of an effort to justify an increase in
its desired number of LCSs, seeking to appropriate some of the
Coast Guard's homeland defense or homeland security
responsibilities?
Would the homeland defense operations that the Navy has in
mind for the LCS be performed more cost effectively by LCSs, or
by Deepwater assets such as NSCs and OPCs?
If the answer to the first question is yes, then there may be some
duplication in mission justification between the LCS program and the
Deepwater Program.
If the answer to the second question is that the homeland defense
operations in question would be more cost effectively performed by
Deepwater assets such as NSCs and OPCs, then the total cost to the
Nation for performing maritime homeland defense operations might be
reduced by decreasing the Navy's recently announced planned number of
LCSs and possibly increasing total planned numbers of Deepwater assets
such as NSCs and OPCs.
Question 2. How much confidence do you put in the accuracy of the
revised implementation plan? The RAND study?
Answer. Revised Implementation Plan. The accuracy of the revised
implementation plan depends to a large degree on the accuracy of the
analytical models that were used to generate the plan. The briefing I
received from the Coast Guard on these models gave me no immediate
reason to believe that they were fundamentally flawed. Such flaws,
however, are sometimes observable only through a detailed inspection of
a model's underlying features. In addition, even if a model contains no
such flaws, the many assumptions that are sometimes necessarily built
into such a model can provide the user an opportunity to vary
assumptions so as to achieve a preferred result.
The Coast Guard contracted with the MITRE Corporation to conduct an
independent assessment of the process that the Coast Guard used for its
Deepwater performance gap analysis (PGA). MITRE performed the
assessment between January 15 and March 1, 2004, and issued a report on
its assessment on March 30, 2004. The Coast Guard provided CRS with a
copy of the report. The report stated:
As part of the Deepwater PGA process, MITRE noted a number of
strengths in the Deepwater PGA effort. These strengths
underscore the credibility of the results produced. In general,
MITRE found that the Deepwater PGA process, and the resulting
analytic results, was likely the most complete and
comprehensive campaign-level study conducted by any uniformed
service in recent times.
The principal strengths of the Deepwater PGA process involve
the composition of the Deepwater PGA Teams, the foundation for
the Deepwater PGA, the involvement of senior Coast Guard
leadership, the models and processed used in the analysis, and
the consistency of the results, which tends to verify the
reasonableness and accuracy of the analysis performed. The work
performed by the Deepwater PGA Teams successfully met the
requirements contained in the Executive Steering Committee
charter that guided the work.
MITRE developed a number of recommendations based upon the
findings and independent assessment of the Deepwater PGA
process, the documentation provided and reviewed, and the
personnel interviews conducted. The primary recommendation is
to continue the process initiated in the Deepwater PGA as a
point of departure for revising the proposal of the prime
contractor, Integrated Coast Guard System, for the Integrated
Deepwater System. The remaining recommendations focus on areas
of improvement for subsequent analyses.\1\
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\1\ Independent Assessment of U.S. Coast Guard Deepwater
Performance Gap Analysis Process. McLean, VA, MITRE, 2004. (Version
1.0, March 30, 2004, Center for Enterprise Modernization) p. i.
---------------------------------------------------------------------------
Potential oversight questions include the following:
Is the MITRE assessment the only independent assessment that
was performed of the process that the Coast Guard used to
arrive at its revised implementation plan? If not, what were
the other assessments, and what were their findings,
conclusions, and recommendations? If the MITRE assessment was
the only independent assessment, has the Coast Guard contracted
for an independent assessment of the post-March 2004 portion of
its work to develop the revised implementation plan? If the
Coast Guard has not contracted for such an assessment, should
Congress require one?
Did the Coast Guard implement all of MITRE's ``remaining
recommendations [that] focus on areas of improvement for
subsequent [i.e., post-March 2004] analyses? If not, which of
MITRE's recommendations were not implemented, and why?
As an entity with a possible interest in securing future
Coast Guard contracts, did MITRE have an incentive to avoid
significantly criticizing the Coast Guard's PGA process or to
avoid recommending changes that might have significantly
delayed the Coast Guard's schedule for completing the revised
plan? Was MITRE, in other words, a truly independent assessor
in this instance? Should the Government Accountability Office
(GAO) be asked to perform an independent assessment of the
Coast Guard's process for developing the revised plan?
