Coast Guard
Action Needed As Approved Deepwater Program Remains Unachievable Gao ID: GAO-11-743 July 28, 2011In Process
The Deepwater Program continues to exceed the cost and schedule baselines approved by DHS in 2007, but several factors continue to preclude a solid understanding of the program's true cost and schedule. The Coast Guard has developed baselines for some assets that indicate the estimated total acquisition cost could be as much as $29.3 billion, or about $5 billion over the $24.2 billion baseline. But additional cost growth is looming because the Coast Guard has yet to develop revised baselines for all assets, including the OPC--the largest cost driver in the program. In addition, the Coast Guard's most recent capital investment plan indicates further cost and schedule changes not yet reflected in the asset baselines, contributing to the approved 2007 baseline no longer being achievable. The reliability of the cost estimates and schedules for selected assets is also undermined because the Coast Guard did not follow key best practices for developing these estimates. Coast Guard and DHS officials agree that the annual funding needed to support all approved Deepwater baselines exceeds current and expected funding levels, which affects some programs' approved schedules. The Coast Guard's acquisition directorate has developed action items to help address this mismatch by prioritizing acquisition program needs, but these action items have not been adopted across the Coast Guard. The Coast Guard continues to strengthen its acquisition management capabilities, but is faced with several near-term decisions to help ensure that assets still in design will meet mission needs. For example, whether or not the planned system-of-systems design is achievable will largely depend upon remaining decisions regarding the design of the command and control system. Important decisions related to the affordability, feasibility, and capability of the OPC also remain. For those assets under construction and operational, preliminary tests have yielded mixed results and identified concerns, such as design issues, to be addressed prior to initial operational test and evaluation. The Coast Guard is gaining a better understanding of cost, schedule, and technical risks, but does not always fully convey these risks in reports to Congress. As lead systems integrator, the Coast Guard planned to complete a fleet mix analysis to eliminate uncertainty surrounding future mission performance and produce a baseline for Deepwater. This analysis, which the Coast Guard began in 2008, considered the current program to be the "floor" for asset capabilities and quantities and did not impose cost constraints on the various fleet mixes. Consequently, the results will not be used for trade-off decisions. The Coast Guard has now begun a second analysis, expected for completion this summer, which includes an upper cost constraint of $1.7 billion annually--more than Congress has appropriated for the entire Coast Guard acquisition portfolio in recent years. DHS is also conducting a study to gain insight into alternatives that may include options that are lower than the program of record for surface assets. A DHS official stated that this analysis and the Coast Guard's fleet mix analysis will provide multiple data points for considering potential changes to the program of record, but Coast Guard officials stated they have no intention of examining fleet mixes smaller than the current, planned Deepwater program. GAO is making recommendations to the Department of Homeland Security (DHS) that include identifying trade-offs to the planned Deepwater fleet and ensuring the Offshore Patrol Cutter (OPC) design is achievable and to the Coast Guard that include identifying priorities, incorporating cost and schedule best practices, increasing confidence that assets will meet mission needs, and reporting complete information on risks to Congress in a timely manner. DHS concurred with the recommendations.
RecommendationsOur 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) 512-7773GAO-11-743, Coast Guard: Action Needed As Approved Deepwater Program Remains Unachievable
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United States Government Accountability Office:
GAO:
Report to Congressional Committees:
July 2011:
Coast Guard:
Action Needed As Approved Deepwater Program Remains Unachievable:
GAO-11-743:
GAO Highlights:
Highlights of GAO-11-743, a report to congressional committees.
Why GAO Did This Study:
The Deepwater Program includes efforts to build or modernize ships and
aircraft, including supporting capabilities. In 2007, the Coast Guard
took over the systems integrator role from Integrated Coast Guard
Systems (ICGS) and established a $24.2 billion program baseline which
included schedule and performance parameters. Last year, GAO reported
that Deepwater had exceeded cost and schedule parameters, and
recommended a comprehensive study to assess the mix of assets needed
in a cost-constrained environment given the approved baseline was no
longer feasible. GAO assessed the (1) extent to which the program is
exceeding the 2007 baseline and credibility of selected cost estimates
and schedules; (2) execution, design, and testing of assets; and (3)
Coast Guard‘s efforts to conduct a fleet mix analysis. GAO reviewed
key Coast Guard documents and applied criteria from GAO‘s cost guide.
What GAO Found:
The Deepwater Program continues to exceed the cost and schedule
baselines approved by DHS in 2007, but several factors continue to
preclude a solid understanding of the program‘s true cost and
schedule. The Coast Guard has developed baselines for some assets that
indicate the estimated total acquisition cost could be as much as
$29.3 billion, or about $5 billion over the $24.2 billion baseline.
But additional cost growth is looming because the Coast Guard has yet
to develop revised baselines for all assets, including the OPC”the
largest cost driver in the program. In addition, the Coast Guard‘s
most recent capital investment plan indicates further cost and
schedule changes not yet reflected in the asset baselines,
contributing to the approved 2007 baseline no longer being achievable.
The reliability of the cost estimates and schedules for selected
assets is also undermined because the Coast Guard did not follow key
best practices for developing these estimates. Coast Guard and DHS
officials agree that the annual funding needed to support all approved
Deepwater baselines exceeds current and expected funding levels, which
affects some programs‘ approved schedules. The Coast Guard‘s
acquisition directorate has developed action items to help address
this mismatch by prioritizing acquisition program needs, but these
action items have not been adopted across the Coast Guard.
The Coast Guard continues to strengthen its acquisition management
capabilities, but is faced with several near-term decisions to help
ensure that assets still in design will meet mission needs. For
example, whether or not the planned system-of-systems design is
achievable will largely depend upon remaining decisions regarding the
design of the command and control system. Important decisions related
to the affordability, feasibility, and capability of the OPC also
remain. For those assets under construction and operational,
preliminary tests have yielded mixed results and identified concerns,
such as design issues, to be addressed prior to initial operational
test and evaluation. The Coast Guard is gaining a better understanding
of cost, schedule, and technical risks, but does not always fully
convey these risks in reports to Congress.
As lead systems integrator, the Coast Guard planned to complete a
fleet mix analysis to eliminate uncertainty surrounding future mission
performance and produce a baseline for Deepwater. This analysis, which
the Coast Guard began in 2008, considered the current program to be
the ’floor“ for asset capabilities and quantities and did not impose
cost constraints on the various fleet mixes. Consequently, the results
will not be used for trade-off decisions. The Coast Guard has now
begun a second analysis, expected for completion this summer, which
includes an upper cost constraint of $1.7 billion annually”more than
Congress has appropriated for the entire Coast Guard acquisition
portfolio in recent years. DHS is also conducting a study to gain
insight into alternatives that may include options that are lower than
the program of record for surface assets. A DHS official stated that
this analysis and the Coast Guard‘s fleet mix analysis will provide
multiple data points for considering potential changes to the program
of record, but Coast Guard officials stated they have no intention of
examining fleet mixes smaller than the current, planned Deepwater
program.
What GAO Recommends:
GAO is making recommendations to the Department of Homeland Security
(DHS) that include identifying trade-offs to the planned Deepwater
fleet and ensuring the Offshore Patrol Cutter (OPC) design is
achievable and to the Coast Guard that include identifying priorities,
incorporating cost and schedule best practices, increasing confidence
that assets will meet mission needs, and reporting complete
information on risks to Congress in a timely manner. DHS concurred
with the recommendations. We also suggest that Congress consider
including a permanent statutory provision that requires timely and
complete information on risks.
View [hyperlink, http://www.gao.gov/products/GAO-11-743] or key
components. For more information, contact John Hutton at (202) 512-
4841 or huttonj@gao.gov.
[End of section]
Contents:
Letter:
Background:
True Cost and Schedule of Deepwater Program Is Not Known:
Execution of the Deepwater Program Is Progressing, but Key Decisions
Remain for the Design and Testing of Deepwater Assets:
Coast Guard Has Not Completed a Comprehensive Trade-Off Analysis for
the Deepwater Assets:
Conclusions:
Recommendations for Executive Action:
Matter for Congressional Consideration:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: Comments from the Department of Homeland Security and
Coast Guard:
Appendix III: Assessments of MPA and C4ISR Cost Estimates:
Appendix IV: Assessments of MPA and NSC Schedules:
Appendix V: Allocation of Deepwater Acquisition, Construction, and
Improvement Dollars in the Fiscal Years 2008, 2009, 2010, and 2011
Capital Investment Plans (Then-Year Dollars):
Appendix VI: GAO Contacts and Staff Acknowledgments:
Related GAO Products:
Tables:
Table 1: Information on Assets the Coast Guard Plans to Buy or Upgrade
as Part of the Deepwater Program:
Table 2: Increased Total Acquisition Cost Estimates for Deepwater
Assets with Approved Baselines as of May 2011 (Then-Year dollars in
millions):
Table 3: Fiscal Years 2012-2016 Capital Investment Plan for Deepwater
Assets (Then-Year dollars in thousands):
Table 4: Current C4ISR System on Each Deepwater Asset Compared to
Planned C4ISR System:
Table 5: Alternative Fleet Mix Asset Quantities According to Coast
Guard's Phase 1 Fleet Mix Analysis:
Table 6: The 12 Steps of High-Quality Cost Estimating Mapped to the
Steps of a High-Quality Cost Estimate:
Table 7: Analysis of the MPA Cost Estimate:
Table 8: Analysis of C4ISR Cost Estimate:
Table 9: Analysis of the MPA 12-14 Contractor's Schedule:
Table 10: Analysis of the NSC 3 Program Schedule:
Figures:
Figure 1: Key Events in the Deepwater Program:
Figure 2: Deepwater Assets Within DHS Acquisition Phases and Decision
Events as of May 15, 2011:
Figure 3: Final Asset Delivery Dates for Selected Deepwater Assets
Identified in the 2007 Deepwater Baseline, Revised Baselines, and
Fiscal Years 2012-2016 Capital Investment Plan:
Figure 4: Extent to which MPA and C4ISR Life-cycle Cost Estimates Meet
Best Practices:
Figure 5: Extent to which the Schedules for MPA 12-14 and NSC 3 Meet
Best Practices:
Figure 6: Allocation of Deepwater Acquisition, Construction, and
Improvements Dollars in the Fiscal Years 2008, 2009, 2010, and 2011
Capital Investment Plans (Then-Year Dollars):
Figure 7: Deepwater System-of-Systems Concept:
Figure 8: Allocation of Deepwater Acquisition, Construction, and
Improvement Dollars in the Fiscal Years 2008, 2009, 2010, and 2011
Capital Investment Plans (Then-Year Dollars):
Abbreviations:
ADE: Acquisition Decision Event:
ASIST: Aircraft Ship Integrated Secure and Traverse:
C4ISR: Command, Control, Communications, Computers, Intelligence,
Surveillance, and Reconnaissance:
DHS: Department of Homeland Security:
DOD: Department of Defense:
FRC: Fast Response Cutter:
ICGS: Integrated Coast Guard Systems:
MPA: Maritime Patrol Aircraft:
NSC: National Security Cutter:
OPC: Offshore Patrol Cutter:
QARC: Quarterly Acquisition Report to Congress:
UAS: Unmanned Aircraft Systems:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
July 28, 2011:
Congressional Committees:
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).[Footnote 1] Our prior work on the Deepwater
Program identified problems in the areas of costs, management, and
oversight that have led to delivery delays and other operational
challenges for certain assets, but it also recognized several steps
the Coast Guard has taken to improve Deepwater management. For
example, beginning in 2007, the Coast Guard assumed the role of lead
systems integrator for the Deepwater Program, a role which the Coast
Guard had previously contracted to Integrated Coast Guard Systems
(ICGS).[Footnote 2] In assuming this role, the Coast Guard has taken a
number of steps to manage the Deepwater projects, including
reorganizing its acquisition directorate, applying the knowledge-based
acquisition policies and practices outlined in its Major Systems
Acquisition Manual, and developing baselines for each asset. These
steps have given the Coast Guard better insight into asset-level
capabilities and costs, but we have reported that the $24.2 billion
program as envisioned in 2007 is no longer feasible, in terms of cost
and schedule. Furthermore, we also reported that it is unlikely that
system-level performance baselines established in 2007 will be met.
