Status of Selected Aspects of the Coast Guard's Deepwater Program
Gao ID: GAO-08-270R March 11, 2008The Coast Guard is in the midst of the largest acquisition program in its history--one that has experienced serious performance and management problems. The Deepwater program is intended to replace or modernize the Coast Guard's fleet of vessels, aircraft, and information management capabilities in order to carry out its missions along our coastlines and farther out at sea. Deepwater incorporates acquisition of 15 major classes of new or upgraded assets--5 major classes each of vessels and aircraft, and 5 other projects, including command, control, communications, computers, intelligence, surveillance, and reconnaissance (C4ISR) systems. To carry out this acquisition, the Coast Guard contracted with a system integrator, Integrated Coast Guard Systems (ICGS). Since 2001, we have reviewed the Deepwater program and have informed Congress, the Department of Homeland Security (DHS), and the Coast Guard of the risks and uncertainties inherent with such a large acquisition. In March 2004, we made recommendations to the Coast Guard to address three broad areas of concern: improving program management, strengthening contractor accountability, and promoting cost control through greater competition among potential subcontractors. In April 2006 and June 2007, we issued follow-on reports describing efforts the Coast Guard had taken to address the recommendations. Congress asked us to determine (1) how decisions are made regarding whether to purchase assets under the contract with ICGS or directly with another vendor; (2) the costs and performance trade-offs, if any, associated with the Coast Guard's acquisition strategy for the Fast Response Cutter (FRC); (3) cost, schedule, and performance issues associated with changes to the National Security Cutter (NSC); and (4) actions the Coast Guard has taken to address the open recommendations from our March 2004 report.
The Coast Guard has changed how decisions are made about purchasing Deepwater assets. It is moving from a "system-of-systems" acquisition model-- with the contractor, ICGS, as the system integrator--to a more traditional acquisition strategy in which the Coast Guard will take a more direct role and manage the acquisition of each asset separately. The Coast Guard obligated approximately $35 million on the ICGS design for the FRC, but concerns prompted officials to put the acquisition on hold. To fill its urgent need for patrol boats, the Coast Guard plans to award a contract for a commercially available design of the FRC. Coast Guard officials said this approach will help ensure competition and meet their tight time frames. The new requirements for this design of the FRC have some differences. These include a top speed that is 2 knots slower--28 instead of 30 knots--and allowance of a manual small-boat launch and recovery system that Coast Guard officials said is not as safe and requires more crew to operate than the preferred stern ramp system. Changes to the NSC have had cost, schedule, and performance ramifications. The estimated costs for the first three ships have generally doubled from the initial projected costs due to a number of contributing factors, including requirements changes as a result of September 11, Hurricane Katrina damages, and some program management actions by the Coast Guard. Delivery of the ship could be delayed. An aggressive trial schedule leaves little time for dealing with the unexpected, and most certifications have yet to be completed. Coast Guard officials expect the ship to meet all performance parameters, but will not know for certain until the ship undergoes trials. Further, Coast Guard engineers have concerns that most of the ship's available weight margin has been consumed during construction, meaning that subsequent changes to the ship will require additional redesign and engineering to offset the additional weight. We have closed two of the five open recommendations from our previous report, pertaining to the Coast Guard's use of models and metrics to measure the contractor's progress toward improving operational effectiveness and establishing criteria for when to adjust the total ownership cost baseline. The Coast Guard has taken actions on the three recommendations that remain open, such as designating Coast Guard officials as the lead on integrated product teams, developing a draft maintenance and logistics plan for the Deepwater assets, and potentially eliminating the award term provision from the ICGS contract. However, at this time, the actions are not sufficient to allow us to close them.
GAO-08-270R, Status of Selected Aspects of the Coast Guard's Deepwater Program
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March 11, 2008:
The Honorable Maria Cantwell:
Chair:
Subcommittee on Oceans, Atmosphere, Fisheries, and Coast Guard:
Committee on Commerce, Science and Transportation:
United States Senate:
The Honorable Olympia J. Snowe:
Ranking Member:
Subcommittee on Oceans, Atmosphere, Fisheries, and Coast Guard:
Committee on Commerce, Science and Transportation:
United States Senate:
Subject: Status of Selected Aspects of the Coast Guard's Deepwater
Program:
The Coast Guard is in the midst of the largest acquisition program in
its history--one that has experienced serious performance and
management problems. The Deepwater program is intended to replace or
modernize the Coast Guard's fleet of vessels, aircraft, and information
management capabilities in order to carry out its missions along our
coastlines and farther out at sea. Deepwater incorporates acquisition
of 15 major classes of new or upgraded assets--5 major classes each of
vessels and aircraft, and 5 other projects, including command, control,
communications, computers, intelligence, surveillance, and
reconnaissance (C4ISR) systems. To carry out this acquisition, the
Coast Guard contracted with a system integrator, Integrated Coast Guard
Systems (ICGS).
Since 2001, we have reviewed the Deepwater program and have informed
Congress, the Department of Homeland Security (DHS), and the Coast
Guard of the risks and uncertainties inherent with such a large
acquisition. In March 2004, we made recommendations to the Coast Guard
to address three broad areas of concern: improving program management,
strengthening contractor accountability, and promoting cost control
through greater competition among potential subcontractors.[Footnote 1]
In April 2006 and June 2007, we issued follow-on reports describing
efforts the Coast Guard had taken to address the recommendations.
You asked us to determine (1) how decisions are made regarding whether
to purchase assets under the contract with ICGS or directly with
another vendor; (2) the costs and performance trade-offs, if any,
associated with the Coast Guard's acquisition strategy for the Fast
Response Cutter (FRC); (3) cost, schedule, and performance issues
associated with changes to the National Security Cutter (NSC); and (4)
actions the Coast Guard has taken to address the open recommendations
from our March 2004 report.
To assess these aspects of the Deepwater program, we reviewed and
analyzed key Coast Guard documents, including the Deepwater Expenditure
Plan and the Acquisition Program Baseline. We reviewed Deepwater
contract files, plans, and reports, and reviewed cost estimates for the
FRC and NSC. We also conducted interviews with Coast Guard officials,
including program managers, contracting officials, and subject matter
experts--such as staff at the Engineering Logistics Center--to discuss
acquisition planning efforts and actions being taken by the Coast Guard
and to obtain information on shipbuilding. We compared the updated
status of open recommendations from our June 2007 report against
current information obtained from Deepwater documentation and
interviews with Coast Guard officials.
We visited the shipyard in Pascagoula, Mississippi, where we toured the
NSCs that were under construction and interviewed officials overseeing
construction. We also met with contractor representatives and
interviewed the officials in the Pacific Area that will receive the NSC
upon completion. Finally, we interviewed representatives from the
American Bureau of Shipping to discuss shipbuilding certification
standards.
