Coast Guard
Deepwater Requirements, Quantities, and Cost Require Revalidation to Reflect Knowledge Gained
Gao ID: GAO-10-790 July 27, 2010
The Deepwater Program includes efforts to build or modernize ships and aircraft and to procure other capabilities. After a series of project failures, the Coast Guard announced in 2007 that it was taking over the systems integrator role from Integrated Coast Guard Systems (ICGS). At the same time, a $24.2 billion program baseline was established which included schedule and performance parameters at an overall system level. GAO has previously reported on the Coast Guard's progress in establishing individual baselines for Deepwater assets and has made a number of recommendations, which have largely been addressed. In response to the conference report accompanying the Department of Homeland Security (DHS) Appropriations Act, 2010, GAO assessed (1) DHS and Coast Guard acquisition policies and approach to managing the program, (2) whether the program is meeting the 2007 baseline, and (3) Coast Guard efforts to manage and build its acquisition workforce. GAO reviewed Coast Guard and DHS policies and program documents, and interviewed officials.
DHS has revised its approach to managing and overseeing Deepwater by making the program subject to its recently finalized acquisition directive, which establishes a number of review points to provide insight into such key documents as baselines and test reports. DHS has also increased the number of its reviews of individual Deepwater assets. The Coast Guard's own management policies are generally aligned with DHS directives, although operational testing policies are still being revised, and it has developed additional guidance on completion of key requirements documents. In taking on the systems integrator role, the Coast Guard is also decreasing its dependence on ICGS by planning for alternate vendors on some of the assets already in production, as well as awarding and managing work outside of the ICGS contract for other assets. Currently, the Deepwater Program exceeds the 2007 cost and schedule baselines, and given revisions to performance parameters for certain assets, it is unlikely to meet system-level performance baselines. The asset-specific baselines that have been approved to date, while providing greater insight into asset-level capabilities, place the total cost of Deepwater at roughly $28 billion, or $3.8 billion over the $24.2 billion 2007 baseline. The revised baselines also present life-cycle costs, which encompass the acquisition cost as well as costs for operations and maintenance. While the revised baselines show a significant decrease in life-cycle costs, due to changes to assumptions like shorter service lives for assets, the Coast Guard's understanding of them continues to evolve as the agency revisits its assumptions and produces new cost estimates. Costs could continue to grow as four assets currently lack revised cost baselines; among them is the largest cost driver in the Deepwater Program, the Offshore Patrol Cutter. The asset-level baselines also indicate that schedules for some assets are expected to be delayed by several years. Regarding system-level performance, the 2007 baseline may not be achievable, as the Coast Guard has redefined or eliminated key performance indicators for many individual assets, while significant uncertainties surround other assets. Further, a planned analysis to reassess the overall fleet mix for Deepwater was not completed as planned, and a new analysis will include surface assets only. In the meantime, the Coast Guard and DHS are proceeding with acquisition decisions on individual assets. The Coast Guard continues to take steps to address its acquisition workforce needs as it assumes the role of system integrator. For example, it is using a workforce planning model to estimate current and future needs for key acquisition personnel. The Coast Guard has also begun to implement initiatives such as promoting career growth for acquisition professionals. External limitations on the availability of acquisition personnel, coupled with 100 new positions authorized in fiscal year 2010, place the Coast Guard's acquisition directorate vacancy rate at about 20 percent. While it is using contractors in support roles, the Coast Guard has released guidance regarding the roles of government staff in overseeing contractors. GAO recommends that the Coast Guard complete an overall assessment that clarifies the quantities, mix, and cost of assets needed to meet requirements, given that the current Deepwater baseline is no longer feasible, and that the results be reported to Congress. DHS concurred with the recommendation.
Recommendations
Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director:
John P. Hutton
Team:
Government Accountability Office: Acquisition and Sourcing Management
Phone:
(202) 512-7773
GAO-10-790, Coast Guard: Deepwater Requirements, Quantities, and Cost Require Revalidation to Reflect Knowledge Gained
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Report to Congressional Committees:
United States Government Accountability Office:
GAO:
July 2010:
Coast Guard:
Deepwater Requirements, Quantities, and Cost Require Revalidation to
Reflect Knowledge Gained:
GAO-10-790:
GAO Highlights:
Highlights of GAO-10-790, a report to congressional committees.
Why GAO Did This Study:
The Deepwater Program includes efforts to build or modernize ships and
aircraft and to procure other capabilities. After a series of project
failures, the Coast Guard announced in 2007 that it was taking over
the systems integrator role from Integrated Coast Guard Systems
(ICGS). At the same time, a $24.2 billion program baseline was
established which included schedule and performance parameters at an
overall system level. GAO has previously reported on the Coast Guard‘s
progress in establishing individual baselines for Deepwater assets and
has made a number of recommendations, which have largely been
addressed. In response to the conference report accompanying the
Department of Homeland Security (DHS) Appropriations Act, 2010, GAO
assessed (1) DHS and Coast Guard acquisition policies and approach to
managing the program, (2) whether the program is meeting the 2007
baseline, and (3) Coast Guard efforts to manage and build its
acquisition workforce. GAO reviewed Coast Guard and DHS policies and
program documents, and interviewed officials.
What GAO Found:
DHS has revised its approach to managing and overseeing Deepwater by
making the program subject to its recently finalized acquisition
directive, which establishes a number of review points to provide
insight into such key documents as baselines and test reports. DHS has
also increased the number of its reviews of individual Deepwater
assets. The Coast Guard‘s own management policies are generally
aligned with DHS directives, although operational testing policies are
still being revised, and it has developed additional guidance on
completion of key requirements documents. In taking on the systems
integrator role, the Coast Guard is also decreasing its dependence on
ICGS by planning for alternate vendors on some of the assets already
in production, as well as awarding and managing work outside of the
ICGS contract for other assets.
Currently, the Deepwater Program exceeds the 2007 cost and schedule
baselines, and given revisions to performance parameters for certain
assets, it is unlikely to meet system-level performance baselines. The
asset-specific baselines that have been approved to date, while
providing greater insight into asset-level capabilities, place the
total cost of Deepwater at roughly $28 billion, or $3.8 billion over
the $24.2 billion 2007 baseline. The revised baselines also present
life-cycle costs, which encompass the acquisition cost as well as
costs for operations and maintenance. While the revised baselines show
a significant decrease in life-cycle costs, due to changes to
assumptions like shorter service lives for assets, the Coast Guard‘s
understanding of them continues to evolve as the agency revisits its
assumptions and produces new cost estimates. Costs could continue to
grow as four assets currently lack revised cost baselines; among them
is the largest cost driver in the Deepwater Program, the Offshore
Patrol Cutter. The asset-level baselines also indicate that schedules
for some assets are expected to be delayed by several years. Regarding
system-level performance, the 2007 baseline may not be achievable, as
the Coast Guard has redefined or eliminated key performance indicators
for many individual assets, while significant uncertainties surround
other assets. Further, a planned analysis to reassess the overall
fleet mix for Deepwater was not completed as planned, and a new
analysis will include surface assets only. In the meantime, the Coast
Guard and DHS are proceeding with acquisition decisions on individual
assets.
The Coast Guard continues to take steps to address its acquisition
workforce needs as it assumes the role of system integrator. For
example, it is using a workforce planning model to estimate current
and future needs for key acquisition personnel. The Coast Guard has
also begun to implement initiatives such as promoting career growth
for acquisition professionals. External limitations on the
availability of acquisition personnel, coupled with 100 new positions
authorized in fiscal year 2010, place the Coast Guard‘s acquisition
directorate vacancy rate at about 20 percent. While it is using
contractors in support roles, the Coast Guard has released guidance
regarding the roles of government staff in overseeing contractors.
What GAO Recommends:
GAO recommends that the Coast Guard complete an overall assessment
that clarifies the quantities, mix, and cost of assets needed to meet
requirements, given that the current Deepwater baseline is no longer
feasible, and that the results be reported to Congress. DHS concurred
with the recommendation.
View [hyperlink, http://www.gao.gov/products/GAO-10-790] or key
components. For more information, contact John P. Hutton at (202) 512-
4841 or huttonj@gao.gov.
Contents:
Letter:
Background:
DHS and Coast Guard Acquisition Policies and Processes Continue to
Evolve, Further Establishing the Coast Guard as Systems Integrator:
As Understanding of Assets Evolves, Achievement of 2007 Deepwater
Baselines Is Unlikely:
Coast Guard Continues to Improve Acquisition Workforce and Develop
Means to Further Reduce Vacancies:
Conclusions:
Recommendation for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: GAO Contact and Acknowledgments:
Related GAO Products:
Tables:
Table 1: Information on Deepwater Assets:
Table 2: Length of Approval Processes for Department-approved Baseline
Revisions:
Table 3: Increased Total Acquisition Costs for Deepwater Assets with
Approved Baselines as of July 2010 (then-year dollars in millions):
Table 4: 2007 and Revised Life-cycle Cost Baselines for Deepwater
Assets (then-year dollars in millions):
Table 5: Revised Life-cycle Cost Baselines and Current Life-cycle Cost
Estimates for Deepwater Assets (then-year dollars in millions):
Table 6: Changes in Initial Operational Capability and Final Asset
Delivery from 2007 Baseline for Selected Deepwater Assets as of July
2010:
Table 7: System-level Requirements from 2007 Deepwater Baseline:
Figures:
Figure 1: Key Events in the Deepwater Program:
Figure 2: Deepwater Assets Within DHS Acquisition Phases and Decision
Events as of July 2010:
Figure 3: Acquisition Workforce, as of April 2010:
Abbreviations:
C4ISR: Command, Control, Communications, Computers, Intelligence,
Surveillance, and Reconnaissance:
DHS: Department of Homeland Security:
ICGS: Integrated Coast Guard Systems:
MSAM: Major Systems Acquisition Manual:
NSC: National Security Cutter:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
July 27, 2010:
The Honorable Frank Lautenberg:
Interim Chairman:
The Honorable George Voinovich:
Ranking Member:
Subcommittee on Homeland Security:
Committee on Appropriations:
United States Senate:
The Honorable David E. Price:
Chairman:
The Honorable Harold Rogers:
Ranking Member:
Subcommittee on Homeland Security:
Committee on Appropriations:
House of Representatives:
The Deepwater Program--the largest acquisition program in the Coast
Guard's history--began in 1996 as an effort to recapitalize the Coast
Guard's operational fleet. The program now includes projects to build
or modernize five classes each of ships and aircraft, and procurement
of other capabilities such as improved command, control,
communications, computers, intelligence, surveillance, and
reconnaissance (C4ISR) and unmanned aircraft. Recognizing that it did
not have a workforce with the experience and depth to manage the
acquisition, the Coast Guard contracted with Integrated Coast Guard
Systems (ICGS) in June 2002 to be the systems integrator for
Deepwater.[Footnote 1] ICGS was contractually responsible for
designing, constructing, deploying, supporting, and integrating the
Deepwater assets into a system-of-systems. However, after a series of
programmatic failures, the Commandant acknowledged in April 2007 that
the Coast Guard had relied too heavily on contractors to do the work
of the government and that government and industry had failed to
control costs. He announced several major changes to the acquisition
approach for Deepwater--primarily the Coast Guard taking over as the
systems integrator. In May 2007, soon after this announcement, the
Department of Homeland Security (DHS) approved an acquisition program
baseline of $24.2 billion for the Deepwater Program.[Footnote 2] Since
that time, the Coast Guard--with greater oversight from DHS--has taken
a number of steps in managing Deepwater projects, such as:
* reorganizing the acquisition directorate and its relationships with
Coast Guard technical authorities,
* applying the knowledge-based acquisition policies and practices
outlined in the Coast Guard's Major Systems Acquisition Manual (MSAM),
and:
* developing baselines on an asset-by-asset level as opposed to a
system-of-systems level.