To what degree can the results of the Coast Guard's
analytical models be varied by varying the models' assumptions?
What assumptions did the Coast Guard plug into the models, and
did these assumptions tend to increase or reduce the size of
the Deepwater force required to perform various missions?
In addition to the above issues, there is a more general question
concerning the policy question that the models were used to answer. The
models might provide a reasonably accurate answer to the question:
``What is the highest-performing force that can be acquired for a total
of $19 billion to $24 billion?'' If so, however, that answer might not
be the same as an accurate answer to the question: ``What is the
lowest-cost force that can perform all the missions we want the
Deepwater force to be able to perform?''
Regarding the potential difference between these two questions, the
Coast Guard states that while the revised Deepwater force is, in its
view, the highest-performing force that can be acquired for a total of
$19 billion to $24 billion, this force would not have enough capacity
to perform certain missions of potential interest to policymakers. In
particular, the Coast Guard states, the revised force:
might not have enough capacity for performing certain Level-
2 operations, which include:
-- achieving an increased degree of maritime domain awareness
(MDA),
-- maintaining continuous presence of two cutters (i.e., 2.0
presence) in the Bering Sea; and
-- performing additional air interdiction operations;
almost certainly would not have enough capacity for
performing certain Level-3 operations, which include operations
for fully achieving long-term (FY 2005-FY 2009) Government
Performance and Results Act (GPRA) goals; and
would not have enough capacity for performing certain Level-
4 operations, which include:
-- conducting fisheries enforcement in certain areas where
fisheries enforcement is not currently performed; and
-- performing additional counter-drug operations, should the
Department of Defense (DOD) reduce its efforts in this area so
as to make DOD resources available for other DOD missions.
If policymakers determine that the revised force should perform
some or all of the above operations, then the revised implementation
plan, though perhaps accurately calculated for achieving the highest
performance for a total acquisition cost of $19 billion to $24 billion,
would not be accurately calculated for performing all missions of
interest to policymakers.
RAND Study. I have no reason to doubt that the RAND study
accurately calculated the number of platforms with Baseline-level
(i.e., Increment 0) capability that would be needed to perform all
Level-4 operations. One option for Congress would be to direct the
Coast Guard to contract with RAND for a follow-on study that would
calculate:
required numbers of platforms, assuming the same combination
of platform capability (i.e., between Increment II and
Increment III) and force capacity (i.e., between Level 1 and
Level 2) as reflected in the Coast Guard's revised plan; and
required numbers of platforms, and resulting acquisition
costs, to perform all Level 2 (or all Level 3, or all Level 4)
operations, assuming different platform capability levels.
Question 3. Do you believe that the proposed increased capabilities
outweigh the urgent need for a significant increase in capacity of
cutters and planes?
Answer. Achieving a proper balance between the capability of
individual platforms (i.e., ships or aircraft) and numbers of platforms
(i.e., capacity) is a longstanding problem in maritime force planning.
Increasing platform capability can often reduce the number of platforms
required to perform a given set of missions. The potential for
increased platform capability to translate into reduced platform
numbers, however, can be limited by a requirement in the set of
missions to be performed to maintain a platform presence in a minimum
number of separate operating areas at the same time.
Whether the Coast Guard has accurately calculated the reduction in
required platform numbers that results from the revised plan's proposed
increase in platform capability depends to a large degree on the
accuracy of the Coast Guard's analytical models. As discussed above,
one potential option for Congress would be to have GAO conduct an
independent assessment of these models. Such an assessment could
include, among other things, an examination of whether the models
accurately translate increased platform capability into reduced
platform numbers after taking into account requirements for maintaining
platform presence in separate areas at the same time.
Question 4. Were you surprised at the recommendations of the
revised implementation report? What aspect of the report concerns you
the most?
Answer. In light of the Coast Guard's expanded post-9/11 mission
demands and the significantly higher platform numbers recommended in
the 2004 RAND report for meeting those demands, I was surprised that
the revised implementation plan did not recommend platform numbers that
were generally higher than those in the original (1998) Deepwater plan.