We conducted this performance audit from September 2007 to March 2008
in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
In summary, we found:
* The Coast Guard has changed how decisions are made about purchasing
Deepwater assets. It is moving from a "system-of-systems" acquisition
model--with the contractor, ICGS, as the system integrator--to a more
traditional acquisition strategy in which the Coast Guard will take a
more direct role and manage the acquisition of each asset separately.
* The Coast Guard obligated approximately $35 million on the ICGS
design for the FRC, but concerns prompted officials to put the
acquisition on hold. To fill its urgent need for patrol boats, the
Coast Guard plans to award a contract for a commercially available
design of the FRC. Coast Guard officials said this approach will help
ensure competition and meet their tight time frames. The new
requirements for this design of the FRC have some differences. These
include a top speed that is 2 knots slower--28 instead of 30 knots--and
allowance of a manual small-boat launch and recovery system that Coast
Guard officials said is not as safe and requires more crew to operate
than the preferred stern ramp system.
* Changes to the NSC have had cost, schedule, and performance
ramifications.
* The estimated costs for the first three ships have generally doubled
from the initial projected costs due to a number of contributing
factors, including requirements changes as a result of September 11,
Hurricane Katrina damages, and some program management actions by the
Coast Guard.
* Delivery of the ship could be delayed. An aggressive trial schedule
leaves little time for dealing with the unexpected, and most
certifications have yet to be completed.
* Coast Guard officials expect the ship to meet all performance
parameters, but will not know for certain until the ship undergoes
trials. Further, Coast Guard engineers have concerns that most of the
ship's available weight margin has been consumed during construction,
meaning that subsequent changes to the ship will require additional
redesign and engineering to offset the additional weight.
We have closed two of the five open recommendations from our previous
report, pertaining to the Coast Guard's use of models and metrics to
measure the contractor's progress toward improving operational
effectiveness and establishing criteria for when to adjust the total
ownership cost baseline. The Coast Guard has taken actions on the three
recommendations that remain open, such as designating Coast Guard
officials as the lead on integrated product teams, developing a draft
maintenance and logistics plan for the Deepwater assets, and
potentially eliminating the award term provision from the ICGS
contract. However, at this time, the actions are not sufficient to
allow us to close them.
We briefed your staff on the general status of these topics in November
2007. As agreed at that time, we are following up with additional
information, which provides more detail on the topics covered in the
briefing.
We provided a draft of this report to DHS and the Coast Guard for
review and comment. The Coast Guard agreed with our findings and DHS
also concurred. Regarding our discussion under objective one of the
enclosure, about the Coast Guard's move away from the ICGS contract and
the system-of-systems model, the Coast Guard stated that its approach
to the Deepwater Program "has not changed." It stated that it still
uses a systems approach to determine solutions to meet Surveillance,
Detection, Classification, Identification, and Prosecution. In a
subsequent discussion, Coast Guard officials clarified their point,
saying that, while they are moving to a more traditional, asset-by-
asset acquisition strategy, they will continue to place emphasis on
ensuring a common operating picture among the individual assets. The
Coast Guard also provided some additional information on various
aspects of the Deepwater Program. The written comments are reproduced
in appendix I.
We are providing copies of this correspondence and attachment to
interested congressional committees, the Secretary of Homeland
Security, and the Commandant of the Coast Guard. We will also make
copies available to others upon request. In addition, this report will
be available on the GAO Web site at [hyperlink, http://www.gao.gov].
Should you or your staff have any questions, please contact me at (202)
512-4841 or by e-mail at huttonj@gao.gov. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this report. Key contributors to this report were
Michele Mackin, Assistant Director; Tatiana Winger; Martin G. Campbell;
Maura Hardy; Melissa Jaynes; Heddi Nieuwsma; Scott Purdy; Raffaele
Roffo; and Sylvia Schatz.
Signed by:
John P. Hutton, Director:
Acquisition and Sourcing Management:
[End of correspondence]
Enclosure:
Status of Selected Aspects of the Deepwater Program:
Background:
Program Overview:
The Coast Guard Deepwater program is intended to replace or modernize
vessels, aircraft, and information management capabilities such as
command, control, communications, computers, intelligence,
surveillance, and reconnaissance (C4ISR) systems. The events of
September 11, 2001, prompted a revision of the planned asset mix,
capabilities, and schedule.
Key Terminology:
Indefinite delivery, indefinite quantity (IDIQ) contracts provide for
an indefinite quantity, within stated limits, of supplies or services
during a fixed period. The contract must specify the total minimum and
maximum quantity of supplies or services the government will acquire
and must include a statement of work or other description of the work to
be performed. The Coast Guard places orders (termed delivery/task
orders [DTO] under the Deepwater contract) for individual requirements.
Award term and award fee: Based on the government‘s assessment of its
performance, the contractor could earn one or more extensions of the
contract period (award term) and/or additional money (award fee).
The Acquisition Program Baseline establishes key cost, schedule, and
performance parameters. Rebaselining involves changing the parameters
to reflect a program‘s current status when program goals change.
Deepwater Program‘s Acquisition Approach:
The Deepwater program has been in development since the mid-1990s, when
the Coast Guard began planning a recapitalization program to replace or
modernize aging or technologically obsolete "deepwater" assets--those
used for missions that generally occur beyond 50 miles from shore.
Rather than using a traditional acquisition approach of replacing
individual classes of assets, the Coast Guard chose a system-of-systems
strategy, managing the program as a single integrated package. To
execute this acquisition approach, the Coast Guard decided to use a
system integrator--a private sector contractor responsible for
designing, building, and integrating the various assets to meet
projected deepwater operational requirements at the lowest possible
cost, either directly or through subcontractors. Furthermore, the Coast
Guard pursued a performance-based acquisition--setting broad
performance requirements for the program but allowing the system
integrator some latitude in meeting the requirements. The Coast Guard's
three main goals for its Deepwater program were to improve operational
effectiveness, reduce total ownership costs, and satisfy the customers,
i.e., the users.
Between 1998 and 2001, three industry teams [Footnote 2] competed to
identify and provide the assets needed--including cutters, aircraft,
helicopters, logistics, and C4ISR--to meet Coast Guard requirements.
Each team was made up of shipbuilders; aircraft manufacturers; and
manufacturers of electronic, communication, and other equipment needed
for the deepwater system. The competition for the Deepwater base
contract was nearing completion when the September 11 terrorist attacks
occurred. Nevertheless, Coast Guard officials decided to move forward
with the contract award to avoid delaying replacement of deteriorating
assets, although they knew at the time that there would be changes to
their mission. In June 2002, the Coast Guard awarded a system
integrator contract to Integrated Coast Guard Systems (ICGS)--a
business entity led and jointly owned by Lockheed Martin and Northrop
Grumman Ship Systems. The award was an IDIQ contract with a 5-year base
period and five potential additional award terms of up to 5 years each.