In response to direction in the conference report accompanying the
Department of Homeland Security Appropriations Act, 2010, and
discussions with your offices, we assessed (1) changes to DHS and
Coast Guard acquisition policies, processes, and the approach related
to Deepwater since our July 2009 report;[Footnote 3] (2) whether the
Deepwater Program is meeting baselines for cost, schedule, and
performance; and (3) the Coast Guard's efforts to manage and build its
acquisition workforce.
To conduct our work, we reviewed key Coast Guard and DHS documentation
such as the MSAM, DHS Acquisition Instruction 102-01, original and
revised acquisition program baselines, and human capital plans. We
interviewed Coast Guard acquisition directorate officials, including
program managers and human capital officials, and officials from other
Coast Guard directorates such as those responsible for providing life-
cycle support and for assessing and developing operational
requirements for Deepwater assets. In addition, we interviewed DHS
officials from the Acquisition Program Management Directorate, Cost
Analysis Division, and Test and Evaluation Directorate. We also
interviewed contractor officials from Northrop Grumman Shipbuilding
and Bollinger Shipyards and toured the shipyards. We relied in part on
our past work on the Deepwater Program. Appendix I contains more
information regarding our scope and methodology. We conducted this
performance audit from October 2009 to July 2010 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.
Background:
The Coast Guard is a multimission, maritime military service within
DHS. The Coast Guard's responsibilities fall into two general
categories--those related to homeland security missions, such as port
security and vessel escort, and those related to the Coast Guard's
traditional missions, such as search and rescue and polar ice
operations. To carry out these responsibilities, the Coast Guard
operates a number of vessels and aircraft, some of which it is
currently modernizing or replacing through its Deepwater Program.
Since 2001, we have reviewed the Deepwater Program and have reported
to Congress, DHS, and the Coast Guard on the risks and uncertainties
inherent in the acquisition.[Footnote 4] In our July 2009 report on
the Coast Guard's progress in fulfilling the role of systems
integrator for the Deepwater Program, we found that the Coast Guard
had increased its role in managing the requirements, determining how
assets would be acquired, defining how assets would be employed, and
exercising technical authority in asset design and
configuration.[Footnote 5] In addition, we found that the Coast Guard
was taking steps to improve its insight into individual assets by
reviewing and revising cost, schedule, and performance baselines.
Additional insight gained by the review of several assets revealed
that the program's 2007 baselines for acquisition cost and delivery
schedules had been exceeded. We concluded that while the steps the
Coast Guard was taking were beneficial, continued oversight and
improvement were necessary to further mitigate risks. We made several
recommendations, which the Coast Guard has taken actions to address.
For example, we recommended that the Coast Guard not exercise options
under the Fast Response Cutter (Sentinel class) contract until the
project was brought into full compliance with the MSAM and DHS
acquisition directives. Coast Guard program officials stated that the
program was in compliance with these directives before the low-rate
initial production option was exercised in December 2009.
A Brief History of the Deepwater Program:
At the start of the Deepwater Program in the late 1990s, the Coast
Guard chose to use a system-of-systems acquisition strategy. A system-
of-systems is a set or arrangement of assets that results when
independent assets are integrated into a larger system that delivers
unique capabilities. The Coast Guard provided ICGS with broad, overall
performance specifications--such as the ability to interdict illegal
immigrants--and ICGS determined the assets needed and their
specifications. According to Coast Guard officials, the ICGS proposal
was submitted and priced as a package; that is, the Coast Guard bought
the entire solution and could not reject any individual component. In
November 2006, the Coast Guard submitted a revised cost, schedule, and
performance baseline for the overall Deepwater Program to DHS that
reflected post-September 11 missions. That baseline established the
total acquisition cost of the ICGS solution at $24.2 billion and
projected that the acquisition would be completed in 2027. In May
2007, shortly after the Coast Guard had announced its intention to
take over the role of systems integrator, DHS approved the baseline.
DHS too has changed its approach to oversight and management of the
Deepwater Program. In 2003, the department had delegated approving
acquisition decisions at key points in the life cycle of individual
assets to the Coast Guard, while retaining some oversight at the
system-of-systems level and requiring annual reviews. In September
2008, in response to our recommendation, DHS rescinded that authority
from the Coast Guard, and began officially reviewing and approving
acquisition decisions for Deepwater assets. In November 2008, DHS also
instituted requirements for new acquisition documentation at key
program decision points to be submitted by DHS components, including
the Coast Guard. Figure 1 provides a time line of key events in the
Deepwater Program.
Figure 1: Key Events in the Deepwater Program:
[Refer to PDF for image: timeline]
1996: Coast Guard begins Deepwater project.
1998: Competition for Deepwater system-of-systems acquisition begins.
2001: September 11 terrorist attacks.
2002: Systems integrator contract awarded to ICGS with projected cost
of $17 billion.
2003: Coast Guard moves into DHS; DHS defers decision authority on
individual Deepwater assets to Coast Guard.
2005: ICGS requests adjustment of National Security Cutter contract
option to account for $300 million in cost growth (negotiations
completed in 2007).
2005: Mission needs revised to include post-September 11 homeland
security operations.
2006: 123‘ patrol boats modified by ICGS removed from service due to
structural problems.
2006: ICGS design work on Fast Response Cutter suspended due to
technical concerns.
2007: Coast Guard begins transitioning into role of lead systems
integrator.
2007: $24.2 billion Deepwater Program baseline approved by DHS.
2008: Contract for Fast Response Cutter design and construction
awarded to Bollinger Shipbuilding – first competitive award outside of
the ICGS contract.
2008: DHS rescinds delegation of decision authority on individual
assets and approves first asset level baseline, for the National
Security Cutter.
2011: Contract with ICGS set to expire in January.
2027: Final Deepwater asset scheduled to deliver according to the 2007
baseline.
Source: GAO presentation of Coast Guard data.
[End of figure]
As we reported in July 2009, since assuming the role of systems
integrator in April 2007, the Coast Guard has taken a number of key
steps to reassert its control and management of the Deepwater Program.
[Footnote 6] While decreasing the scope of work under the ICGS
contract, which as noted above is scheduled to expire in January 2011,
the Coast Guard has also reorganized its own acquisition directorate
to better fulfill its expanded roles in acquiring and managing
Deepwater assets. In addition, the Coast Guard formalized new
relationships among its directorates to better establish and maintain
technical standards for Deepwater assets related to design,
construction, maintenance, C4ISR, and life-cycle staffing and
training. The Coast Guard also began transitioning to an asset-based
acquisition approach--as opposed to the former approach that focused
at the high-level system-of-systems approach--guided by the formalized
process outlined in its MSAM.
As a part of its asset-based acquisition approach, the Coast Guard has
also begun to develop better-informed cost, schedule, and performance
baselines. While these new baselines provided increased insight into
what the Coast Guard is buying, the anticipated cost, schedules, and
performance of many of the assets have changed since the $24.2 billion
system-level baseline was approved by DHS in 2007. Table 1 describes
in more detail the assets the Coast Guard plans to procure or upgrade
under the Deepwater Program.
Table 1: Information on Deepwater Assets:
Asset: National Security Cutter (NSC);
Planned quantity: 8 cutters;
Delivered quantity (as of July 2010): 2 cutters;
Description: 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 small boat assets
are to operate worldwide.
Asset: Offshore Patrol Cutter;
Planned quantity: 25 cutters;
Delivered quantity (as of July 2010): 0;
Description: This cutter is intended to conduct patrols for homeland
security functions, law enforcement, and search and rescue operations.
It will be designed for long-distance transit, extended on-scene
presence, and operations with multiple aircraft and small boats. The
Coast Guard has developed requirements for this asset and submitted
them to DHS for approval.
Asset: Fast Response Cutter;
Planned quantity: 58 boats;
Delivered quantity (as of July 2010): 0;
Description: The Fast Response Cutter, also referred to as the
Sentinel class, is conceived as a patrol boat with high readiness,
speed, adaptability, and endurance to perform a wide range of
missions. After terminating ICGS' design efforts, the Coast Guard
competitively awarded a contract for a modified commercially available
patrol boat in 2008.
Asset: Medium Endurance Cutter Sustainment;
Planned quantity: 27 cutters;
Delivered quantity (as of July 2010): 19 cutters;
Description: The cutter sustainment project is intended to improve the
cutters' operating and cost performance by replacing obsolete,
unsupportable, or maintenance-intensive equipment. This work is being
performed at the Coast Guard yard in Curtis Bay, Maryland.
Asset: Patrol Boat Sustainment;
Planned quantity: 20 boats;
Delivered quantity (as of July 2010): 11 boats;
Description: The patrol boat sustainment project is intended to
improve the boats' operating and cost performance by replacing
obsolete, unsupportable, or maintenance-intensive equipment. This work
is being performed at the Coast Guard yard in Curtis Bay, Maryland.
Asset: Cutter Small Boats;
Planned quantity: 124 boats;
Delivered quantity (as of July 2010): 9 boats;
Description: Cutter small boats are an integral component of the
planned capabilities for the larger cutters and patrol boats and are
critical to achieving success in all operational missions. The Coast
Guard is currently restructuring its cutter small boat programs.
Asset: Maritime Patrol Aircraft;
Planned quantity: 36 aircraft with mission system pallets;
Delivered quantity (as of July 2010): 9 aircraft, 4 mission system
pallets;
Description: This transport and surveillance, fixed-wing aircraft is
intended to be used to perform search and rescue missions, enforce
laws and treaties, and transport cargo and personnel. Much of the
capability for this aircraft, especially for C4ISR-intensive missions,
is provided by the mission system pallet, a suite of electronic
equipment installed on the aircraft that enables the aircrew to
compile data from sensors and transmit them to surface vessels, other
aircraft, and shore facilities.
Asset: HC-130J Long-Range Surveillance Aircraft;
Planned quantity: 6 aircraft;
Delivered quantity (as of July 2010): 6 aircraft;
Description: The HC-130J is a four-engine turbo-prop aircraft which
the Coast Guard has deployed with improved interoperability, C4ISR,
and sensors to enhance surveillance, detection, classification,
identification, and prosecution.
Asset: HC-130H Long-Range Surveillance Aircraft;
Planned quantity: 16 aircraft;
Delivered quantity (as of July 2010): 16 aircraft through first
segment;
Description: The HC-130H is the legacy Coast Guard long-range
surveillance aircraft which the Coast Guard intends to update in six
segments--one of which is currently unfunded--for radar replacement,
updates and upgrades of avionics, structural sustainability, improved
mission capabilities, and life extension.
Asset: HH-65 Multi-mission Cutter Helicopter;
Planned quantity: 102 aircraft;
Delivered quantity (as of July 2010): 57 aircraft through third
segment, 2 through fourth, prototype for fifth;
Description: The HH-65 Dolphin is the Coast Guard's short-range
recovery helicopter. It is being upgraded to improve its engines,
sensors, navigation equipment, avionics, ability to land on the NSC,
and other capabilities in nine segments--three of which are currently
unfunded.