Given this situation, we recommended last year that the Commandant of
the Coast Guard present to Congress a comprehensive review of the
Deepwater Program that clarifies the overall cost, schedule,
quantities, and mix of assets required to meet mission needs,
including trade-offs in light of fiscal constraints, given that the
currently approved Deepwater baseline is no longer feasible.[Footnote
3]
Under the Comptroller General's Authority, we assessed (1) the extent
to which the Deepwater Program's planned cost and schedule baselines
have been exceeded and the credibility of cost estimates and schedules
for selected assets; (2) the progression of the execution, design, and
testing of the assets within the Deepwater Program; and (3) whether
the Coast Guard has undertaken a fleet mix study that addresses trade-
offs in a cost-constrained environment.
To conduct our work, we reviewed the Coast Guard's Major Systems
Acquisition Manual, capital investment plans, and key asset documents
including operational requirements documents, acquisition strategies
and plans, acquisition program baselines, life-cycle cost estimates,
test reports, and contracts. We obtained and analyzed schedule and
cost estimates for selected assets using the best practices criteria
set forth in our cost guide.[Footnote 4] We also reviewed a Coast
Guard analysis of various fleet mixes--termed fleet mix analysis phase
I--which was completed in December 2009. We also reviewed the charter
and contractor's statement of work for the phase 2 analysis. We
interviewed Coast Guard officials in the acquisitions directorate as
well as officials in the directorates responsible for budgeting and
resources and for assessing and developing operational requirements
for Deepwater assets (the capabilities directorate). In addition, we
interviewed Department of Homeland Security (DHS) officials from the
Acquisition Program Management Directorate, Cost Analysis Division,
Program Analysis and Evaluation Division, and the Science and
Technology Test & Evaluation and Standards Division. We discussed the
Coast Guard's Quarterly Acquisition Reports to Congress with Office of
Management and Budget and DHS's Office of the Chief Financial Officer
officials. We interviewed contractor representatives from Northrop
Grumman Shipbuilding and Bollinger Shipyards and toured their
respective shipyards. We also met with Coast Guard officials at the
Navy's Commander Operational Test and Evaluation Force and Coast Guard
operators at the Aviation Training Center. 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 September 2010 to July 2011
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 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 has a variety of responsibilities including port
security and vessel escort, search and rescue, and polar ice
operations. To carry out these responsibilities, the Coast Guard
operates a number of vessels, aircraft, and information technology
programs. Since 2001, we have reviewed the Deepwater Program and
reported to Congress, DHS, and the Coast Guard on the risks and
uncertainties inherent with this program. In our July 2010 report, we
found that DHS and Coast Guard acquisition policies and processes
continued to evolve, further establishing the Coast Guard as systems
integrator, and that the Coast Guard continued to improve its
acquisition workforce and develop means to further reduce vacancies.
We also found that as the Coast Guard's understanding of the assets
evolved, achievement of the DHS-approved May 2007 acquisition program
baseline of $24.2 billion for the Deepwater Program was not feasible
due to cost growth and schedule delays.[Footnote 5] We concluded that
while the Coast Guard had deepened its understanding of the resources
needed and capabilities required on an asset level, the Coast Guard
had not revalidated its system-level requirements and lacked the
analytical framework needed to inform Coast Guard and DHS decisions
about asset trade-offs in the future.
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 contracted with ICGS in June 2002
to be the systems integrator for Deepwater and 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, ICGS
submitted and priced its proposal as a package; that is, the Coast
Guard bought the entire solution and could not reject any individual
component.
In 2002, the Coast Guard conducted a performance gap analysis that
determined the Deepwater fleet as designed by ICGS would have
significant capability gaps in meeting emerging mission requirements
following the September 11, 2001, terrorist attacks. The Coast Guard
decided, due to fiscal constraints, not to make significant changes to
the ICGS planned Deepwater fleet, but did approve several asset
capability changes.[Footnote 6] Following these changes, the Coast
Guard submitted a revised cost, schedule, and performance baseline for
the overall Deepwater Program to DHS in November 2006. The new
baseline established the total acquisition cost of the ICGS solution
at $24.2 billion and projected the Coast Guard would complete the
acquisition in 2027. DHS approved the baseline in May 2007, shortly
after the Coast Guard--acknowledging that it had relied too heavily on
contractors to do the work of the government and that government and
industry had failed to control costs--announced its intention to take
over the role of systems integrator.
With limited insight into how ICGS's planned fleet would meet overall
mission needs, the Coast Guard has acknowledged challenges in
justifying the proposed capabilities and making informed decisions
about possible trade-offs. In October 2008, the capabilities
directorate initiated a fleet mix analysis intended to be a
fundamental reassessment of the capabilities and mix of assets the
Coast Guard needs to fulfill its Deepwater mission. As we reported
last year, officials stated that this analysis did not impose fiscal
constraints on the outcome and therefore, the results were unfeasible.
As a result of discussions with DHS, the Coast Guard started a second,
cost-constrained analysis--fleet mix analysis phase 2.[Footnote 7]
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: Performance Gap Analysis conducted – determined ICGS solution
had significant capability gaps when meeting post-September 11 mission
requirements.
2002: Systems integrator contract awarded to ICGS with projected cost
of $17 billion.
2003: Coast Guard moves into DHS.
2005: Mission needs statement revised to include post-September 11
homeland security operations.
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 –
first competitive award outside of the ICGS contract.
2009: Fleet Mix Analysis Phase 1 completed by Coast Guard.
2011: Contract with ICGS expired in January.
2011: Fleet Mix Analysis Phase 2 expected to be completed by Coast
Guard.
2027: Final Deepwater asset scheduled to deliver according to the 2007
baseline.
Source: GAO presentation of Coast Guard data.
[End of figure]
Key directorates involved in the management of the Deepwater Program
include the capabilities, resources, C4 and information technology,
and acquisition directorates. Most of the Deepwater assets are
considered major acquisitions, as outlined in the Coast Guard's Major
Systems Acquisition Manual. Acquisitions with life-cycle cost
estimates equal to or greater than $1 billion are considered level I,
and those with cost estimates from $300 million to less than $1
billion are considered level II. These major acquisition programs are
to receive oversight from DHS's acquisition review board, which is
responsible for reviewing acquisitions for executable business
strategies, resources, management, accountability, and alignment with
strategic initiatives. The Coast Guard provides oversight to programs
that have life-cycle cost estimates less than $300 million (level
III). Table 1 describes in more detail the assets the Coast Guard
plans to buy or upgrade under the Deepwater Program, the associated
investment level if known, and planned and delivered quantities.
Table 1: Information on Assets the Coast Guard Plans to Buy or Upgrade
as Part of the Deepwater Program:
Asset/acquisition level: National Security Cutter (NSC); Level I;
Planned quantity (as of May 15, 2011): 8 cutters;
Delivered quantity (as of May 15, 2011): 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/acquisition level: Offshore Patrol Cutter (OPC); Level I
(projected);
Planned quantity (as of May 15, 2011): 25 cutters;
Delivered quantity (as of May 15, 2011): 0;
Description: The OPC 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.
Asset/acquisition level: Fast Response Cutter (FRC); Level I;
Planned quantity (as of May 15, 2011): 58 cutters;
Delivered quantity (as of May 15, 2011): 0;
Description: The FRC, also referred to as the Sentinel class, is a
patrol boat envisioned to have high readiness, speed, adaptability,
and endurance to perform a wide range of missions.
Asset/acquisition level: Medium Endurance Cutter Sustainment; Level I;
Planned quantity (as of May 15, 2011): 27 cutters;
Delivered quantity (as of May 15, 2011): 16 cutters;
Description: The Medium Endurance Cutter Sustainment project is
intended to improve the cutters' current operating and cost
performance by replacing obsolete, unsupportable, or maintenance-
intensive equipment.
Asset/acquisition level: Patrol Boat Sustainment; Level II;
Planned quantity (as of May 15, 2011): 17 boats;
Delivered quantity (as of May 15, 2011): 13 boats;
Description: The patrol boat sustainment project is intended to
improve the 110' patrol boats' operating and cost performance by
replacing obsolete, unsupportable, or maintenance-intensive equipment.
Asset/acquisition level: Cutter Small Boats; Level III;
Planned quantity (as of May 15, 2011): 27 boats;
Delivered quantity (as of May 15, 2011): 0;
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.