I was not surprised that the numbers in the revised plan were below
those in the RAND report because articles in the trade press suggested
that this would be the case. But I did not anticipate that the Coast
Guard would calculate that increased unit capability would be
sufficient to avoid a general increase in platform numbers above those
in the original Deepwater plan.
The revised force appears to have been optimized for an acquisition
cost of $19 billion to $24 billion. I do not understand why a range of
$19 billion to $24 billion, rather than some lower or higher figure,
was used as the acquisition cost range within which to optimize the
revised force, or why the Coast Guard didn't instead optimize the force
to fully achieve long-term (FY 2005-FY 2009) Government Performance and
Results Act (GPRA) goals (i.e., perform all Level 3 operations) at
lowest cost. Federal programs must take limits on available resources
into account, but as a result of being optimized within an acquisition
cost of $19 billion to $24 billion, the revised force almost certainly
would not have enough capacity to fully achieve the GPRA goals, which
presumably are of some importance to the policymakers who established
them. The Coast Guard did not (and was not required to) include in the
revised plan information on the composition and cost of alternative
Deepwater forces that could perform all Level 2 operations (or all
Level 3 operations, or all Level 4 operations) at lowest cost. Congress
consequently does not have this information, which would assist
Congress, as a policymaking body, in considering potentially important
tradeoffs between achieving certain levels of Deepwater performance and
meeting goals for other Federal programs.
Question 5. Can the United States shipbuilding industry handle an
acceleration of this project to 10 or 15 years?
Answer. I believe the U.S. shipbuilding industrial base could
accommodate an acceleration of the Deepwater Program under which the
NSCs and OPCs included in the revised plan are procured in a period of
10 to 15 years, provided that design work on each class of cutter was
completed before procurement of that class was accelerated. The yards
that could build these cutters have more than enough unused production
capacity to accommodate such an increase, and these cutters are
relatively low-risk designs that are to incorporate proven rather than
developmental systems. The 2004 RAND report similarly concluded that
the U.S. shipbuilding industrial base could accommodate a compression
of the NSC and OPC procurement period to 10 or 15 years.\2\
---------------------------------------------------------------------------
\2\ John Birkler et al., The U.S. Coast Guard's Deepwater Force
Modernization Plan, Can It Be Accelerated? Will It Meet Changing
Security Needs? RAND Corporation, Santa Monica (CA), 2004. pp. xxv-
xxvi, 32-41, 53-61.
Question 6. What shipyards can accommodate the new contracts that
would be associated with building Deepwater cutters?
Answer. U.S. shipyards that could accommodate new contracts
associated with building Deepwater cutters include the two yards
currently involved in building larger Navy surface combatants--the
Ingalls shipyard that forms part of Northrop Grumman Ship Systems
(NGSS), and General Dynamics' Bath Iron Works (GD/BIW). Both of these
yards currently have considerable unused capacity. Other shipyards that
could accommodate the new contracts include yards that currently build
larger ships of other types, but have past experience in building
cutters or larger Navy surface combatants, such as the Avondale
shipyard that forms part of NGSS, or Northrop Grumman Newport News
(NGNN).
______
Response to Written Questions Submitted by Hon. Daniel K. Inouye to
Ronald O'Rourke
Question 1. The revised Deepwater plan lists a number of enhanced
capabilities that will be provided to the Coast Guard. Understandably,
most of these capabilities are aimed at the Coast Guard's security
mission. How will these new capabilities also help the Coast Guard to
fulfill its non-security related missions, such as fisheries
enforcement?
Answer. Ship and aircraft capabilities useful for performing
homeland security missions in some cases can also be useful for
performing non-homeland security missions such as fisheries
enforcement. Consequently, increasing planned Deepwater ship and
aircraft capabilities so as to enhance the Deepwater force's ability to
perform homeland security missions might in some cases also improve its
ability to perform non-homeland security missions such as fisheries
enforcement. For example, the higher maximum speeds now planned for the
Offshore Patrol Cutters (OPCs) and Fast Response Cutters (FRCs) and the
improved sensors now planned for the HC-130 Long Range Search (LRS)
aircraft and the H-65C Multi-Mission Cutter Helicopter (MCH) might
improve the Deepwater force's ability to detect, track, and intercept
ships or boats engaged in illegal fishing operations.
