[House Hearing, 110 Congress] [From the U.S. Government Publishing Office] DEEPWATER: 120-DAY UPDATE ======================================================================= (110-50) HEARING BEFORE THE SUBCOMMITTEE ON COAST GUARD AND MARITIME TRANSPORTATION OF THE COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE HOUSE OF REPRESENTATIVES ONE HUNDRED TENTH CONGRESS FIRST SESSION __________ JUNE 12, 2007 __________ Printed for the use of the Committee on Transportation and Infrastructure U.S. GOVERNMENT PRINTING OFFICE 36-681 PDF WASHINGTON DC: 2007 --------------------------------------------------------------------- For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866)512-1800 DC area (202)512-1800 Fax: (202) 512-2250 Mail Stop SSOP, Washington, DC 20402-0001 COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE JAMES L. OBERSTAR, Minnesota, Chairman NICK J. RAHALL, II, West Virginia JOHN L. MICA, Florida PETER A. DeFAZIO, Oregon DON YOUNG, Alaska JERRY F. COSTELLO, Illinois THOMAS E. PETRI, Wisconsin ELEANOR HOLMES NORTON, District of HOWARD COBLE, North Carolina Columbia JOHN J. DUNCAN, Jr., Tennessee JERROLD NADLER, New York WAYNE T. GILCHREST, Maryland CORRINE BROWN, Florida VERNON J. EHLERS, Michigan BOB FILNER, California STEVEN C. LaTOURETTE, Ohio EDDIE BERNICE JOHNSON, Texas RICHARD H. BAKER, Louisiana GENE TAYLOR, Mississippi FRANK A. LoBIONDO, New Jersey ELIJAH E. CUMMINGS, Maryland JERRY MORAN, Kansas ELLEN O. TAUSCHER, California GARY G. MILLER, California LEONARD L. BOSWELL, Iowa ROBIN HAYES, North Carolina TIM HOLDEN, Pennsylvania HENRY E. BROWN, Jr., South BRIAN BAIRD, Washington Carolina RICK LARSEN, Washington TIMOTHY V. JOHNSON, Illinois MICHAEL E. CAPUANO, Massachusetts TODD RUSSELL PLATTS, Pennsylvania JULIA CARSON, Indiana SAM GRAVES, Missouri TIMOTHY H. BISHOP, New York BILL SHUSTER, Pennsylvania MICHAEL H. MICHAUD, Maine JOHN BOOZMAN, Arkansas BRIAN HIGGINS, New York SHELLEY MOORE CAPITO, West RUSS CARNAHAN, Missouri Virginia JOHN T. SALAZAR, Colorado JIM GERLACH, Pennsylvania GRACE F. NAPOLITANO, California MARIO DIAZ-BALART, Florida DANIEL LIPINSKI, Illinois CHARLES W. DENT, Pennsylvania DORIS O. MATSUI, California TED POE, Texas NICK LAMPSON, Texas DAVID G. REICHERT, Washington ZACHARY T. SPACE, Ohio CONNIE MACK, Florida MAZIE K. HIRONO, Hawaii JOHN R. `RANDY' KUHL, Jr., New BRUCE L. BRALEY, Iowa York JASON ALTMIRE, Pennsylvania LYNN A WESTMORELAND, Georgia TIMOTHY J. WALZ, Minnesota CHARLES W. BOUSTANY, Jr., HEATH SHULER, North Carolina Louisiana MICHAEL A. ACURI, New York JEAN SCHMIDT, Ohio HARRY E. MITCHELL, Arizona CANDICE S. MILLER, Michigan CHRISTOPHER P. CARNEY, Pennsylvania THELMA D. DRAKE, Virginia JOHN J. HALL, New York MARY FALLIN, Oklahoma STEVE KAGEN, Wisconsin VERN BUCHANAN, Florida STEVE COHEN, Tennessee JERRY McNERNEY, California VACANCY (ii) SUBCOMMITTEE ON COAST GUARD AND MARITIME TRANSPORTATION ELIJAH E. CUMMINGS, Maryland, Chairman GENE TAYLOR, Mississippi STEVEN C. LaTOURETTE, Ohio RICK LARSEN, Washington DON YOUNG, Alaska CORRINE BROWN, Florida HOWARD COBLE, North Carolina BRIAN HIGGINS, New York WAYNE T. GILCHREST, Maryland BRIAN BAIRD, Washington FRANK A. LoBIONDO, New Jersey TIMOTHY H. BISHOP, New York TED POE, Texas VACANCY JOHN L. MICA, Florida JAMES L. OBERSTAR, Minnesota (Ex Officio) (Ex Officio) (iii) CONTENTS Page Summary of Subject Matter........................................ vi TESTIMONY Allen, Admiral Thad W., Commandant, United States Coast Guard.... 6 Skinner, Richard L., Inspector General, Department of Homeland Security, accompanied by Rich Johnson, Project Manager, Office of Inspector General, Department of Homeland Security.......... 6 PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS Cummings, Hon. Elijah E., of Maryland............................ 42 PREPARED STATEMENTS SUBMITTED BY WITNESSES Allen, Admiral Thad W............................................ 44 Skinner, Richard L............................................... 58 SUBMISSIONS FOR THE RECORD Allen, Admiral Thad W., responses to questions from the Committee 55 [GRAPHIC] [TIFF OMITTED] 36681.001 [GRAPHIC] [TIFF OMITTED] 36681.002 [GRAPHIC] [TIFF OMITTED] 36681.003 [GRAPHIC] [TIFF OMITTED] 36681.004 [GRAPHIC] [TIFF OMITTED] 36681.005 HEARING ON DEEPWATER: 120 DAY UPDATE ---------- Tuesday, June 12, 2007 House of Representatives, Committee on Transportation and Infrastructure, Subcommittee on Coast Guard and Maritime Transportation, Washington, DC. The Subcommittee met, pursuant to call, at 11:00 a.m., in Room 2167, Rayburn House Office Building, the Honorable Elijah E. Cummings [Chairman of the Subcommittee] presiding. Mr. Cummings. The Subcommittee will come to order. Today, the Subcommittee on Coast Guard and Maritime Transportation convenes to receive an update on the steps that the Coast Guard has taken over the past 120 days to continue strengthening the management of the $24 billion 25 year Deepwater procurement program. I note the significance of the 120 day time period. It is the time that has elapsed since I convened the Committee's first oversight hearing on Deepwater in the 110th Congress, and it is the time period after which I promised the Subcommittee would reconvene to hear again from the Coast Guard's Commandant, Admiral Thad Allen. This hearing continues our Subcommittee's unwavering commitment to require strict accountability from the Coast Guard for its implementation of the Deepwater program and the expenditures of taxpayers' resources. Since we met in January, our Subcommittee has examined the Coast Guard's fiscal year 2008 budget, and the House is considering the appropriation for the Coast Guard on the Floor today. The Full Committee on Transportation and Infrastructure has also held an investigative hearing to examine the extent to which contractors working on the failed 123 foot patrol boat program complied with the requirements of the Deepwater contract. During that 120 day period, the Commandant has also announced important changes to the Deepwater program including promising the Coast Guard will assume the lead role as systems integrator for the program, that the use of third party certification will be increased and that the Coast Guard will contract directly with vendors when it is in the best interest of the service to do so. Further, the Coast Guard will stand up a new acquisitions directorate under the command of Rear Admiral Gary Blore on July 13. The principles and plans the Commandant has announced appear likely to set the Deepwater program on a steadier course. However, it is important that we understand how these principles will be translated into the specific practices that will insure the success of the program. The failures already registered in Deepwater are simply unacceptable. An approximately $100 million effort to lengthen 8 123 foot patrol boats yielded only 8 buckled hulls. According to the Inspector General, the Coast Guard has obligated more than 100 million of money allocated to the development of the vertical unmanned aerial vehicle through fiscal year 2007, but this obligation has yielded little more than a pile of rubble and the first effort to design a Fast Response Cutter, which at just 120 to 160 feet is the smallest of the new cutters expected to be acquired under Deepwater, produced a failed design. As I have said before, what we expect from Deepwater is really quite simple. It is no rocket scientist stuff. We expect boats to float. We expect aircraft to fly. Yet, as simple as these goals appear to be, too frequently they have not been met in the Deepwater program, and this is simply intolerable. Unfortunately, there are problems with other ongoing procurements, most notably the National Security Cutter, the most expensive asset to be acquired under Deepwater. I had the opportunity, thanks to Admiral Allen, to visit the NSC last week in Pascagoula, Mississippi, and it is indeed, without a doubt, an impressive ship. However, like all of my colleagues on the Subcommittee, I am deeply concerned by lingering questions about the likely fatigue life of hulls 1 and 2. I believe that it is imperative and should be among the Coast Guard's top priorities at this time to ensure that design changes incorporated into hulls 3 through 8 will yield ships that will fulfill all of the requirements of the Deepwater contract. For that reason, I believe that all proposed designs must be closely examined by the Navy's Carderock Division. During today's hearing, I also hope to understand the specific role that the Integrated Coast Guard Systems Team is currently playing in implementing the Deepwater procurements and how any future contract extension granted to that team will be structured to ensure that performance is based solely on the quality of work performed and the effectiveness of assets produced. In recent years, our great Country has unfortunately witnessed the troubled aftermath of incompetence in government, and the Congress has been too willing to tolerate mediocrity. Ladies and gentlemen, these days are over. We are the United States of America. We were not founded on mediocrity. We cannot stoop to it now, and we will no longer tolerate failures in the Deepwater program. Thus, while I continue to have the utmost confidence in Admiral Allen, our Subcommittee will also continue to expect the Coast Guard to meet the highest standards of performance. We look forward to hearing today from Admiral Allen and how he will put in place the systems and personnel that will ensure these standards are met. In addition to hearing from Admiral Allen, we will also hear from the Inspector General of the Department of Homeland Security, Richard Skinner. Inspector General Skinner has done an outstanding job in reporting on emerging problems throughout the Deepwater program, and it was his office that identified the hull fatigue life problems with the NSC. The Inspector General's Office has been a critical partner to our Subcommittee as we have conducted our oversight over the Coast Guard. I look forward to Mr. Skinner's comments today on the steps that the Coast Guard still needs to take to prepare to implement the reforms that Admiral Allen has announced. I also invite him to comment on the steps being taken to mitigate the problems with the NSC. Again, I want to reiterate my full confidence in Admiral Allen. Admiral Allen has earned our trust, not only from a standpoint of integrity and the highest integrity but also from the standpoint of the highest level of competence. And so, with that, I would like to now recognize my colleague, the Ranking Member of our Committee, Mr. LaTourette. Mr. LaTourette. Thank you very much, Mr. Chairman, for yielding and also for conducting this hearing. The Subcommittee, as you have indicated, is meeting this morning to continue its oversight of the Coast Guard's Deepwater program. This Subcommittee has already held three oversight hearings to review the setbacks that have been encountered by the Deepwater program. Since our last hearing, the Coast Guard has proposed several modifications to improve its management of the acquisition process to address some of the issues that have caused previous problems. I know and I hope that Commandant Allen today will provide the Subcommittee with an update on the progress that has been made since we met in January. The Coast Guard has taken several promising steps to improve its management and oversight of the Deepwater contract. The Coast Guard has started and will continue to enhance its acquisition and contracting personnel levels and expertise. The service has also reasserted itself as the lead technical authority for all designs and design modifications of Deepwater assets. Lastly, the Coast Guard has committed to use the capabilities of the American Bureau of Shipping and other third parties to review and oversee the design and construction of Deepwater vessels. While I commend the Coast Guard for these actions, I continue to have deep reservations about the decision to take on the wide-ranging responsibilities of the lead system integrator for a project of this size and length. I am concerned that the Coast Guard does not have the resources, personnel or capabilities to fully take on this task. When the concept of Deepwater was first considered, the Coast Guard made the decision to utilize a private sector lead system integrator because the Coast Guard lacked the in-house administrative, technical and contracting expertise to carry out such a large multi-year project. While the Coast Guard is rapidly increasing its personnel and capabilities of the acquisition staff, the service does not presently have the necessary personnel or expertise in place. I hope to hear and I have confidence that we will hear how the Coast Guard plans to build on these capabilities while at the same time carrying out all of its other vital missions within the service's limited resources. The Deepwater program and the assets that will be acquired under Deepwater are critical to the Coast Guard future mission success. The program remains at a critical junction, but I have confidence that under the leadership of Admiral Allen the program can be a success. The men and women of the Coast Guard carry out brave and selfless service to our Nation each and every day, and we all need to make sure that this program is delivering the aircraft, vessels and systems that are necessary to support their missions. I thank the witnesses for appearing and thank the Inspector General and his staff for their continued efforts to examine and approve this complex, wide-ranging program. In closing, the Chairman noted that during the consideration of the Homeland Security appropriations bill, that the Deepwater program was one of the line items contained in that bill. I am disappointed at the level in that bill, and I hope that Members of the Subcommittee will join me later during debate in expressing disappointment with the decision of the Appropriations Committee in that regard. I thank you, Mr. Chairman, and yield back my time. Mr. Cummings. Before I yield to Mr. Larsen for an opening statement, I hope that the Admiral will comment on the level of funding in the appropriations bill so we can have some guidance from you as to how that fits with your program. Mr. Larsen? Mr. Larsen. Thank you, Mr. Chairman. I will just try to be brief here. I think we all share the goal of the Coast Guard's long term recapitalization plan, Deepwater, and I think we all share the goal that the purpose is critical to the security of the United States. We also, though, need to be sure to work with the Coast Guard to pull Deepwater out of the critical care that it still seems to be in. The U.S. Coast Guard will soon activate a directorate that will have responsibility for acquisition. This is a major positive step, I think. However, according to testimony, the Coast Guard currently lacks the number of acquisition professional necessary to handle the major acquisitions and has requested no funding for this. I would be interested in hearing from Admiral Allen how they plan to handle these major acquisitions in the short term while they build up for the long term. Second, numerous reports and testimony indicate problems with the testing and certification of the secured communication components of Deepwater, but the U.S. Coast Guard doesn't address this problem in its testimony except to say it seems that it isn't a problem. I don't think that we can nor should we accept a he said/ she said debate regarding this important national security element of the Deepwater program, and I would like to hear a little more detail from Admiral Allen exactly what he believes the problems are with the secured communication components