Asset: HH-60 Medium Range Recovery Helicopter;
Planned quantity: 42 aircraft;
Delivered quantity (as of July 2010): 10 aircraft through first
segment;
Description: The HH-60 is a medium-range recovery helicopter designed
to perform search and rescue missions offshore in all weather
conditions. The Coast Guard has planned upgrades to the helicopter's
avionics, sensors, radars, and C4ISR systems in four segments.
Asset: Unmanned Aerial System;
Planned quantity: TBD;
Delivered quantity (as of July 2010): 0;
Description: The Coast Guard has deferred acquisition of this asset
because of challenges in technology maturation of the initial design.
The Coast Guard continues its analysis of needs and alternatives, and
an acquisition plan for this asset is in development.
Asset: C4ISR;
Planned quantity: 8 segments;
Delivered quantity (as of July 2010): 1 segment;
Description: The Coast Guard is incrementally acquiring C4ISR
capabilities, including upgrades to existing cutters and shore
installations, acquisitions of new capabilities, and development of a
common operating picture to provide operationally relevant information
and knowledge across the full range of Coast Guard operations.
Source: GAO analysis of Coast Guard data.
[End of table]
DHS and Coast Guard Acquisition Policies and Processes Continue to
Evolve, Further Establishing the Coast Guard as Systems Integrator:
DHS has revised its approach to managing and overseeing Deepwater by
conforming the program to its recently finalized acquisition
directive, Acquisition Management Directive 102-01, which establishes
a number of review points for the department's acquisitions to provide
senior acquisition officials insight into such key documents as
baselines and test reports. DHS has increased the number of reviews of
individual Deepwater assets and plans to review up to six assets in
fiscal year 2010. For its part, the Coast Guard's MSAM is generally
aligned with DHS directives although operational testing policies are
still being revised, and the Coast Guard has developed additional
guidance on completing key requirements documents. The Coast Guard is
also decreasing its dependence on ICGS by planning for alternate
vendors on some of the assets already in production, as well as
awarding and managing work outside of the ICGS contract for those
assets at earlier stages of the acquisition life cycle.
DHS Oversight of Deepwater Acquisitions Has Increased:
Since our last report,[Footnote 7] DHS has finalized its Acquisition
Management Directive 102-01, effective January 2010, which provides
guidance on planning and executing acquisitions by linking DHS's
requirements, resourcing, and acquisition processes. The four phases
of the DHS acquisition life-cycle process, each of which is authorized
by an acquisition decision event, are as follows.
* The first phase identifies the specific functional capabilities
needed for the asset and how these capabilities fill identified gaps.
* The second phase explores alternative solutions to provide these
capabilities and establishes cost, schedule, and performance baselines
as well as operational requirements. By the end of this phase, a
decision event is held which reviews the selection of the preferred
alternative and approves program start.
* The third phase is focused on developing, testing, and evaluating
the selected alternative and refining it prior to entering full
production. This phase can contain multiple decision events depending
on the complexity of the program. DHS approval is sometimes required
for supporting acquisitions and activities such as procuring
demonstrator assets for test and evaluation, service contracts, and
low-rate initial production.[Footnote 8]
* In order to proceed into the fourth phase, a final decision event is
held to review the results of formal operational testing and determine
if the asset meets requirements and is supportable and sustainable
within cost baselines. This decision event authorizes full-rate
production and transfers responsibility for deployment and support to
the DHS component.
Figure 2 depicts the DHS acquisition phases and decision events and
where Deepwater assets currently fall within the process.[Footnote 9]
Figure 2: Deepwater Assets Within DHS Acquisition Phases and Decision
Events as of July 2010:
[Refer to PDF for image: illustration]
Need: Define the problem;
Black diamond 0;
* Unmanned Aircraft Systems;
* C4ISR Segment III-VIII.
Analyze/select: Identify alternatives and resource;
Black diamond 1;
* Cutter Small Boats;
* Offshore Patrol Cutter;
* HH-60 Medium Range Recovery Helicopter Upgrades Segment IV;
Black diamond 2A.
Obtain: Develop and evaluate capabilities;
Black diamond 2B;
* HH-65 Multi-Mission Cutter Helicopter Upgrade Segment VI;
* HC-130H Segment II;
* Fast Response Cutter;
Black diamond 2C;
* Maritime Patrol Aircraft;
* HH-60 Medium Range Recovery Helicopter Upgrades Segment I-III;
* National Security Cutter;
* C4ISR Increment II;
* HH-65 Multi-Mission Cutter Helicopter Upgrade Segment V.
Produce/deploy/support: Produce and maintain the capabilities;
Black diamond 3;
* HH-65 Multi-Mission Cutter Helicopter Upgrade Segment IV;
* Medium Endurance Cutter Sustainment;
* HH-65 Multi-Mission Cutter Helicopter Upgrade Segment I - III;
* Patrol Boat Sustainment;
* HC-130H Segment 1;
* C4ISR Increment I;
* HC-130J.
Source: DHS data with GAO presentation.
Note: Black diamonds denote key DHS acquisition decision events.
[End of figure]
Acquisition review boards are the principal mechanism DHS uses to
oversee major acquisitions. These boards, which include DHS executives
from the cost, management, and test and evaluation directorates,
evaluate the progress of an asset at the acquisition events described
above. The review boards make recommendations about asset acquisition
decisions and, according to officials, can request the revision of key
documents, like life-cycle cost estimates and test plans. For example,
because of concerns about operational testing on the Maritime Patrol
Aircraft, the DHS review board recommended that the aircraft's
"obtain" acquisition phase be extended, keeping the aircraft in low-
rate, rather than full-rate, production. In another example, the DHS
review board authorized low-rate initial production of three
additional Fast Response Cutters (Sentinel class); however, it asked
that the Coast Guard revise some documentation, such as the plans for
logistics support and life-cycle cost estimates. According to Coast
Guard program officials, this documentation has been submitted to DHS.
DHS has increased the frequency with which it holds Deepwater
acquisition decision events: it held no reviews in fiscal year 2008
and three in fiscal year 2009; thus far three have been held in fiscal
year 2010 and an additional three are planned. Coast Guard program and
project managers told us that the level of DHS scrutiny and questions
has increased significantly, which has led to constructive discussions
and improvements. However, Coast Guard and DHS approval of key
documentation such as program baselines can take months. Table 2
provides approval times for the most recent Deepwater asset baselines.
Table 2: Length of Approval Processes for Department-approved Baseline
Revisions:
National Security Cutter;
Coast Guard project manager submission: Sept. 2008;
USCG endorsement: Sept. 2008;
DHS approval: Dec. 2008;
Time to final approval: 2 months 9 days.
Fast Response Cutter;
Coast Guard project manager submission: Dec. 2008;
USCG endorsement: Feb. 2009;
DHS approval: Aug. 2009;
Time to final approval: 8 months 13 days.
Maritime Patrol Aircraft;
Coast Guard project manager submission: July 2008;
USCG endorsement: Dec. 2008;
DHS approval: Feb. 2009;
Time to final approval: 6 months 14 days.
HC-130J;
Coast Guard project manager submission: Oct. 2008;
USCG endorsement: Dec. 2008;
DHS approval: May. 2009;
Time to final approval: 7 months 16 days.
HC130-H;
Coast Guard project manager submission: Oct. 2008;
USCG endorsement: Dec. 2008;
DHS approval: June 2009;
Time to final approval: 8 months 12 days.
HH-65;
Coast Guard project manager submission: Oct. 2008;
USCG endorsement: Dec. 2008;
DHS approval: May 2009;
Time to final approval: 7 months 15 days.
HH-60;
Coast Guard project manager submission: Oct. 2008;
USCG endorsement: Dec. 2008;
DHS approval: Aug. 2009;
Time to final approval: 10 months 0 days.
Source: GAO analysis of Deepwater acquisition baseline documents.
[End of table]
Coast Guard officials stated that DHS approval of these documents is
an iterative process that can take some time but they coordinate
informally to speed approvals when necessary. According to officials,
Coast Guard and DHS officials are working together to reduce the
approval times for key program documents. For example, the Coast Guard
now forwards a draft version of key acquisition documents, such as
requirements documentation and cost estimates, to DHS at the same time
that it is being reviewed within the Coast Guard. This approach gives
DHS an earlier opportunity to review and comment.
Coast Guard Continues to Refine Its Processes for Managing Deepwater
Assets with a Focus on Requirements Definition:
To support the continued procurement of Deepwater assets, the Coast
Guard's MSAM is generally aligned with DHS' Acquisition Management
Directive 102-01. As a result of this and other changes, the MSAM now
requires additional requirements documentation--referred to as the
concept of operations and the preliminary operational requirements
document--to ensure traceability through the design, development, and
testing of an asset. In particular, the MSAM requires that the
capabilities directorate, known as CG-7, describe clearly and in
detail what specific functional capabilities will be filled with a
proposed asset or system, the relationship of a proposed asset to
existing assets or systems, and how the asset is expected to be used
in actual operations. As we have previously reported, determining an
asset's requirements early in the life cycle is essential, as
requirements ultimately drive the performance and capability of an
asset and should be traceable through design, development, and testing
to ensure that needs are met.[Footnote 10]
Generation of Coast Guard requirements documentation is now guided by
USCG Publication 7-7 Requirements Generation and Management Process,
which was released by CG-7 in March 2009. The previous lack of
overarching, formalized guidance had often resulted in requirements
that were vague, not testable, not prioritized, and not supportable or
defendable. The Coast Guard has also expanded the key stakeholders
involved in the requirements process to include not only the
operational users and the capabilities directorate, but also the
acquisitions directorate, technical authorities, support and
maintenance authorities, and budget officials.
One area where the DHS guidance and the MSAM are still not fully
aligned is the issue of the independent test authority, the entity
responsible for concurring that an asset's test and evaluation master
plan ensures adequate demonstration of an asset's ability to meet
operational needs. Last year, we reported that the MSAM appeared to be
inconsistent with DHS guidance regarding the role of this test
authority. The DHS Acquisition Guidebook states that the test
authority should be independent of both the acquirer and the user,
while the MSAM allows the Coast Guard's requirements directorate--CG-
7, which represents the end user--to serve as the test authority. We
recommended that the Coast Guard consult with the DHS Office of Test &
Evaluation and Standards on this apparent conflict. Both DHS and the
Coast Guard are in the process of revising their policies to address
this issue. Coast Guard officials state that a new version of the MSAM
will be released this summer, and that they are working with DHS to
determine which entities may act as test authorities for specific
assets. In May 2009, DHS released its test and evaluation directive
which states that the test authority may be organic to the component--
the Coast Guard in this case--another government agency, or a
contractor but must be independent of the developer and the
development contractor. In commenting on this directive, DHS officials
stated that the test authority should be independent of the
acquisition division but can be within another division of the
component acquiring the asset, including those representing the
asset's end user. According to DHS officials, it is preferred that a
test authority independent of both the acquirer and the user
representative conduct operational testing for assets whose life-cycle
costs are at or exceed $1 billion. This independent test authority is
already in place for some of the Deepwater assets, including the NSC,
the Maritime Patrol Aircraft, and the Fast Response Cutter (Sentinel
class). However, for assets below this threshold, operational testing
may be planned and conducted by the user, subject to approval by the
department.