Asset/acquisition level: HC-144A Maritime Patrol Aircraft (MPA); Level
I;
Planned quantity (as of May 15, 2011): 36 aircraft with mission system
pallets;
Delivered quantity (as of May 15, 2011): 11 aircraft; 12 mission
system pallets;
Description: The MPA is a transport and surveillance, fixed-wing
aircraft intended to be used to perform search and rescue missions,
enforce laws and treaties, and transport cargo and personnel. The
mission system pallet is a roll-on, roll-off suite of electronic
equipment intended to enable the aircrew to compile data from the
aircraft's multiple integrated sensors and transmit and receive
information.
Asset/acquisition level: HC-130J Long-Range Surveillance Aircraft;
Level II;
Planned quantity (as of May 15, 2011): 8 aircraft;
Delivered quantity (as of May 15, 2011): 6 aircraft;
Description: The HC-130J is a four-engine turbo-prop aircraft that the
Coast Guard has deployed with improved interoperability, C4ISR, and
sensors to enhance surveillance, detection, classification,
identification, and prosecution.
Asset/acquisition level: HC-130H Long-Range Surveillance Aircraft;
Level I;
Planned quantity (as of May 15, 2011): 16 aircraft;
Delivered quantity (as of May 15, 2011): Segments 1 through 5 - not
complete;
Description: The HC-130H is the legacy Coast Guard long-range
surveillance aircraft, which the Coast Guard intends to update in
multiple segments.
Asset/acquisition level: HH-65 Multi-mission Cutter Helicopter;
Level I;
Planned quantity (as of May 15, 2011): 102 aircraft;
Delivered quantity (as of May 15, 2011): Segments 1 and 2 - complete;
Segments 3 through 6 - not complete;
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 multiple segments.
Asset/acquisition level: HH-60 Medium Range Recovery Helicopter;
Level I;
Planned quantity (as of May 15, 2011): 42 aircraft;
Delivered quantity (as of May 15, 2011): Segments 1 through 4 - not
complete;
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 communication systems in multiple
segments.
Asset/acquisition level: Unmanned Aircraft Systems (UAS); Level I
(projected);
Planned quantity (as of May 15, 2011): To be decided;
Delivered quantity (as of May 15, 2011): 0;
Description: The Coast Guard is exploring the use of UASs to
supplement the service's cutter- and land-based aviation capabilities.
Asset/acquisition level: C4ISR; Level I;
Planned quantity (as of May 15, 2011): 8 segments;
Delivered quantity (as of May 15, 2011): Segment 1 - complete;
Segments 2-8 - not complete;
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: Coast Guard data with GAO presentation.
[End of table]
DHS's acquisition review board not only provides oversight for major
acquisition programs, but also supports the department's Acquisition
Decision Authority in determining the appropriate direction for an
acquisition at key Acquisition Decision Events (ADE). At each ADE, the
Acquisition Decision Authority approves acquisitions to proceed
through the acquisition life-cycle phases upon satisfaction of
applicable criteria. Additionally, Component Acquisition Executives at
the Coast Guard and other DHS components are responsible in part for
managing and overseeing their respective acquisition portfolios, as
well as approving level III systems acquisitions. The DHS four-phase
acquisition process is:
* Need phase--define a problem and identify the need for a new
acquisition. This phase ends with ADE 1, which validates the need for
a major acquisition program.
* Analyze/Select phase--identify alternatives and select the best
option. This phase ends with ADE-2A, which approves the acquisition to
proceed to the obtain phase and includes the approval of the
acquisition program baseline.
* Obtain phase--develop, test, and evaluate the selected option and
determine whether to approve production. During the obtain phase, ADE-
2B approves a discrete segment if an acquisition is being developed in
segments and ADE-2C approves low-rate initial production.[Footnote 8]
This phase ends with ADE-3 which approves full-rate production.
* Produce/Deploy/Support phase--produce and deploy the selected option
and support it throughout the operational life cycle. Figure 2 depicts
where level I and II Deepwater assets currently fall within these
acquisition phases and decision events.
Figure 3: Deepwater Assets Within DHS Acquisition Phases and Decision
Events as of May 15, 2011:
[Refer to PDF for image: illustration]
0: Need: Define the problem;
* Unmanned Aircraft Systems;
* C4ISR Segments 3-4; Segments 6-8.
1: Analyze/Select: Identify alternatives and resource requirements;
* Offshore Patrol Cutter;
* HC-130H Segments 4-5.
Obtain: Develop and evaluate capabilities;
2A:
* HH-60 Segments 3-4.
2B:
* Fast Response Cutter;
* HH-65 Segment 6;
* C4ISR Segments 2 and 5.
2C:
* National Security Cutter;
* Maritime Patrol Aircraft;
* HH-65 Segment 5;
* HC-130H Segments 2-3.
3: Produce/deploy/support: Produce and maintain the capabilities;
* Medium Endurance Cutter Sustainment;
* Patrol Boat Sustainment;
* HH-60 Segments 1-2;
* HH-65 Segments 1-4;
* HC-130H Segment 1;
* HC-130J;
* C4ISR Segment 1.
Source: Coast Guard data with GAO presentation.
[End of figure]
True Cost and Schedule of Deepwater Program Is Not Known:
The Deepwater Program as a whole continues to exceed the cost and
schedule baselines approved by DHS in May 2007, but several factors
preclude a solid understanding of the true cost and schedule of the
program. The Coast Guard has developed baselines for some assets, most
of which have been approved by DHS, that indicate the estimated total
acquisition cost could be as much as $29.3 billion, or about $5
billion over the $24.2 billion baseline. But additional cost growth is
looming because the Coast Guard has yet to develop revised baselines
for all the Deepwater assets, including the Offshore Patrol Cutter
(OPC)--the largest cost driver in the Deepwater Program. In addition,
the Coast Guard's most recent 5-year budget plan, included in DHS's
fiscal year 2012 budget request, indicates further cost and schedule
changes not yet reflected in the asset baselines. The reliability of
the cost estimates and schedules for selected assets is also
undermined because the Coast Guard did not follow key best practices
for developing these estimates. Coast Guard and DHS officials agree
that the annual funding needed to support all approved Deepwater
baselines exceeds current and expected funding levels in this fiscal
climate. This contributes to churn in program baselines when programs
are not able to execute schedules as planned. The Coast Guard's
acquisition directorate has developed several action items to help
address this mismatch by prioritizing acquisition program needs, but
these action items have not been adopted across the Coast Guard.
Additional Cost Growth and Schedule Delays beyond Those in Approved
Program Baselines Are Looming:
The estimated total acquisition cost of the Deepwater Program, based
on approved program baselines as of May 2011, could be as much as
approximately $29.3 billion, or about $5 billion more than the $24.2
billion baseline approved by DHS in 2007.[Footnote 9] This represents
an increase of approximately 21 percent. As of May 2011, DHS had
approved eight revised baselines from the 2007 program and the Coast
Guard had approved two based on a delegation of approval authority
from DHS. The increase in acquisition cost for these programs alone is
about 43 percent. Table 2 compares each Deepwater asset's acquisition
cost estimate from the 2007 program baseline with revised baselines,
if available.
Table 2: Increased Total Acquisition Cost Estimates for Deepwater
Assets with Approved Baselines as of May 2011 (Then-Year dollars):
Asset: NSC;
2007 baseline: $3.450 billion;
Revised baseline[A]: $4.749 billion;
Percentage change from 2007 baseline to revised baseline: 38%.
Asset: FRC;
2007 baseline: $3.206 billion;
Revised baseline[A]: $4.243 billion;
Percentage change from 2007 baseline to revised baseline: 32%.
Asset: OPC;
2007 baseline: $8.098 billion;
Revised baseline[A]: No revised baseline;
Percentage change from 2007 baseline to revised baseline: n/a.
Asset: Cutter Small Boats;
2007 baseline: $110 million;
Revised baseline[A]: No revised baseline[B];
Percentage change from 2007 baseline to revised baseline: n/a.
Asset: Medium Endurance Cutter Sustainment;
2007 baseline: $317 million;
Revised baseline[A]: $321 million;
Percentage change from 2007 baseline to revised baseline: 1%.
Asset: Patrol Boat Sustainment;
2007 baseline: $117 million;
Revised baseline[A]: $194 million;
Percentage change from 2007 baseline to revised baseline: 66%.
Asset: MPA;
2007 baseline: $1.706 billion;
Revised baseline[A]: $2.400 billion;
Percentage change from 2007 baseline to revised baseline: 41%.
Asset: HC-130J[C];
2007 baseline: $11 million;
Revised baseline[A]: $176 million;
Percentage change from 2007 baseline to revised baseline: 1,500%.
Asset: HC-130H;
2007 baseline: $610 million;
Revised baseline[A]: $745 million;
Percentage change from 2007 baseline to revised baseline: 22%.
Asset: HH-65[D];
2007 baseline: $741 million;
Revised baseline[A]: $1.242 billion;
Percentage change from 2007 baseline to revised baseline: 68%.
Asset: HH-60;
2007 baseline: $451 million;
Revised baseline[A]: $487 million;
Percentage change from 2007 baseline to revised baseline: 8%.
Asset: UAS;
2007 baseline: $503 million;
Revised baseline[A]: No revised baseline;
Percentage change from 2007 baseline to revised baseline: n/a.
Asset: C4ISR;
2007 baseline: $1.353 billion;
Revised baseline[A]: $2.522 billion;
Percentage change from 2007 baseline to revised baseline: 86%.
Asset: Other Deepwater Costs[E];
2007 baseline: $3.557 billion;
Revised baseline[A]: No new baseline will be developed;
Percentage change from 2007 baseline to revised baseline: n/a.
Asset: Total;
2007 baseline: $24.230 billion;
Revised baseline[A]: $29.347 billion;
Percentage change from 2007 baseline to revised baseline: 21%.
Source: GAO analysis of Coast Guard data.
Note: If the revised baselines present both threshold costs (the
maximum costs allowable before a breach occurs) and objective costs
(the minimum cost expected), threshold costs are used. An acquisition
program baseline breach of cost, schedule, or performance is an
inability to meet the threshold value of the specific parameter.
[A] When a revised baseline is not available, the 2007 baseline cost
is carried forward for calculating the total revised baseline cost.