Question 2. I am a bit concerned that the new plan reduces the
total number of assets, especially given the need for physical presence
in areas like the Western and Central Pacific. Being able to see and to
identify an illegal foreign fishing vessel with this cutting-edge
technology is all well and good, but how will the Coast Guard catch
them unless a cutter is out there too?
Answer. Cutters and their embarked helicopters and interceptor
boats are central to the Coast Guard's ability to halt and board
fishing vessels that are operating beyond the range of shore-based
helicopters and interceptor boats. The Coast Guard states that the
revised Deepwater force:
might not have enough capacity (i.e., platforms) for
performing certain Level-2 operations;
almost certainly would not have enough capacity for
performing certain Level-3 operations; and
would not have enough capacity for performing certain Level-
4 operations.
Level-2 operations include, among other things, maintaining
continuous presence of two cutters in the Bering Sea.
Level-3 operations include additional forces for achieving long-
term (FY 2005-FY 2009) Government Performance and Results Act (GPRA)
goals. The GPRA goal for living marine resources is to maintain a 97
percent observed domestic compliance rate by commercial fishers.
Level-4 operations include, among other things, conducting
fisheries enforcement in certain areas where fisheries enforcement is
not currently performed. The Coast Guard states that in the Pacific,
these areas include waters between Hawaii and Australia covered by the
Western and Central Pacific Tuna agreement and waters extending from
Baja, Mexico, down past the Galapagos islands, and west about three-
quarters of the way to Hawaii that are covered by the Inter-American
Tropical Tuna Commission.
Question 3. Given all of the problems that the Coast Guard has
experienced with its two major legacy programs thus far, the HH-65
helicopters and the 110, cutter conversions, I am surprised to see that
the new plan would upgrade rather than replace 22 of your C-130
aircraft, and all of your HH-60 helicopters. Is this really the best
decision in your opinion, in terms of long-term performance?
Answer. A decision on whether to upgrade rather than replace a
group of aircraft can depend on several things, including the
industrial-base implications of upgrading vs. building new aircraft,
the potential impact of an upgrade program on near-term aircraft
availability (particularly for numerically small aircraft fleets with
high operational tempos), the time horizon for calculating cost
effectiveness (i.e., how many future years ``long term'' is defined to
include), the accuracy of performance estimates for upgraded and
replacement aircraft, and the accuracy of cost estimates for upgrading
existing aircraft, procuring replacement aircraft, and operating and
supporting the upgraded or replacement aircraft. Some observers believe
that cost and schedule estimates for upgrading existing aircraft carry
more risk of being inaccurate because of the difficulty of predicting
certain problems associated with aircraft aging. Confidence in the
Coast Guard's decisions regarding its C-130 aircraft and HH-60
helicopters could depend in part on how well the Coast Guard is judged
to have incorporated lessons learned from past Coast Guard and DOD
upgrade programs.
Question 4. How can we be sure that the HH-60 and C-130 aircraft
will not have problems in the long-run? The Air Force has found that
the older C-130J aircraft have cracks in their wing-boxes. And in
December 2004, during an attempted search and rescue of the fishing
vessel, the NORTHERN EDGE, 3 out of 4 of the Coast Guard's HH-60
helicopters were forced to return to Cape Cod Air Station due to
mechanical problems. Five of the NORTHERN EDGE crew members died.
Answer. Careful inspection and maintenance of older aircraft can
reduce the probability that they will experience problems in operation,
but some probability would remain. Although the military services have
growing experience in operating aircraft to advanced ages, some
observers are concerned that the aging mechanisms for certain aircraft
components, and thus the risks of operating aircraft to advanced ages,
are not yet fully understood. Technical issues involved include items
such as corrosion, metal fatigue (particularly on components that
undergo aerodynamic stress), and wire embrittlement.
Question 5. Does the fact that the Coast Guard submitted a $24
billion plan mean that the $19 billion plan will not in fact allow the
Coast Guard to achieve its performance goals for all of its many
missions?
Answer. The Coast Guard states that, until Deepwater assets are
actually fielded, the exact amount of mission performance they will
generate is uncertain. The Coast Guard wants the Deepwater force to
achieve a certain level of overall mission performance. The Coast Guard
appears confident that the larger $24 million force would achieve that
level of overall mission performance, but believes that the smaller $19
billion force might be able to do so, depending on the actual amount of
mission performance generated by the new Deepwater assets. The ultimate
force procured to achieve the intended level of overall mission
performance, the Coast Guard states, could be the $19 billion force,
the $24 billion force, or perhaps something in between.