Coast Guard Is Reducing Contractual Reliance on ICGS:
As the Coast Guard has assumed the Deepwater systems integrator role,
the extent of its reliance on ICGS continues to decrease. ICGS remains
the prime contractor for four Deepwater assets: the NSC, HC-130J Long-
Range Surveillance Aircraft, the Maritime Patrol Aircraft, and C4ISR,
but some of these assets are transitioning away from ICGS. Contracts
for other assets at earlier stages of the acquisition process, such as
the Fast Response Cutter (Sentinel class), were awarded outside of the
ICGS contract.
The status of Deepwater assets with contracts in place for production
as of July 2010 is as follows.
* While ICGS remains under contract for the production of the third
NSC, the USCGC Stratton, the Coast Guard plans to contract directly
with Northrop Grumman Ship Systems, previously a subcontractor for
ICGS, on a sole-source basis to produce the remaining five cutters.
* Two additional Maritime Patrol Aircraft and eight removable
electronic command and control mission system pallets also remain on
contract with ICGS. The Coast Guard intends to hold a limited
competition for the additional aircraft in order to retain the same
airframe, issuing a request for proposals in April 2010 for up to nine
aircraft over the next 5 years. According to Coast Guard officials,
the procurement strategy for additional mission systems pallets is
still in development.
* The Coast Guard is preparing to move the HC-130J into the
sustainment phase as it nears the end of this acquisition, with ICGS'
delivery of the sixth and final aircraft on May 27, 2010.
* Development of C4ISR, a key Deepwater asset referred to as the
"glue" intended to make all assets interoperable, is currently in
transition from ICGS. Under the 2007 Deepwater baseline, the C4ISR
project was to consist of four segments of capability, plus upgrades
to Coast Guard shore facilities and legacy cutters. According to
program officials, C4ISR will now comprise eight segments, including
the capabilities planned for Deepwater and additional capabilities for
post-9/11 homeland security missions. ICGS has delivered the first
segment, which is currently in operation on the NSC, Maritime Patrol
Aircraft, and HC-130J, and is under contract to develop the second
segment. This second segment is primarily focused on increasing the
Coast Guard's ability to develop and maintain future capabilities. It
is considered a bridge to begin the transition from the ICGS-developed
architecture to a Coast Guard-developed and managed architecture by
ensuring that the ICGS systems are operational and supported while the
Coast Guard puts in place its own capability to support the systems.
Program officials state that development of the third segment has been
delayed due to funding constraints, although development of
capabilities for key assets, such as the Offshore Patrol Cutter, will
continue. According to officials, the acquisition strategy for future
C4ISR segments has not been determined.
* The Coast Guard structured the acquisition of the Fast Response
Cutter (Sentinel class) as the systems integrator, competitively
awarding a lead ship design and production contract to Bollinger
Shipyards in September 2008 for the lead cutter. The Coast Guard has
exercised contract options for hulls 2 though 4, with the goal of
having up to 15 cutters either delivered or under contract by 2012.
As Understanding of Assets Evolves, Achievement of 2007 Deepwater
Baselines Is Unlikely:
Currently, the Deepwater Program as a whole exceeds the cost and
schedule baselines approved by DHS in May 2007, and it is unlikely to
meet the system-level performance baselines that were approved at that
time. The new asset-specific baselines that have been developed--and
approved by DHS for seven of nine assets--put the total cost of
Deepwater at roughly $28 billion, or $3.8 billion over the $24.2
billion baseline. The revised baselines also present life-cycle costs,
which encompass the acquisition cost as well as costs for operations
and maintenance throughout the assets' life cycle. While the revised
baselines show a significant decrease in life-cycle costs compared to
the 2007 baseline, the Coast Guard's understanding of these costs
continues to evolve as the agency revisits its assumptions and
produces new cost estimates. These baselines also indicate that some
schedules are expected to be delayed by several years. Preliminary
assessments by the Coast Guard indicate that some assets may be at
risk for further cost and schedule growth. Further, as the Coast Guard
develops more refined requirements, it has redefined or eliminated key
performance indicators for many individual assets, while significant
uncertainties surround other assets like C4ISR, the key to the system-
of-systems as initially envisioned and approved. As a result of the
way Deepwater was implemented in the past, some assets--including the
NSC, Maritime Patrol Aircraft, and HC-130J--have begun deployment and
operations, but their ability to fully satisfy operational
requirements is unproven as they have not yet undergone operational
evaluations. Further, because the Coast Guard has not determined the
overall quantities and mix of assets needed for Deepwater in light of
changes to the 2007 baseline, it is unknown what the overall Deepwater
Program should look like going forward. In the meantime, the Coast
Guard and DHS are proceeding with acquisition decision events on
individual assets.
Total Acquisition Costs Continue to Exceed 2007 Baselines:
As of July 2010, DHS had approved seven of the revised baselines and
the Coast Guard had approved two of them based on a delegation of
approval authority from DHS. Regarding total acquisition cost, the
Coast Guard has determined that some of the assets will significantly
exceed anticipated costs in the 2007 Deepwater baseline. Due to this
growth, the total cost of the Deepwater Program is now expected to be
roughly $28 billion, or $3.8 billion more than the $24.2 billion that
DHS approved in 2007, an increase of approximately 16 percent. For the
assets with revised baselines this represents cost growth of
approximately 35 percent. Further growth could occur, as four
Deepwater assets currently lack revised cost baselines. Among them is
the largest cost driver in the program, the 25 cutters of the Offshore
Patrol Cutter class which, in the 2007 baseline, accounted for over 33
percent of the $24.2 billion total acquisition cost.
Table 3 compares the 2007 and revised baselines of asset acquisition
costs available as of July 2010. The table does not reflect the
roughly $3.6 billion in other Deepwater costs, such as program
management, that the Coast Guard states do not require a new baseline.
Table 3: Increased Total Acquisition Costs for Deepwater Assets with
Approved Baselines as of July 2010 (then-year dollars in millions):
Asset: National Security Cutter;
2007 Baseline: 3,450;
Revised baseline: 4,749;
Change: 1,299.
Asset: Fast Response Cutter[A];
2007 Baseline: 3,206;
Revised baseline: 4,243;
Change: 1,037.
Asset: Medium Endurance Cutter Sustainment;
2007 Baseline: 317;
Revised baseline: 321[B];
Change: 4.
Asset: Patrol Boat Sustainment;
2007 Baseline: 117;
Revised baseline: 194[B];
Change: 77.
Asset: Maritime Patrol Aircraft;
2007 Baseline: 1,706;
Revised baseline: 2,400;
Change: 694.
Asset: HC-130J;
2007 Baseline: 11;
Revised baseline: 176;
Change: 165.
Asset: HC-130H;
2007 Baseline: 610;
Revised baseline: 745;
Change: 135.
Asset: HH-65;
2007 Baseline: 741;
Revised baseline: 1,041[C];
Change: 300.
Asset: HH-60;
2007 Baseline: 451;
Revised baseline: 487;
Change: 36.
Asset: C4ISR;
2007 Baseline: 1,353;
Revised baseline: Baseline submitted to DHS January 2009.
Asset: Offshore Patrol Cutter;
2007 Baseline: 8,098;
Revised baseline: Baseline in development.
Asset: Cutter Small Boats;
2007 Baseline: 110;
Revised baseline: Baseline in development.
Asset: Unmanned Aerial System;
2007 Baseline: 503;
Revised baseline: Baseline in development.
[End of table]
Note: If the approved baselines present both threshold costs (the
maximum costs allowable before a breach occurs) and objective costs
(the minimum cost expected), threshold costs are used.
[A] In the 2007 baseline, costs for two variants of the Fast Response
Cutter were presented. The revised baseline presents the total costs
for the design currently in production.
[B] The baselines for these assets were approved within the Coast
Guard.
[C] We removed the costs of some capabilities introduced in the
revised baseline to preserve traceability to the 2007 Deepwater
baseline. A detailed cost estimate for portions of the planned
upgrades has not been completed, so additional revisions may occur in
the future.
Source: GAO analysis of Coast Guard data.
These revised baselines reflect the Coast Guard's and DHS' improved
understanding of the acquisition costs of individual Deepwater assets,
as well as insight into the drivers of the cost growth. We reported
last year on some of the factors contributing to increased costs for
the NSC and Maritime Patrol Aircraft.[Footnote 11] More recently, DHS
approved the revised baseline for the Fast Response Cutter (Sentinel
class) in August 2009. The Coast Guard has attributed this asset's
more than $1 billion rise in cost to the use of actual contract costs
from the September 2008 contract award and costs for shore facilities
and initial spare parts not included in the original baseline.
Coast Guard's Assessment of Life-cycle Costs Continues to Evolve:
As the Coast Guard has revised asset baselines for acquisition costs,
it has also reevaluated operating costs and their effect on life-cycle
costs. According to the 2007 Deepwater baseline, the program's life-
cycle cost was to be approximately $304.4 billion. The life-cycle
costs presented in the revised asset baselines decreased by
approximately $96 billion, as shown in table 4.
Table 4: 2007 and Revised Life-cycle Cost Baselines for Deepwater
Assets (then-year dollars in millions):
Asset: National Security Cutter;
2007 Life-cycle cost baseline: 22,998;
Revised baseline: 24,277;
Change: 759.
Asset: Fast Response Cutter[A];
2007 Life-cycle cost baseline: 22,256;
Revised baseline: 15,634;
Change: (6,622).
Asset: Medium Endurance Cutter Sustainment;
2007 Life-cycle cost baseline: 7,157;
Revised baseline: 4,515[B];
Change: (2,642).
Asset: Patrol Boat Sustainment;
2007 Life-cycle cost baseline: 897;
Revised baseline: 847[B];
Change: (50).
Asset: Maritime Patrol Aircraft;
2007 Life-cycle cost baseline: 22,773;
Revised baseline: 13,267;
Change: (9,506).
Asset: HC-130J;
2007 Life-cycle cost baseline: 6,551;
Revised baseline: 430[C];
Change: (6,121).
Asset: HC-130H;
2007 Life-cycle cost baseline: 16,582;
Revised baseline: 16,662;
Change: 80.
Asset: HH-65;
2007 Life-cycle cost baseline: 53,433;
Revised baseline: 6,298[C];
Change: (47,135).
Asset: HH-60;
2007 Life-cycle cost baseline: 26,075;
Revised baseline: 902[C];
Change: (25,173).
Asset: C4ISR;
2007 Life-cycle cost baseline: 1,353;
Revised baseline: Baseline submitted to DHS January 2009.
Asset: Offshore Patrol Cutter;
2007 Life-cycle cost baseline: 47,601;
Revised baseline: Baseline in development.
Asset: Unmanned Aerial System;
2007 Life-cycle cost baseline: 17,753;
Revised baseline: Baseline in development.
Source: GAO analysis of Coast Guard data.
Note: If the approved baselines present both threshold and objective
costs, threshold costs (which are the maximum allowable costs) are
used.
[A] In the 2007 baseline, costs for two variants of the Fast Response
Cutter were presented. The revised baseline presents the total costs
for the design currently in production.
[B] The baselines for these assets were approved within the Coast
Guard.