[B] The cutter small boat program includes two different versions of
small boats. Only one had an approved revised baseline as of May 2011.
[C] The acquisition costs are related to the mission system. The
original HC-130J baseline only included costs associated with the
fleet introduction of missionized aircraft and did not include the
cost of acquiring the mission system and logistics support of the
first six aircraft, and the revised baseline corrected this omission.
[D] The 2007 approved baseline did not include airborne use of force,
National Capital Region Air Defense, and the surface search radar for
the HH-65. The addition of these capabilities constitutes about $420
million of the revised costs.
[E] Includes other Deepwater costs, such as program management, that
the Coast Guard states do not require a new baseline.
[End of table]
As we reported last year, these revised baselines reflect the Coast
Guard's and DHS's efforts to understand acquisition costs of
individual Deepwater assets, as well as insight into the drivers of
the cost growth. We previously reported on some of the factors
contributing to increased costs for the NSC, MPA, and FRC.[Footnote
10] For example, the Coast Guard has attributed the more than $1
billion rise in FRC's cost to a reflection 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. More
recently, DHS approved the revised baseline for the C4ISR program in
February 2011, 2 years after the Coast Guard submitted it to the
department. The revised baseline includes more than $1 billion in
additional acquisition costs to account for factors such as post-
September 11 requirements and the need to maintain a common core
system design beyond the previously established fiscal year 2014 end
date.
Additional cost growth is looming because the Coast Guard has yet to
develop revised baselines for all of the Deepwater assets and even the
approved baselines do not reflect all known costs. The Coast Guard has
not submitted to DHS revised baselines for the OPC or the UAS because
these two projects are pre-ADE-2. These two assets combined accounted
for over 35 percent of the original baseline. The uncertainty
regarding the OPC's cost estimate presents a key difficulty in
determining what the Deepwater program may end up costing. The
original 2007 estimate for one OPC was approximately $320 million.
[Footnote 11] However, the Coast Guard's fiscal years 2012-2016
capital investment plan cites a planned $640 million in fiscal year
2015 for the lead cutter.[Footnote 12] Coast Guard resource and
acquisition directorate officials stated that this $640 million is a
point estimate for the lead cutter, some design work, and project
management, but the estimate was not based on an approved life-cycle
cost estimate and the Coast Guard has identified affordability as a
risk for this program.[Footnote 13]
Coast Guard officials stated that some of the approved acquisition
program baselines fall short of the true funding needs. This not only
exacerbates the uncertainty surrounding the total cost of the
Deepwater acquisition, but also contributes to the approved Deepwater
Program no longer being achievable. For example, the NSC program's
approved baseline reflects a total acquisition cost of approximately
$4.7 billion.[Footnote 14] However, Congress has already appropriated
approximately $3.1 billion for the program and the Coast Guard's
fiscal years 2012-2016 capital investment plan indicates an additional
$2.5 billion is needed through fiscal year 2016 for a total of $5.6
billion to complete the acquisition. This would represent an increase
of approximately 19 percent over the approved acquisition cost
estimate for eight NSCs. According to section 575 of Title 14 of the
U.S. Code, the Commandant must submit a report to Congress no later
than 30 days after the Chief Acquisition Officer of the Coast Guard
becomes aware of a likely cost overrun for any level I or level II
acquisition program that will exceed 15 percent. If the likely cost
overrun is greater than 20 percent, the Commandant must include a
certification to Congress providing an explanation for continuing the
project. Senior Coast Guard acquisition officials stated that they
cannot corroborate a total cost of $5.6 billion for the NSC program,
or a cost increase of 19 percent, because the Coast Guard has not yet
completed a life-cycle cost analysis for the program. However, these
officials stated that a certification to Congress for the NSC program
is pending as well as one for the MPA program.
We previously reported several schedule delays for assets based on the
revised baselines and noted that as the Coast Guard reevaluates its
baselines, it gains improved insight into the final delivery dates for
all of the assets.[Footnote 15] While the Coast Guard's revised
baselines identify schedule delays for almost all of the programs,
these baselines do not reflect the extent of some of these delays as
detailed in the Coast Guard's fiscal years 2012-2016 capital
investment plan. For example, the MPA's revised baseline has final
asset delivery in 2020--a delay of 4 years from the 2007 baseline--but
the capital investment plan indicates final asset delivery in 2025--an
additional 5-year delay not reflected in the baseline. Coast Guard
resource officials responsible for preparing this plan acknowledged
that the final asset delivery dates in most of the revised baselines
are not current. The forthcoming delays identified in the fiscal years
2012-2016 capital investment plan indicate that the final asset
delivery dates approved in the 2007 Deepwater baseline are no longer
achievable for most assets. Figure 3 shows delays in final asset
delivery dates according to (1) the 2007 baseline; (2) the asset's
revised baseline, if available; and (3) the fiscal years 2012-2016
capital investment plan submitted to Congress.
Figure 3: Final Asset Delivery Dates for Selected Deepwater Assets
Identified in the 2007 Deepwater Baseline, Revised Baselines, and
Fiscal Years 2012-2016 Capital Investment Plan:
[Refer to PDF for image: illustrated table]
Asset: National Security Cutter:
Fiscal year: 2014: 2007 Deepwater baseline;
Fiscal year: 2016: Revised baseline;
Fiscal year: 2018: FY 2012 – 2016 Capital Investment Plan;
Change from 2007 baseline to FY 2012 – 2016 Capital Investment
Plan[A]: 4 years.
Asset: Fast Response Cutter[B];
Fiscal year: 2016: 2007 Deepwater baseline;
Fiscal year: 2021: Revised baseline;
Fiscal year: 2022: FY 2012 – 2016 Capital Investment Plan;
Change from 2007 baseline to FY 2012 – 2016 Capital Investment
Plan[A]: 6 years.
Asset: Medium Endurance Cutter Sustainment;
Fiscal year: 2014: FY 2012 – 2016 Capital Investment Plan;
Fiscal year: 2016: 2007 Deepwater baseline;
Fiscal year: 2017: Revised baseline;
Change from 2007 baseline to FY 2012 – 2016 Capital Investment
Plan[A]: (2 years).
Asset: Patrol Boat Sustainment;
Fiscal year: 2013: 2007 Deepwater baseline;
Fiscal year: 2014: Revised baseline;
Change from 2007 baseline to FY 2012 – 2016 Capital Investment
Plan[A]: n/a.
Asset: Maritime Patrol Aircraft;
Fiscal year: 2016: 2007 Deepwater baseline;
Fiscal year: 2020: Revised baseline;
Fiscal year: 2025: FY 2012 – 2016 Capital Investment Plan;
Change from 2007 baseline to FY 2012 – 2016 Capital Investment
Plan[A]: 9 years.
Asset: HC-130J;
Fiscal year: 2009: 2007 Deepwater baseline;
Fiscal year: 2011: Revised baseline;
Fiscal year: 2011: FY 2012 – 2016 Capital Investment Plan;
Change from 2007 baseline to FY 2012 – 2016 Capital Investment
Plan[A]: 2 years.
Asset: HC-130H;
Fiscal year: 2017: 2007 Deepwater baseline;
Fiscal year: 2017: Revised baseline;
Fiscal year: 2022: FY 2012 – 2016 Capital Investment Plan;
Change from 2007 baseline to FY 2012 – 2016 Capital Investment
Plan[A]: 5 years.
Asset: HH-65;
Fiscal year: 2013: 2007 Deepwater baseline;
Fiscal year: 2020: Revised baseline;
Fiscal year: 2020: FY 2012 – 2016 Capital Investment Plan;
Change from 2007 baseline to FY 2012 – 2016 Capital Investment
Plan[A]: 7 years.
Asset: HH-60;
Fiscal year: 2019: 2007 Deepwater baseline;
Fiscal year: 2020: Revised baseline;
Fiscal year: 2020: FY 2012 – 2016 Capital Investment Plan;
Change from 2007 baseline to FY 2012 – 2016 Capital Investment
Plan[A]: 1 year.
Asset: C4ISR;
Fiscal year: 2014: 2007 Deepwater baseline;
Fiscal year: 2025: FY 2012 – 2016 Capital Investment Plan;
Fiscal year: 2027: Revised baseline;
Change from 2007 baseline to FY 2012 – 2016 Capital Investment
Plan[A]: 11 years.
Asset: Offshore Patrol Cutter;
Fiscal year: 2021: 2007 Deepwater baseline;
Fiscal year: 2031: FY 2012 – 2016 Capital Investment Plan;
Change from 2007 baseline to FY 2012 – 2016 Capital Investment
Plan[A]: 10 years.
Source: GAO analysis of Coast Guard data.
[A] To calculate the change from the final asset delivery date
reported in the 2007 Deepwater baseline to the final asset delivery
date reported in the fiscal years 2012-2016 capital investment plan,
we used the first month of each fiscal year. If the approved baselines
provide both threshold and objective dates, threshold dates (which are
the latest allowable dates) are used.
[B] In the 2007 baseline, costs for two variants of the FRC were
presented. For the 2007 baseline we used the last date reported for
final asset delivery.
[End of figure]
Coast Guard's Cost Estimates and Schedules for Selected Assets Did Not
Reflect Key Best Practices:
Our analysis of selected assets' life-cycle cost estimates found that
the Coast Guard did not fully follow best practices for developing
reliable life-cycle cost estimates, which is at the core of
successfully managing a project within cost and affordability
guidelines. The Major Systems Acquisition Manual cites our Cost
Estimating and Assessment Guide as a source for guidance and best
practice information.[Footnote 16] Furthermore, we found that the
Coast Guard is not receiving reliable schedules for selected assets
from its contractors, which should be inputs into a programwide
schedule. We reviewed the MPA program's life-cycle cost estimate and
schedule because this program has the highest life-cycle cost estimate
of all Deepwater assets and has experienced schedule delays. We also
reviewed the NSC program's schedule because this program has the
second highest life-cycle cost estimate and has also experienced
schedule delays. The Coast Guard was not able to provide us with a
current NSC life-cycle cost estimate to review because the program is
revising its estimate, an effort that was directed in a December 2008
DHS acquisition decision memorandum. Therefore, we reviewed the C4ISR
program's life-cycle cost estimate because the estimate was complete,
but the program did not yet have a DHS-approved acquisition program
baseline and there was uncertainty concerning the direction of the
program.