Although the force that is ultimately procured would be capable of
achieving a certain level of overall mission performance desired by the
Coast Guard and the Department of Homeland Security (DHS), this force
would not have enough capacity to perform certain missions of potential
interest to policymakers. In particular, the Coast Guard states, the
revised force:
might not have enough capacity for performing certain Level-
2 operations, which include:
-- achieving an increased degree of maritime domain awareness
(MDA),
-- maintaining continuous presence of two cutters (i.e., 2.0
presence) in the Bering Sea, and
-- performing additional air interdiction operations;
almost certainly would not have enough capacity for
performing certain Level 3 operations, which include operations
for fully achieving long-term (FY 2005-FY 2009) Government
Performance and Results Act (GPRA) goals; and
would not have enough capacity for performing certain Level
4 operations, which include:
-- conducting fisheries enforcement in certain areas where
fisheries enforcement is not currently performed, and
-- performing additional counter-drug operations, should the
Department of Defense (DOD) reduce its efforts in this area so
as to make DOD resources available for other DOD missions.
Question 6. Why are both of the plans significantly more expensive
than the original projection of $17 billion for completion of the
program? Are all of the costs attributable to the new capabilities
Coast Guard would acquire?
Answer. Potential sources of acquisition cost growth from the
earlier figure of $17 billion to the new estimated cost of $19 billion
to $24 billion include:
additional equipment to be installed on previously planned
platforms;
additional platforms to be acquired; and
repricing of previously planned items due to revised
inflation indices or a revised understanding of the intrinsic
cost of those items.
This first item clearly accounts for some portion of the increase
above the $17 million figure. The second item may account for an
additional portion, particularly in the case of the $24 billion plan.
______
Response to Written Questions Submitted by Hon. Maria Cantwell to
Ronald O'Rourke
Question 1. Will the new mix of capability and capacity of assets
ensure that the Coast Guard will be able to meet its performance goals
for all of its security and non-security missions?
Answer. Although the Coast Guard states that the Deepwater force
recommended under the revised implementation plan would generate much
more overall mission performance than the originally planned force, and
would be able to meet certain DHS and Coast Guard long-range
performance goals, the revised Deepwater force would not have enough
capacity to perform certain missions of potential interest to
policymakers. In particular, the Coast Guard states, the revised force:
might not have enough capacity for performing certain Level-
2 operations, which include:
-- achieving an increased degree of maritime domain awareness
(MDA),
-- maintaining continuous presence of two cutters (i.e., 2.0
presence) in the Bering Sea, and
-- performing additional air interdiction operations;
almost certainly would not have enough capacity for
performing certain Level 3 operations, which include operations
for fully achieving long-term (FY 2005-FY 2009) Government
Performance and Results Act (GPRA) goals; and
would not have enough capacity for performing certain Level
4 operations, which include:
-- conducting fisheries enforcement in certain areas where
fisheries enforcement is not currently performed, and
-- performing additional counter-drug operations, should the
Department of Defense (DOD) reduce its efforts in this area so
as to make DOD resources available for other DOD missions.
Question 2. Which level of funding--$19 billion or $24 billion--is
needed for the Coast Guard to implement all of its missions? Does the
inclusion of a $24 billion plan mean that the $19 billion plan--$2
billion higher than the original cost estimate for Deepwater--will
somehow fall short?
Answer. The Coast Guard states that, until Deepwater assets are
actually fielded, the exact amount of mission performance they will
generate is uncertain. The Coast Guard wants the Deepwater force to
achieve a certain level of overall mission performance. The Coast Guard
appears confident that the larger $24 billion force would achieve that
level of overall mission performance, but believes that the smaller $19
billion force might be able to do so, depending on the actual amount of
mission performance generated by the new Deepwater assets. The ultimate
force procured to achieve the intended level of overall mission
performance, the Coast Guard states, could be the $19 billion force,
the $24 billion force, or perhaps something in between.