From 2005 to 2006, the Coast Guard worked to rebaseline the Deepwater
program to reflect its post-9/11 mission. The Deepwater Acquisition
Program Baseline, approved by the Department of Homeland Security (DHS)
in May 2007, reflects the changes. In June 2007, the Coast Guard
awarded ICGS its first award term extension, 43 months of the potential
60 months, based on the government's assessment of the contractor's
performance.
Objective #1: Decisions to Purchase from ICGS versus Other Vendors:
Background:
When the Coast Guard awarded the Deepwater contract to ICGS, the
contractor was to be a system integrator. ICGS proposed a solution, or
mix of assets, to meet Coast Guard requirements and was then
responsible for designing, developing, delivering, integrating, and
supporting the assets. The acquisition structure of the Deepwater
program allowed the two first-tier subcontractors, Lockheed Martin and
Northrop Grumman--the companies that formed ICGS and that developed the
Deepwater solution--to have sole responsibility for determining how
assets would be acquired.
Changing Approach to Deepwater Acquisition:
The Coast Guard is moving away from the ICGS contract and the system-
of-systems model, with the contractor as system integrator, to a more
traditional acquisition strategy, where the Coast Guard will manage the
acquisition of each asset separately. In a series of reports since
2001, we have noted the risks inherent in the systems integrator
approach to the Deepwater program and have made a number of
recommendations intended to improve the Coast Guard's management and
oversight. We specifically focused on the need to improve program
management, contractor accountability, and cost control. We, as well as
the DHS Inspector General and others, have also noted problems in
specific acquisition efforts, notably the National Security Cutter
(NSC) and the 110-Foot Patrol Boat Modernization, which was permanently
halted due to operational and safety concerns.
The Coast Guard has recognized that it needs to increase government
oversight and has begun to transfer system integration and program
management responsibilities back to the Coast Guard. It has begun
taking formal steps to reclaim authority over decision making and to
more closely monitor program outcomes.
The Coast Guard has also:
* begun to competitively purchase one asset (the Fast Response Cutter-
B) and plans to competitively purchase other assets outside of the ICGS
contract;
* expanded the role of third parties, including the U.S. Navy, to
perform independent cost assessments and program technical analyses;
and:
* reorganized and consolidated the acquisition function to strengthen
its ability to manage projects.
Additionally, because the IDIQ contract minimum was met during the 5-
year base term, the government is under no further obligation to use
the contract. Coast Guard officials said that they are currently
evaluating whether to continue to use the ICGS contract for efforts
that are already under way, such as the NSC, versus contracting
directly with the subcontractors. Further, they may continue to use the
ICGS contract for certain efforts, such as logistics.
Objective #2: Status of the Fast Response Cutter‘s (FRC) Cost,
Schedule, and Performance:
Background:
The FRC was conceived as a patrol boat with high readiness, speed,
adaptability, and endurance. ICGS proposed a fleet of 58 FRCs
constructed of composite materials (later termed FRC-As). Although
estimates of the initial acquisition cost for these composite materials
were high, they were chosen for their perceived advantages over other
materials (e.g., steel), such as lower maintenance and life-cycle
costs, longer service life, and lower weight.
In 2005, the Coast Guard accelerated the delivery date of the lead FRC-
A from 2018 to 2007 because of problems with modifications to the 110-
foot patrol boat fleet. However, in February 2006 the Coast Guard
suspended FRC-A design work in order to assess and mitigate technical
risks.
To fulfill its urgent need for patrol boats, the Coast Guard decided in
early 2006 to pursue a dual-path acquisition approach. The Coast Guard
planned to purchase 12 modified commercially available patrol boats
(termed FRC-Bs) through ICGS. Concurrently, it continued to assess the
possible use of composite materials for the hull of the FRC-A.
In March 2007, the Coast Guard terminated the ICGS FRC-B acquisition
effort and reassigned it to the Coast Guard Acquisition Directorate.
The Coast Guard believed that by issuing the request for proposals
(RFP) itself, it could better ensure full and open competition while
controlling costs and acquiring the patrol boats in the shortest amount
of time.
FRC-A Design Efforts Remain Suspended:
Since the FRC-A acquisition effort began, the Coast Guard obligated
approximately $35 million to ICGS for the design of this asset, but a
viable design has not been produced. Coast Guard officials told us that
at this time design efforts remain suspended; they do not expect to
incur any additional costs related to the FRC-A. The original estimate
for the fleet of 58 FRC-As was approximately $3.2 billion.
Due to high risk and uncertain cost savings, Coast Guard officials
recommended to the Commandant that the Coast Guard not pursue
acquisition of an FRC-A design that includes unproven composite hull
technology. The officials told us this recommendation was largely based
on a third-party analysis that found the composite technology unlikely
to meet the desired 35-year service life under the Coast Guard's
operational conditions. Therefore, officials believe that the use of
the proposed composite materials would not offset high initial
acquisition costs, as ICGS had initially proposed.
Cost, Schedule, and Performance of FRC-B:
In June 2007, the Coast Guard issued an RFP for the design,
construction, and delivery of a modified commercially available patrol
boat for the FRC-B. The Coast Guard estimated, in late 2006, that the
total acquisition cost for 12 FRC-Bs would be $593 million. Coast Guard
officials do not plan to update cost estimates for the FRC-B until
after the contract is awarded. The Coast Guard is currently evaluating
proposals and expects to award the FRC-B contract in the third quarter
of fiscal year 2008, with the lead cutter to be delivered in 2010.
Coast Guard officials stated that their goal is still to acquire 12
FRC-Bs by 2012. The contract will include a 2-year base period for the
design and production of the lead cutter and six 1-year option periods.
The first option period includes 3 low-rate initial production cutters,
and the subsequent five option periods include an option of 4 or 6
cutters each. The Coast Guard intends to award a fixed price contract
for design and construction of the FRC-B, with the potential to acquire
a total of 34 cutters.
Regarding performance, there are some key differences in the FRC-B, as
outlined in the RFP, compared with the requirements for the FRC-A. One
difference is speed--the Coast Guard lowered the minimum requirement
for sprint speed from 30 knots for the FRC-A to 28 for the FRC-B.
Another pertains to onboard small boat launch-and-recovery mechanisms:
the initial design for the FRC-A included a stern ramp launch. This
capability is not required on the FRC-B. However, Coast Guard officials
expressed a preference for the stern ramp launch-and-recovery system
because it would be safer and require fewer crew to operate than a
manual alternative. Coast Guard officials said that eliminating these
design requirements would ensure more competition on the open market
and meet their urgent need for patrol boats.