Reliable life-cycle cost estimates reflect four characteristics. They
are (1) well-documented, (2) comprehensive, (3) accurate, and (4)
credible.[Footnote 17] These four characteristics encompass 12 best
practices for reliable program life-cycle cost estimates that are
identified in appendix III. The results of our review of the MPA and
C4ISR life-cycle cost estimates are summarized in figure 4. Appendix
III contains a more detailed discussion of the extent to which the two
cost estimates met the four best practices criteria.
Figure 4: Extent to which MPA and C4ISR Life-cycle Cost Estimates Meet
Best Practices:
[Refer to PDF for image: illustrated table]
Best practice: Well-documented;
Best practice description: The cost estimates should be supported by
detailed documentation that describes the purpose of the estimate, the
program background and system description, the scope of the estimate,
the ground rules and assumptions, all data sources, estimating
methodology and rationale, and the results of the risk analysis.
Moreover, this information should be captured in such a way that the
data used to derive the estimate can be traced back to, and verified
against, their sources;
MPA: August 2009: Substantially met;
C4ISR: December 2009: Substantially met.
Best practice: Comprehensive;
Best practice description: The cost estimates should include costs of
the program over its full life-cycle, provide a level of detail
appropriate to ensure that cost elements are neither omitted nor
double-counted, and document all cost-influencing ground rules and
assumptions;
MPA: August 2009: Substantially met;
C4ISR: December 2009: Substantially met.
Best practice: Accurate;
Best practice description: The cost estimate should be based on an
assessment of most likely costs (adjusted for inflation), documented
assumptions, and historical cost estimates and actual experiences on
other comparable programs. Estimates should be cross-checked against
an independent cost estimate for accuracy, double counting, and
omissions.[A] In addition, the estimate should be updated to reflect
any changes;
MPA: August 2009: Partially met;
C4ISR: December 2009: Partially met.
Best practice: Credible;
Best practice description: The cost estimates should discuss any
limitations of the analysis because of uncertainty, or biases
surrounding data or assumptions. Risk and uncertainty analysis should
be performed to determine the level of risk associated with the
estimate. Further, the estimate‘s results should be cross-checked
against an independent estimate;
MPA: August 2009: Substantially met;
C4ISR: December 2009: Minimally met.
Source: GAO analysis based on information provided by the Coast Guard.
Note:
"Not met" means the Coast Guard provided no evidence that satisfies
any of the criterion.
"Minimally met" means the Coast Guard provided evidence that satisfies
a small portion of the criterion.
"Partially met" means the Coast Guard provided evidence that satisfies
about half of the criterion.
"Substantially" means the Coast Guard provided evidence that satisfies
a large portion of the criterion.
"Fully met" means the Coast Guard provided evidence that completely
satisfies the criterion.
[A] An independent cost estimate is another estimate based on the same
technical information that is used to validate and cross-check the
baseline estimate, but is prepared by a person or organization that
has no stake in the approval of the project.
[End of figure]
While both life-cycle cost estimates addressed elements of best
practices, their effectiveness is limited because they do not reflect
the current program and have not been updated on a regular basis,
which is considered a best practice for an accurate cost estimate. For
example, the MPA life-cycle cost estimate was completed in August
2009. While the Coast Guard has obtained actual costs, the program
office has not updated the formal estimate with these actual costs.
This limits the program's ability to analyze changes in program costs
and provide decision makers with accurate information. The Coast Guard
did include a sensitivity analysis to identify cost drivers, but this
analysis did not examine possible effects of funding cuts--an area of
risk for the MPA program. The Coast Guard completed the C4ISR life-
cycle cost estimate in December 2009. DHS reviewed this estimate, but
did not validate it. We found that this estimate was minimally
credible for several reasons, including that the program did not
complete a sensitivity analysis of cost drivers--even though cost
drivers were identified and major funding cuts occurred which led to a
program breach. C4ISR program officials told us that they are
currently revising the 2009 estimate because it is no longer
reflective of the current program. Coast Guard C4ISR officials agreed
with our analysis and stated that they plan to incorporate the best
practices going forward.
We found that neither the MPA nor the NSC programs are receiving
schedule data from their contractors that fully meet schedule best
practices. Our guidance identifies nine interrelated scheduling best
practices that are integral to a reliable and effective master
schedule. For example, if the schedule does not capture all
activities, there will be uncertainty about whether activities are
sequenced in the correct order and whether the schedule properly
reflects the resources needed to accomplish work. MPA and NSC
contractor schedule data should feed into each program's integrated
master schedule in order to reliably forecast key program dates.
However, the NSC program does not have an integrated master schedule
that would account for all planned government and contractor efforts
for the whole program. The program is currently managing a schedule
for only the third cutter out of a total planned eight cutters. The
MPA program does have an integrated master schedule which it updates
with the contractor schedule data. However, our assessment found the
contractor's schedule for aircraft 12-14 is unreliable. Because an
integrated master schedule is intended to connect all government and
contractor schedule work, unreliable contractor schedule data will
result in unreliable forecasted dates within the integrated master
schedule. Figure 5 summarizes the results of our review of the MPA
contractor's schedule for aircraft 12-14 and the NSC 3
schedule.[Footnote 18] Appendix IV includes a detailed discussion of
our analysis.
Figure 5: Extent to Which the Schedules for MPA 12-14 and NSC 3 Meet
Best Practices:
[Refer to PDF for image: illustrated table]
Best practice: Capturing all activities;
Best practice description: A schedule should reflect all activities as
defined in the program‘s work breakdown structure to include
activities to be performed by the government and the contractor;
Extent to which schedule met best practices:
MPA 12-14: Partially met;
NSC 3: Partially met.
Best practice: Sequencing all activities;
Best practice description: The schedule should be planned so that it
can meet program critical dates;
Extent to which schedule met best practices:
MPA 12-14: Minimally met;
NSC 3: Partially met.
Best practice: Assigning resources;
Best practice description: The schedule should realistically reflect
what resources (i.e., labor, material, and overhead) to activities are
needed to do the work, whether all required resources will be
available when needed, and whether any funding or time constraints
exist;
Extent to which schedule met best practices:
MPA 12-14: Minimally met;
NSC 3: Substantially met.
Best practice: Establishing the duration of all activities;
Best practice description: The schedule should reflect how long each
activity will take to execute;
Extent to which schedule met best practices:
MPA 12-14: Partially met;
NSC 3: Partially met.
Best practice: Integrating schedule activities horizontally and
vertically;
Best practice description: The schedule should be horizontally
integrated, meaning that it should link the products and outcomes
associated with already sequenced activities. These links are commonly
referred to as ’hand offs“ and serve to verify that activities are
arranged in the right order to achieve aggregated products or
outcomes. The schedule should also be vertically integrated, meaning
that traceability exists among varying levels of activities and
supporting tasks and sub-tasks. Such mapping or alignment among levels
enables different groups to work to the same master schedule;
Extent to which schedule met best practices:
MPA 12-14: Minimally met;
NSC 3: Partially met.
Best practice: Establishing the critical path;
Best practice description: The schedule should identify a critical
path-”the longest duration path through the sequenced list of
activities-”developed using scheduling software. The establishment of
a program‘s critical path is necessary for examining the effects of
any activity slipping along this path. Potential problems that may
occur on or near the critical path should also be identified and
reflected in the scheduling of the time for high risk activities;
Extent to which schedule met best practices:
MPA 12-14: Not met;
NSC 3: Partially met.
Best practice: Identifying reasonable float between activities;
Best practice description: The schedule should identify float”the time
that a predecessor activity can slip before the delay affects
successor activities”so that schedule flexibility can be determined.
As a general rule, activities along the critical path typically have
the least amount of float;
Extent to which schedule met best practices:
MPA 12-14: Minimally met;
NSC 3: Partially met.
Best practice: Conducting a schedule risk analysis;
Best practice description: The schedule should reflect a schedule risk
analysis conducted using a good critical path method schedule and data
about project schedule risks as well as statistical techniques to
predict the level of confidence in meeting a program‘s completion
date, the amount of time contingency needed for a level of confidence,
and the identification of high-priority risks. This analysis focuses
not only on critical path activities but also on other schedule paths
that may become critical;
Extent to which schedule met best practices:
MPA 12-14: Not met;
NSC 3: Not met.
Best practice: Updating the schedule using logic and durations to
determine dates;
Best practice description: The schedule should use logic and durations
in order to reflect realistic start and completion dates. The schedule
should be continually monitored to determine when forecasted
completion dates differ from the planned dates, which can be used to
determine whether schedule variances will affect future work;
Extent to which schedule met best practices:
MPA 12-14: Not met;
NSC 3: Substantially met.
Source: GAO analysis based on information provided by the Coast Guard.
Note:
"Not met" means the Coast Guard provided no evidence that satisfies
any of the criterion.
"Minimally" means the Coast Guard provided evidence that satisfies a
small portion of the criterion.
"Partially" means the Coast Guard provided evidence that satisfies
about half of the criterion.
"Substantially" means the Coast Guard provided evidence that satisfies
a large portion of the criterion.
"Fully met" means the Coast Guard provided evidence that completely
satisfies the criterion.
[End of figure]
As shown above, the MPA contractor's schedule for aircraft 12-14 did
not substantially or fully meet any of the nine best practices. Based
on our discussions with the program manager, this condition stems, in
part, from a lack of program management resources, as the program
office does not have trained personnel to create and maintain a
schedule. In addition, while program officials stated that they do
conduct meetings to provide oversight on production and delivery
schedules, it does not appear that management is conducting proper
oversight of existing schedule requirements. Program officials stated
that they were not interested in obtaining a detailed schedule, even
though it is a deliverable in the production contract, because the MPA
contract is fixed price and the contractor's past delivery has been
good. However, regardless of contract type, best practices call for a
schedule to include all activities necessary for the program to be
successfully completed. After we raised concerns about the Coast Guard
paying for a detailed schedule that the program office does not plan
to request or use, program officials told us that the contractor has
been very responsive to Coast Guard's subsequent direction to update
the schedule to incorporate best practices. They said the Coast Guard
has modified the schedule reporting procedures so that the contractor
will provide monthly reporting of the data.