[C] Reflects only the cost of upgrades to mission systems and not the
costs to acquire and maintain the whole asset.
[End of table]
This substantial reduction in life-cycle costs is due in part to new
assumptions applied by the Coast Guard in calculating the costs to
support and maintain its assets. In preparing the revised baselines,
the Coast Guard updated its assumptions by reducing the time it
expects certain assets to continue in operations. Any reduction of the
years in service for an asset reduces the total life-cycle cost, as
the overall cost for operating the asset would decrease. For example,
the useful life of the HH-65 was reduced from 40 years to 23 years of
extended service, contributing to a $47 billion reduction in life-
cycle costs in the revised baseline. According to the Coast Guard, a
40-year extended service life for the HH-65 was not realistic, as the
first of these assets became operational in 1984 and upgrades to
extend the service life will not enable the helicopters to operate for
an additional 40 years. The service life expected of the HH-60 was
also reduced, from 30 years of additional service to 20, which
contributed to its $25.2 billion decrease in life-cycle costs.
Assumptions for the expected service life of the Fast Response Cutter
(Sentinel class) also changed as a result of selecting an alternate
design for production. The current Sentinel class design is expected
to have a service life of 20 years, less than ICGS' proposed Fast
Response Cutter-A--which had an estimated service life of 35 years--
but more than its proposed Fast Response Cutter-B, which had a
proposed 15-year service life. While altering these assumptions does
reduce the expected life-cycle costs associated with the current
Deepwater Program, it also indicates that the Coast Guard may need to
acquire new assets sooner than anticipated in the 2007 baseline.
The Coast Guard also used different assumptions about what support
costs were included in its revised baselines. For example, the life-
cycle costs in the revised baselines for the HH-65, HH-60, and the HC-
130J reflect only the costs to support the upgraded mission systems
and not the costs of the entire aircraft and therefore appear to be
understated. As a result, the stated life-cycle costs for these assets
significantly decreased; for example, in the case of the HC-130J costs
decreased from $6.6 billion to $430 million.
However, the Coast Guard's understanding of life-cycle costs continues
to evolve. DHS approved all the revised Deepwater asset baselines on
the condition that the Coast Guard resubmit life-cycle cost estimates.
According to Coast Guard officials, DHS also requested that new
estimates for the HC-130J, HH-60, and HH-65 reflect the cost to
support the entire aircraft. As of July 2010, the Coast Guard has
submitted life-cycle cost estimates for eight assets: NSC, Fast
Response Cutter (Sentinel class), Maritime Patrol Aircraft, HC-130J,
C4ISR, HH-65, and the two mission effectiveness programs. These
estimates suggest that some assets may meet the revised cost baselines
while others are in danger of exceeding them. Table 5 compares the
revised baselines to the Coast Guard's current life-cycle cost
estimates.
Table 5: Revised Life-cycle Cost Baselines and Current Life-cycle Cost
Estimates for Deepwater Assets (then-year dollars in millions):
Asset: National Security Cutter;
Revised baseline: 24,277;
Current estimate[A]: 16,859;
Difference: (7,419).
Asset: Fast Response Cutter[B];
Revised baseline: 15,634;
Current estimate[A]: 13,174;
Difference: (2,460).
Asset: Medium Endurance Cutter Sustainment;
Revised baseline: 4,515[C];
Current estimate[A]: 4,427;
Difference: (88).
Asset: Patrol Boat Sustainment;
Revised baseline: 847[C];
Current estimate[A]: 861;
Difference: 14.
Asset: Maritime Patrol Aircraft;
Revised baseline: 13,267;
Current estimate[A]: 25,493;
Difference: 12,226.
Asset: HC-130J;
Revised baseline: 430[D];
Current estimate[A]: 1,705;
Difference: 1,275.
Asset: HC-130H;
Revised baseline: 16,662;
Current estimate[A]: Estimate in development.
Asset: HH-65;
Revised baseline: 6,298[D];
Current estimate[A]: 8,173;
Difference: 1,875.
Asset: HH-60;
Revised baseline: 902[D];
Current estimate[A]: Estimate in development.
Asset: C4ISR;
Revised baseline: Baseline submitted to DHS January 2009;
Current estimate[A]: 6,713[E];
Difference: 5,360[E].
Source: GAO analysis of Coast Guard data.
Note: If the approved baselines present both threshold and objective
costs, threshold costs (which are the maximum allowable costs) are
used.
[A] The current estimates presented represent the risk-adjusted costs
which, according to program managers, are the estimates used for
budgeting purposes.
[B] In the 2007 baseline, costs for two variants of the Fast Response
Cutter were presented. The revised baseline presents the total costs
for the design currently in production.
[C] The baselines for these assets were approved within the Coast
Guard.
[D] Reflects only the cost of upgrades to mission systems and not the
costs to acquire and maintain the whole asset.
[E] Although DHS has not yet approved the C4ISR acquisition program
baseline, the Coast Guard has approved a life-cycle cost estimate for
this asset.
[End of table]
As shown in the table above, expected life-cycle costs for some
assets, such as the NSC and the Fast Response Cutter (Sentinel class),
continue to decrease as more information about the actual costs to
operate and acquire these assets is used to refine estimates. The
expected life-cycle costs of other assets, however, have increased
beyond their current baselines. Coast Guard officials told us they
have worked to make their life-cycle cost estimates consistent, in
keeping with DHS guidance, and plan to update them every 12 to 18
months. A discussion of the estimates for the NSC, Fast Response
Cutter (Sentinel class), Maritime Patrol Aircraft, C4ISR, and the HH-
65 follows.
* The current estimate for the NSC is $7.4 billion below the revised
baseline for life-cycle costs even when additional costs are added to
the estimate to account for identified risks. These risks include
unstable C4ISR requirements, which could result in modifications to
the ship, and the Coast Guard's change in contract type for
construction of the last five NSCs from cost-reimbursement to fixed
price-incentive fee. Generally, cost-reimbursement contracts are
suitable only when uncertainties involved in contract performance do
not permit costs to be estimated with sufficient accuracy to use a
fixed-price contract--such as the lack of cost experience in
performing the work or unstable manufacturing techniques or
specifications.[Footnote 12] Under cost-reimbursement contracts, most
of the cost risk is placed on the government, while under fixed-price
incentive fee contracts an increased share of cost performance risk is
borne by the builder. Because of this additional risk, the cost
estimate assumed that the contract price would increase.
* The current life-cycle cost estimate for the Fast Response Cutter
(Sentinel class) is also below its revised life-cycle cost baseline,
by $2.5 billion, even after additional costs were added to account for
risks. The most significant risk is attributable to the Coast Guard's
acquisition approach for this asset. The government plans to procure a
total of 58 cutters. Under the contract for design and production of
the first patrol boat, the government plans to procure 24-34 boats,
with the remaining portion to be competitively procured, potentially
resulting in a change of contractor. This competition would be for
construction of the remaining boats utilizing the same design. The
Coast Guard adopted this acquisition strategy as a means of reducing
overall risk under the contract. The current cost estimate states that
there could be an increase in cost if a new contractor were brought on
board, potentially modifying the design to fit its construction
processes in addition to establishing the production line and learning
how to more efficiently produce the boats. The cost estimate also
presents risks in the estimates of operating costs. As the Sentinel
class has never been used operationally, these costs were determined
by using historical data on similar ships and discussions with the
intended Coast Guard user, meaning true costs are unknown and could
exceed or be lower than the current estimates. Uncertainty about
future fuel costs also drives risk.
* The $12.2 billion increase between the current life-cycle cost
estimate and the revised baseline for the Maritime Patrol Aircraft is
primarily attributable to a difference in assumptions about crew sizes
and cost per flight hour, which affect the cost to operate the
aircraft. Further, additional costs for training devices are now
included in the estimate. The primary risks discussed in the estimate,
which have also added costs, are the Euro/dollar exchange rate and the
cost to maintain the aircraft over time. Because a portion of the
aircraft the Coast Guard currently has under contract is produced in
Europe, any fluctuation in the strength of the dollar could have an
effect, positive or negative, on the aircraft's cost. The estimate
also states that long-term maintenance of the mission systems pallet
could be problematic if parts become obsolete, a risk identified for
other systems dependent on C4ISR-intensive systems.
* The current life-cycle cost estimate for C4ISR places the cost at
$6.7 billion, well above the $1.3 billion baseline established in
2007. This estimate presents, for the first time, a full life-cycle
cost for this capability, as the 2007 baseline presented only
acquisition costs for C4ISR and assumed that operations and
maintenance costs were included in the baselines for individual
assets. This increase is attributed to the changing nature of the
program and the risks involved. When the Coast Guard made the decision
to become systems integrator, it also assumed greater oversight of the
software development and maintenance associated with C4ISR. The Coast
Guard intends to establish laboratories to develop, integrate, and
support this software, which accounts for a portion of the cost
increase. According to program officials, costs have also increased
due to maintenance needs, especially the need for upgrades to keep
software and information secure. The risks are driven primarily by
technical uncertainty due to undefined requirements in later segments
and the effect of technology changes on C4ISR capabilities in the
future. As the Coast Guard has not yet fully defined the capabilities
it wants from C4ISR, it is difficult to assess the associated costs.
The interrelated nature of segments, with each segment building upon
and enhancing the capabilities of prior segments, could lead to
cascading effects on cost and schedule if one is delayed. To account
for these uncertainties, the Coast Guard built additional costs into
the estimate.
* The current life-cycle cost estimate for the HH-65 Multi-mission
Cutter Helicopter is $8.2 billion--$1.9 billion above the cost stated
in the revised baseline. The majority of the increase is due to a
change in the assumptions about the costs to operate and maintain the
asset over its life cycle. As mentioned previously, the revised
baseline included only the costs to support the upgraded mission
systems aboard the HH-65. The current cost estimate includes support
for the entire aircraft and raises the cost of operations and
maintenance from $5.164 billion to $7.033 billion. The current cost
estimate also takes into account risks the aircraft may encounter in
the further development of its upgraded mission systems and risks that
could increase operational costs. The risks discussed in the estimate
include the possibility of a structural redesign or installation
issues associated with a new sub-system that improves the helicopter's
ability to land on the NSC, the possibility of software or labor cost
growth for other upgrades, and the uncertainty surrounding the future
price of fuel. To account for these uncertainties, the Coast Guard
built additional costs into the estimate.
Revisions to Asset Baselines Show Further Schedule Delays:
The Coast Guard's reevaluation of asset baselines has also improved
insight into the schedules for when assets are expected to begin
operations--also known as initial operational capability--and when all
assets have been delivered and are ready for operations--or full
operational capability. For example, the Fast Response Cutter
(Sentinel class) patrol boat is now scheduled to deliver the final
asset by September 2021, rather than 2016 as stated in the 2007
baseline--a delay of 5 years. The HH-60 Medium Range Recovery
helicopter will also not complete deliveries until later than planned
due to a restructuring of scheduled upgrades. This asset will now
complete upgrades by 2020, a 1-year delay from the previous baseline.
The schedule to upgrade the capabilities of the HH-65 Multi-mission
helicopter has also been restructured, but a date for completing all
the necessary upgrades has not yet been determined. Table 6 provides
more information on changes in asset schedules.