Although the force that is ultimately procured would be capable of
achieving a certain level of overall mission performance desired by the
Coast Guard and the Department of Homeland Security (DHS), as discussed
in the answer to the previous question, this force would not have
enough capacity to perform certain missions of potential interest to
policymakers relating to Level 4, Level 3, and possibly Level 2
operations.
Question 3. What steps if any should the Coast Guard or ICGS take
to examine other assets such as the Littoral Combat Ship that Navy is
acquiring, as an alternative to the cutters in the Deepwater Program?
Answer. The 2004 RAND report on the Deepwater Program recommended
that the Coast Guard explore alternative platforms and technologies for
meeting the service's expanded post-9/11 mission demands. The report
states that the Coast Guard can meet its expanded post-9/11
responsibilities:
only by acquiring significantly more cutters, unmanned air
vehicles (UAVs), and helicopters than are in the current [1998
Deepwater] acquisition program, or by mixing into the program
other platforms and technologies that provide the same or
additional capabilities . . . .
We recommend that the USCG pursue a two-pronged strategy. The
USCG should meet its mission demands and start replacing its
aging assets by (1) accelerating and expanding the asset
acquisitions in the current Deepwater Program and, at the same
time, (2) identifying and exploring new platform options,
emerging technologies, and operational concepts that could
leverage those assets. Such a two-pronged strategy may satisfy
demand more quickly and at less cost than expanding the
original Deepwater plan.
While we recommend that the USCG accelerate Deepwater and buy
more assets than in the current plan, we also recommend that
USCG leaders bear in mind that buying more of today's assets
may not provide an optimal solution over the long-term. To
handle some of the responsibilities currently handled by
traditional assets, the USCG could, for example, employ
offshore rigs and airships, or realize emerging UAV concepts.
Placing rigs near sea-lanes may enable the USCG to base and
sustain surface and air assets in Deepwater environments, while
lessening its traditional reliance on cutters. Employing
airships or relying more heavily on UAVs, particularly those
able to stay aloft for long periods and to cover significant
territory, may allow the USCG to enhance its surveillance,
reconnaissance, and search and rescue capabilities. Such
alternatives may involve less-costly assets than platforms the
USCG currently uses to handle its responsibilities.
We provide a preliminary analysis of cost and performance for a
100-percent force structure. Our analysis is sufficient for
order-of-magnitude comparisons; however, more work would be
required to produce budget-level cost estimates and analysis of
operational effectiveness. Policymakers should use the order-
of-magnitude estimates of the 100-percent force structure as an
upper bound against which they can explore and evaluate
alternative concepts and assets that provide the same or
improved capabilities at less cost, rather than as a road map
to pinpoint specific acquisition decisions.\1\
---------------------------------------------------------------------------
\1\ John Birkler et al., The U.S. Coast Guard's Deepwater Force
Modernization Plan, Can It Be Accelerated? Will It Meet Changing
Security Needs? RAND Corporation, Santa Monica (CA), 2004. pp. xix-xx,
xxviii-xxix. Italics added for emphasis.
In addition to the systems mentioned above (offshore rigs,
airships, and emerging UAV concepts), potential alternative ship
platforms for meeting the Coast Guard's post-9/11 mission demands
---------------------------------------------------------------------------
include, but are not limited to, the following:
the Littoral Combat Ship (LCS), which currently exists in
two designs--a high-speed monohull and a high-speed trimaran;
a ship like the Navy's recently built high-speed catamaran
X-Craft (previously known as the Littoral Support Craft-
Experimental, or LSC-X); or
ships like the high-speed catamaran ferries that the Defense
Department has leased in recent years for experiments and
operational evaluations.
Question 4. Is it possible, given the needs for shore-based
facilities and personnel training, for the Coast Guard to implement its
entire Deepwater plan in a shorter timeframe?
Answer. If annual funding were sufficiently high, the systems
envisioned in the revised implementation plan could be acquired in
something less than the 20 to 25 years contemplated in the revised
plan. In general, the more the acquisition period for the entire plan
is compressed, the greater the burden of managing the program would be,
and the higher the risk of a problem occurring in program execution.