and what is being done to address the problems in it based on the reports that we have heard, not just from individuals but from certainly qualified analyses from the IG and others. So with that, Mr. Chairman, I will yield back and look forward to the testimony. Mr. Cummings. Thank you very much. Mr. Coble? Mr. Coble. Thank you, Mr. Chairman. I will not use the full five minutes, but I thank you for having this hearing. I want to associate myself with your remarks in commending Admiral Allen. I think he has performed superbly. Gentlemen, many of these problems that currently plagued the Coast Guard are unfamiliar to some of us, but many of those problems were inherited by Admiral Allen prior to his appointment as Commandant. To coin an oft-uttered nautical phrase, they did not happen on your watch, Admiral. That doesn't make them disappear. You are still stuck with them. But I am looking forward to hearing from you, Admiral. I think you are doing a good job. I still believe, Mr. Chairman, that the American taxpayer, these other problems notwithstanding, get the best bang for the buck with the Coast Guard, and I continue to believe that. I look forward to hearing from Admiral Allen today, and I yield back my time. Mr. Cummings. Mr. Coble, as a response to what you just said, I agree with you. I think they get the best bang for their buck too, and that is why I want to make sure--and I know we all want to make sure--that they have the equipment that they need so that they can do the job that we have asked them to do. I want to thank you for your support. Are there any opening statements on this side? Mr. Higgins, did you? Thank you very much. We will now go to Mr. LoBiondo. Mr. LoBiondo. Thank you very much, Mr. Chairman. I would like to commend you for vigorously pursuing the looking into of the Deepwater program and for holding this hearing. I really think it is imperative that we continue to pursue the particulars of the Deepwater program. I join with most of my colleagues in expressing my disappointment in the missteps and failures of the Deepwater program especially prior to the tenure of Admiral Allen. I think there are a lot of things we can look at and wish had been done differently and wish that we knew about. However, I am, like my colleagues, very pleased with the direction Admiral Allen has taken to rein in control of the program including taking the lead role of systems integrator. It is a very serious situation that needs to be fixed, and again I have full confidence in Admiral Allen. But as Mr. LaTourette mentioned a minute ago, I am concerned that the Coast Guard does not currently have the proper number of qualified acquisition personnel to properly manage the program, and I am also concerned that in the time it takes to establish that competency the procurement of desperately needed replacement assets may be further delayed. Mr. Chairman, I certainly look forward to working with you and the Committee to make sure that we move forward with reforming Deepwater and seeing that it is positively moving forward. Finally, I would like to remind my colleagues of what really Deepwater is all about, that the safety of the men and women of the Coast Guard and success of their mission are dependent on a replacement of these rapidly failing obsolete assets. We must see this program through, but it must be done right. Again, Mr. Chairman, thank you very much. Mr. Cummings. Thank you very much. Admiral Allen, please. TESTIMONY OF ADMIRAL THAD W. ALLEN, COMMANDANT, UNITED STATES COAST GUARD; RICHARD L. SKINNER, INSPECTOR GENERAL, DEPARTMENT OF HOMELAND SECURITY ACCOMPANIED BY RICH JOHNSON, PROJECT MANAGER, OFFICE OF INSPECTOR GENERAL, DEPARTMENT OF HOMELAND SECURITY Admiral Allen. Thank you, Mr. Chairman. Chairman Cummings, Representative LaTourette, thank you for the opportunity to appear before this Committee as well as the other Members. Let me first say that the Coast Guard family expresses its deepest sympathy and regret at the passing of Representative Millender-McDonald. Our thoughts remain with her family, friends and loved ones. Mr. Chairman, in January, I committed to returning here and testify to the progress of the last 120 days in addressing the challenges associated with our Deepwater program. As I have stated previously, I am personally accountable to make the changes needed to move this program forward, and I am prepared to report before this Committee in another 120 days or at whatever interval is needed to ensure that you and the American public have confidence that we are on track. I have a brief opening statement. I would ask that my written statement be included in its entirety for the record. Mr. Cummings. So ordered. Admiral Allen. My written statement contains an extensive list of actions taken in the last 120 days, but I will focus on a few important points, and I will be glad to answer any questions. Mr. Chairman, last week, you walked the decks of two Coast Guard cutters with me. The first one was 40 years old, the Cutter Decisive that was commissioned the year I entered the Coast Guard Academy, 1967. You saw the 24 person berthing areas with 3-high bunks and a single head. You saw the cramped operations spaces and the separation of communication and sensors displays in different compartments. You saw the flight deck where Commander Walker explained that just a few days earlier held over 200 migrants. Across the channel in Pascagoula, the Cutter Bertholf nears completion, and we anticipate in the new calendar year it will see successful acceptance trials. The largest berthing module in the Bertholf will house only six personnel in two-high bunks. Its propulsion and electrical systems are the most capable and versatile that have ever been built into a Coast Guard cutter. The flight deck is more capable than any Navy or Coast Guard vessel of similar size and requires no personnel on deck to launch or recover an aircraft. Mr. Chairman, you have seen our past and our future. When you addressed the crew of the Project Management Resident Office in Pascagoula, you gave them a charge. You told them, our children are the signals we send to a future we will never see. Your words were stunning then, and they remain so now. The aircraft, sensors and surface craft that Deepwater will provide to the Coast Guard are the signals we will send to a future Coast Guard that we will never see. For that reason, we are building an acquisition organization that can create a future for the Coast Guard. Rear Admiral Ron Rabago has relieved Rear Admiral Gary Blore as Program Executive Officer for Deepwater. Next month, we will stand up our new acquisition organization that will unify and strengthen program management, contracting and workforce development. Within another year, we will create a mission support organization that will unify our technical authorities with the acquisition organization under a single accountable senior flag officer. We are nearing completion of negotiations regarding the structural changes for the third National Security Cutter. We have been engaged in near continual negotiations for the past week and are close to an agreement. I hope to be able to report to you shortly NSC 3 is under contract. This will establish the technical baseline for changes needed to lock in the first two cutters and create a design baseline for the remaining hulls. This month, we will award the next term contract to Integrated Coast Guard Systems under a substantially changed structure. We will have the opportunity to award the contract for a period of 43 months. We intend to limit any tasking to 18 months or less so that we can determine whether the level of performance justifies further awards. It is important that we retain our relationship with ICGS as we transition the Coast Guard to a lead role in systems integration and allow for our workforce to be brought on board and developed. I have met regularly with the CEOs of Lockheed Martin and Northrop Grumman, most recently in Pascagoula two weeks ago. The focus of that meeting was the need to develop a comprehensive, realistic, integrated schedule for the delivery of the first National Security Cutter to complete the consolidated contract action being negotiated as we speak this morning. Our next meeting will focus on aviation and logistics issues and will be held at our Aviation and Logistics Center in Elizabeth City, North Carolina. On the 22nd of June, we will issue a request for proposals for the Fast Response Cutter based on an existing design. We are moving at best speed to bring more patrol boat hours into the fleet. This vessel will be ABS classed. Every integrated product team in Deepwater is now chaired by a Coast Guard military or civilian employee, and the remaining accomplishments are listed in my statement for the record. Mr. Chairman, I would ask two things of you to assist me and the Coast Guard in continuing our progress. First, we are seeking through our appropriations request the ability to manage all Coast Guard personnel within a single funding account to create flexibility to respond in gaps and surges and needs associated with the Deepwater or other operations. Stovepiping personnel costs within appropriation inhibits the optimum use of resources. Second, I am in the process of adding 50 additional personnel to the Deepwater program management organization to the current year programmings and the fiscal year 2008 appropriations request. I have temporarily assigned four personnel to assist in meeting congressional reporting requirements. I am prepared to work with the Congress to consolidate the various information request and status reports to effectively and transparently communicate to you and other Committees. Prior to responding to your questions, I would close by assuring the Committee that as the Commandant, I am committed to the effective execution of all of our assigned missions. I have stated from the outset one year ago that mission execution is our first responsibility. That includes all of our missions. Security concerns in a post-9/11 environment present significant challenges as have the mandates provided by Congress. We are also mindful that the Country depends on the Coast Guard for safety and stewardship of our maritime transportation system and the Earth's last global commons. The rapid growth of maritime shipping, the expansion of liquid natural gas facility permit requests, and the fragility and vulnerability of our ecosystems require a discussion and a prioritization of Coast Guard resources against assigned tasks. I look forward to the discussion. I would be glad to answer questions. Mr. Cummings. Admiral, thank you very much. I want to go straight to the heart of matters. As you have heard the opening statements, there seems to be some concern about the systems integrator and the capacity of the Coast Guard to take on those responsibilities. So I am going to ask you some questions about that because I think we need to get that cleared up. I know you have carefully looked at your manpower and womanpower and tried to figure out exactly your experts in this and that and how you are going to run them and all that, but I want to make sure the Committee is satisfied but first of all understands exactly where you are going with this, and the capability questions must be brought up. The current award term for the contract for the ICGS expires in June, 2007. Can you describe in more detail the status of the next award and how it will be structured? Admiral Allen. Yes, sir. Based on the evaluation of the first award, the base award term, we are allowed to award a contract for up to 43 months, a sole source. We are not required to nor are we obligated to. There are certain support functions and integration functions that ICGS provides to us that are separate from the platform acquisitions that we can acquire under the contract. Our goal is to issue task orders regarding the ongoing operations including the operations of the Systems Integration Program Office which has the lead systems integration responsibility right now for a period not to exceed 18 months and to determine the level of performance before we proceed after that. So the first thing we are going to do is there will be no task order issued under the new contract that is longer than 18 months even though we could go 43 months because we want to make sure we understand the level of performance. That also allows us to maintain a contractual relationship with ICGS regarding the systems integration and support functions they carry out as we make that transition. It can't be an on-off switch where they do it one day and we do it the next day, and this will allow for that transition. We intend to take the current functions that are being carried out at the Systems Integration Program Office and move those to Coast Guard Headquarters as part of the larger acquisition organization, but that will take over the next six to twelve months to accomplish. To make sure that this is carried out in a timely fashion and we are ramping up with personnel at the same time we are slowly lessening our dependence on ICGS, we have, over the course of fiscal year 2007 and 2008, added approximately 50 new people to the Deepwater organizational structure. To give you an idea of the order of magnitude, when the contract was awarded in 2002, we had 245 personnel assigned to project management. As we sit here this morning, that number is 451 of which 50 more will be added. So there have been significant resources that have been added to this program. In addition, we have strategic agreements with Naval Sea Systems Command, Naval Surface Warfare Center at Carderock, SPAWAR for things like TEMPEST testing and so we can also partner and outsource to bring in some of that technical competency. At the same time, we have designated technical authorities for hull machinery and equipment associated with design, and we have emerging together a technical authority and program management that did not exist before. The challenge moving forward will be to take that same technical authority structure and apply that to the sensor systems with our Chief Information Officer, and we are in the process of doing that right now. Mr. Cummings. How do we make sure? One of the things about the Coast Guard and we hear this. I have heard this from a number of folks, the heads of ports, and I have heard it from various people in the maritime industry. One of the things that they are concerned about is that people, they do certain things for a certain period of time and then they move on. I know that is the nature of the military. Admiral, say, for example, we train people to do these things that you are talking about. I know what you are trying to do is create a mechanism so that when Admiral Allen is fixing to retire, that systems are still in place, smooth transition is in place, so that we keep the strong expertise and personnel that we need, so that we don't have to keep reinventing the wheel and keep borrowing from other people. Admiral Allen. Yes, sir, excellent point. Mr. Cummings. How do you do that? Have you thought about it? Admiral Allen. Yes, sir. You have to bootstrap it and build it from the ground up, and these things don't happen overnight. We are looking at some very innovative career entry level opportunities where we can engage college students with the right technical capabilities while they are still in school-- internships, co-ops, bring them in and stairstep, let us say to GS-7, 9, 11, offer them a career progression fairly early on, get them into the organization and then create that work structure, that pyramid that we had lost over the years. A fundamental part of the Blueprint for