Table 6: Changes in Initial Operational Capability and Final Asset
Delivery from 2007 Baseline for Selected Deepwater Assets as of July
2010:
Asset: National Security Cutter;
Initial operational capability (FY): 2007 baseline: 2008;
Initial operational capability (FY): Current baseline: 2009;
Initial operational capability (FY): Change: 12 months;
Final asset delivery (FY): 2007 baseline: 2014;
Final asset delivery (FY): Current baseline: 2016;
Final asset delivery (FY): Change: 24 months.
Asset: Fast Response Cutter[A];
Initial operational capability (FY): 2007 baseline: 2010;
Initial operational capability (FY): Current baseline: 2013;
Initial operational capability (FY): Change: 27 months;
Final asset delivery (FY): 2007 baseline: 2016;
Final asset delivery (FY): Current baseline: 2021;
Final asset delivery (FY): Change: 60 months.
Asset: Medium Endurance Cutter Sustainment;
Initial operational capability (FY): 2007 baseline: 2006;
Initial operational capability (FY): Current baseline: 2006[B];
Initial operational capability (FY): Change: 0 months;
Final asset delivery (FY): 2007 baseline: 2016;
Final asset delivery (FY): Current baseline: 2017[B];
Final asset delivery (FY): Change: 17 months.
Asset: Patrol Boat Sustainment;
Initial operational capability (FY): 2007 baseline: 2009;
Initial operational capability (FY): Current baseline: 2007[B];
Initial operational capability (FY): Change: (18 months);
Final asset delivery (FY): 2007 baseline: 2013;
Final asset delivery (FY): Current baseline: 2014[B];
Final asset delivery (FY): Change: 17 months.
Asset: Maritime Patrol Aircraft;
Initial operational capability (FY): 2007 baseline: 2008;
Initial operational capability (FY): Current baseline: 2009;
Initial operational capability (FY): Change: 21 months;
Final asset delivery (FY): 2007 baseline: 2016;
Final asset delivery (FY): Current baseline: 2020;
Final asset delivery (FY): Change: 57 months.
Asset: HC-130J;
Initial operational capability (FY): 2007 baseline: 2008;
Initial operational capability (FY): Current baseline: 2009;
Initial operational capability (FY): Change: 3 months;
Final asset delivery (FY): 2007 baseline: 2009;
Final asset delivery (FY): Current baseline: 2011;
Final asset delivery (FY): Change: 21 months.
Asset: HC-130H;
Initial operational capability (FY): 2007 baseline: 2013;
Initial operational capability (FY): Current baseline: to be
determined;
Final asset delivery (FY): 2007 baseline: 2017;
Final asset delivery (FY): Current baseline: to be determined.
Asset: HH-65;
Initial operational capability (FY): 2007 baseline: 2009;
Initial operational capability (FY): Current baseline: to be
determined;
Final asset delivery (FY): 2007 baseline: 2013;
Final asset delivery (FY): Current baseline: to be determined.
Asset: HH-60;
Initial operational capability (FY): 2007 baseline: 2014;
Initial operational capability (FY): Current baseline: to be
determined;
Final asset delivery (FY): 2007 baseline: 2019;
Final asset delivery (FY): Current baseline: 2020;
Final asset delivery (FY): Change: 12 months.
Source: GAO analysis of Coast Guard data.
Note: If the approved baselines present both threshold and objective
dates, threshold dates (which are the latest allowable dates) are used.
[A] In the 2007 baseline, costs for two variants of the Fast Response
Cutter were presented. For the 2007 baseline initial operational
capability date we use the first delivery and for full operating
capability the last possible date reported.
[B] The baselines for these assets were approved within the Coast
Guard.
[End of table]
System-level Performance Baselines Unlikely to be Met:
In addition to establishing cost and schedule baselines, the 2007
Deepwater acquisition program baseline also established a baseline for
system-of-systems level performance and the key performance parameters
at the asset level that contribute to this performance. This system-
level baseline remains important, as the Coast Guard continues to
pursue system-of-systems level effects even as it devolves its
approach to Deepwater management to an asset level. According to the
Coast Guard's 2005 mission needs statement, the intent of the
Deepwater Program was to improve the capability to detect, intercept,
and interdict potential threats in the maritime domain using a layered
defense of major cutters, patrol boats, helicopters, unmanned aerial
vehicles, and maritime patrol aircraft, all connected using a single
command and control architecture. This description is still valid
given that the Coast Guard is still pursuing the same types of assets
and capabilities proposed by ICGS. The 2007 baseline describes
thresholds and objectives for three system-level performance
requirements.[Footnote 13]
* Available mission hours: Establishes the numbers of hours surface
and aviation assets must perform on an annual basis to meet mission
needs.
* Surveillance of nautical square miles: Describes system-level
effects specific to an NSC acting in concert with its embarked HH-65
helicopter and unmanned aerial vehicles.
* System task sequence: Establishes the number of nautical square
miles in which the fully deployed Deepwater Program is capable of
searching for, identifying, and prosecuting targets of interest per
day.
The specific capabilities to be achieved under these overarching
performance requirements are listed in table 7.
Table 7: System-level Requirements from 2007 Deepwater Baseline:
Available mission hours:
Threshold: 366,257 hours;
Objective: 445,000 hours.
Available mission hours: Surface vessels;
Threshold: 265,572 hours;
Objective: 305,000 hours.
Available mission hours: Aircraft;
Threshold: 100,685 hours;
Objective: 140,000 hours.
National Security Cutter Force Package Surveillance;
Threshold: 13,489 nm[2];
Objective: 56,000 nm[2].
System task sequence: Search;
Threshold: 1,101,593 nm[2]/day;
Objective: 2,500,000 nm[2]/day.
System task sequence: Identify;
Threshold: 500,182 nm[2]/day;
Objective: 1,300,000 nm[2]/day.
System task sequence: Prosecute;
Threshold: 351,583 nm[2]/day;
Objective: 850,000 nm[2]/day.
Source: GAO analysis of Coast Guard data.
[End of table]
The ability of the overall system to meet these capabilities hinges on
the ability of the individual assets to meet key performance criteria
that contribute to the overall performance. For example, assets
contribute to the ability to search a given area by meeting criteria
for detection range and speed. In addition, the ability to meet
mission hours largely depends on the assets' availability for
operations and ability to remain in operations for a set period of
time. These asset-level criteria are evolving as the Coast Guard
revisits requirements baselines for individual assets. According to
Coast Guard officials, the primary focus when revising the asset
baselines has been on accurately stating the asset's expected
capabilities or, when possible, on making trade-offs between
performance and cost. While Coast Guard officials told us that the
effect of revised asset-level baselines on the overall system-level
performance was considered to some extent, the revised baselines do
not reflect any impact on the system-of-systems requirements.
In addition, the revised, asset-level performance baselines for assets
already in production or being upgraded have redefined or eliminated
key performance criteria that were in the 2007 baseline. As the Coast
Guard develops more comprehensive requirements documentation for
Deepwater assets, the performance criteria for many of these assets
has changed as key performance criteria are added, altered, or
eliminated. According to program officials, these changes are being
made to ensure that requirements are measurable and testable. For
example, the criteria for speed and detection range or operational
availability have been deleted--or redefined in a manner that makes
traceability to the system-level requirements difficult--in the
revised baselines for the HH-60, HH-65, Maritime Patrol Aircraft, HC-
130J, and the Fast Response Cutter (Sentinel class). In total, the
revised acquisition program baselines for only 4 of the 13 assets
included in the 2007 baseline--the NSC, HC-130H, and medium cutter and
patrol boat sustainment programs--have not yet had changes to the key
performance criteria. According to program officials, changes to
performance criteria are made to clarify requirements and develop
measurable criteria for testing. The Coast Guard has not fully taken
into account, however, how these changes affect system-of-systems
level requirements, although officials state that those requirements
are being revalidated.
Some assets or capabilities key to the performance of the Deepwater
Program as a whole--including the 25 ships of the Offshore Patrol
Cutter class, the capabilities provided by the integrated C4ISR
system, and the cutter-based Unmanned Aerial Vehicle essential to
extending major cutter surveillance times and ranges--remain in
development. The capabilities provided by C4ISR are particularly
important to achieving the performance required for Deepwater. These
systems are at the core of every Coast Guard activity and provide the
essential situational awareness, data processing, interoperability,
and records accountability and transparency necessary to successfully
execute the Coast Guard's many missions. If the designs of these
assets, and therefore the performance criteria they are able to meet,
were to be significantly different than those proposed under the ICGS
baseline, the system's ability to achieve the higher-level performance
requirements set forth in the 2007 system-level baseline would be
doubtful.
Results of Ongoing and Planned Operational Assessments May Further
Affect Performance Baselines:
To determine whether Deepwater assets can meet their revised
performance baselines, the Coast Guard has performed operational and
capability assessments, through formalized test procedures or through
limited operations, on a number of assets. Three of the Deepwater
assets--the NSC, Maritime Patrol Aircraft, and HC-130J--have begun
limited operations although they have not undergone formal testing to
determine whether capabilities meet requirements. The Fast Response
Cutter (Sentinel class) has undergone an early operational assessment
to determine whether its capabilities meet requirements, and the Coast
Guard plans to conduct an operational evaluation of the asset in 2011.
Additional information on the status of operational testing for these
assets follows.
* The first NSC completed an assessment of its operational
capabilities in 2007, before final delivery to the Coast Guard, and
has since been performing limited operations from its homeport in
Alemeda, California.[Footnote 14] While it has completed some missions
successfully, shortfalls in the expected overall capabilities have
been noted. Specifically, the lack of unmanned air vehicles limits the
full capability of the cutter to conduct surveillance as reflected in
the 2007 performance baseline. The Coast Guard is also continuing to
address design problems with the NSC's small boat launch and recovery
systems.[Footnote 15] The operational evaluation for the NSC is
currently scheduled to begin in 2011; however, there are some aspects
of the cutter's performance that will not be demonstrated at that
time. Coast Guard officials stated that the NSC will not demonstrate
the ability to operate for 230 days away from port. This demonstration
requires the use of four sets of crews to operate three cutters at
different times in order to maintain operations without exceeding
regulations governing how long crews can remain at sea. This
multicrewing concept could have an effect on the maintenance needs of
these vessels or on personnel deployment times. The Coast Guard states
that it will not fully demonstrate this multicrewing capability until
2014 or 2015, when three cutters are available for operations. In
addition, the operational evaluation will not demonstrate the ability
of an unmanned aerial system to operate as intended from the NSC, as
the Coast Guard has not selected an appropriate unmanned system and
has not indicated when it plans to do so. According to officials, some
demonstrations of the ability of an unmanned system to take off and
land on the cutter may take place, but operational missions with an
unmanned aerial system will not be performed.
* The Maritime Patrol Aircraft underwent an operational assessment in
2009 using aircraft previously delivered to the Coast Guard. This
asset, too, has been used in limited operations before completing
operational evaluation. Program officials stated that while the
aircraft itself is performing well in those limited operations, the
mission systems pallet--which contributes significantly to operational
capabilities--has previously experienced reliability and maintenance
challenges. The Coast Guard is working to address these challenges by
updating the software and hardware. Currently, the Maritime Patrol
Aircraft is expected to provide 1,200 hours of operational performance
per year. Coast Guard officials stated that the ability of the
aircraft to achieve this will be demonstrated in fiscal year 2011
during the aircraft's operational evaluation.