The NSC 3 schedule substantially met two best practices and partially
met six best practices, but the program office did not conduct a
schedule risk analysis to predict a level of confidence in meeting the
completion date. The purpose of the analysis is to develop a
probability distribution of possible completion dates that reflect the
project and its quantified risks. This analysis can help project
managers understand the most important risks to the project and focus
on mitigating them. A schedule risk analysis will also calculate
schedule reserve, which can be set aside for those activities
identified as high risk. Without this reserve, the program faces the
risk of delays to the scheduled completion date if any delays were to
occur on critical path activities.[Footnote 19] Senior Coast Guard
acquisition officials stated that the Coast Guard has high confidence
in the projected delivery date and uses a full range of project tools,
including the schedule, to project the delivery date. Collectively
though, we found that the weaknesses in not meeting the nine best
practices for the NSC 3 program integrated master schedule increase
the risk of schedule slippages and related cost overruns and make
meaningful measurement and oversight of program status and progress,
as well as accountability for results, difficult to achieve.
Budget Planning for Deepwater Does Not Reflect the Realities of a Cost
Constrained Environment, Exacerbating Program Uncertainties:
Coast Guard and DHS officials agreed that the annual funding needed to
support all approved Deepwater acquisition program baselines exceeds
current and expected funding levels, particularly in this constrained
fiscal climate. For example, Coast Guard acquisition officials stated
that up to $1.9 billion per year would be needed to support the
approved Deepwater baselines, but they expect Deepwater funding levels
to be closer to $1.2 billion annually over the next several years.
[Footnote 20] Therefore the Coast Guard is managing a portfolio--which
includes many revised baselines approved by DHS--that is expected to
cost more than what its annual budget will likely support. Our
previous work on Department of Defense (DOD) acquisitions shows that
when agencies commit to more programs than resources can support,
unhealthy competition for funding is created among programs. This
situation can lead to inefficient funding adjustments, such as moving
money from one program to another or deferring costs to the future.
[Footnote 21]
When a program's projected funding levels are lower than what the
program was previously projected to receive, the program is more
likely to have schedule breaches and other problems, as the program
can no longer remain on the planned schedule. From September-October
2010, the Coast Guard reported potential baseline breaches to DHS for
the C4ISR, HC-130H, and HH-60 programs that were caused, at least in
part, by reduced funding profiles in the fiscal years 2011-2015
capital investment plan.[Footnote 22] For example, in the fiscal years
2008 and 2009 capital investment plans, the Coast Guard had
anticipated allocating 20-27 percent of its planned $1.1 billion
fiscal year 2011 Deepwater budget to its aviation projects. In its
actual fiscal year 2011 budget request, however, the Coast Guard only
allocated about 9 percent of the $1.1 billion to aviation projects.
The percentage of dollars allocated to surface projects increased--
largely driven by an increase of dollars allocated to the FRC program.
Figure 6 illustrates how the allocation of acquisition, construction,
and improvements dollars in the Coast Guard's budget request in fiscal
years 2008, 2009, 2010, and 2011 differed from prior year plans.
Figure 6: Allocation of Deepwater Acquisition, Construction, and
Improvements Dollars in the Fiscal Years 2008, 2009, 2010, and 2011
Capital Investment Plans (Then-Year Dollars):
[Refer to PDF for image: illustrated table]
[Interactive features: Roll your mouse over the circle for more
information regarding each fiscal year‘s Capital Investment Plan. For
the print version, please refer to Figure 6 in Appendix V for the
details]
Each fiscal year allocation consists of the following:
Requested;
Aviation;
Surface;
C4ISR;
Other.
Fiscal year 2008-2012: Capital Investment Plan:
2008: $837 million;
2009: $1.03 billion;
2010: $1.07 billion;
2011: $1.13 billion;
2012: $1.1 billion.
Fiscal year 2009-2013: Capital Investment Plan:
2009: $990 million;
2010: $969 million;
2011: $1.12 billion;
2012: $1.04 billion;
2013: $1 billion.
Fiscal year 2010-2014: Capital Investment Plan:
2010: $1.05 billion;
2011: [Empty];
2012: [Empty];
2013: [Empty];
2014: [Empty].
Fiscal year 2011-2015: Capital Investment Plan:
2011: $1.11 billion;
2012: $1.18 billion;
2013: $1.19 billion;
2014: $1.2 billion;
2015: $1.27 billion.
Source: GAO analysis of Coast Guard data.
[End of figure]
Note: The Coast Guard's fiscal years 2010-2014 capital investment plan
did not include a plan for years 2011-2014.
[End of figure]
In the October 2010 Blueprint for Continuous Improvement (Blueprint),
signed by the Commandant, the Coast Guard's Assistant Commandant for
Acquisition identified the need to develop and implement effective
decision making to maximize results and manage risk within resource
constraints. The Blueprint outlines several action items, expected to
be completed by the end of fiscal year 2011, to accomplish this goal.
The action items include:
* promoting stability in the Coast Guard's capital investment plan by
measuring the percentage of projects stably funded year to year in the
plan,
* ensuring acquisition program baseline alignment with the capital
investment plan by measuring the percentage of projects where the
acquisition program baselines fit into the capital investment plan,
and:
* establishing Coast Guard project priorities.
Acquisition officials responsible for implementing the Blueprint
action items acknowledged that successful implementation requires buy-
in from leadership. Senior resource directorate officials responsible
for capital investment planning told us that the action items in the
Blueprint are "noble endeavors," but that the directorates outside of
the acquisition directorate are not held responsible for accomplishing
them. According to the Major Systems Acquisition Manual, the Component
Acquisition Executive (Vice-Commandant), to whom both the acquisition
and resource directorates report, is responsible for establishing
acquisition processes to track the extent to which requisite resources
and support are provided to project managers.
In addition to the acquisition directorate's recognition of the need
to establish priorities to address known upcoming resource
constraints, in August 2010, the Coast Guard's flag-level Executive
Oversight Council--chaired by the Assistant Commandant for Acquisition
with representatives from other directorates--tasked a team to
recommend strategies to revise acquisition program baselines to better
align with annual budgets.[Footnote 23] This acknowledgment that
program baselines must be revised to fit fiscal constraints, however,
is not reflected in the Coast Guard's most recent capital investment
plan. Table 3 presents planned funding projections for Deepwater
assets as outlined in the fiscal years 2012-2016 capital investment
plan. With the exception of fiscal year 2012, the Coast Guard is
planning for funding levels well above the expected funding level of
$1.2 billion.[Footnote 24]
Table 3: Fiscal Years 2012-2016 Capital Investment Plan for Deepwater
Assets (Then-Year dollars):
Fiscal Years 2012-2016 Capital Investment Plan:
FY 2012: $870,240,000;
FY 2013: $1,374,500,000;
FY 2014: $1,417,100,000;
FY 2015: $2,039,300,000;
FY 2016: $1,419,400,000.
Source: Coast Guard.
[End of table]
This outyear funding plan seems unrealistic, especially in light of
the rapidly building fiscal pressures facing our national government
and DHS's direction for future budget planning. To illustrate, in
fiscal year 2015, the Coast Guard plans to request funding for
construction of three major Deepwater surface assets: NSC, OPC, and
FRC, but the Coast Guard has never requested funding for construction
of three major Deepwater surface assets in the same year before. In a
recent testimony, the Commandant of the Coast Guard stated that the
plan for fiscal year 2015 reflects the Coast Guard's actual need for
funding in that year. If program costs and schedules are tied to this
funding plan and it is not executable, these programs will likely have
schedule and cost breaches. When a program has a breach, the program
manager must develop a remediation plan that explains the
circumstances of the breach and propose corrective action and, if
required, revise the acquisition program baseline.
Execution of the Deepwater Program Is Progressing, but Key Decisions
Remain for the Design and Testing of Deepwater Assets:
The Coast Guard continues to strengthen its acquisition management
capabilities. As lead systems integrator, the Coast Guard is faced
with several decisions to help ensure that the promised capabilities
of assets still in design are achieved. For example, whether or not
the planned system-of-systems design is achievable largely depends on
the Coast Guard's ability to make important decisions regarding the
design of the C4ISR program, as the Coast Guard has continued to
define and redefine its strategy for this program since 2007. For
those assets already under construction and operational, preliminary
tests have yielded mixed results and identified issues that need to be
addressed prior to upcoming test events. As part of its role as lead
systems integrator, the Coast Guard is gaining a better understanding
of each asset's cost, schedule, and technical risks, but this
information is not always fully conveyed in the Coast Guard's
quarterly reports to Congress.
Coast Guard Continues to Strengthen Its Acquisition Management
Capabilities:
The Coast Guard continues to strengthen its acquisition management
capabilities in its role of lead systems integrator and decision maker
for Deepwater acquisitions. We recently reported that the Coast Guard
updated its Major Systems Acquisition Manual in November 2010 to
better reflect best practices, in response to our prior
recommendations, and to more closely align its policy with the DHS
Acquisition Management Directive 102-01.[Footnote 25] We also reported
that according to the Coast Guard, it currently has 81 interagency
agreements, memorandums of agreement, and other arrangements in place,
primarily with DOD agencies, which helps programs leverage DOD
expertise and contracts. To further facilitate the acquisition
process, the Coast Guard's Acquisition Directorate has increased the
involvement of the Executive Oversight Council as a structured way for
flag-level and senior executive officials in the requirements,
acquisition, and resources directorates, among others, to discuss
programs and provide oversight on a regular basis.
In addition to these efforts to strengthen its management
capabilities, the Coast Guard has significantly reduced its
relationship with ICGS. ICGS's remaining responsibilities include
completing construction of the third NSC and a portion of the C4ISR
project. In moving away from ICGS, the Coast Guard has awarded fixed-
price contracts directly to prime contractors. For example, since our
last report in July 2010, the Coast Guard: (1) awarded a sole source
fixed price contract for the fourth NSC and long lead materials for
the fifth NSC to Northrop Grumman Shipbuilding Systems, (2) exercised
fixed price options for four additional FRCs on the contract with
Bollinger Shipyards, and (3) awarded a fixed price contract to EADS
for three MPAs with options for up to six additional aircraft,
following a limited competition in which EADS made the only offer.