Acquisition Reform in the Coast Guard is the workforce development portion of that. We have new direct hiring authorities regarding bringing contract specialists on board, and we will continue to partner and find other ways to meet those gaps, but we have to grow this workforce ourselves and make sure that it can be sustained. In addition to that, we have to have blue-suiters, active duty military folks that go in and out of program management as they go back to sea and do the things that they are expected to do throughout a career that ultimately culminate in them being a project manager and very similar to the operation you saw down in Pascagoula. We have extensive experience down there as we briefed you on it. We need to create that kind of competency throughout the acquisition organization, and you do that with human resources first, sir. Mr. Cummings. Similarly, let us go back. In April, you announced that the Coast Guard will expand the role of the American Bureau of Shipping, and I was very excited about that. But you went on to say, or other third parties as appropriate to increase assurances that Deepwater assets are properly designed and constructed in accordance with established standards. That is what you said. Admiral Allen. Yes, sir. Mr. Cummings. What exactly does that mean? Just be fair, will you now ensure that every cutter you acquire in the future will be classed by the ABS or another appropriate third party? Admiral Allen. Yes, sir. The issue involving the American Bureau of Shipping is they have a series of what they call Naval Vessel Rules which are an interpretation of the old military specifications to more commercial standards, and they are actually rules specifically related to what they call a high speed craft which is what the new Fast Response Cutter will be. We intend to bring ABS as part of the solicitation process, part of the proposal review and have them involved throughout the construction of the vessel and have the vessel classed by the American Bureau of Shipping, sir. To the extent we need other technical support, we have the Naval Surface Warfare Center at Carderock that can provide us engineering support, and we have SPAWAR that can provide us support related to TEMPEST inspections. As you saw when you were in Pascagoula, about one-third of our inspection force down there is people that have 15 to 20 years experience working for the Navy Supervisor of Ships in Pascagoula, sir. Mr. Cummings. I was very impressed with the folks down there. Let me go back for just one moment to the ICGS. One of the things I think our Committee has been very concerned about--and I am sure the American people, when they found out about this, are concerned about--is whether we are overspending with regard to this project. Let me show you where I am going. You just talked about the increase in personnel with regard to acquisitions, is that right? The overseeing contracts, is that right? Admiral Allen. Yes, sir. Mr. Cummings. As we increase, is there a decrease on the other end? Do you understand what I am saying? Admiral Allen. Yes, sir. Mr. Cummings. I would hate to see us increasing our folks in the Coast Guard and then the integrated team folks, Lockheed Martin, Northrop Grumman are staying a certain level. How does that work and how do we make sure we are not increasing our costs? I mean there may be some costs associated that may have to be. Admiral Allen. There is some because of the overlap. Mr. Cummings. Right, but I just want to make sure that we are not increasing our costs overall and then we end up paying twice. What are you doing to make sure that we have that one goes up and the other one goes down effect? Admiral Allen. Yes, sir. That is exactly what is happening, and I can give you a three year answer for the record if you like on the amount of money that has gone into the ICGS contract for program management and systems integration. That is tailing off, and ours is being ramped up. We can give you those exact numbers. Mr. Cummings. Fine. I would appreciate that. Admiral Allen. That is exactly what is happening, sir. Mr. Cummings. I am going to get ready to go to Mr. LaTourette, but I wanted to say that I really do appreciate the visit down to Pascagoula and also down to Houston. I think that going back to something Mr. Coble said a moment ago. I tell you when I stood there and I spoke to two groups of our Coast Guard's folks, I could not have been more proud of them and to just let them know. Mr. Coble, I made it clear to them that we are their number one fans and that we are going to do every single thing in our power to help you provide them with the very best that our Nation can provide and that how we proud we are. I tell you it was just a wonderful opportunity to address them. To the Committee, I can't tell you how much they were appreciative of knowing of our interest and our support of what they were doing, and I appreciate the opportunity. Mr. LaTourette? Mr. LaTourette. Thank you very much, Mr. Chairman. Commandant, when you, in your opening remarks, talked about the appropriations bill that is on the Floor and you talked about stovepiping, I just want to be clear because that bill is on the Floor today. Were you referring to the request that you made to transfer personnel devoted to overseeing and supporting acquisitions to operating expenses, that $82 million? Is that what you were talking about? Admiral Allen. I was, sir. Mr. LaTourette. Can you tell me because the bill that is on the Floor today denies that request and says that at least the Appropriations Committee feels that it is better if it stays in the AC&I account as opposed to going to the ONE account? Can you explain the basis of that and why you think that money should have been transferred to the ONE account? Admiral Allen. I can, sir. For many years, personnel costs associated with a particular appropriation, in other words, executing those funds was required to be funded out of that appropriation. In fact back when I was a commander at Coast Guard Headquarters, we had a GAO desk audit where they came and they said, for an engineer, how much work do you do that utilizes operation expense fund and how much of your work is entailed in designing capital investment expenditures out of AC&I? Actually, we had a couple of anti-deficiency issues arise because of that, so everything was stovepiped. So you are limited in the amount of personnel you can put toward a problem set in a particular appropriation. For several years now, we have proposed to take our personnel account and put it one particular funding source which is not inconsistent with the way the other military services do it. That allows you to do a couple of things. If you have a surge or a gap, you can readdress within your own operating base personnel to cover that. It wouldn't be just a problem regarding acquisition. It might be an operational situation regarding a mass migration or type of a surge operation, long term surge operation following a natural disaster. It provides flexibility. We are willing to be transparent, provide reports on where our personnel are assigned and so forth, but we just think it will allow us to be more responsive to the oversight being provided by the Congress in how we are applying human resources to the acquisition issue. Mr. LaTourette. Thank you, Commandant. The Chairman, in his opening remarks, referenced a number of the hearings, and one of the hearings that we had was an oversight hearing, an investigative Subcommittee, I guess, done with the Full Committee. I am sorry you couldn't have been with us until 11:30 that night. We had a good time. But there were some reports that followed that hearing, and I think that those reports were at least disturbing to me because some of the things that were in those reports were not what I came away from at that hearing. The reports suggested that secure communications installed aboard the lengthened 123 foot patrol boats failed the TEMPEST inspections and that the use of these vessels could have and some suggested did expose national security information to unauthorized persons. Were you made aware of those allegations at that hearing and what response do you have to that? Admiral Allen. I am aware of the allegations, sir. To state this very briefly, I know the hearing had exhaustive treatment of this issue but to summarize before I make a statement. A TEMPEST certification is divided into both a visual inspection and a test of emanations that might come from the cables. There has been exhaustive information provided to the Committee on how that came about, changes that were made regarding the equipment, a lack of a waiver procedure for the Coast Guard, all of those which have been put into effect since the lessons learned from the 123s. To my knowledge, and I have talked extensively with my staff, we have no indication there were ever any insecure emanations made from those vessels while they were operating. I would also add that to the extent there are questions, and I noted earlier this sometimes becomes a he said-he said- she said-they said regarding whether or not there is compliance. I would submit to the Congress that I would request that you call the National Security Agency and have them testify, and I think they would be the experts of record because they own this program for the Federal Government. Mr. LaTourette. Thank you, Commandant. Lastly, one of our hearings touched upon the fact that there were some rulemaking projects that the Coast Guard was undertaking, and staff tells me that that may be 100. Could you just give us an update of where you are with these rulemaking projects? Admiral Allen. Yes, sir. It is of some source of concern to me and has been for a while even before I assumed the duties as Commandant. To give you an example, I will give you a rough order of magnitude, and we will give you an exact answer for the record. But I believe around 9/11 we had about 50 or 51 rulemaking projects that were backlogged that we were working on, anywhere from invasive species on the Great Lakes to alternate tonnage, a wide variety of issues that impact maritime transportation security and safety and, quite frankly, facilitation of commerce, if you will. That backlog is over 90 right now. A lot of these have been generated by new legislation, the Maritime Transportation Security Act, SAFE Port Act and so forth. We are working on these now, but basically have roughly, with some modest increases, the same workforce that we had before 9/11. It is of significant concern to me that I have raised it in meetings with Members, and we are looking at a way to prioritize these things, come back and communicate to the Committee. We are going to have to do one of two things. You have to prioritize what you can do with the resources you have or you have to look at resources. One of the things I am concerned about right now is the proliferation of requests for permits for liquid natural gas facilities that require extensive Coast Guard oversight for waterway suitability assessments. Then if there is a suitability assessment that says that a plant can be operated with certain security or safety safeguards, I am not sure if there has been an adequate enough public discussion about who should provide those resources. Is that something that should be passed on to the consumer through the price of goods? Is this a local responsibility, a Federal responsibility? I think that needs much, much more discussion, sir. Mr. LaTourette. Thank you very much, Commandant. I know that the Chairman would be happy if maybe you didn't do that waterway survey up at Sparrows Point and take care of that. Thank you, Mr. Chairman. I yield back my time. Mr. Cummings. Thank you very much, Mr. LaTourette. Mr. Larsen? I am sorry, Mr. Bishop, and then we will come back to you. Mr. Bishop. Thank you, mr. Chairman. Thank you very much for holding this hearing. I want to pick up on where you just left off on the LNG issue. There is an LNG platform proposed in my district. The captain of the port issued a report, a waterway suitability report that said that the facility would be acceptable, would not impair the waterway but that the Coast Guard would need significant additional resources, and he specifically indicated that one of the things that he needed would be a new 110 foot cutter. Now given the difficulties with the 110 foot cutters that we currently have that we all have discussed, the IG's report says that the ability of you, of the Coast Guard to close its patrol gap is compromised by the shortfall of cutters. How do you see the Coast Guard going forward with respect to dealing with this issue of securing LNG platforms? There are 42 some platforms I believe proposed all over the Country. So given, if you will, the juxtaposition of Deepwater which admittedly has not gone the way any of us would like it to go and now a new demand that perhaps was not foreseen at the time Deepwater was conceived, how do you see this playing out? Admiral Allen. Yes, sir. First of all, I thank you for the question. When we look at a requirement for security or safety or any mission requirement for the Coast Guard, it is always better to look at the requirement. In this case, if there is a requirement for a certain number of hours for a patrol boat to be operating there, that doesn't necessarily presuppose that 110 foot cutter would be the right cutter. In fact, most of the cutters that operate in and around Long Island Sound are 87 foot cutters, and there is one that is home-ported in New London, Connecticut. We have, with supplemental money provided by the GWOT supplement that was just passed, placed on order with Bollinger Shipyard a request for 4 87 foot patrol boats. There are many places at the lower end of the operating spectrum of 110 foot patrol boats where we can use those patrol boats to do the same thing, and the type of patrols in and around an LNG facility would be something that would be suitable for an 87 footer. So we are able to mitigate the gap that is currently existing right now while we bring the new Fast Response Cutter online through a number of way crewing 110 foot cutters down south. We are buying 4 additional 87 foot patrol boats, and we have negotiated with the Navy to retain their 179 foot patrol boats they had transferred to us through 2011. Three of those will be stationed in Pascagoula. But I would separate out the requirement to have a presence on sea to meet the conditions of the waterway suitability assessment and how that source. I would add, as I stated earlier, I think there needs to be a public discussion on whether or not that is a Federal role or not. Mr. Bishop. Thank you. Thank you for that. One more question, if I may, the VUAV acquisitions project, and I am going to reference Mr. Skinner's testimony which I don't know whether you have seen or not. Admiral Allen. I have. Mr. Bishop. If I have this correct, we will spend approximately $198 million of the $500 million that had been originally contemplated for 45 VUAVs. We will spend $198 million and take ownership of only 2 VUAVs if I understand the IG's testimony correctly which would suggest that we will have committed 40 percent of the at least expected expenditure for this project but only have 5 percent of the assets. So my question is, the VUAV program, if we are going to carry it forward, are we likely to see significant cost overruns or is this a program that may not realize the potential that you first? If that is the case, what does that do to the NSC capability? Admiral Allen. Yes, sir, a fair question as well. Just a general statement for all the Committee Members, what we are doing right now as part of the Deepwater