Again assuming sufficient annual funding, the Coast Guard could
accelerate its plans for shore-based facilities and personnel training
to meet a compressed platform-acquisition schedule, but the more the
acquisition period is compressed, the greater the management burden
associated with preparing shore-based facilities and training personnel
would become. The 2004 RAND report stated:
With respect to accelerating Deepwater acquisitions, it should
be noted that both of the acceleration schedules we examined--
the 10-year and the 15-year--are feasible. However, to assess
the ability of the USCG to integrate assets it would acquire
using either of those schedules was beyond the scope of this
study.\2\ Without that assessment, we are reluctant to make a
recommendation on whether to go with a 15-year or a 10-year
acquisition schedule.\3\
---------------------------------------------------------------------------
\2\ At this point, the RAND report has a footnote that reads: ``By
integrate, we mean providing the facilities, training, manpower, and
other implications that such a force structure might require.''
\3\ Ibid, p. xxix.
Question 5. What new assets would be easiest to accelerate, and
could be accelerated with the least risks in terms of the GAO concerns?
Answer. Assuming sufficient annual funding, assets whose
procurement would be the easiest to accelerate, and could be
accelerated with the least risk, would be those:
whose producers currently have unused production capacity;
whose designs are complete and relatively stable (i.e., not
likely to be revised significantly in the near term); and
whose systems and technologies are proven and well
understood rather than developmental or novel.
Among the Deepwater assets that can be viewed as currently meeting
all three criteria is the National Security Cutter (NSC). The Offshore
Patrol Cutter (OPC) can be viewed as currently meeting the first and
third criteria. With regard to the second criterion, the FY 2006
Deepwater budget request includes funding to complete the design for
the OPC.
Question 6. I'd like for all of the witnesses to elaborate on this
question I posed to Admiral Collins during the hearing. The Army--the
only other Armed Service to use the ``Lead Systems Integrator''
approach--recently backed away from that approach in their Future
Combat Systems procurement due to concerns over lack of cost control.
These are similar to the concerns that GAO raised on the Deepwater
Program. Are the Army's new arrangements for managing this contract
similar to those that the Coast Guard has in place? Should the Coast
Guard use this approach to ensure that the costs are kept down?
Answer. As part of a restructuring of the business aspects of the
Future Combat System (FCS) program announced on April 5, 2005, the
Secretary of the Army directed that the FCS Other Transaction Agreement
(OTA) with the lead system integrator, Boeing/SAIC, be changed to a
Federal Acquisition Regulation (FAR)-based contract that includes the
Truth in Negotiations Act, the Procurement Integrity Act, cost
accountability standards, and an organizational conflicts of interest
clause. Boeing/SAIC remains the lead systems integrator for the FCS
program. The FCS program is still a large, system-of-systems
acquisition program that is being executed for the government by an
industry entity acting as lead system integrator, and the FCS program
continues to share this basic structural similarity with the Deepwater
acquisition program.
The Army's recent restructuring of the FCS program also included
the following actions intended to strengthen the Army's management of
the program:
The Secretary of the Army and the Chief of Staff of the Army
will conduct an in-depth review of the program at least three
times a year.
The Secretary and the Chief of Staff will serve as the lead
Army officials for all major changes to the program.
The Army will establish an Army Modular Force Integration
Office to ensure that FCS technologies are incorporated into
the Army as soon as they are ready, and to integrate and
coordinate the FCS program with evolving Army warfighting
doctrine and the Army's emerging global communication and
information infrastructure. The new office will be overseen by
the Acting Under Secretary of the Army and the Vice Chief of
Staff of the Army.
As an additional oversight measure, the Army Audit Agency,
the Army Science Board, and an outside panel of advisors will
conduct periodic independent assessments of program cost,
schedule, and technical viability.\4\
---------------------------------------------------------------------------
\4\ U.S. Army News Release, ``Army Announces Business Restructuring
of the FCS Program,'' April 5, 2005. [http://www4.army.mil/ocpa/
print.php?story_id_key=7125] See also Jen DiMascio, ``Army Announces
Future Combat System Contract Restructuring,'' Inside the Army, April
11, 2005; and Jonathan Karp and Andy Pasztor, ``About-Face: Army's
Decision On Boeing Changes Philosophy,'' Wall Street Journal, April 6,
2005.