Objective #3: Status of National Security Cutter (NSC): Cost:
Background:
The NSC is intended to be the flagship of the Coast Guard‘s fleet, with
an extended on-scene presence, long transits, and forward deployment.
The cutter and its aircraft and boat assets are to operate worldwide.
In November 2005, ICGS submitted a request for equitable adjustment
(REA) of $300 million, contending that the Coast Guard had deviated
from a very detailed contractor implementation plan on which pricing
was based. This matter was not resolved until August 2007, when the
Coast Guard and ICGS completed negotiations of a consolidated contract
action that encompasses the first three ships (NSC 1, 2, and 3). This
negotiation also converted NSC 2 from a fixed price to a cost-plus
incentive fee contract type and eliminated the contract clause
referencing the implementation plan.
Additionally, the Coast Guard and ICGS disagreed over the ship's
expected 30-year fatigue life. Fatigue is physical weakening due to
age, stress, or vibration. A U.S. Navy analysis done for the Coast
Guard determined that the ship's design was unlikely to meet fatigue
life expectations. The Coast Guard decided to correct the structural
deficiencies for the first two NSCs at scheduled drydocks to avoid
stopping the production lines and to incorporate structural
enhancements into the design and production for future ships. The
structural enhancements were included as part of the consolidated
contract action.
NSC Cost Growth Driven by Various Factors:
The NSC‘s projected costs have increased compared to the initial
baseline, as shown in table 1.
Table 1: Cost Growth for NSC 1-3 (Dollars in millions):
Design:
NSC 1: $67.7;
NSC 2: [Empty];
NSC 3: [Empty].
Build:
NSC 1: $264.4;
NSC 2: $200.7;
NSC 3: $189.2.
Govt. furnished equipment (GFE):
NSC 1: $52.8;
NSC 2: $50.0;
NSC 3: $40.0.
Initial projected costs (2002):
NSC 1: $384.9;
NSC 2: $250.7;
NSC 3: $229.2.
Requirements changes:
NSC 1: $75.9;
NSC 2: $60.0;
NSC 3: $60.0.
Hurricane Katrina;
NSC 1: $40.0;
NSC 2: $44.4;
NSC 3: $38.7.
Economic changes:
NSC 1: $58.3;
NSC 2: $69.9;
NSC 3: $86.8.
Structural enhancements:
NSC 1: $40.0;
NSC 2: $30.0;
NSC 3: $16.0.
Other GFE:
NSC 1: $41.5;
NSC 2: $40.7;
NSC 3: $73.9.
Current projected costs (2008):
NSC 1: $640.7;
NSC 2: $495.7;
NSC 3: $504.6.
Source: Coast Guard.
Note: Economic changes include, for example, escalation of material/
labor and some costs associated with settling the REA. Other GFE
includes certifications, tests, and training. For NSC 3, other GFE also
includes additional government oversight.
[End of table]
Requirements changes to address post-9/11 needs are one of the main
reasons for the cost increases. The new requirements include:
* expanded interoperability with the Department of Defense, DHS, and
local first responders;
* increased self-defense and survivability, including chemical,
biological, and radiological measures;
* increased flight capability via longer and enhanced flight deck;
* upgraded weapon systems; and:
* improved classified communication capabilities.
Another contributing factor was Hurricane Katrina, which not only
caused considerable damage to the shipyard, including tooling,
equipment, shops, and other facilities, but also caused an exodus of
the experienced workforce. The overall number of shipworkers declined
significantly, causing the contractor to use more overtime hours. The
loss of workers, in turn, considerably disrupted the ship's learning
curve, which normally results in greater efficiencies in production of
subsequent ships.
However, some of the increase can be attributed to Coast Guard actions.
For example, the contractor used the Coast Guard's failure to precisely
execute the contract according to the implementation plan as basis for
requesting an equitable adjustment. Furthermore, even though the Coast
Guard's own technical staff raised fatigue life concerns--later
confirmed by a U.S. Navy study--during the design phase, the decision
was made to proceed with production of the first two NSCs and enhance
the structure later.
Objective #3: NSC 1 Delivery Schedule May Be Delayed:
Background:
Key Terminology:
Ship trials: Before the NSC 1 is delivered to the Coast Guard, it will
undergo three sets of trials. Machinery trials and builder's trials are
the contractor's demonstrations to the Coast Guard of machinery and
ship capabilities, respectively. Acceptance trials, conducted by the
U.S. Navy Board of Inspection and Survey (INSURV), determine compliance
with contract requirements and test system capabilities.
Ship certification process: The certification process for the NSC
includes verification of all standards by either a third-party agency
such as the American Bureau of Shipping (ABS) or by the Coast Guard
Technical Authority independent of the Deepwater program office. There
are 987 certification standards in total for the NSC 1.
TEMPEST inspection: An inspection of a ship's ability to ensure that
data-related or intelligence-bearing signals will not be
unintentionally radiated from equipment and the ship's structure is
known as a TEMPEST (Telecommunications Electromagnetic Performance and
Emission Standards) inspection. TEMPEST inspections are intended to
identify the potential for such an occurrence through communications
systems or any equipment or system that processes classified
information in an electrical form. Inspectors may conduct visual and
instrumented inspections.
Status of NSC: Delivery Schedule:
The first NSC was initially projected for delivery in 2006, but slipped
to August 2007 after the 9/11 requirements changes. However, delivery
was again delayed until April 2008. It is uncertain at this time
whether the new delivery date will be met due to several factors
involving testing, certifications, and other areas of technical risk.
Page 5 The NSC's projected costs have increased compared to the initial
baseline, as shown in table 1. The NSC is intended to be the flagship
of the Coast Guard's fleet, with an extended on-scene presence, long
transits, and forward deployment. The cutter and its aircraft and boat
assets are to operate worldwide. Page 3 FRC-A Design Efforts Remain
Suspended Status of the Fast Response Cutter's (FRC) Cost, Schedule,
and Performance The FRC was conceived as a patrol boat with high
readiness, speed, adaptability, and endurance. ICGS proposed a fleet of
58 FRCs constructed of composite materials (later termed FRC-As).
Although estimates of the initial acquisition cost for these composite
materials were high, they were chosen for their perceived advantages
over other materials (e.g., steel), such as lower maintenance and life-
cycle costs, longer service life, and lower weight. Cost, Schedule, and
Performance of FRC-B Page 2 Background:
Machinery trials occurred in early December and builder's trials
occurred February 8-11, 2008. The current schedule leaves little
margin for delay. Acceptance trials are scheduled to begin April 7,
2008. The contract requires 30 days between acceptance trials and ship
delivery, but the scheduled dates for these events are about 3 weeks
apart. The Coast Guard and the contractor are aware of the discrepancy;
however, no decision has been made on how to resolve this issue. The
Coast Guard will have to either extend the delivery date of the ship to
meet the requirement or waive it. Our prior work has shown that event-
driven rather than schedule-driven decisions are preferable, thus it
may be in the best interest of the Coast Guard to delay acceptance of
the first NSC until a number of these issues are resolved.