program is take a look at every single platform, going back and revisiting the business case, where we are at, is the current solution the right solution, is there enough competition, and what is the best way forward. The solution that was offered for a vertically launched UAV, which is part of the larger system for both the National Security Cutter and the Offshore Patrol Cutter to increase their effectiveness, if you will, to be able to allow us to reduce the number of vessels that are operating out there, assumed that we would operate with vertically launched UAVs. At the time the contract was awarded, there were only two out there that might be viable, a helicopter drone and a tilt rotor type drone which is what was offered to us by ICGS. In the last year since I became Commandant, we have had a technical evaluation done that tells us there is risk associated with proceeding forward with the vertically launched UAV that was offered by Integrated Coast Guard Systems. We have stopped at this point and are looking at other alternatives. We do not want to proceed forward and make another mistake that results in the same type of first article failures we have had before, so we are calling an all-stop, assessing where we are at and if there are other solutions to providing that type of surveillance with the National Security Cutter package. We do recognize as the IG has stated, however, that if you deploy that vessel without the proper aviation assets with it, you will not get the mission effectiveness that was advertised in the proposal by Deepwater. So I would tell you that we probably in the next three to four months owe this Committee a way forward on VUAVs. Everything has been kind of queued up with the National Security Cutter and the 123s being at the top of the triage list, I would say right now. But we do not anticipate any further action on the vertically launched UAV task order that we have got in place right now until we clarify the way forward for the aerial assets to be with the NSC. Mr. Cummings. The gentleman's time has expired. Mr. Bishop. Thank you. Mr. Cummings. Thank you. We are very pleased to have the Ranking Member of our Full Committee, Mr. Mica. Mr. Mica? Mr. Mica. Thank you and thank you for conducting this important follow-up hearing. I think it is very important that we proceed as Mr. Cummings and I worked very closely together for a number of years, and I appreciate his thoroughness on this important responsibility he had inherited. I had some questions. As you know, Admiral Allen, I was a little bit concerned about sort of the stampeding of the Coast Guard into becoming the systems integrator and not having the capability to do systems integration in these large projects. First of all, I have to say looking at the history of the Deepwater problems, you inherited most of this and you have done a great job in trying to resolve some of the problems that you inherited. Many of these decisions go back long before you took your current position. I still have some questions, though. Now it is my understanding that the contract, the ICGS contract, is going to continue with a maximum of 43 months but 18 months, is that what you said, for any one assignment? Admiral Allen. Yes, sir, that is correct. Mr. Mica. Also, you talked about the number of personnel. The thing that concerned me about the Coast Guard becoming the systems integrator is the ability, one, to attract the personnel that you need to do that kind of job. I think the mistake they made was not having a third party. You have Northrop Grumman and Lockheed, who have formed this consortium, are doing the whole enchilada. We should have had somebody else. Someone writes the specs. Someone conducts the systems, oversees systems integration and some oversight responsibility. You also said you went from 240 to was it 400 and some? Admiral Allen. Four hundred and fifty-one, yes, sir. Mr. Mica. How many of those are enlisted Coast Guard personnel versus civilian employees? Admiral Allen. Right now, I can give you a rough approximately. I would be glad to answer for the record. Mr. Mica. Of the added personnel. Admiral Allen. It is about one-third military, one-third civilian and one-third contractor, sir. Mr. Mica. With that combination, you feel you can have in- house the expertise to perform? Admiral Allen. I would say to begin the transition, sir. As I mentioned earlier, we are going to need to build a larger workforce. We have time to do that. In the meantime, we need to partner with the Navy and other folks to provide some of this expertise and capacity that we need, but we have to build ultimately an organization. Mr. Mica. Are the contractors an en bloc number that you retained someone or you hired them individually? Admiral Allen. We retain a third. Mr. Mica. You said a third are your personnel. Admiral Allen. Yes, sir. We can give you a breakdown on it, but it is usually a contractor that we award a contract, and they provide the personnel, a support contractor. Mr. Mica. See, I don't think you can hire in-house all the expertise that you need and retain them. I mean your average enlisted person probably is in and out in how many years? Admiral Allen. Well, we don't have very many enlisted people doing this. If they are, they are usually senior, sir. Mr. Mica. I know. I know, but I am just saying your average Coast Guard person. Even with a Commandant now you get a four- year slot. Admiral Allen. Yes, sir, I am term-limited. Mr. Mica. And you are cleaning up the mess from the last one. But these programs do take a long time. This started over four years ago. Admiral Allen. Yes, sir. This is building for the future. Mr. Mica. Exactly. Then a lot of this is contingent on Congress providing additional money. What was the figure that you need to have the personnel and have the additional physical capability of putting in place the component to do this job? Admiral Allen. Well, we actually have requested increased personnel as part of the fiscal year 2008 request, but the other issue was having the ability to have more expanded use of all personnel funds in the Coast Guard so you can surge if you need to do that. Mr. Mica. I think that there were some problems that a Member relayed. Admiral Allen. Yes, sir. Mr. Mica. But did you have a dollar total figure? Admiral Allen. The entire amount of personnel applied to the acquisition, construction, improvement portion of our budget is around $82 million. Mr. Mica. Around $82 million. Admiral Allen. Eighty-two million, yes, sir. Mr. Mica. On an annualized basis. Admiral Allen. Yes, sir. Mr. Mica. All right, well, again we will watch this. I know you are trying to clean it up, and you have done as good a job as possible in trying to put in place, something, a mechanism and a protocol so that we don't have the same problem. Thank you. I yield back. Mr. Cummings. Thank you very much. Before we go on to Mr. Larsen, let me just follow up one real quick question. The one-third military, one-third contract and one-third civilian, do you anticipate, Admiral, that those percentages remain the same or is there an effort to, say, reduce the contractors and increase the civilians or increase the military and what have you? Admiral Allen. I think we need to increase our civilian workforce and diminish the number of contractors. I am not sure what that right balance is because you always need a margin just because of the ebb and flow of work. Civilians provide us continuity across changes in military assignments as was mentioned earlier. But one of the things we are going to have to do is create a pyramid so there is career growth. One of the challenges we have currently in the Coast Guard is with being largely military and only having about 6,000 civilians. In some specialties, there is not a broad enough pyramid or base, if you will, to be able to support upward mobility, and we need to take a look at that. That is the reason the structure of some of these ratings is going to be important. But we have had success, believe it or not, in wooing some of the folks that are working for our contractors to come on over once we get those positions established on the civilian side. My goal is to diminish somewhat the contracting force but not entirely, sir. Mr. Cummings. Mr. Larsen? Mr. Larsen. Thank you, Mr. Chairman. Admiral, regarding the C4ISR issue that I mentioned in my opening statement, the OIG reported in their testimony--I think you indicated you had read the OIG testimony--on page seven of the OIG testimony talked about them reviewing the efforts to design and implement C4ISR to support the Deepwater program, lack of discipline and changed management processes provided little assurance that requirements remain up to date or effective and meet program goals. Certification and accreditation of C4ISR equipment was difficult to obtain and so on. Your statement discusses that and your written and oral testimony indicates to the best of your knowledge there was no compromise of classified information and suggests that we look into that, and I am sure we will. But I think what I gather from the OIG's comments wasn't so much whether classified information was compromised or not but that there were problems with certification and accreditation regardless of the outcome on the other end. So I was wondering if you could address the issue the OIG brings up, that is, the challenges of the certification and accreditation and then what steps you are taking to address those challenges. Admiral Allen. I am happy to do that and thank you for the question, sir. The way the Coast Guard's technical community is structured right now is really in two different offices. One, we have the CG-4 shop which is a civil engineering, naval engineering and aviation engineering and ocean engineering. The electronics engineering and censor part of our technical world comes underneath the CIO shop in the Coast Guard which is the CG-6 organization. Early on when I became Commandant, it was clear that the technical authority vested in CG-4, even if it was not explicit, was not good enough to make sure that the contractors were adhering to standards. We officially designed the CG-4 shop as a technical authority for all those engineering disciplines that they own. We are in the process now of doing exactly the same thing for the CG-6 shop, the CIO, and make them the responsible technical authority not only for issues like TEMPEST certification and dealing with the National Security Agency, SPAWAR and so forth but to have the technical authority reside in them for certification and accreditation for C4ISR systems, sir. Mr. Larsen. Well, before that, was the authority to do that floating around the Coast Guard? Admiral Allen. I am not sure it was floating around, but it wasn't explicitly delegated in terms of a written instruction to me, saying you are accountable and there is going to be a person that is, for instance, for an air search radar. This is the one that certifies that the requirements are being met, and that is what we are doing, sir. Mr. Larsen. Okay, so that is how you are addressing that. Admiral Allen. Yes, sir. Mr. Larsen. Can I ask a question about helicopters as well? In your written testimony, you start off, and I encourage everyone to read early on in your testimony, some great stories about the results of some of the investments including the great story in Washington State of this high altitude rescue-- you call it daring, I think--and the video from this rescue, of this high altitude rescue at 7,000 feet in my home State of Washington State. It is, in fact, pretty compelling and pretty exciting to watch, and that was on a helicopter with new engines or re-engined engines, some great stories. However, there is always a but in this. Again, the OIG indicates that after some recommendations were made, the Coast Guard did not concur with any of the agency's 65 recommendations that it had made. It goes on to say that Coast Guard officials said that ICGS minimized operational legal costs and contract performance risk associated with re- engining. Can you address the OIG's comments? Those are on page seven of the OIG's testimony with regards to helicopter re-engining. Admiral Allen. I can, but I would just make a general comment. There were a number of decisions that were taken over the last three or four years in the course of Deepwater that were senior management decisions that were not documented to the level that there was an audible or traceable record on which the IG could determine how the decision was made. For instance, we merely issued the DTO for the construction of the NSC because it required no more affirmative action than to do that, but the lack of a business case on the subject and the basis for the decisions brings into question whether or not terms are being dictated to the Coast Guard. I was present and understood when the decision was being made to re-engine the helicopters that it was done to mitigate risk. We knew there was a cost premium associated with that. We knew that we could have ordered the work directly to our logistics center in Elizabeth City, North Carolina, but the decision was taken, maybe not documented to an audible trail level of specificity, but that was the decision that was taken. We could have gone other ways through a sole source contract or a sole source award through our own logistics function. But we were mitigating risk and, at that point, we considered the additional cost associated with going through ICGS was worth the value achieved in reducing the risk to the acquisition. That was the decision that was taken. Whether or not there was an adequate business case to support that, that is up to question. But I was there. I was privy to it. That was the decision taken. Mr. Larsen. Thank you. Thank you, Mr. Chairman. Mr. Cummings. Thank you very much. Mr. Coble? Mr. Coble. Thank you, Mr. Chairman. Admiral, thank you for your testimony today. Let me put a two part question to you, Admiral. As you know, the problems of Deepwater have been widely reported in the media and closely scrutinized by the Congress. In fairness to you, I would like for you to tell us some of the segments of the program that are succeeding, number one. Number two, what, if anything, can be salvaged from 123 conversion and what can be done to recoup some of the monies expended on that project to assure that similar situations do not subsequently occur? Admiral Allen. Yes, sir. A couple of successes: the retrofitting of our Legacy Cutters with new sensor and communication equipment has been very successful. We have the ability now to come up and classify what we call SIPRNET, secure internet protocol router chatrooms. Where we used to have to relay requests up the chain of command for permission to do something, everybody is on the circuit at once, if you will, negotiating how the resources do apply to what the problems are that are out there. The Coast Guard Cutter Sherman recently set a maritime record seizing nearly 20 tons of cocaine off Panama just a matter of weeks ago. That whole operation, including the pursuit into Panamanian waters under the bilateral agreement with Panama, was facilitated through SIPRNET chat that did not exist before the Legacy equipment was put on the old cutters. So the ability to operate these old cutters with a higher level of efficiency is a significant win, and our commanding officers out there love this equipment. We are happy with where we are going with the Casa 235 aircraft. We are in the process now of testing the mission palate. That is the integration of the sensor suite in the back of the aircraft. We have achieved connectivity with that first palate in the C4ISR