[Footnote 26] In addition, the Coast Guard has developed acquisition
strategies intended to inject competition into future procurements
where possible. For example, the Coast Guard is planning to buy a
"reprocurement data licensing package" from Bollinger Shipyards. This
information package, according to project officials, is expected to
provide the Coast Guard with the specifications to allow full and open
competition of future FRCs. Our previous work has shown that when the
government owns technical specifications, its does not need to rely on
one contractor to meet requirements.[Footnote 27] As part of its
acquisition strategy for the OPC, the Coast Guard plans to award
multiple preliminary design contracts and then select the best value
contract design for a detailed design and production contract. This
planned acquisition strategy will also include an option for a data
and licensing package, similar to the FRC. In May 2011, the Coast
Guard released a draft of the OPC specifications for industry review
in advance of releasing a request for proposals, currently planned to
occur in the fall of 2011. Lastly, the Coast Guard is in the process
of holding a competition for the over-the-horizon cutter small boat
through a small business set-aside acquisition approach.
Key Decisions Remain for Assets in Design to Ensure Promised
Capabilities Are Achieved:
Several Deepwater assets remain in the "analyze/select" or "need"
phases of the Coast Guard's acquisition process which involve
decisions that affect the system-of-systems design. At the start of
our review, these included portions of the C4ISR project, OPC, cutter
small boats, unmanned aircraft system, and portions of the HH-60
helicopter.
C4ISR:
The Deepwater Program was designed to improve the detection and
engagement of potential targets in the maritime domain. Key to the
Coast Guard's success is engaging targets of interest, such as a
terrorist activity within the U.S. maritime domain. To do this, the
Coast Guard goes through a process of surveying the maritime domain,
detecting and classifying targets, and then responding to the
situation. The planned system-of-systems design connects the Deepwater
assets through a single command and control architecture--C4ISR--that
is designed to increase the probability of mission success by
improving the accuracy and speed of this process. For example, as
envisioned, the MPA would conduct more efficient searches in
conjunction with other assets. During a search for a missing vessel,
the MPA would receive information from the operational commander
regarding the location of the distress signal and then communicate
search information back to the commander and with other on-scene Coast
Guard assets. The commander and the MPA could then increase the speed
of the response by locating the closest available cutter and informing
it of injuries and other issues.
Figure 7 depicts the Deepwater concept of using information technology
to more quickly and successfully execute missions.
Figure 7: Deepwater System-of-Systems Concept:
[Refer to PDF for image: illustration]
Source: © 2001 Integrated Coast Guard Systems, LLC. Provided courtesy
of Integrated Coast Guard Systems, LLC.
[End of figure]
To achieve the system-of-systems design, the Coast Guard planned for
C4ISR to be the integrating component of Deepwater. This was expected
to improve mission performance by increasing the success rate and
frequency of engaging targets. However, the $600 million ICGS-
developed Coast Guard command and control system, currently on the
NSC, MPA, and HC-130J, does not achieve the system-of-systems vision.
After taking over as lead systems integrator in 2007, the Coast Guard
has changed its C4ISR strategy multiple times in an effort to achieve
a common software system for all Deepwater assets that facilitates
data sharing between these assets and external partners. But as the
Coast Guard continues to change its strategy, decisions remain
regarding how to achieve this promised capability in a feasible
manner. These decisions relate to realizing the overall goal of
sharing data between all of the Deepwater assets, creating and
updating acquisition documents, and developing a strategy for
designing and managing the C4ISR technical baselines.
The Coast Guard has yet to achieve the promised capability of an
interoperable system with communication and data sharing between all
assets and may limit some of the planned capability. According to the
approved Deepwater mission needs statement, data sharing, centralized
networks, and information from sensors are critical for the Coast
Guard and DHS to achieve mission performance in a resource-
constrained world. While according to information technology
officials, the Coast Guard has voice communications between assets,
the currently operational Deepwater assets--NSC, MPA, HC-130J, HH-60,
and HH-65--do not yet have the capability to fully share data with
each other or commanders. In addition, the Coast Guard has not fully
established a centralized network for C4ISR, creating communications
problems. For example, the NSC and MPA use classified systems to
record and process C4ISR data while the HC-130J and HC-130H have
unclassified systems. According to operators, sharing data gathered by
the MPA during the Deepwater Horizon oil spill incident was difficult
because all information gathered by the MPA was maintained on a
classified system. According to senior officials, the Coast Guard
recognizes that classification issues inhibit fully sharing data and
is working to address these issues through changes to Coast Guard
policies, which have not been finalized.
Furthermore, it is unclear whether or not full data interoperability
between all assets remains a goal for the Deepwater program. Overall,
according to the Coast Guard's recent cost estimating baseline
document, the C4ISR system will be installed on only 127 air and
surface assets, which is fewer than half of the approximately 300
assets within the Deepwater acquisition. For example, senior
acquisition officials stated that the helicopters are not going to be
equipped with the C4ISR software that is planned to enable data
sharing with commanders and other assets, but this has not yet been
reflected in project documentation.[Footnote 28] A senior official
with the information technology directorate questioned the extent to
which the level of shared data communications as set forth in the
mission needs statement would help the Coast Guard more efficiently
achieve mission success because some Coast Guard assets, such as the
cutters, rarely work in tandem. Additionally, project officials stated
that the vision of full data-sharing capability between assets,
depicted above, is transforming into a "hub and spoke" model where
assets share data with shore-based command centers that maintain the
operating picture and maritime awareness; this also has yet to be
detailed in project documentation. Given these uncertainties, the
Coast Guard does not have a clear vision of the C4ISR required to meet
its missions.
The Coast Guard is also currently managing the C4ISR program without
key acquisition documents, including an acquisition program baseline
that reflects the planned program, a credible life-cycle cost
estimate, and an operational requirements document for the entire
program.
* The Coast Guard has replanned the C4ISR project baseline multiple
times since 2007, which, under ICGS, contained a high-level
description of the system with no requirements document to provide
further detail. In November 2009, the Coast Guard submitted a revised
baseline to DHS that provided some additional detail of the planned
capabilities, including capabilities designed to protect the homeland,
but also delayed development of these capabilities due to concerns
about the reliability and affordability of the ICGS system. DHS
approved the baseline in February 2011, but by that time it was out of
date. For example, according to this baseline, the Coast Guard was
planning to reach a milestone for developing improved capabilities on
selected assets in early fiscal year 2010--an event that was
indefinitely deferred before the baseline was approved and is now
scheduled to take place no sooner than 2017. Coast Guard officials
stated that a revised acquisition program baseline is currently being
drafted.
* A key input into the acquisition program baseline is a credible life-
cycle cost estimate, but the Coast Guard is currently revising the
C4ISR estimate and officials stated that the current cost estimate no
longer reflects the current status of the program.
* An operational requirements document for the entire project has not
yet been completed; project officials told us that requirements
documents for portions of the system are in the review process or
under development. However, the documents in review do not include
C4ISR requirements for the OPC. C4ISR project officials stated that
those requirements are included in the OPC's operational requirements
document, but acknowledged that these requirements are vague.
In addition to inadequate or incomplete acquisition documentation, the
Coast Guard also lacks technical planning documents necessary to both
articulate the vision of a common C4ISR baseline--a key goal of the
C4ISR project--and to guide the development of the C4ISR system in
such a way that the system on each asset remains true to the vision.
While Coast Guard officials told us that their goal is still a common
software baseline, we have identified at least four software variants
in operation or under development but whose commonality is not clear:
* the legacy Coast Guard system prior to Deepwater,
* the ICGS-developed Coast Guard command and control system (ICGS
system),
* a Coast Guard-developed command and control system called Seawatch,
and:
* a forthcoming Seawatch-ICGS hybrid system for the NSC.
The Coast Guard continues to maintain a legacy C4ISR system which is
operational on the 210-foot and 270-foot cutters and maintains the
ICGS system on the NSC, MPA, and HC-130J. The Coast Guard also planned
to put the ICGS system on the 110-foot patrol boats that were to be
converted to 123-foot boats.[Footnote 29] According to FRC program
officials, after this conversion failed for structural reasons and the
FRC program was accelerated to offset the loss of planned patrol boat
capability, the Coast Guard planned to use the legacy C4ISR system for
the FRC. However, due to obsolescence of the legacy system, the Coast
Guard's information technology directorate developed a new system
called Seawatch for FRC. The Coast Guard has since decided to also
incorporate Seawatch into the upgrades to the original ICGS system for
NSCs five through eight and plans to do so for NSCs one through four,
but this effort is currently not funded. Until this Seawatch-ICGS
hybrid system is installed on the first four NSCs, the Coast Guard
will have to maintain two systems for the NSC. Further, according to
C4ISR project officials, the Coast Guard is currently analyzing the
extent to which the Seawatch-ICGS hybrid system meets the requirements
for the OPC.
The C4ISR project has yet to identify a software system that will meet
the requirements of the HC-130H, HH-60, and HH-65 aircraft and that is
also compatible with surface assets. The Coast Guard is redesigning
the ICGS system currently on the MPA and HC-130J to replace some parts
that are now obsolete so that the Coast Guard can hold a competition
for the system. The goal is to develop a common software baseline for
the MPA and the HC-130J to address variations in the ICGS system
currently on these assets. Once the Coast Guard finishes developing
this common software baseline for the MPA and HC-130J, it will be a
new baseline in addition to the four baselines identified above. While
some officials in the capabilities directorate told us that Seawatch
could become the common command and control system for the Coast
Guard, Seawatch system developers in the information technology
directorate told us that Seawatch is not currently suitable for
aviation assets. Table 4 shows the software system currently installed
on each asset and the anticipated system for the asset.
Table 4: Current C4ISR System on Each Deepwater Asset Compared to
Planned C4ISR System:
Asset: NSCs 1-4;
Current C4ISR system: ICGS Developed System;
Planned C4ISR system: Seawatch-ICGS hybrid system.
Asset: NSCs 5-8;
Current C4ISR system: n/a;
Planned C4ISR system: Seawatch-ICGS hybrid system.
Asset: OPC;
Current C4ISR system: n/a;
Planned C4ISR system: Unknown pending Coast Guard analysis.
Asset: FRC;
Current C4ISR system: Coast Guard developed system (Seawatch);
Planned C4ISR system: Coast Guard developed system (Seawatch).
Asset: MPA;
Current C4ISR system: ICGS Developed System;
Planned C4ISR system: Unknown pending Coast Guard analysis.