Of the 987 certification standards, ICGS was to submit documentation on
892 for review and acceptance by the Coast Guard Technical Authority.
Almost all remain outstanding. In addition, the Coast Guard and
contractor differed in their understanding of the number of
certifications for which ABS was responsible. Northrop Grumman had
contracted with ABS to certify 60 standards; however, the Coast Guard
believed ABS was responsible for 84. According to Coast Guard
officials, the issue has been resolved and ABS will now be responsible
for 86 certifications. Further, for NSC 3 and later ships, ABS will be
responsible for about 200 certifications. Other third parties will
certify 11 of the standards.
The Coast Guard has identified 13 issues pertaining to C4ISR and Hull,
Mechanical, and Electrical as risk areas, 8 of which have moderate to
high risk of occurrence or impact if not resolved. One of these relates
to the results of the July 2007 visual TEMPEST inspection, conducted by
a team of Coast Guard officials. The team reported hundreds of
discrepancies, over 40 percent of which pertain to cable grounding and
separation, such as cables intended for classified information not
being adequately separated from those intended for nonclassified
information. Coast Guard officials told us that they requested the test
be done earlier than usual so that issues could be identified and
corrected sooner.
Coast Guard and Navy personnel noted that having open issues with a
ship--particularly for the first in class--at the time of delivery is
normal. After acceptance, the Coast Guard plans to conduct operational
testing at sea for approximately 2 years, during which time open issues
can be resolved. The ship will officially become operational
thereafter, which, based on the current schedule, will be March 2010.
Objective #3: Status of NSC: Performance:
Key Terminology:
Key performance parameters (KPP) are the acceptable standards of
performance for a system. The number of KPPs should be the minimum
needed to characterize operational and technical performance, but should
include all parameters considered mission critical.
KPPs include threshold and objective values. A performance parameter
threshold is the minimum value necessary to satisfy a requirement. A
parameter‘s objective is a measurable, cost-effective value greater
than the threshold. In some cases, the threshold and objective are the
same.
NCS Performance:
Key performance parameters for the NSC were first defined in the
Acquisition Program Baseline submitted for DHS approval in November
2006. Coast Guard officials explained that the key performance
parameters were derived from performance specification requirements
that had been in place before contract award.
The key performance parameters for the NSC are shown below:
Parameter: Sprint speed (knots);
Threshold: 28;
Objective: 31.
Parameter: Patrol speed (knots);
Threshold/Objective: 15.
Parameter: Operating range–nautical miles (NM);
Threshold/Objective: 12,000.
Parameter: Detection range–NM;
Threshold/Objective: 11.7.
Parameter: Continuous efficient operations (sea state);
Threshold: Mid 5;
Objective: Through 6.
Parameter: Operational availability;
Threshold: 0.80;
Objective: 0.90.
Source: Coast Guard.
[End of table]
The key performance parameters have not been changed due to post-9/11
mission requirements. Coast Guard officials expect the NSC to meet the
current threshold parameters, but they will not know for certain until
the ship undergoes sea trials.
However, the Coast Guard‘s Engineering Logistics Center officials
expressed concern about the ship‘s weight margin. Ship designs typically
include a margin for additional weight to accommodate service
enhancements during the ship‘s service life. The officials noted that
most of the available weight margin has already been consumed during
construction”not including the fatigue life structural enhancements. The
officials further noted that subsequent changes to the ship will cost
more than they would have otherwise due to additional redesign and
engineering that may be necessary to offset the additional weight.
Coast Guard officials noted, however, that a mitigation strategy is in
place and adjustments are being made that will increase the service
life weight margin.
Objective #4: Status of Prior GAO Recommendations:
Background:
Our March 2004 report, Contract Management: Coast Guard‘s Deepwater
Program Needs Increased Attention to Management and Contractor
Oversight (GAO-04-380) contained a number of recommendations to DHS and
the Coast Guard. As of June 2007, five remained open.
We have provided status updates on the 2004 recommendations in the
following GAO reports and testimonies:
* Coast Guard: Changes to Deepwater Plan Appear Sound, and Program
Management Has Improved, but Continued Monitoring Is Warranted (GAO-06-
546), April 2006.
* Coast Guard: Preliminary Observations on Deepwater Program Assets and
Management Challenges (GAO-07-446-T), February 15, 2007.
* Coast Guard: Status of Efforts to Improve Deepwater Program
Management and Address Operational Challenges (GAO-07-575T), March 8,
2007.
* Coast Guard: Challenges Affecting Deepwater Asset Deployment and
Management and Efforts to Address Them (GAO-07-874), June 2007.
Table 2: Recommendation Status:
GAO‘s 2004 recommendation: Program management:
A) In collaboration with the system integrator, take the necessary
steps to make Integrated Product Teams (IPT) effective including: (1)
training IPT members in a timely manner, (2) chartering the sub-IPTs,
and (3) making improvements to the electronic information system that
would result in better information sharing among IPT members
(government and ICGS) who are geographically dispersed;
Status we reported in June 2007: Partially implemented: The Coast Guard
had taken over IPT leadership and planned to update the program
management plan to reflect changing roles and responsibilities between
the Coast Guard and ICGS;
Status as of December 2007 (following pages contain additional detail):
Partially implemented: The Coast Guard is in the process of
restructuring IPTs and chartering new ones. With decreased reliance on
ICGS, chartering sub-IPTs and improving the current electronic
information system may become less of an issue.
GAO‘s 2004 recommendation: Program management:
B) As Deepwater assets begin to be delivered to operational units,
ensure that field operators and maintenance personnel are provided with
timely information and training on how the transition will occur and how
maintenance responsibilities are to be divided between system
integrator and Coast Guard personnel;
Status we reported in June 2007: Partially implemented: The Coast Guard
was reaffirming its role as technical authority and became the default
provider of maintenance and logistics;
Status as of December 2007 (following pages contain additional detail):
Partially implemented: The Coast Guard has taken over maintenance and
logistics responsibilities for the assets and plans to use contractor
support on an as needed basis. However, the Commandant instruction
formalizing this decision has not yet been issued.