Center of Excellence in Morristown, New Jersey. We need to finish the tests and evaluation of that to make sure that the new palate integrates with the aircraft. We are ready and into full production on the airframe itself. Once we are sure of the integration on that, then we need to pull that forward as fast as we can. Where we do achieve success, I think we need to selectively accelerate those things and pull them forward. If there is not an issue with first article performance, let us buy that out and get it off the table because we have other problems we have to deal with. Regarding the 123s, we have revoked acceptance of those cutters. That is the first step in the process of recouping the Government's interest in the money that was invested there. There is some residual value related to the short range prosecutors, the boats that were delivered with the boats, the sensor suites that are on the boats and the engines that are in the boats. Ultimately, we will come up with a fair value that the Government should receive in consideration for this, and we will take that to ICGS and request that money be returned. At that point, we will move on to whatever legal remedies are required after that. Mr. Coble. You can keep the Committee up to speed on the progress to that. Admiral Allen. I would be happy to do that, sir. Mr. Coble. Thank you, Admiral. I yield back, Mr. Chairman. Mr. Cummings. Mr. LoBiondo? Mr. LoBiondo. Thank you, Mr. Chairman. Admiral, you just referenced the drug bust with the improved capability for communication. Can you just briefly say what implications that would have for homeland security, how that would apply? You told us how it applied in the drug bust. Admiral Allen. Maybe I can give you a better example. There are some cases where there is a threat approaching this Country, and it could be a migrant or a drug boat but where you may have cause to want to use warning shots or disabling fire. Traditionally in the Coast Guard, that starts at the unit level with the commanding officer, goes up maybe through the local sector to the district command centers, sometimes to headquarters for interagency consultation regarding the country that is involved and the particular situation where we are trying to negotiate what we call a Maritime Operational Threat Response. To be able to do that in parallel at the same time and not sequentially reduces a process that could be a half hour to an hour to hours. In some cases, we have been able to reduce that down to 15 minutes or less, that allows the commanding officer on the scene to be able to react to the threat, in some cases before they might enter the territorial sea or actually get involved in an illegal operation because we had not gotten the permission to use warning shots or disabling fire. Mr. LoBiondo. So pretty invaluable. Admiral Allen. It is. Mr. LoBiondo. Admiral, your statement indicated that you will be releasing a request for proposals to build the interim Fast Response Cutter B in the next couple of weeks. The cutter will replace the rapidly failing 110 patrol boats and the failed 123s. My concern and I think a concern of the Committee is the time it will take to field the Fast Response Cutter B. I understand the first one will not be in the water until 2010, is that correct? Admiral Allen. The proposal has that right now. I have been working hard with our folks to try and incentivize us to make it sooner than that, sir. We can't get these boats soon enough and if I can get them before 2010, I will, sir. Mr. LoBiondo. There is still a delay here. Meanwhile, the readiness gap, I think, is at about 25,000 hours--if my information is correct--25,000 hours annually and will be expanding. How do you plan to make up the gap? Admiral Allen. Yes, sir, I will give you a qualitative breakdown of where that is at, and we can give you an answer for the record as to actually the hours we are accumulating right now. About half of those hours have been recouped by taking the eight crews and the maintenance money associated with the 123s that were taken out of service and double-crewing 8 boats, 4 in Miami and 4 in St. Pete. So we are basically recouping close to 50 percent of those hours by just using the crews on other vessels and operating the vessels at a higher tempo. We are taking the maintenance money associated with the 123s and supporting those higher maintenance costs with that. This is not unlike the operations we are running in the Persian Gulf with the six patrol boats over there that have been serving in superb fashion for a number of years now because we have the right maintenance processes in place. That is one. Two, we are making better use of maritime patrol aircraft down there as far as taking the search out of search and seizure or search and rescue. We are also using multi-mission hours that are available to us through our buoy tender fleet or the cutter fleets to fill in those other hours, and we can give you a detailed breakdown of where those hours are coming from, sir. Mr. LoBiondo. Thank you. One more question, Admiral, can you explain if there will be any impact on the schedule for the replacement of the Legacy assets from the service's efforts to build an acquisition staff and assume the role of systems integrator and what steps are you taking to mitigate that potential? Admiral Allen. Well, I think we have to almost on a yearly basis, and I think we need to be up here talking with you folks about how the organization is being stood up. We are going to be making one by one decisions on every one of these platforms. In other words, how are we going to continue with the Casa 235? Where are we going to go with the FRC, the NSC, the Offshore Patrol Cutter? Each time we make a decision to bring a new platform on, we are going to have to balance that with the capacity, capability and competency needed to execute that in a lead systems integrator role. There have been a lot of requests for status from a number of Committees this year. I think we need, on an annual basis, to say, here is the plan. Here are the platforms that are coming on board. Here is the human resource plan that supports that, the workforce development plan that support it. Where there is a gap, it will be filled by ABS certification, agreements with the Naval Sea Systems Command, putting supervisor ship inspectors into our Project Management Resident Offices, and that plan needs to be transparent to you, sir. Mr. LoBiondo. Thank you. I will just close, Admiral, by saying thank you for your outstanding leadership at this very critical time. Thank you, Mr. Chairman. Mr. Cummings. Thank you. Let me just ask a few wrap-up questions because the IG is going to come up and I want to make sure that I address some of the things that the IG may be addressing so that you will have an opportunity to do that. Not all of these things but I am going to try to go through a little list of things that I am concerned about. The 123 program, first of all, I was very pleased and I am sure all of us were pleased that you rescinded the delivery of the 123s. It just made sense. But there is a piece of that that really interested me, and I have expressed these concerns to at least Lockheed Martin. I want the American people to get every dime, not every dime, every penny of the money that they are due as a result of not getting what they were supposed to get, and I want to know where are we on that piece. It is one thing to rescind. It is another thing to make sure that the American people get their money. I just want to know. What is the status of that? As a lawyer, I know that you are not necessarily going to get every penny, but I just want to know where that stands. Admiral Allen. The next step is for the Coast Guard to issue a letter to ICGS, saying, here is the dollar amount, we would like it back. Mr. Cummings. You have already done that? Admiral Allen. We are in the process of finalizing that number, yes, sir. Mr. Cummings. And so, you are going to ask for a certain amount of money. Can you share that with us later if you can? We don't want to interfere with your negotiations. Admiral Allen. Yes, sir. I would have to check with my contracting officers and my attorney if it is allowable. Mr. Cummings. Fine. I understand. I understand. We just want to make sure that the American people get their due. I just don't think that you can have a situation like this, Admiral. It sends a bad message to a whole lot of people. Admiral Allen. Sir, it sends a bad message for the Coast Guard. Mr. Cummings. Yes, but what I am saying is that we teach our kids that you keep a commitment. You deliver what you say you are going to deliver. Then we see a situation, as I have used the example, where you go and buy, for example, a $375 lawnmower that doesn't cut a blade of grass, and then the United States of America's taxpayers' dollars are being spent on that. We can't have that. A lesson must be sent. I mean the word must go out that when you do that to the American people, the American people want their money back. It is just simple, basic accountability. But I want you, if you can, to just keep us apprized of that. We know that you are working with your lawyers and everything. I am just glad that it was a two part statement. Admiral Allen. Yes, sir. Mr. Cummings. We rescind. We want money back. Admiral Allen. Yes, sir. Mr. Cummings. Now let me go to some of the things that the IG may be concerned about. First of all, when do you anticipate taking delivery of NSC 1? Admiral Allen. My best guess, this is caught up in the current negotiations because one of the things is we can't close on the current contracting arrangements right now until we both agree on how many hours it will take to finish NSC 1 and then establish the cost to be able to settle all the claims associated with that, and that is where we are about now. I would tell you that the hull and machinery portion, the stuff that you saw below decks, will probably be ready sometime before the end of the calendar year. The sensor suite, while it may be there, it may be after the end of the calendar year. So I would err on the side of conservatism and tell you that acceptance trials probably after the first of the year, sir. Mr. Cummings. What, if any, are the systems that will not be fully operational and mission-ready when you accept delivery of the ship? Do you anticipate such? Admiral Allen. That is another great question. Since we are going to retrofit certain portions of that ship, we have to agree on what is the NSC that will be delivered because, as we know, once we issue the construction order for NSC 3, we will establish a technical baseline that we have to go back and change 2 and 1. Knowing that will happen at a later date than acceptance, we have to define what is acceptance and what is that hull at acceptance, and that is the basis for the current contract negotiations that we are about to close, sir. Mr. Cummings. Do you anticipate the ship will be TEMPEST certifiable when delivery of the ship is made? Admiral Allen. Yes, sir. We spoke when you were down there. We showed you the cabinets and the cables, sir. Mr. Cummings. If you recall, when I was down there, there was that issue of nine feet. Admiral Allen. Nine feet versus twelve feet, yes, sir. Mr. Cummings. So you all anticipate you will be able to address that. Admiral Allen. Yes, sir, as you remember, the 12 feet was a standard that was developed many, many years ago that was based on the fact that there would be physical separation of visual inspection and then an emanation inspection. We are waiting for the results of the test, and we will provide that to you as soon as we have it, sir. Mr. Cummings. Now let me just ask you a few more questions about the life, fatigue life of NSCs 3 through 8. Admiral Allen. Yes, sir. Mr. Cummings. Before you begin construction on NSC 3, will you have implemented a new design to strengthen the hull fatigue life and, if so, can you describe that design? Admiral Allen. Yes, sir. In fact, the basis for the entire what we call a consolidated contracting action is to decide what the baseline is moving forward from NSC number 3. Once you do that, then you know what you have to change in 1 and 2. So the very first decision that is being negotiated right now is the changes related to the NSC 3 design and what are we going to do. My statement for the record has a schematic, and we can answer in a lot of detail. But as we explained when we were down in Pascagoula the other day, the biggest change will be to make a separation between the two superstructures so that stresses associated with the ship when it is hogging and sagging can't be transmitted back and forth through the ship and create a way to absorb the stresses. There are some other areas regarding transitions between certain areas of the structure that will be strengthened and reinforced. These are based on an agreement between our technical authority that has now been designated for hull and machinery and the program manager, that that is the fix that will guarantee the service life of the ship that is being designed as NSC 3, sir. Mr. Cummings. What you just told me, has the Navy Surface Warfare Center at Carderock gone over that, what you just said? Admiral Allen. The changes that were recommended by our technical authority were based on a finite element analysis conducted by Carderock Surface Warfare Center that were subject to previous hearings, sir. Mr. Cummings. Perfect, perfect. I want to make sure we are learning from our mistakes. Admiral Allen. Yes, sir. In fact, before Carderock did the finite element analysis, this was just a supposition on the part of our engineers based on their experience that there might be problems just based on their knowledge of how structures work. The Carderock finite element analysis basically corroborated what our engineers believed to be the case on fatigue life, sir. Mr. Cummings. Do we have any idea about how much that design will cost? In other words, we are making some changes. We had anticipated a certain amount the NSC 3 costing. Admiral Allen. Yes, sir. In a matter of days, as soon as that NSC 3 task order is awarded, we will be able to tell you the costs for NSC 3 and the following hulls, sir. Mr. Cummings. Are you confident that the new design will enable NSC 3 through 8 to be underway for 185 days per year in the general Atlantic and north Pacific sea states without experiencing hull buckling or cracking? Admiral Allen. Yes, sir. It will allow them to be away from home port 230 days and approximately 180, 185 days in the operational environments that were exposed under the finite element analysis that Carderock conducted, sir. Mr. Cummings. To what extent does the ICGS team or Northrop Grumman now believe that there is a problem with the fatigue life on the NSC and to what extent will Northrop Grumman assume responsibility for the cost of strengthening hulls 1 and 2, if you know? Admiral Allen. Sir, the difference between Northrop Grumman and the Coast Guard on this issue is as follows and, not being a naval engineer, I will extend revised comments if I could for the record. Mr. Cummings. Yes, you may. Admiral Allen. To the best of my knowledge, the construction standards used by Northrop Grumman to develop the design of the National Security Cutter were based on something called design data sheets and general specifications that are used to build military vessels. That is a different type of a design approach than our engineers used to assess the fatigue life. In other words, we accepted the design offered by Northrop Grumman for the National Security Cutter based on the technology they had at the time, military specifications. We