* The HC-130J did not undergo any operational testing or assessments
conducted by an independent operational test authority and none are
planned. The current approved operational requirements document, which
establishes the performance baseline for the aircraft and should be
reflected in the key performance criteria to which the asset is
tested, was signed in 2003 and does not necessarily reflect the
current capabilities or established baseline for the aircraft.
According to officials, the Coast Guard and DHS have developed a
report that defines the aircraft's performance by describing the
demonstrations that have already been conducted to quantify the
characteristics of the aircraft and mission systems--such as the
performance capabilities of the radar. This report, however, is not
akin to a test plan that demonstrates the aircraft is able to meet
operational needs. Determining the capabilities in this manner makes
it difficult to assess whether the aircraft meets asset-level or
system-level capabilities. However, DHS and the Coast Guard have
agreed that no further testing or documentation is necessary, as
production for the aircraft is complete.
* The Fast Response Cutter (Sentinel class) is one of the few
Deepwater assets to undergo an early operational assessment, conducted
by an independent test authority--the Navy's Commander Operational
Test and Evaluation Force--prior to the project's critical design
review, which allowed for early detection and rectification of issues.
According to Coast Guard program and Navy test officials, all but five
minor items recommended for correction as a result of this assessment
were addressed prior to the design review. However, program and test
officials stated that the cutter will not undergo an additional
assessment before as many as 15 of the expected 58 vessels are under
contract and operational testing is completed. If significant issues
are found in testing, these vessels may have to undergo costly
modifications. The Coast Guard acknowledges the risks inherent in this
approach and states that it is reducing risk by conducting testing of
the patrol boat's design and subsystems and closely monitoring the
contractor's performance during production.
Coast Guard Has Not Yet Revalidated the Quantities or Mix of Assets
Required to Meet Needs:
While the Coast Guard has made progress in revising baselines for the
cost, schedule, and capabilities of individual assets, it has not yet
revalidated the quantities of those assets needed to meet operational
needs--as it stated that it would in assuming the role of systems
integrator. Determining the force structure and size of the Deepwater
Program, specifically the number and type of assets needed to meet
mission demands, is key to managing the acquisition and will have an
impact on the final cost and performance of the program.
The Coast Guard planned to complete a comprehensive fleet mix analysis
in July 2009 to eliminate uncertainty surrounding future mission
performance and to produce a baseline for the acquisition. The
analysis, which began in October 2008--and is now termed the fleet mix
analysis Phase I--was led by the capabilities directorate and included
a review of all Deepwater missions and assets. Assumptions on asset
capabilities were based on the capabilities of the current fleet as
well as the capabilities that are projected for the Deepwater assets.
In most cases, Coast Guard officials stated, Deepwater assets retained
the capabilities determined by ICGS with a few exceptions. For
example, the Offshore Patrol Cutter was assumed to operate away from
port for 230 days out of the year as envisioned by ICGS, but the
Maritime Patrol Aircraft was assumed to operate for 800 instead of
1,200 flight hours per year. For those assets that have evolved
significantly since 2007, the analysis made "best guess" assumptions
that utilized the capabilities currently being pursued by the Coast
Guard. While the 2007 Deepwater baseline was considered the "floor"
for asset capabilities and quantities, officials stated that the
analysis did not impose financial constraints on the outcome and that,
therefore, the result was not feasible in terms of what the Coast
Guard could afford. As a result, officials stated that they do not
intend to use the results to produce recommendations on a baseline for
fleet mix decisions, as originally intended. The results of the
analysis have not been released.
As a result of discussions with DHS, the Coast Guard intends to
conduct a second, cost-constrained fleet mix analysis Phase II,
limited to surface assets. This analysis is being conducted to further
validate mission needs, roles, and responsibilities and will produce
recommendations on the numbers and types of surface assets the Coast
Guard should procure. It is intended to be complete in February 2011.
In the meantime, the Coast Guard continues to pursue quantities of
planned procurements that, to a large extent, reflect the 2007
baseline.
The Coast Guard also completed a study in August 2008 on the
appropriate number and type of HC-130 aircraft to procure to meet
needs, but no decision has been made yet. The Coast Guard currently
operates two models of the HC-130 aircraft: the HC-130H, which entered
operations in the 1970s, and the HC-130J, which entered operations in
the last few years. Both models were upgraded as part of the Deepwater
Program but, given the advanced age and deteriorating state of many of
the older HC-130H aircraft, the Coast Guard decided to revalidate how
many of each aircraft should be upgraded and maintained. The study
concluded that while the HC-130J offered more capability than the HC-
130H, and a longer expected life cycle, budgetary concerns prevent
retiring all the older aircraft in favor of HC-130Js. Instead, a
hybrid plan was proposed to maintain 11, instead of the currently
planned 16, HC-130Hs and to increase the numbers of HC-130Js from the
currently planned 6 to 11. However, the Coast Guard has not yet taken
the additional actions needed to purchase additional HC-130Js.
Officials stated that any additional acquisitions would necessitate a
revalidation of HC-130J requirements and resubmission of much of the
asset's documentation, including baselines and test plans.
Coast Guard Continues to Improve Acquisition Workforce and Develop
Means to Further Reduce Vacancies:
The Coast Guard sought a systems integrator at the outset of the
Deepwater Program in part because its workforce lacked the experience
and depth to manage the acquisition internally. As the Coast Guard
assumes the role of system integrator it is important that it
understand its needs and builds an acquisition workforce to manage the
Deepwater Program. One key method the Coast Guard uses is a workforce
planning model, modified from a model developed by the Air Force, to
improve its estimates of workforce needs. According to Coast Guard
officials, input from project managers is used in the model to
estimate current and future needs for key personnel such as project
managers, contracting officials, and business and financial managers.
Officials stated that the output of the model is then discussed in a
forum of all the project managers, and requests for additional
personnel are then developed and forwarded for inclusion in the budget.
Since our last report, the Coast Guard has begun to implement
initiatives aimed at further reducing its acquisition workforce gap.
One such initiative is the acquisition professional career program, a
3-year internship program that targets engineering and business
students for development as civilian acquisition personnel. As of
July, the Coast Guard had approximately 20 interns supporting
contracting and other program management areas. The career entry
opportunity program is another initiative meant to attract qualified
employees to the Coast Guard while also promoting career growth for
current Coast Guard employees. Participants in the program receive on-
the-job training for 2 to 3 years in a variety of positions within the
acquisition directorate and, upon completing the program, are
permanently placed in positions in the Coast Guard's acquisition
community. Officials said they are also attempting to obtain direct
hire authority to streamline the hiring process and avoid delays in
placing new hires. Along with enhancing its recruiting and improving
its hiring process for civilian personnel, officials discussed how
they are attempting to make employment in the acquisitions area more
appealing for military personnel by developing an acquisition career
path that offers opportunities for advancement similar to other
uniformed career paths within the Coast Guard.
The Coast Guard has had some success in narrowing the acquisition
workforce gap we have reported on in the past. Officials stated that
by the end of fiscal year 2009, 11 percent of the Coast Guard's
civilian acquisition workforce positions remained unfilled, down from
the 16 percent that the Coast Guard reported for April 2009.[Footnote
16] In its fiscal year 2010 budget, however, the acquisition
directorate received an additional 100 government positions that must
be filled. Officials stated that 25 percent of these new positions
were going to be allocated to the Offshore Patrol Cutter program, due
to the need for more staff as the program prepares to award a design
and construction contract, and 40 percent were going to different
sponsors and technical authorities that support the acquisition
directorate. This increase in number of positions has had an effect on
the Coast Guard's current vacancy rate. As of April 2010, the Coast
Guard had a total of 951 government acquisition workforce positions,
consisting of 556 civilian positions and 395 military positions. Of
these 951 positions, 190 were vacant as of April 2010, leaving a
workforce gap of approximately 20 percent.
Although workforce gaps remain, the Coast Guard has increased the
number of certifications for the acquisition officials it has in place
for areas such as program management, business management, and systems
engineering. These officials are required to complete specialized
training in their respective acquisition career fields in order to
manage or execute acquisition contracts at various dollar thresholds.
Since April 2009, the Coast Guard reports that it has increased the
total number of certified acquisition officials in a number of these
types of fields from 593 to 862, an approximately 45 percent increase.
The number of certified program managers alone rose from 357 in April
2009 to 601 in June 2010, for an increase of about 68 percent.
Although the Coast Guard is attempting to close its acquisition
workforce gaps it faces challenges--like many federal agencies that
acquire major systems--in recruiting and retaining a sufficient number
of government employees in acquisition positions such as contract
specialists, cost estimators, system engineers, and program management
support. When these gaps cannot be filled, contractors are often used
to support the work performed by government staff. For example, the
Coast Guard has used support contractors to perform life-cycle cost
estimates and to assist in the drafting of program documentation. As
shown in figure 3, support contractors made up 24 percent of the
acquisition workforce as of April 2010.
Figure 3: Acquisition Workforce, as of April 2010:
[Refer to PDF for image: pie-chart]
Civilian: 42%;
Military: 30%;
Support contractors: 24%;
Other government agency support: 4%.
Source: GAO analysis of Coast Guard data.
[End of figure]
The Coast Guard acknowledges that the use of support contractors puts
it at risk for potential conflicts of interest and the possibility of
these contractors functioning in roles that closely support inherently
governmental functions. To address conflicts of interest, all
solicitations and contracts include appropriate clauses where a
potential for conflict may exist, according to Coast Guard officials,
and staff are trained on how to identify and manage conflicts of
interest. Further, the Coast Guard has made efforts to ensure that
support contractors do not perform inherently governmental work. These
efforts include releasing guidance to define inherently governmental
roles and the roles of government staff in overseeing contractors and
ensuring appropriate oversight and approval of work performed.
Conclusions:
In creating new baselines for individual asset cost, schedule, and
performance, the Coast Guard has deepened its understanding of the
resources needed and capabilities required on an asset level in a
manner that improves oversight and management of the Deepwater
Program. As it does so, it is also becoming increasingly clear that
the baselines for cost, schedule, and performance established in 2007
cannot be achieved. Because the Coast Guard has not revalidated its
system-level requirements, it lacks the analytical framework needed to
inform Coast Guard and DHS decisions about asset trade-offs in the
future. In the absence of recommendations from the fleet mix analysis,
it remains unclear what number of assets are required to meet the
Coast Guard's needs or what trade-offs in capabilities or mission
goals are required to control costs in a fiscally constrained
environment.
Recommendation for Executive Action:
To capitalize on the increase in knowledge gained by creating new
baselines for Deepwater assets, and to better manage acquisitions of
further assets and capabilities, we recommend that the Commandant of
the Coast Guard complete, and present to Congress, a comprehensive
review of the Deepwater Program that clarifies the overall cost,
schedule, quantities, and mix of assets that are needed to meet
mission needs and what trade-offs need to be made considering fiscal
constraints, given that the currently approved Deepwater baseline is
no longer feasible.
Agency Comments and Our Evaluation:
We provided a draft of this report to the Coast Guard and DHS. DHS
provided oral comments via an e-mail stating that it concurred with
the recommendation. The Coast Guard provided technical comments, which
we incorporated into the report as appropriate.
We are sending copies of this report to interested congressional
committees, the Secretary of Homeland Security, and the Commandant of
the Coast Guard. This report will also be available at no charge on
GAO's Web site at [hyperlink, http://www.gao.gov].