GAO‘s 2004 recommendation: Contractor accountability:
C) Based on the current schedule for delivery of Deepwater assets,
establish a time frame for when the models and metrics will be in place
with the appropriate degree of fidelity to be able to measure the
contractor‘s progress toward improving operational effectiveness;
Status we reported in June 2007: Partially implemented: Key performance
parameters were added to criteria for measuring operational
effectiveness; however, the models still lacked the fidelity to
attribute improvements to the contractor or the Coast Guard;
Status as of December 2007 (following pages contain additional detail):
Closed: overcome by events. The Coast Guard is no longer using
operational effectiveness to measure contractor performance.
GAO‘s 2004 recommendation: Contractor accountability:
D) Establish criteria to determine when the total ownership cost (TOC)
baseline should be adjusted and ensure that the reasons for any changes
are documented;
Status we reported in June 2007: Partially implemented: DHS had not
approved the Coast Guard‘s most recent baseline update (Nov. 2006);
Status as of December 2007 (following pages contain additional detail):
Closed: implemented. DHS approved the Coast Guard‘s Acquisition Program
Baseline for Deepwater, which includes criteria for TOC adjustments, in
May 2007.
GAO‘s 2004 recommendation: Cost control through competition:
E) Develop a comprehensive plan for holding the system integrator
accountable for ensuring an adequate degree of competition among second-
tier suppliers in future program years. This plan should include
metrics to measure outcomes and consideration of how these outcomes
will be taken into account in future award fee decisions;
Status we reported in June 2007: Partially implemented: The Coast Guard
did not have information from ICGS to determine the level of
competition achieved and planned to perform additional analyses to gain
insight on the level of competition;
Status as of December 2007 (following pages contain additional detail):
Partially implemented. The Coast Guard has decreased its reliance on
ICGS, moving toward full and open competition, and intends to eliminate
award term evaluation criteria from the current contract with ICGS. The
ICGS contract no longer contains award fee provisions.
[End of table]
Objective #4: Take Steps to Make Integrated Product Teams Effective:
Background:
We reported in 2004 that Integrated Product Teams (IPT)”composed of
Coast Guard, ICGS, and subcontractor employees (Lockheed Martin and
Northrop Grumman)”were the Coast Guard‘s primary tool for managing the
program and overseeing the contractor. IPT responsibilities included
such things as guiding development, allocating resources and budgets,
measuring performance, performing product level design/performance cost
trade-offs, and delivering and fielding tangible products and processes
in accordance with the overall Deepwater program. The IPTs were chaired
by contractor personnel.
We recommended that the Coast Guard, in collaboration with the system
integrator, take the necessary steps to improve the effectiveness of
IPTs, including (1) training IPT members in a timely manner, (2)
chartering sub-IPTs, and (3) making improvements to the electronic
information system that would result in better information sharing
among geographically dispersed IPT members. We reported in July 2005
that the training portion of this recommendation had been addressed.
Current Status: Partially Implemented:
The Coast Guard is in the process of restructuring the IPTs, which
remain a key program management tool. Coast Guard program managers,
rather than ICGS representatives, now chair the IPTs. The IPTs‘ current
role is to discuss options for problem solving related to cost,
schedule, and performance objectives, but the program manager is
ultimately responsible for making decisions. In addition to evaluating
and rechartering some existing IPTs, the Coast Guard has organized two
new ones and is in the process of establishing several others.
Since the Coast Guard will now chair IPTs, the chartering of sub-IPTs to
clarify roles and responsibilities is no longer an issue. Coast Guard
officials plan to use working groups established under the authority of
the IPTs to address specific issues. Working groups are more informal
and can come together and disband on an as-needed basis.
Finally, the electronic information system, built and managed by ICGS,
is still used as a tool used to share information among geographically
dispersed IPT members”specifically, ICGS and the Coast Guard. However,
with the decreasing reliance on ICGS as the system integrator, this
particular contractor-led electronic information-sharing system may
become less integral to effective management of the Deepwater program.
Due to the ongoing chartering, restructuring, and re-evaluation of the
roles and responsibilities of the IPTs within the new construct of the
Deepwater program, this recommendation remains open as partially
implemented.
Objective #4: Provide Information on Maintenance and Logistics
Responsibilities:
Background:
In 2004, we reported that the Coast Guard had not adequately
communicated with operational units, field operators, and maintenance
personnel regarding how maintenance and logistics responsibilities
would be handled when Deepwater assets were delivered. We recommended
that these personnel be provided with timely information and training on
how the transition will occur and how maintenance responsibilities are
to be divided between the system integrator and Coast Guard personnel.
Current Status: Partially Implemented:
In June 2007, we reported that the Coast Guard announced it was
assuming the role of the default provider of maintenance and logistics,
supplemented by contractors as necessary. The Coast Guard is still
formalizing its assumption of maintenance and logistics
responsibilities. The Coast Guard technical authority is developing a
commandant instruction that outlines policies, processes, roles, and
responsibilities for maintenance and logistics support for Deepwater
assets. The Coast Guard plans for Deepwater assets to follow the same
maintenance program”already familiar to Coast Guard maintenance
personnel---as its other assets. However, the Coast Guard expects that
some areas, such as command, control, communications, and computer
electronics, will require contractor support until Coast Guard
personnel can be trained or new personnel can be hired to fill these
roles.
Because the Coast Guard has not yet issued the final commandant
instruction that assigns maintenance and logistics responsibilities to
Coast Guard personnel instead of ICGS, we are leaving this
recommendation open as partially implemented. Once the instruction that
addresses our recommendation is issued, we plan to close this
recommendation as implemented.
Objective #4: Establish Time Frame for Measuring Operational
Effectiveness:
Background:
In 2004, we reported that that the Coast Guard planned to use
operational effectiveness as one of the criteria for evaluating the
contractor‘s performance. ’Operational effectiveness“ was measured by
the number of missions, such as search and rescue or drug interdiction,
carried out by current assets; however, because Deepwater assets had
not been delivered, their contribution to operational effectiveness was
difficult to determine. In 2007, we noted that because assets were not
available at the time of the evaluation, the model used to measure the
contractor‘s performance credited the contractor for planned, not
actual, capabilities.
We recommended that the Coast Guard establish a time frame, based on
its current schedule for delivery of Deepwater assets, for when models
and metrics would be in place with the appropriate degree of fidelity
in order to measure the contractor‘s progress toward improving
operational effectiveness.
Current Status: Closed as Overcome by Events:
The Coast Guard has drafted revised award term criteria and no longer
plans to measure operational effectiveness. Instead, the Coast Guard is
considering criteria”primarily subjective and objective measures of
cost, schedule, and performance”that would measure past performance for
work on Deepwater assets. The model will no longer be used to measure
contractor performance. In fact, in June 2007, the Coast Guard
transferred possession of the model to the research and development
group for use in business case and force structure analyses.