are applying a different standard to assess fatigue life. Northrop Grumman feels they have met the requirements of the contract with the technical basis for their designs. We believe they have not. Therefore, it is a Government-requested change, sir. Mr. Cummings. I see. And so, you feel confident that your recommendations are better than Northrop Grumman's. In other words, it will serve our purpose better. Admiral Allen. I think that is a better way to say it. Mr. Cummings. The purpose of the Coast Guard. Admiral Allen. Yes, sir. Mr. Cummings. I am not trying to get you to beat up on Northrop Grumman. Admiral Allen. No. I talked to them. Mr. Cummings. Again, I am trying to make sure that we are clear as to what we are bargaining for, and I want us to be clear as to what performance is, and I want to be clear as to making sure that we have the kinds of equipment, i.e., ships to do the job that the American people expect us to do. Admiral Allen. Yes, sir. We are in violent agreement, sir. Mr. Cummings. Let me ask you this, and this will be my last question. When you look, I just want you to do a little crystal ball thing for me and try to tell us. You have what, about a year and a half left, two years left? Admiral Allen. In my term, sir? Mr. Cummings. Yes. Admiral Allen. Three. Mr. Cummings. Three years? Admiral Allen. About three years. Mr. Cummings. What do you want to see? Everybody up here just about has expressed tremendous confidence in you, and it is not too much that we all agree on. I can tell you. But that says a lot. So I want to know. Now, you can't tell me exactly, but every morning when you get up, you must say, at the end of my three years, I want to have accomplished this. I just want to know, what is this? Do you follow what I am saying? Admiral Allen. Yes, sir. It is an organization that is positioned to execute its mission to the standards that the American people have come to expect of us especially in a post- Katrina environment and having the mission execution and mission support structure that allows us to do that effectively but also allows us to adapt to change and changing external environments. As I stated in my State of the Coast Guard speech--and you were there, sir--we have been acting like a small business when we are a Fortune 500 company. We have got to get our business processes, command and control, and the organizational structure of this Coast Guard to be more flexible, agile and adaptable including human resources and technology and everything. I consider myself a transition commandant trying to reposition the service for success far after I am gone, sir. Mr. Cummings. I take it that with all that has happened, there were plans before and those plans had to be changed to a certain degree. Can you give us a new schedule? Admiral Allen. Are you talking about the National Security Cutter? Mr. Cummings. I am talking about now with regard to Deepwater, period. In other words, you expect certain things to be happening at a certain time. Admiral Allen. Yes, sir. Mr. Cummings. I am just wondering, can you submit to us? I don't want a situation where we have to keep, not have to but keep bringing you to the Hill to tell us where things are. I think that you realize the reason why we did this, this time, is because we were in a critical situation. I personally think that this Committee has been very helpful in helping you to do the things that you have been trying to do. Again, we are your number one fan. Admiral Allen. Yes, sir. Mr. Cummings. We are just trying to make sure that things are the best that they can be. I guess what I am trying to get at is exactly because of the problems we experienced, we learn from them and we go forward. I am just asking, can you get a new schedule as to when you see certain things being completed? Admiral Allen. Yes, sir. I think on an annual basis because there are certain things that impact a schedule: contractor performance that you are observing, the level of funding you may get year to year that may not be what was anticipated early on that impacts the number of units you can produce on any particular platform. This is almost going to have to be a year to year presentation to you across all platforms. We come with a budget. Here is what we are requesting this year. Here is what we got last year. Here is the progress we have made. Here is where I think we are going. I would tell you that I haven't compiled them all side by side and sat down and looked at them. If you look at all the pending provisions that have either been included in the GWOT supplemental or are being considered right now, collectively, I think give you that information. As I mentioned in my opening statement, I would like to work with the Congress to create a transparent way to give you that information on a real time basis so we hold it, you know it and there are no surprises, sir. Mr. Cummings. Last but not least, then I will go to Mr. LoBiondo if he has anything, and I understand Mr. Larsen has a follow-up question, but let me ask you this. You mentioned a few moments ago that you said there were Government changes, is that right, I think with NSC with regard to 3? You said there were Government changes. Admiral Allen. Yes, sir. Mr. Cummings. Who pays for that? Admiral Allen. We do, sir, if we ask them to be done. Mr. Cummings. Okay, very well. Mr. Larsen? Mr. Larsen. Thank you, Mr. Chairman. Just a quick couple of questions, regarding the FRC B, the off the shelf model, has the initial failure of a composite hull model soured the Coast Guard on composite hulls as you move forward? Admiral Allen. I am not sure we are soured on composite hulls, and I think composites have shown themselves to be successful in other areas, particularly the superstructures and naval vessels and reducing the weight and long term durability and lower maintenance cost. I think, in our case, applying that technology to a high speed craft of that size had not been demonstrated before, and we had done two things that weren't done early on when we started pursuing a composite variant. Number one was just plain business case analysis. How much is it going to cost to do this because to achieve a certain speed and certain requirements, it requires a certain amount of horsepower that drives the parameters of the boat? The second one was the technical issues and the risks associated with producing the boat. Both of those told us that this was a high risk and we needed to take a look at mitigating the risks associated with that. While all that has been going on, you can't wait for all that to be done to fill this patrol boat gap as we talked about earlier. So we elected to proceed with the FRC B instead. Mr. Larsen. Right. Finally, in your oral testimony and in our questions, we have focused on the 50 or so folks that you plan to hire for acquisition, but you mentioned 4 people that you have assigned specifically to respond to various requests probably from us here. Admiral Allen. That is correct, sir. Mr. Larsen. If those four weren't responding to our requests, what would they be doing? Admiral Allen. They would be applied somewhere else in the organization, working on the problems that have been discussed, sir. Mr. Larsen. Pardon me? Admiral Allen. They would be applied somewhere else in the organization, working on the problems that have been discussed, sir. Mr. Larsen. Thank you. Thank you, Mr. Chairman. Mr. Cummings. Thank you. As we let you go, the NSC 3, you said something that just kind of ricocheted back into my mind. Apparently, with the NSC 1 and NSC 2, the Coast Guard was not satisfied with the Northrop Grumman design. Is that an accurate statement? Admiral Allen. Our engineers were not satisfied that the design that was offered by Northrop Grumman would meet the fatigue life of the vessel, sir, our engineers, and they notified senior management in 2004 of their concerns, sir. The decision was made to go ahead and proceed with construction because of the implications for cost of stopping, redesigning and starting again with the knowledge we would have to retrofit whatever solution that was developed into hulls 1 and 2. Mr. Cummings. Okay, now, let us put a pen in that and rewind. What has been done to address those issues that you just stated with regard to 1 and 2 because we are going to have Coast Guard men and women on those ships? They are going to be trying to do the things that you are mandated to do. So just tell me what has been done to make sure that those, 1 and 2, are okay. Admiral Allen. It starts with establishing the technical baseline for the entire fleet with NSC 3 which will have the changes to meet the fatigue life designed in. The second step then is to go back and look at 1 and 2. As you know, more work will have to be done to institute those changes on 1 because it is over 70 percent complete. There may be an opportunity to make those changes earlier as they sit in the shop and other places with NSC 2 which is somewhere between 20 and 30 percent done at this time. So the type of retrofit for both the first two hulls will have to be depending on where those ships were at when the baseline was established. That is the reason it is so incredibly important to get the baseline established for NSC 3, sir. Mr. Cummings. So it is possible. It is possible--I didn't say probable--possible that we could end up scrapping 1 and 2? Admiral Allen. Not in the vaguest realm of my imagination, sir. Mr. Cummings. You see where I am going with this, right? Admiral Allen. Yes, sir. I understand the issue with the 123s. The issue with fatigue life of the NSCs is different on what is going to happen 15, 20 or 30 years from now, not what is going to happen tomorrow. In fact, we are offered the opportunity to do some forensics on the hull 1 that we have never been able to do before, and that is to put strain gauges on the ship--it has not been changed yet--and see who is right. Mr. Cummings. Okay. Admiral Allen. This is not an immediate safety problem, sir. I would not put my people to sea in this ship if I thought it was. Mr. Cummings. Say that one more time. Admiral Allen. I would not put my people to sea in this ship if it was a safety problem. Mr. Cummings. I take it that that was the same thinking, what you just said--what you just said--with regard to 123s, in other words, the last sentence or two that you just said. You said I would not put my people on a ship that whatever you just said. Admiral Allen. That is the reason I laid them up, sir. Mr. Cummings. Right. I just wanted to make sure we were on the same page. Admiral Allen. In my view, by the time we laid the 123s up, it ceased to be a technology issue. It became a leadership issue. Mr. Cummings. Finally, with regard to that, how do we make sure when we know that there is a disagreement? We know it because you just said it, that there is a disagreement with regard to the design of the NSC 3, the proposed design, and what we have done with NSC 1 and 2. Do we then put and are we now putting NSC 1 and 2--I guess I am just trying to do some prevention stuff here--under a microscope where we make sure that every single inch is right? I think we are making great progress. I really do. I think we are moving forward. The last thing we need is for one of these NSCs to get out there and then we discover we have got problems. Admiral Allen. I don't believe that will happen. The issues associated with fatigue life which could produce cracking based on the repeated stress of wave action on the hull that is repeated over a period of time and doesn't happen immediately when the ship is launched. Mr. Cummings. Right. Admiral Allen. You have got to bend that paper clip quite a few times before it finally breaks. We will be able to test the strain on the hull with instrumentation at the same time we are developing on how to retrofit those hulls. But we are not talking about an immediate safety problem, sir. Mr. Cummings. I understand, but I am also concerned. You used some of my words in your opening. We are talking about a future we will never see. You and I, hopefully, will be having tea up in heaven, and we want to make sure these ships are still doing okay. Admiral Allen. Yes, sir. Well, I hope I am there with you. [Laughter.] Mr. Cummings. I guess I am being kind of presumptuous. Admiral Allen. Sir, let me make a comment about Coast Guard culture because I think this needs to be said. We rejected technical solutions offered by Deepwater in the aviation community because the aviation community would not stand for it. We originally offered an extended-range Casa 235 and an AB- 139 helicopter, neither of which we are using in the aircraft solution for Deepwater. I would tell you that the technical competency mind set, configuration control union, if you will, of our aviation engineers held the line. Mr. Cummings. Good. Admiral Allen. I think the traditional notion of service operators, and I am one. I have got a cutterman's pin. I am I have been the commanding officer of a ship. We tend to be more independent, less organized. I think there are a lot of issues related to the two cultures that played into this, and I think we are going to solve some of those by going to a standard maintenance concept for the entire service, sir. Mr. Cummings. Very well. Could you try to get us just a general idea at some point of where you expect to be in the next six months? I am not going to bring you back up here, but I would like to have that so I can hold you to it. Admiral Allen. Sir, I will come back as often as you want. I will be glad to communicate. I suggest maybe, if you have never seen acceptance trials, you might like to see that ship underway, sir. Mr. Cummings. I will. I will. Any other comments, questions? Admiral, we have the full confidence. The things that I said down there in Pascagoula and down in Houston, I hope that you make sure that your men and women know that we really mean that. We are so very, very proud of them, and we want to do everything we can to support them. Admiral Allen. Yes, sir. Your hope has made it throughout the Coast Guard, sir. Mr. Cummings. Thank you very much. Inspector General Skinner? Mr. Skinner, how are you? Mr. Skinner. Fine, thank you. Mr. Cummings. Thank you very much for being with us. Mr. Skinner. It is my pleasure and thank you and good afternoon, Mr. Chairman and Members of the Committee. Today, I have with me, Rich Johnson who is our Project Manager providing audit oversight for our Coast Guard operations, and I am pleased to have Rich next to me to answer any technical questions you may have about any of our work. When I last appeared before this Subcommittee over three months ago, I talked about our acquisition management concerns associated with the Deepwater program and how they affected the modernization of key Coast Guard assets and systems. I would like to take this opportunity today to talk about the Coast Guard's ongoing and future challenges in their efforts to improve the management of this very important and complex acquisition initiative. We previously identified several problems in our audits of assets and IT systems being acquired under the Deepwater contract. These deficiencies contributed to schedule delays, cost increases and assets designs that did not meet minimum Deepwater performance specifications. As you heard today from Admiral Allen, the Coast Guard recognizes these challenges and, through its recently published Blueprint for Acquisition Reform, is taking aggressive action to strengthen program management and oversight. The Blueprint, among other things, outlines the Coast Guard's plans for reorganizing and rebuilding its acquisition workforce. We are encouraged that the Coast