If you or your staff have any questions about this report or need
additional information, please contact me at (202) 512-4841 or
huttonj@gao.gov.
Contact points for our Offices of Congressional Relations and Public
Affairs may be found on the last page of this report. Staff
acknowledgments are provided in appendix II.
Signed by:
John P. Hutton:
Director Acquisition and Sourcing Management:
[End of section]
Appendix I: Scope and Methodology:
In conducting this review, we relied in part on the information and
analysis in our past work, including reports completed in 2008 and
2009.[Footnote 17] Additional scope and methodology information on
each objective of this report follows.
To assess changes to the Department of Homeland Security (DHS) and
Coast Guard acquisition policies, processes, and approach related to
Deepwater since our July 2009 report we reviewed DHS' Acquisition
Directive 102-01, Acquisition Guidebook 102-01-001, Directive 026-06
on test and evaluation, as well as acquisition decision and other
memoranda. We also reviewed the Coast Guard's Major Systems
Acquisition Manual (MSAM), Requirements Generation and Management
Process, and other policy documents. We also interviewed senior
acquisition directorate officials, representatives of the Coast
Guard's capabilities directorate, and representatives of Coast Guard's
technical and support authorities. We also interviewed program and
project managers to discuss the effect of the policies and processes
on Deepwater assets and spoke with DHS officials about the
department's major acquisition review process and reporting
requirements. To determine the contractual status of Deepwater assets
we reviewed Coast Guard contracts and acquisition strategies and spoke
with contracting and acquisition officials. In addition, we met with
contractor and Coast Guard officials at Northrop Grumman facilities in
Pascagoula, Mississippi and with Bollinger officials in Lockport,
Louisiana. We also met with Coast Guard officials at the Aviation
Logistics Center in Elizabeth City, North Carolina; Surface Fleet
Logistics Center in Curtis Bay, Maryland; Lockheed Martin facilities
in Moorestown, New Jersey; and the Command and Control Engineering
Center in Portsmouth, Virginia to discuss their role in upgrading and
maintaining Deepwater assets.
To assess whether the Deepwater Program is meeting baselines for cost,
schedule, and performance, we reviewed the Deepwater Program's 2007
baseline and compared it to the revised baselines for individual
assets that have been approved to date. We also interviewed senior
acquisition directorate officials and program and project managers to
discuss how the Coast Guard is developing new acquisition program
baselines for individual assets and how the process used differs from
that in the 2007 baseline, such as the basis for cost estimates. In
addition we reviewed the life-cycle cost estimates for selected
assets. We also reviewed operational requirements documents for
selected assets in various stages of the development and production
processes to understand the major drivers of cost growth, schedule
delays, and capability changes. We interviewed acquisition directorate
officials and program and project managers to discuss options for
controlling cost growth by making trade-offs in asset quantities
and/or capabilities, as well as some of the potential implications of
unplanned schedule delays. We also interviewed Coast Guard officials
and analyzed documentation for the fleet-mix analysis and follow-on
studies being conducted by the capabilities directorate. In addition
we met with Navy and Coast Guard officials at the U.S. Navy's
Commander Operational Test and Evaluation Force in Norfolk, Virginia
to discuss their role in conducting operational testing.
To assess the Coast Guard's efforts to manage and build its
acquisition workforce, we reviewed Coast Guard information on
government, contractor, and vacant positions. We supplemented this
analysis with interviews of acquisition directorate officials,
including contracting and Office of Acquisition Workforce Management
officials and program and project managers to discuss current vacancy
rates and the Coast Guard's plans to increase the size of the
acquisition workforce. We also reviewed documentation and interviewed
senior acquisition directorate officials about the use of support
contractors and oversight to prevent contractors from performing
inherently governmental functions. We reviewed documentation such as
the updated Acquisition Human Capital Strategic Plan and discussed
workforce initiatives, challenges, and obstacles to building an
acquisition workforce, including recruitment and difficulty in filling
key positions.
We conducted this performance audit between October 2009 and July 2010
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.
[End of section]
Appendix II: GAO Contact and Acknowledgments:
For further information about this report, please contact John P.
Hutton, Director, Acquisition and Sourcing Management, at (202) 512-
4841 or huttonj@gao.gov. Other individuals making key contributions to
this report include Michele Mackin, Assistant Director; J. Kristopher
Keener; Matthew Alemu; Kelly Bradley; and Kristine Hassinger.
[End of section]
Related GAO Products:
Coast Guard: Observations on the Requested Fiscal Year 2011 Budget,
Past Performance, and Current Challenges. [hyperlink,
http://www.gao.gov/products/GAO-10-411T]. Washington, D.C.: February
25, 2010.
Coast Guard: Better Logistics Planning Needed to Aid Operational
Decisions Related to the Deployment of the National Security Cutter
and Its Support Assets. [hyperlink,
http://www.gao.gov/products/GAO-09-497]. Washington, D.C.: July 17,
2009.
Coast Guard: As Deepwater Systems Integrator, Coast Guard Is
Reassessing Costs and Capabilities but Lags in Applying Its
Disciplined Acquisition Approach. [hyperlink,
http://www.gao.gov/products/GAO-09-682]. Washington, D.C.: July 14,
2009.
Coast Guard: Change in Course Improves Deepwater Management and
Oversight, but Outcome Still Uncertain. [hyperlink,
http://www.gao.gov/products/GAO-08-745]. Washington, D.C.: June 24,
2008.
Coast Guard: Observations on Changes to Management and Oversight of
the Deepwater Program. [hyperlink,
http://www.gao.gov/products/GAO-09-462T]. Washington, D.C.: March 24,
2009.
Status of Selected Assets of the Coast Guard's Deepwater Program.
[hyperlink, http://www.gao.gov/products/GAO-08-270R]. Washington,
D.C.: March 11, 2008.
Coast Guard: Status of Efforts to Improve Deepwater Program Management
and Address Operational Challenges. [hyperlink,
http://www.gao.gov/products/GAO-07-575T]. Washington, D.C.: March 8,
2007.
Coast Guard: Status of Deepwater Fast Response Cutter Design Efforts.
[hyperlink, http://www.gao.gov/products/GAO-06-764]. Washington, D.C.:
June 23, 2006.
Coast Guard: Changes to Deepwater Plan Appear Sound, and Program
Management Has Improved, but Continued Monitoring Is Warranted.
[hyperlink, http://www.gao.gov/products/GAO-06-546]. Washington, D.C.:
April 28, 2006.
Coast Guard: Progress Being Made on Addressing Deepwater Legacy Asset
Condition Issues and Program Management, but Acquisition Challenges
Remain. [hyperlink, http://www.gao.gov/products/GAO-05-757].
Washington, D.C.: July 22, 2005.
Coast Guard: Preliminary Observations on the Condition of Deepwater
Legacy Assets and Acquisition Management Challenges. [hyperlink,
http://www.gao.gov/products/GAO-05-651T]. Washington, D.C.: June 21,
2005.
Coast Guard: Deepwater Program Acquisition Schedule Update Needed.
[hyperlink, http://www.gao.gov/products/GAO-04-695]. Washington, D.C.:
June 14, 2004.
Contract Management: Coast Guard's Deepwater Program Needs Increased
Attention to Management and Contractor Oversight. [hyperlink,
http://www.gao.gov/products/GAO-04-380]. Washington, D.C.: March 9,
2004.
Coast Guard: Actions Needed to Mitigate Deepwater Project Risks.
[hyperlink, http://www.gao.gov/products/GAO-01-659T]. Washington,
D.C.: May 3, 2001.
[End of section]
Footnotes:
[1] ICGS is a business entity jointly owned by Northrop Grumman and
Lockheed Martin. These companies are first-tier subcontractors to ICGS
and under the ICGS contract provide Deepwater assets or award second-
tier subcontracts.
[2] The Deepwater Program originally had an estimated cost of $17
billion. The May 2007 baseline of $24.2 billion reflects changes to
the program to reflect the Coast Guard's post-September 11, 2001,
missions.
[3] GAO, Coast Guard: As Deepwater Systems Integrator, Coast Guard Is
Reassessing Costs and Capabilities but Lags in Applying Its
Disciplined Acquisition Approach, [hyperlink,
http://www.gao.gov/products/GAO-09-682] (Washington, D.C.: July 14,
2009).
[4] See a list of related GAO products at the end of this report.
[5] [hyperlink, http://www.gao.gov/products/GAO-09-682].
[6] [hyperlink, http://www.gao.gov/products/GAO-09-682].
[7] [hyperlink, http://www.gao.gov/products/GAO-09-682].
[8] DHS officials stated that a decision event has been added to
authorize low-rate initial production; this addresses a recommendation
in GAO, Homeland Security: Successes and Challenges in DHS's Efforts
to Create an Effective Acquisition Organization, [hyperlink,
http://www.gao.gov/products/GAO-05-179] (Washington, D.C.: Mar. 29,
2005).
[9] For information on how DHS' process is being applied to programs
across the department, see GAO, Department of Homeland Security:
Assessments of Selected Complex Acquisitions, [hyperlink,
http://www.gao.gov/products/GAO-10-588SP] (Washington, D.C.: June 30,
2010).
[10] GAO, Coast Guard; Change in Course Improves Deepwater Management
and Oversight, but Outcome Still Uncertain, [hyperlink,
http://www.gao.gov/products/GAO-08-745] (Washington D.C.: June 24,
2008).
[11] [hyperlink, http://www.gao.gov/products/GAO-09-682].
[12] We recently reported on the government's use of cost-
reimbursement contracts. GAO, Contract Management: Extent of Federal
Spending under Cost-Reimbursement Contracts Unclear and Key Controls
Not Always Used, [hyperlink, http://www.gao.gov/products/GAO-09-921]
(Washington, D.C.: Sept. 30, 2009).
[13] A threshold is the minimum performance value necessary to satisfy
a requirement. A requirement's objective is a measurable, cost-
effective value greater than the threshold. In some cases, the
threshold and objective are the same.
[14] An operational assessment focuses on significant trends noted in
development efforts, programmatic voids, risk areas, adequacy of
requirements, and the ability of the program to support operational
testing. An operational assessment may be conducted at any time using
technology demonstrators, prototypes, mock-ups, engineering
development models, or simulations, but is not to substitute for
initial operational testing and evaluation.
[15] We recently reported on the operational effects of delays in the
delivery of the NSC class and its accompanying support assets of
unmanned aircraft and small boats. GAO, Coast Guard: Better Logistics
Planning Needed to Aid Operational Decisions Related to the Deployment
of the National Security Cutter and Its Support Assets, [hyperlink,
http://www.gao.gov/products/GAO-09-497] (Washington, D.C.: July 17,
2009).
[16] [hyperlink, http://www.gao.gov/products/GAO-09-682].
[17] GAO, Coast Guard: As Deepwater Systems Integrator, Coast Guard Is
Reassessing Costs and Capabilities but Lags in Applying Its
Disciplined Acquisition Approach, [hyperlink,
http://www.gao.gov/products/GAO-09-682] (Washington, D.C.: July 14,
2009) and GAO, Change in Course Improves Deepwater Management and
Oversight, but Outcome Still Uncertain, [hyperlink,
http://www.gao.gov/products/GAO-08-745] (Washington, D.C.: June 24,
2008).
[End of section]
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