Because the Coast Guard is no longer using operational effectiveness as
a measure of contractor performance, this recommendation has been
overcome by events and we consider it closed.
Objective #4: Establish Criteria for Changing Total Ownership Cost
Baseline:
Background:
We reported in 2004 that proposed changes to the Deepwater total
ownership cost (TOC) baseline, due to variables such as fuel costs,
would be approved by the program executive officer on a case-by-case
basis. The Coast Guard had no criteria in place for potential upward or
downward adjustments to the baseline. We recommended that the Coast
Guard establish criteria to determine when the TOC baseline should be
adjusted and ensure that the reasons for any changes were documented.
Current Status: Closed as Implemented:
We previously reported that in November 2005, the Coast Guard had
increased the total ownership cost baseline to $304 billion. [Footnote
3] We noted, however, that although the Coast Guard was required to
provide information to DHS for a baseline cost breach of 8 percent or
more, the 8 percent threshold had not been breached because the
threshold was measured against total program costs and not on an asset
basis. At the time, Coast Guard officials acknowledged that only a
catastrophic event would trigger such a breach.
In November 2006, the Coast Guard submitted a revised Acquisition
Program Baseline (APB) to DHS that set forth criteria for baseline
adjustments. DHS approved the document in May 2007. The APB includes
criteria for baseline adjustments to cost, schedule and performance for
the total system or individual asset classes and states that breaches
will be reported in accordance with DHS policy. See table 3.
Table 3: Criteria for Baseline Adjustments:
Key parameter: Cost;
Threshold for adjustment: Total system or asset class acquisition,
construction, and improvement cost increases exceeding 8 percent.
Key parameter: Performance;
Threshold for adjustment: Any mission, system or asset class
performance parameters not met or are anticipated to fail to meet the
threshold key performance parameter.
Key parameter: Schedule;
Threshold for adjustment: Any system schedule baseline or asset class
key schedule parameter slip by more than 180 days.
Source: Coast Guard documentation.
[End of table]
Since then, the Coast Guard has reported two cost breaches to DHS: one
for the NSC and another for an aviation asset, the C-130J Missionization
Project. For the NSC, the breach was reported upon submission of the
individual APB for the NSC in September 2007. [Footnote 4] The total
acquisition cost increased from $3.45 billion to $3.97 billion, which
was attributed to the structural/fatigue enhancements to the ship, the
impact of the shipyard strike, and C4ISR cost growth. With respect to
the C-130J missionization project, a November 2007 notification
memorandum provides that the estimate at completion is now projected to
be 10 to 20 percent over the original contract price of $117.95 million
because of parallel design and installation activities resulting in
rework, among other things. The Coast Guard committed to providing a
revised APB and remediation plan within 30 days of the notification
that will include a root cause analysis, identification of corrective
actions, and a plan for monitoring future progress. At this time, the
revised APB and remediation plan have not been finalized.
Given the fact that criteria for adjusting the baseline have been
incorporated in the Deepwater ABP and approved by DHS, we are closing
this recommendation as implemented.
Objective #4: Hold System Integrator Accountable for Competition among
Subcontractors (Make-or-Buy Decisions):
Background:
In 2004, we reported that although competition is a key method for
controlling costs, the Coast Guard had no insight into the extent of
competition among the suppliers of Deepwater assets. Lockheed Martin
and Northrop Grumman, the first-tier subcontractors, had sole
responsibility for determining whether to compete assets among lower-
tier subcontractors or provide the assets themselves. We reported that
ICGS did not leverage competition to deliver the best value for certain
Deepwater assets.
We recommended that the Coast Guard develop a comprehensive plan for
holding the system integrator accountable for ensuring an adequate
degree of competition among second-tier suppliers in future program
years. We also recommended that the plan include metrics to measure
outcomes and consider how these outcomes will be taken into account in
future award fee decision.
Key Terminology:
Make-or-buy: In performing a contract, the contractor may decide to
make or buy an item. To make means that the contractor, its affiliates,
subsidiaries, or divisions will produce an item or perform a work
effort. To buy suggests that the contractor will subcontract for an
item or work effort.
Cost-plus-incentive-fee contracts reward the contractor for cost-
effectiveness or performance. Incentive fees are determined by a
formula, while award fees are based on the government‘s judgmental
evaluation of the contractor‘s overall performance.
Current Status: Partially Implemented:
The Coast Guard has taken steps to increase its insight into make-or-buy
decisions for Deepwater assets under the ICGS contract. In 2005, the
Coast Guard asked ICGS to notify the government of make-or-buy
decisions of $10 million or more. However, in December 2006, the Coast
Guard reported that contractor data were inadequate to determine the
level of competition achieved. Subsequently, the June 2007 award term
modification incorporated a formal requirement for reporting make-or-buy
decisions. ICGS must submit a make-or-buy plan that outlines rationale
and justification for each DTO proposal that contains work items or work
efforts priced at more than $5 million and/or that would typically
require company management review because of complexity, cost, need for
large quantities, or requirement for additional production facilities.
The rationale should consider overall benefit to the government,
including:
(1) long-term and/or near-term cost benefit;
(2) adequacy of considerations made in the make-or-buy determination;
(3) impacts on product performance;
(4) present and future supportability, maintenance and/or upgrade
potential; and;
(5) proprietary data or other restrictions that could limit pursuit of
future cost-effective alternatives.
The Coast Guard is putting less emphasis on the subcontractor
competition issue due to the move away from using the ICGS contract and
more toward full and open competition. In fact, Coast Guard officials
told us that because of potential legislation that would prohibit them
from using ICGS as the system integrator, they are considering
eliminating award term provisions from the contract.
In addition, the Coast Guard no longer uses award fees under the ICGS
contract. However, it has incorporated an incentive fee for the NSC.
We are leaving this recommendation open as partially implemented
pending Coast Guard documentation regarding the award term provision.
Related GAO Products:
Coast Guard: Challenges Affecting Deepwater Asset Deployment and
Management and Efforts to Address Them, GAO-07-874 (Washington, D.C.:
June 18, 2007).
Coast Guard: Status of Efforts to Improve Deepwater Program Management
and Address Operational Challenges, GAO-07-575T (Washington, D.C.: Mar.
8, 2007).
Coast Guard: Preliminary Observations on Deepwater Program Assets and
Management Challenges, GAO-07-446-T (Washington, D.C.: Feb. 15, 2007).
Coast Guard: Changes to Deepwater Plan Appear Sound, and Program
Management Has Improved, but Continued Monitoring Is Warranted, GAO-06-
546 (Washington, D.C.: Apr. 28, 2006).