Guard recognizes these challenges and is beginning to take aggressive action to strengthen its acquisition management capabilities. However, many of these corrective measures will take time, such as building a procurement workforce to manage the broad scope and complexity of the program. There is considerable risk associated with the Coast Guard assuming the lead systems integrator role at this time before having fully implemented its Blueprint for Acquisition Reform. If all goes as planned, the Coast Guard's Blueprint will not be fully implemented until fiscal year 2010. In the meantime, this month, the Coast Guard is planning to move ahead with the second phase of the Deepwater contract which will entail the estimated expenditure of more than $3 billion over a 43 month period. We believe the Coast Guard should exercise caution and take a slower or phased approach to assuming the systems integrator role, taking advantage of all the tools at its disposal to mitigate risk and to avoid future problems. At a minimum, the Coast Guard needs to develop a performance baseline, that is, something against which they can measure the progress being made to achieve the goals outlined in the Blueprint. These include the specific numbers and types of acquisition professionals needed, when they are scheduled to arrive on board and the financial costs associated with the realignment, reorganization, retraining and rebuilding of its acquisition workforce. We are also concerned that the Coast Guard may have difficulty resolving the structural design and performance issues associated with National Security Cutters 1 and 2. For example, the Coast Guard stated that it plans to go ahead with construction of cutter 3 before it determines the actual cost of the structural modifications to cutters 1 and 2 as well as cutters 3 through 8 and the impact these modifications will have on its operational performance requirements. Consequently, there is a possibility that the required changes to all eight cutters could be cost-prohibitive or result in a reduction in operational capability. The cost and operational impact of structural modifications to all of the cutters should be identified and evaluated fully before the Coast Guard authorizes any future construction. Finally, we continue to identify other issues that may impact Deepwater costs and inhibit the Coast Guard's ability to perform its mission. The Coast Guard's acquisition of a vertical unmanned aerial vehicle is a case in point. Originally, the Coast Guard intended the VUAV to significantly increase the aerial surveillance of the National Security Cutter from 13,800 square nautical miles to 58,000 square nautical miles, a four-fold increase in surveillance capability. Acquiring the VUAV was also a major reason why the Coast Guard elected to build eight versus twelve cutters. To date, the Coast Guard has obligated over $114 million to the project with very little to show for it. It is not yet clear exactly when the VUAV will come online and how the Deepwater system of systems approach to acquisition will make up for this lost capability. Another concern that we have deals with the needed modifications to the HH-65 helicopter fleet to enable the helicopters to deploy and be stowed safely on the National Security Cutter. The Coast Guard estimates that it could take as long as 5 years and an estimated 55 million to install such a system on the entire fleet. Again, this is an integral part of the cutter's system of systems capability. To date, however, no funding has been available for this project. Consequently, the Coast Guard will be unable to fully test the interoperability of the ship's systems with the HH-65 when National Security Cutter 1 undergoes builder sea trials and operational tests that are scheduled to begin, as you heard, early next year. In conclusion, the Coast Guard is to be commended for the steps it has taken to regain control of the Deepwater program and the improvements it is making to its acquisition management function. When fully implemented, these actions should mitigate many of the cost, schedule and performance risks identified with the Deepwater program. Nevertheless, we must keep in mind that these changes are in their infant stage. A lot can go wrong before they are fully implemented. The Deepwater program will continue to require the highest levels of planning, coordination and oversight to be fully successful. Mr. Chairman, Members, this concludes my remarks. I will be happy to answer any questions. Mr. Cummings. Thank you very much, Mr. Skinner, and I want to thank you for your very thorough work. We really appreciate it. You have been extremely, extremely helpful. Let me ask you this. I think we all know the problem generally. On the one hand, you have got the Coast Guard that is trying to get this contract complete to get performance. They are also coming under a lot of pressure from the Members of Congress, and they need this equipment. So we have got the ICGS. We see what the problems have been with them. I guess what is happening is that the Coast Guard is saying, okay, things didn't work out. So now we are going to do it. I am just trying to figure out, on the one hand, I think almost all of us have concerns, the same concerns that you have. Are they ready to do this, even in the time period? As I listened to the Admiral and I didn't get a chance to ask him. I didn't think of it until after he left actually. If we are bringing on these military folks in particular and some civilians and contractors, but I am more concerned about the military and the civilians, to do this oversight of the contracts, the question becomes, who are we bringing? In other words, are those people going to be really qualified to do this job or is there a steep learning curve? You may not even have the answers to these questions. But then on the other hand, on the other side of it, Mr. Skinner, you have a situation where they are saying, well, we just can't keep doing what we are doing because what we have been doing doesn't work. I think that is the problem. They are trying to say get away from the ICGS because there has been embarrassment. There have been problems and whatever. But then the question is becoming, are they moving too fast into taking it over themselves? Is that a fair statement? Mr. Skinner. That is correct. That is one of the concerns, and that is one of the issues we have discussed with Admiral Allen and his executive team. We agree that a transitional period moving from the ICGS to the Coast Guard assuming the integrator role is probably a wise decision. However, we need to proceed with caution. I think we are seeing what the Coast Guard is currently doing. They are, in fact, proceeding with caution. For example, the Admiral that they are bringing in the Navy to fill in some gaps, operational gaps, management gaps. They are using the integrator, the ICGS, that is, to continue to work on those contracts that are currently in place without giving them necessarily new contracts. Instead of providing task orders, which they did in the past for five years, in this case 43 months, they are providing them task orders for 18 months so that they can better manage and control how the ICGS continues to do the work that it now has responsibility for or any future work that it may have responsibility for. But it is something that needs to be closely monitored. It is something that requires the highest level of management attention as we move forward. Are we moving too fast, that is, are we tasking our contractors to do more work than we are able or faster than our ability to manage them? That is something that needs to be taken into consideration every time they issue a tasking order or a task order. Mr. Cummings. Now, considering what you just said, what would make you feel more comfortable? I understand what you are saying is maybe we need to slow down this process a little bit. Maybe we need to be a little more careful. Do you see a role, let us say under ideal circumstances, while making that transition? Do you see a significant role for the ICGS team or would you have something else in place to try to make sure that things still flow nicely while we are building up within the Coast Guard? Mr. Skinner. There is no question there is a continuing role for the ICGS. Mr. Cummings. What would that be? Mr. Skinner. They have contracts, for example, outstanding right now. In actually systems integration, for example, there are things that they have been heavily involved in, and they probably can do a better job at this point in time than anyone in Government can do. We don't want to halt that work. There are some successes under this Deepwater program. Unfortunately, those get overshadowed by all the failures that we have had. The systems integration work, for example, is something they can continue to do. We just don't want to cut them off, and there may be other work that they might be able to do. I don't want to speculate what that could be or what that would be or what they couldn't do. But, nonetheless, each time there is a tasking, I think the Coast Guard needs to be more intricately involved in the decision-making as to whether we want to go sole source with the ICGS or whether we want to look outside ICGS to procure those assets, for example, the FRC B. I think they are going outside the Deepwater program. Mr. Cummings. Yes. Mr. Skinner. I think that is probably a wise decision. Mr. Cummings. Has the Coast Guard, to your knowledge, experienced challenges recruiting and retaining qualified acquisitions professionals? Mr. Skinner. Like I said, this initiative in acquisition management, this program, is in its infant stages. It is too early to tell whether they are going to see challenges. If they experience anything like what we have experienced in other parts of the department, in CBP, for example, or in FEMA as another example or, for that matter, Government-wide, they are going to experience considerable problems in bringing the right mix of expertise to the table that can do these jobs. Mr. Cummings. Earlier, I talked about some problems that have been experienced by the Coast Guard with regard to Deepwater. It seems as if while we know that there have been some successes, we also know that there have been a number of things that have been touched in this process that simply have not worked. I think that we as human beings expect that there are going to be failures. That is part of life. But when you see them over and over and over again, then you have to begin to ask the question, is there something wrong with the system or the systems? Is there something wrong with the personnel? Is there something wrong with the leadership? The question is with the Admiral having done all the things that he has stated. I know his intentions are great. We believe in him. Do we still have the elements of whatever caused us to get to where we are? With the mistakes and the problems, are they still present? Does that make sense? Mr. Skinner. Yes, it does. I think I understand where you are going. If we don't continue to focus on the management of this program--it is a 24, 25 year program--we can revert back and start experiencing the same problems that we experienced in the first 5 years. A lot of it has to do with leadership and a commitment to manage, and Admiral Allen, I believe, has made that commitment. But like we all know, that is a four year appointment. That commitment needs to be carried forward to ensure that the resources are maintained to provide the oversight and the management of this initiative or we could revert back to where we were. We are making progress. We are in an infant stage. There is a long way to go before we can say that we have this Deepwater program under control. Mr. Cummings. You heard my questions of Admiral Allen, as a matter of fact, my last set of questions with regard to NSC 1, NSC 2 and then NSC 3. I was concerned because it sounds like there are some issues with NSC 1 and 2. Can you comment on some of the things that he said? I mean the things they are doing, for example, to mitigate any problems that there might be with NSC 1 and 2. Mr. Skinner. Yes. Mr. Cummings. And do you have concerns? Mr. Skinner. We have concerns. Admiral Allen's comments, I believe, were at the 30,000 foot level, and the devil is in the details. Our concerns are, one, they say the Coast Guard has an engineering solution to mitigate or to fix cutter 1 and cutter 2. Our concern is what impact is that going to have on your operational performance capability and also how much is it going to cost? When I say operational capability because these ships are going to have to be taken offline. They are going to have to be taken offline for an extensive period of time somewhere down the road, probably within their first four or five years. When they start retrofitting these ships, they are not going to be in operation. We are only going to build eight of these cutters. We are taking two offline in the first five years. That leaves us with six, and that raises concern. Mr. Cummings. Where do you get the five years from? Why do you say five years? Mr. Skinner. I believe it is our understanding that generally a new ship that goes out to sea is usually brought back in for maintenance and repairs and just to check to see how it is operating at sea, and generally that is done in four or five years. That may be a Navy standard. Mr. Cummings. I got you. Mr. Skinner. Somewhere along the way, someone within the Coast Guard in their engineering area has told us that. Mr. Cummings. Okay. Mr. Skinner. It could be sooner. Mr. Cummings. I understand, but you raised a very, very significant issue. When I was talking to Admiral Allen, as best I can remember, he was talking about immediate safety problems, and you are talking about not necessarily immediate safety problems but definite problems. He, I think, was trying to distinguish that with regard to long term fatigue. I think that is what he was trying to do. Mr. Skinner. Yes. Mr. Cummings. So what you are saying, though, is that there are concerns because they are going to bring them back in and they are going to probably be in some kind of trouble. That is going to take them offline, and then we are going to have to start over again, at least do some serious work. Then we are going to have another bill, by the way. Let us not forget the bill where folks are going to make some decent money and the American people are going to pay. Is there something that you all would recommend different than what he said? Mr. Skinner. What we are suggesting is that I think the Coast Guard needs to step back, analyze what the total costs are associated with retrofitting 1 and 2 to ensure that they meet the performance specifications and the costs associated with the design changes to 3 through 8, plus look at the operational limitations these design changes may or may not have on their performance capability as well as the impact it will have on their operational capabilities when 1 and 2 are taken offline for extensive repairs somewhere down the road, anywhere from 2 to 4 or 5 years. We have heard different figures from different sources. Once they are equipped with that knowledge, then they can make an informed decision or have a business case as to whether they want to proceed with the construction of 3 through 8 or look for other alternatives. Mr. Cummings. I will have some more questions. Mr. LoBiondo? Mr. LoBiondo. Thank you, Mr. Chairman. Mr. Skinner, thank you for being here. You asked some of the questions, Mr. Chairman, that I had outlined. Mr. Skinner, Admiral Allen has proposed and is in the process of implementing significant modifications