---------------------------------------------------------------------------
As points of comparison with the last of the above actions by the
Army, the Coast Guard, has done, or is doing, the following:
During the source-selection phase of the Deepwater Program,
the Coast Guard used an Independent Analysis Government
Contractor (or IAGC, staffed originally by the MITRE
Corporation and later by Booz Allen Hamilton) to provide the
Coast Guard with independent assessments of the bids submitted
by the three industry teams that competed for the right to
become the Deepwater Program prime contractor. The IAGC was
stood down following the completion of source selection.\5\
---------------------------------------------------------------------------
\5\ Source: Telephone consultation with Deepwater Program office,
May 3, 2005.
During the source-selection phase and on two subsequent
occasions (including, most recently, during the analysis that
led to the revised implementation plan), the Coast Guard turned
to the Logistics Management Institute (LMI) for independent
cost estimates relating to the Deepwater Program.\6\
---------------------------------------------------------------------------
\6\ Ibid.
In early 2004, the Coast Guard used MITRE to perform an
independent assessment of the process the Coast Guard had
developed for performing the Performance Gap Analysis (PGA)
that eventually led to the revised Deepwater Implementation
Plan.\7\
---------------------------------------------------------------------------
\7\ MITRE Corporation, Independent Assessment of U.S. Coast Guard
Deepwater Performance Gap Analysis Process, McLean (VA), 2004. (Version
1.0, March 30, 2004, MITRE Center for Enterprise Modernization, McLean,
Virginia). A copy of this report was provided to CRS by the Coast Guard
during the April 28, 2005 briefing.
As of late-April 2005, a third-party assessment of the use
of competition by ICGS was in progress.\8\
---------------------------------------------------------------------------
\8\ U.S. Coast Guard. Oversight and Management of the Coast Guard's
Integrated Deepwater System, Washington, 2005. (Rear Adm. Patrick M.
Stillman, USCG, Program Executive Officer, Integrated Deepwater System,
U.S. Coast Guard Headquarters, Washington, D.C., 27 April 2005) p. 5.
The broad similarities between the Deepwater and FCS acquisition
strategies, and the Army's recent actions to strengthen its management
of the FCS program, raise the following potential oversight questions
---------------------------------------------------------------------------
for Congress:
How do the Coast Guard's arrangements for managing the
Deepwater Program compare to the Army's arrangements, as
recently restructured, for managing the FCS program?
Are the Army's arrangements for managing the FCS program
stronger in some ways than the Coast Guard's arrangements for
managing the Deepwater Program, and if so, should the Coast
Guard consider adopting the stronger Army measures?
How does the Coast Guard compare to the Army in terms of in-
house acquisition-management and system-integration expertise?
Does the Coast Guard have enough in-house system-integration
expertise to conduct complete and fully independent assessments
of ICGS decisions and recommendations regarding the Deepwater
Program's system-integration approach?
Should the Coast Guard establish a standing independent
organization--perhaps similar to the Deepwater source-selection
IAGC (but permanent in nature), or to the Army's outside board
of advisors for the FCS program--to provide periodic and
ongoing assessments of ICGS decisions and recommendations
regarding the Deepwater Program, including decisions relating
to the program's system-integration approach, or to solicit and
assess, on an ongoing basis, proposed innovations for the
Deepwater Program, particularly from firms outside the ICGS
team?
Have the Coast Guard and Army established a regular process
for sharing with each other their experiences in managing the
Deepwater and FCS programs, and for trading ideas for improving
their management of the programs? If not, would the Coast Guard
and Army benefit from establishing such a process?
Question 7. Should the Coast Guard conduct an analysis of
alternatives to ensure the Deepwater Program is on the right track?
Answer. The Coast Guard may believe that the performance gap
analysis (PGA) and associated analytical work that the Coast Guard did
to arrive at the revised implementation plan amounts to an updated
Deepwater analysis of alternatives (AOA), and that another AOA
consequently is not needed at this point. As a cross-check on the Coast
Guard's work, a possible option for Congress would be to direct DHS to
contract for an independent AOA to be performed by an entity outside of
DHS that has the requisite analytical capability and independence from
DHS.
As discussed in relation to an earlier question, the 2004 RAND
report on the Deepwater Program recommended that the Coast Guard
explore alternative platforms and technologies for meeting the
service's expanded post-9/11 mission demands. An AOA could form part of
the process for exploring such alternative platforms and technologies.