Coast Guard: Progress Being Made on Addressing Deepwater Legacy Asset
Condition Issues and Program Management, but Acquisition Challenges
Remain, GAO-05-757 (Washington, D.C.: July 22, 2005).
Contract Management: Coast Guard‘s Deepwater Program Needs Increased
Attention to Management and Contractor Oversight, GAO-04-380
(Washington, D.C.: Mar. 9, 2004).
Coast Guard: Progress Being Made on Deepwater Project, but Risks Remain,
GAO-01-564 (Washington, D.C.: May 2, 2001).
[End of enclosure]
Assistant Commandant for Acquisition (CG-9):
Chief Acquisition Officer (CAO):
United States Coast Guard:
Washington, D.C. 20593-0001:
February 20, 2008:
John P. Hutton:
US Government Accountability Office:
Washington, DC 20548:
Subject: Draft Report titled "Status of Selected Aspects of the Coast
Guard's Deepwater Program."
This letter provides the United States Coast Guard's comments on the
Government Accountability Office's (GAO) draft report titled "Status of
Selected Aspects of the Coast Guard's Deepwater Program."
The Coast Guard remains grateful for all that the GAO has done to bring
attention to issues with our Deepwater program's challenges and concurs
in the findings of this report. We appreciate the commitment the GAO
has towards making the Deepwater program successful and value the
opinions of the GAO. We benefit from the oversight and are prudently
implementing the recommendations to ensure improvement to our
acquisition program in the future.
We thank you for considering our comments on these very important
issues. We look forward to working with the GAO on future issues to aid
in strengthening the Coast Guard.
Sincerely,
Signed by:
Gary T. Blore, RADM:
Chief Acquisition Officer:
U.S. Coast Guard:
Enclosure: USCG Comments to Draft GAO Report titled Status of Selected
Aspects of the Coast Guard's Deepwater Program:
Copy:
CG-91:
CG-93:
CG-4:
CG-8:
[End of letter]
Enclosure: USCG comments on the GAO draft report titled "Status of
Selected Aspects of the Coast Guard's Deepwater Program."
Acquisition Directorate:
CG-9:
USCG comments on GAO draft report titled "Status of Selected Aspects of
the Coast Guard's Deepwater Program"
RADM Gary T. Blore:
20 February 2008:
Purpose:
The purpose of this document is to serve as supplemental information to
the GAO's findings addressed in the draft report titled "Status of
Selected Aspects of the Coast Guard's Deepwater Program". Each point
outlined below serves as a clarification to the findings represented in
GAO's draft report. Overall, the Coast Guard supports the findings as
written in this draft report.
USCG Comments:
1. FRC-B Stem Ramp Requirement: To clarify the statements discussed in
the letter to Senator Cantwell and Senator Snowe as well as in the
draft report, the Coast Guard does not intend to allow a less-safe
requirement for the cutter boat launch and recovery system in the FRC-
B. The companies bidding on the FRC-B have the option as to whether
they want to include a stern ramp or other cutter boat launch and
recovery system as long as it follows the specific guidelines outlined
in the Circular of Requirements (COR) for the FRC-B. The Circular of
Requirements provides general guidelines the proposal has to meet (e.g.
No more than three crew members are required to operate the system
regardless of the system proposed) as well as specific guidelines if
the company chooses to bid a stern ramp or davit launch and recovery
system. There is also technical evaluation criteria which specifically
addresses the safety element of the cutter boat stern launch and
recovery system and ensures compliance with the specific requirements
outlined in the COR. A stern launch is one alternative to potentially
meet this requirement.
2. NSC's Available Weight Margin: To clarify the statements discussed
in the letter to Senator Cantwell and Senator Snowe as well as in the
draft report, the Coast Guard acknowledges that there is a reduced
weight margin after the structural enhancements are installed on NSC #1
and #2, but according to the USCG Technical Authority for Engineering
and Logistics (CG-4), the overall displacement can be increased without
detriment to any of the NSC's other requirements. CG-4 is currently
engaged in a detailed analysis prior to making a recommendation to
increase the displacement from 4300LT to 4500LT (which includes more
weight margin than before the structural enhancements). We anticipated
the cost for accomplishing this and already included it in the cost for
NSC 1 and 2.
3. Background of Deepwater Contract: To clarify that the background
section of Objective #1, "Decisions to Purchase From ICGS Versus Other
Vendors," although the Integrated Coast Guard Systems (ICGS) had
proposed a solution to meet Coast Guard requirements as well as how
those assets would be acquired, the Coast Guard did have final approval
authority for all decisions made concerning the Deepwater program. The
Coast Guard approved contract awards and obligated funding against
those contracts ” this is the essence of final authority.
4. Changing Approach to Deepwater Acquisition: The approach has not
changed. The Coast Guard uses a systems approach in determining the
community of capabilities needed to meet Surveillance, Detection,
Classification, Identification, and Prosecution (SDCIP), and models
this in DMOES. A systems approach does not preclude an asset by asset
execution of the acquisition strategy. A systems approach is a means by
which to determine solutions ” not necessarily a tactical acquisition
strategy.
5. The use of the US Navy Board of Inspection and Survey (INSURV): As
discussed in the "Key Terminology" in Objective #3 " Status of NSC:
Delivery Scheduled," the GAO auditors point out the Coast Guard's use
of INSURV during Acceptance Trials to determine compliance with
contract requirements and test system capabilities. The Coast Guard has
taken many steps to include third party assessments to assist and serve
as subject matter experts to ensure asset compliance with the Coast
Guard's requirements. It was the Coast Guard's decision to use INSURV
to serve as its inspection agent during Acceptance Trials due to its
long standing and approved acceptance standards that have been used and
proven throughout the U.S. Navy.
6. The NSC KPP for speed: As discussed in Objective #3 "Status of NSC:
Performance," the Coast Guard was able to demonstrate and meet the key
performance parameter threshold for speed during both the Machinery
Trials in December 2007 and Builders Trials in February 2008.
[End of enclosure]
Footnotes:
[1] GAO, Contract Management: Coast Guard's Deepwater Program Needs
Increased Attention to Management and Contractor Oversight, GAO-04-380
(Washington, D.C.: Mar. 9, 2004)
[2] The industry teams were led by Litton/Avondale Industries, Lockheed
Martin Naval Electronics and Surveillance Systems, and Science
Applications International Corporation.
[3] GAO, Coast Guard: Status of Efforts to Improve Deepwater Program
Management and Address Operational Challenges, GAO-07-575T (Washington,
D.C.: Mar. 8, 2007).
[2] The Coast Guard is planning to develop individual APBs for each
asset.
[End of section]
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