to the Deepwater program which will establish the Coast Guard as the lead system integrator and reassert the Coast Guard technical authority over Deepwater projects and hopefully enhance the Coast Guard's oversight over all facets of the program. What, in your mind, are additional steps that the Coast Guard can take to further improve its management and oversight of the program? Mr. Skinner. Incidentally, these things that you just referred to are things that we recommended in prior audit reports. Thank you for the question. It goes beyond more than just reorganizing which is something that we think they need to do, reasserting a technical authority. But there are things like they need to ensure that we have third party certification of our designs as we move forward. We should not be self-certifying. We should have third party or an independent. Mr. LoBiondo. Excuse me. What would an example be? Mr. Skinner. You can go to Carderock, for example. There is the private sector as well that can provide such certification but Carderock for dealing with the ships, the national cutters and any others that we may be bringing in that are state of the art, first line cutters in the out years. There is the self-certification, technical authority. The acquisition reorganization, of course, is something that we talked about. There is also the contract itself needs to be rewritten to ensure that the Coast Guard. Now I understand these are the things that were told, that these are the things that are going to be written into the new contract or the Phase 2 contract for the 43 month contract that we referenced earlier that will give the Coast Guard additional authority, that will clearly define what we expect. We can do a better job of defining our specifications and ensuring that the contractor in fact meets the performance requirements. There is a whole series of things that goes along with just the reorganization. It is the management of the contracts. It is the way the contract is written. It is the definition, the specificity that we have in our taskings so that when we to back, we can say this is not what we asked for. We found ourselves in trouble with the 123 retrofits because we were not that specific. When we went back and said this is not what we ordered and we looked at the requirements of the contract, it was so vague. We couldn't hold the contractor accountable. Mr. LoBiondo. What do you see as the risks associated for the Coast Guard with taking on the role of lead system integrator in the middle of the 25 year acquisition process? Mr. Skinner. It is highly risky, and that is why we suggest that they take a deep breath and they proceed with caution and they do it in a very phased approach. This is something that I believe Admiral Allen and the Coast Guard recognize that it can be very risky if they move too quickly. They are now using. They are not just going to eliminate the ICGS. They are going to phase them out over time, and in the interim they are also going to rely very heavily on resources from the Navy, for example, to fill any gaps in management or oversight, give them the oversight capability of any new taskings that may be coming down the road. But if we don't do it in a very phased, cautious manner, we could get in trouble. It is too early now to predict whether we are moving too fast. Our assessment right now is that we are in fact moving in a very cautious manner. Mr. LoBiondo. How do you see the potential liability for costs associated with delays, modifications and potential asset failure to be shared between the parties under the new arrangement? Mr. Skinner. It is very important that the Government clearly defines what it is asking for. If we clearly define what we are asking for and before we take delivery of any products, we obtain expert certification that this is what we were asking for, then I believe that the contractor has 100 percent responsibility to give us that. If they don't, they need to be held liable. Our biggest problem now is or has been that we don't clearly define what we are asking for, up-front, before we issue the tasking or at the time we issue the task order. So, therefore, when delivery is made, we are not in a position to hold the contractor accountable. Mr. LoBiondo. Mr. Chairman, do I have time for a couple more questions. Mr. Cummings. Please. Mr. LoBiondo. Mr. Skinner, the Coast Guard obviously is in the process of significantly increasing its acquisition and contracting staff to carry out the increased responsibilities associated with the assumption of the lead system integrator role. What do you think about the Coast Guard having the resources necessary to carry out this buildup without negatively impacting other acquisitions and operations? Mr. Skinner. I don't think it should impact. For one thing, under the reorganization, acquisition is going to be under one directorate. That is one thing. Secondly, this buildup should not have an impact on any other of their acquisition functions. If anything, it would complement any other acquisition activities they may have ongoing outside of Deepwater. But I wouldn't see that having any type of negative impact. Our concern is you are not going to be able to build up that capability easily. It is not just a matter of hiring people. It is a matter of hiring the right mix of people, getting them, training them and retaining them. Mr. LoBiondo. That leads to my next question. What do you think about the Coast Guard's ability to attract and retain the tremendously qualified acquisition and contracting personnel that Deepwater requires? Mr. Skinner. It is going to be very, very difficult. We are experiencing these problems in other parts of the Department of Homeland Security, most notably in CBP, Customs Border and Patrol, and within FEMA. It is going to be a difficult task. We are competing not only with ourselves in the Department, but we are also competing with other Federal agencies which also are strapped and are short of acquisitions types, and we are also competing with the private sector. It is not going to be an easy task. Mr. LoBiondo. Having the continuum of information and background is going to be critical along with the expertise, isn't it? Mr. Skinner. Yes. You can bring in contracting officers that have contracting experience but not necessarily the type of Coast Guard-related experience, but nonetheless that expertise is invaluable as well. You need people to come in that have not necessarily Coast Guard experience but naval military or the type of acquisition experience associated with buying, retrofitting or building ships, airplanes, things that are necessary to modernize the Coast Guard's fleet. The IT area is another area that is going to be very challenging as well, there primarily because of the competition we have with the private sector, we in the Federal Government, that is. You don't necessarily have to come through the ranks of the Coast Guard to have an appreciation for systems communications and things of that nature. Those things can be learned on the job. Mr. LoBiondo. Mr. Chairman, it seems to me that is real critical point. I am not sure if Admiral Allen addressed that. I might respectfully request that you consider asking him about not only attracting the top-flight people that are necessary but the plan to keep them on board so that while the best laid plans are there, if we have gaps in service, we could experience further problems. Mr. Skinner, thank you very much. Mr. Chairman, thank you. Mr. Cummings. Thank you. I will do that. I am going to go back to what I started with because we have got a little bit of a dilemma here, I think, and I want some clarity. On the one hand, we have a team that has been in place doing this, that the results of their efforts have not been stellar. Is that a fair statement? Mr. Skinner. Yes. Mr. Cummings. On the other hand, we are trying to get to a place where the Coast Guard can do the work of the integrator team. Is that a fair statement? Mr. Skinner. Yes. Mr. Cummings. This is a piece that I found interesting, and I don't know whether you find it interesting or not. We just heard the Admiral provide testimony about rescinding the 123s and to my knowledge--to my knowledge--nobody has ever told me anything different. We scrapped I guess more than about $100 million worth? How much was that? The scrapping process, how much did we scrap? Do you know what that was worth? Mr. Skinner. No, I don't. Mr. Cummings. Okay, well, millions, tens of millions. Mr. Skinner. Yes. Mr. Cummings. Do you know whether anybody in the present team was fired or demoted, the present team? Mr. Skinner. Not that I am aware of. We have to understand when we talk about the present team and the performance was not stellar, we have to understand that oft times their hands were tied because of the terms and conditions on the contract under which they were operating which left the ICGS, giving them ultimate authority to make final decisions as to go, no go. Mr. Cummings. I got you. Mr. Skinner. And so, it is not the people within the Coast Guard per se. Matter of fact, there were some very good people who came forward and complained to us about this which brought it to our attention, some of the problems. Mr. Cummings. Is it a good idea to leave things as they are then or as they have been? Mr. Skinner. No, no. Mr. Cummings. Why do you say that? Mr. Skinner. The Coast Guard needs to assume control over the program. As I testified, I believe three or four months ago, they were content to ride shotgun and turn over the reins to the integrator, allowing them to define what your requirements are and to deliver, make the ultimate decisions as to what we are going to deliver, when we are going to deliver it, how much it is going to cost and who is going to deliver it to you. The Coast Guard just relied too heavily on the integrator to make its decisions for them, and that is where we need to turn the pendulum. The Coast Guard needs to get more actively engaged in making those decisions. Mr. Cummings. Right now, because that is what we have got to deal with, we are trying to figure out where we are going to be, where we are proceeding in the next year. What do you see as being the role of the integrator team once again? See, it sounds like you are saying on the one hand. I don't what to misunderstand you. On the one hand, the Coast Guard needs to slow down. On the other hand, we have got the integrator team over here saying, okay, I am just hypothetically saying, well, things may not have gone right, but we will stay in the ball game, coach. I am just trying to figure out what role would they be playing while we are slowly proceeding and carefully proceeding to take over, that is, the Coast Guard take over? Mr. Skinner. Yes, and there is where the devil is in the details. We have an acquisition blueprint, the Blueprint for Acquisition Reform. That is a strategic plan. We need, you need detail. The Coast Guard needs detail. Now, it is my understanding, and I think Admiral Allen did allude to it at the end of his testimony, that they are developing an operational performance baseline plan which will set forth: these are the things we intend to do. These are the people that are going to do it. These are the things that are going to remain with ICGS, for example, some of its IT capabilities or the NSC capabilities. These are the things that we are going to take outside of the Deepwater, and these are the things we are going to keep in Deepwater but we are going to do ourselves. We don't have that right now. Mr. Cummings. I guess it sounds like this 18 month proposal as opposed to 43 months that the Admiral talked about, is that a good idea in that it gives you a shorter assessment time? In other words, you see how things go, how we are doing. Then you go back and say, okay, this is what we do. Instead of waiting 43 months which is about, what, three times the time? Mr. Skinner. Yes. The first time I heard about the 18 month thing was today, and I think that is an excellent idea because that gives the Coast Guard an exit ramp or an exit clause to say, we don't like where you are headed here, and so therefore we are just going to sever this particular. We are just going to take away from you, this particular tasking. It is somewhat modeled after what we are doing in the SPINET program. Instead of entering into a three to five year contract, we are doing this in a very incremental basis and a phased approach. And so, at any point in time, in a short period of time, if we don't like the progress we are making, you can pull out without penalty. Mr. Cummings. Based upon what you just said--I guess this might be difficult to answer--do you have any idea when the Coast Guard might be ready to take over as the full integrator? Mr. Skinner. It would only be speculation. Mr. Cummings. Yes. Mr. Skinner. It is going to some time. I don't think it is anything. It is going to happen in the next two to three years because they are going through a major reorganization. It is also a cultural shock for many people in the Coast Guard. It is not the numbers so much that we are concerned about. It is the mix of expertise that you have to ensure continuity, to ensure continuity on the integrated project teams. You don't want people coming in and out every two years. You want people, civilians that are in there that can lend continuity to this whole thing, and it is going to take time, two to three years at a minimum. Mr. Cummings. Let me say this, and then I am finished. One of the things I think that has concerned me over and over again, and I said it in my opening statement, is as far as I am concerned this is the greatest country in the world. I tell you when I went to see the 123s. I am not a ship guy, but when I went to see them and I saw the buckling and whatever, I have seen yachts that were bigger. I said to myself, how in the world couldn't we get this right? We send people to the moon. Then today when I listened to the Admiral, I must admit that I had some flashbacks because I thought about the NSC 1 and NSC 2, and really not under our watch do I want to see us go backwards. Under our watch, I want to see us go forward. That is why your testimony and the work of your staff, and I hope you will convey this to them, has been incredible. So often, our public servants do not get their due, but I really mean it. You all have been working with our staff. You have been absolutely great, and I just want you to know. Again, I know there are people working behind the scenes that we never see. I know that. Mr. Skinner. Yes, and one of them is sitting next to me at the moment. Mr. Cummings. Mr. Johnson, thank you very much and your team back there. The reason why I say that is because we couldn't have done a number of things that we have been able to do without you. We are going to stay on top of this, and I am trying to stay away from a political thing because I think it is so much bigger than that. This is about our national security. I am very pleased. Mr. LoBiondo cannot imagine. I know he chaired this Committee, and his support and both sides have been great because I think we are all looking at the big picture, and I think everybody is trying to be fair across the board. But, in the end, we want to make sure that the Coast Guard has what it needs to do the job and that our personnel are safe on these vessels and these planes and these helicopters. Mr. LoBiondo, did you have anything? Mr. LoBiondo. No, thank you, Mr. Chairman. Mr. Skinner and Mr. Johnson, thank you. Mr. Cummings. Thank you very much. That ends this hearing. Mr. Skinner. You are welcome. 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