Asset: HC-130J;
Current C4ISR system: ICGS Developed System;
Planned C4ISR system: Unknown pending Coast Guard analysis.
Asset: HC-130H;
Current C4ISR system: Legacy System (prior to ICGS);
Planned C4ISR system: Unknown pending Coast Guard analysis.
Asset: HH-60/65;
Current C4ISR system: None;
Planned C4ISR system: Unknown pending Coast Guard analysis.
Source: GAO analysis of Coast Guard information.
Note: "n/a" indicates that the system is currently not in use while
"none" indicates that the system does not have a C4ISR system though
it has voice communications, an avionics system, and sensors.
[End of table]
According to Coast Guard information technology officials, the
abundance of software baselines could increase the overall instability
of the C4ISR system and complexity of the data sharing between assets.
Moreover, additional baselines may continue to proliferate because
each asset is now responsible for managing and funding technology
obsolescence as opposed to having a Coast Guard-wide technology
obsolescence prevention program. From 2008 to 2010, the Coast Guard
had funded a technology obsolescence program to avoid costly C4ISR
system replacements by proactively addressing out-of-date technology.
For example, program officials stated that the Coast Guard established
a uniform software baseline for 12 MPA mission system pallets under
this program. The Coast Guard is currently developing a policy to
manage obsolete technology now that the technology obsolescence
program is no longer funded.
Offshore Patrol Cutter:
Important decisions remain to be made regarding the OPC, the largest
cost driver in the Deepwater program. DHS approved the OPC's
requirements document in October 2010 despite unresolved concerns
about three key performance parameters--seakeeping, speed, and range--
that shape a substantial portion of the cutter's design. For example,
DHS questioned the need for the cutter to conduct full operations
during difficult sea conditions, which impact the weight of the cutter
and ultimately its cost. The Coast Guard has stated that limiting the
ability to conduct operations during difficult sea conditions would
preclude operations in key mission areas. While it approved the OPC
requirements document, DHS at the same time commissioned a study to
further examine these three key performance parameters. According to
Coast Guard officials, the study conducted by the Center for Naval
Analysis found that the three key performance parameters were
reasonable, accurate, and adequately documented. By approving the
operational requirements document before these factors were resolved,
DHS did not ensure that the cutter was affordable, feasible, and
unambiguous and required no additional trade-off decisions, as
outlined in the Major Systems Acquisition Manual. Our previous work on
DHS acquisition management found that the department's inability to
properly execute its oversight function has led to cost overruns,
schedule delays, and assets that do not meet requirements.[Footnote 30]
In addition to the three performance parameters discussed above, other
decisions, with substantial cost and capability implications for the
OPC, remain unresolved. For example, it is not known which C4ISR
system will be used for the OPC, whether the cutter will have a
facility for processing classified information, and whether the cutter
will have air search capabilities. The Coast Guard's requirements
document addressed these capabilities but allowed them to be removed
if design, cost, or technological limitations warrant. According to
Coast Guard officials, remaining decisions must be made before the
acquisition program baseline is approved as part of the program's
combined acquisition decision event 2A/B and the request for proposals
is issued, both of which are planned for the fall of 2011. In
addition, following the approval of the requirements document, the
Coast Guard formed a ship design team tasked with considering the
affordability and feasibility of the OPC. This team has met with
Assistant Commandants from across the Coast Guard on several occasions
to discuss issues that impact the affordability and feasibility of the
cutter, including, among others, the size of the living quarters, the
aviation fuel storage capacity, and the range of the cutter. The Coast
Guard has stated that affordability is a very important aspect of the
OPC project and that the request for proposal process will inform the
project's efforts to balance affordability and capability.
Cutter Small Boats:
The cutter small boats project was delayed when the initial ICGS plan
was halted due to unrealistic requirements that we have reported on in
the past.[Footnote 31] The Coast Guard has since made decisions on
providing small boats for the NSC, but key decisions remain regarding
the Coast Guard's overall strategy for buying a standard cutter small
boat fleet, including quantities. According to project officials, a
standard cutter boat fleet is an important capability for the Coast
Guard because it permits shared training and maintenance and allows
for sharing small boats among the larger cutters, potentially reducing
acquisition and maintenance costs.
There are two types of cutter small boats that the Coast Guard plans
to use to engage targets--a 36-foot version launched from the NSC and
potentially the future OPC and a 25-foot version planned for the three
largest Deepwater cutters: NSC, OPC, and FRC. Following the failure of
ICGS' cutter small boats, the Coast Guard identified requirements for
the cutter small boat project to supply the three large cutters with
at least 135 small boats. However, in August 2010, DHS changed the
project to a nonmajor acquisition after the Coast Guard downsized the
scope of the project to only 27 cutter small boats--which includes a
mix of 25-foot and 36-foot boats--for the NSC, thus lowering the life-
cycle cost for the project. As a result, the program is no longer
subject to DHS's review or independent testing. Project officials told
us that despite this change in quantities, a standard cutter boat for
all three cutters nevertheless remains a key goal; in fact, the
current 25-foot small boat project plan recognizes the potential for
the project to buy up to 101 small boats, which includes the ability
for other DHS components to buy boats off of that contract.[Footnote
32] The project plan for the 36-foot boats is not yet complete. If the
Coast Guard intends to still buy a standard cutter boat fleet,
depending on the mix, the life-cycle cost of the project could mean
the project is actually a major system acquisition subject to DHS
review.
Unmanned Aircraft Systems:
The UAS was envisioned as a key component of the Deepwater system that
would enhance surveillance capability on board the NSC and OPC and
also from land. Congress has appropriated over $100 million since 2003
to develop an unmanned aerial vehicle, but the Coast Guard terminated
the program due to cost increases and technical risks in June 2007. In
February 2009, DHS approved a strategy for the Coast Guard to acquire
UASs, but the Coast Guard has not yet decided what specific solutions
are required to perform operations. Lead asset delivery was originally
scheduled for 2008, but the Coast Guard is waiting until Navy
technology for cutter-based UASs advances and is partnering with
Customs and Border Protection for use of the maritime land-based UAS,
Guardian. There are some indications that the Coast Guard UAS program
will continue to incur substantial delays. For example, there is
currently no funding for the program in the Coast Guard's fiscal years
2012-2016 capital investment plan and the Coast Guard does not expect
the C4ISR software for the UAS to share data with other assets to be
ready for operations until 2024. Until the Coast Guard buys UASs, the
planned capability of the major cutter fleet is limited[Footnote 33].
Without a UAS, for instance, the DHS Inspector General estimates that
the aerial surveillance capability of the NSC is reduced from 58,160
square nautical miles to 18,320 square nautical miles, a 68 percent
decline.[Footnote 34]
HH-60:
The HH-60 project office is continuing to make progress upgrading the
Coast Guard's largest helicopter, but decisions remain concerning the
extent to which the Coast Guard will use the helicopter for
surveillance. According to the current acquisition program baseline,
the Coast Guard plans to replace the existing weather radar on the HH-
60 with a surface search radar to improve detection and classification
capabilities. The project office originally planned to begin this work
in fiscal year 2006, but is now planning to begin the work in fiscal
year 2012. Officials at the Coast Guard's Aviation Logistics Center,
where the helicopter depot maintenance is conducted, stated that
funding for the workforce currently conducting the upgrades on the HH-
60 will expire in the summer of 2014. These officials expressed
concern that if the Coast Guard delays surface search radar work
further, there will be a loss of learning on the production line,
leading to an increase in the cost of the project due to production
restart costs. Furthermore, project officials told us that the Coast
Guard is developing a preliminary-operational requirements document
that will address requirements for the HH-60's C4ISR capabilities.
These remaining decisions for the HH-60 will shape the extent to which
the helicopter shares information collected by the surface search
radar with operational commanders and other Coast Guard assets.
Preliminary Test Events Have Yielded Mixed Results in Advance of
Initial Operational Testing:
None of the Deepwater assets have completed initial operational test
and evaluation, a major test event which identifies deficiencies by
evaluating operational effectiveness during the execution of simulated
operational missions. The NSC, MPA, and FRC are scheduled to complete
this testing in fiscal years 2012 and 2013. The HC-130J will not
undergo any operational testing or assessments by an independent
operational test authority, and the other Deepwater assets are not yet
scheduled to start this testing. In advance of this testing, the Coast
Guard has completed preliminary tests for the NSC, MPA, and FRC, such
as operational assessments, which the Coast Guard is using to mitigate
risk and address problems during asset development prior to initial
operational test and evaluation. The Coast Guard also conducts
acceptance testing, which helps ensure that the functionality of the
delivered asset meets contract requirements and may help demonstrate
that it will meet defined mission needs. Using these tests, officials
have identified issues that need to be addressed prior to initial
operational testing on the following assets.
NSC:
During acceptance testing for the second NSC in October 2010, Coast
Guard officials identified five key issues, also identified on NSC 1
in an operational assessment completed in September 2010:
* reliability and maintenance problems with the crane on the back of
the cutter,
* an unsafe ammunition hoist for the main gun,
* instability with the side davit for small boat launch,
* insufficient power to a key system used for docking the cutter, and:
* an impractical requirement for using the side rescue door in
difficult sea conditions.
Senior acquisition directorate officials stated that there are
currently workarounds for some of these issues and the cutters do meet
contractual requirements. Program officials added that funding and
design changes have yet to be finalized for these five issues and in
some cases, correcting these issues will likely require costly
retrofits.
In January 2011, Coast Guard officials canceled the Aircraft Ship
Integrated Secure and Traverse (ASIST)--a system intended to automate
the procedure to land, lock down, and move the HH-65 helicopter from
the deck to the hangar on the NSC--after significant deficiencies were
identified during testing conducted by the U.S. Naval Air Warfare
Center. Examples of deficiencies included increased pilot workload
during landing, excessive stress on the helicopter components as the
aircraft moved across the deck into the hangar, and failure to reduce
the number of people needed to secure the helicopter as the system was
designed to do. In addition, testing officials determined that the
system could cause injury to the aircrew because the landing operator
could not communicate with the pilot in a timely manner, and the
system demonstrated unpredictable failures to locate the aircraft
while it was hovering over the NSC's flight deck. The ASIST system was
identified by ICGS as a solution to a Coast Guard requirement. Several
Coast Guard officials told us that the Coast Guard was aware of
potential problems with ASIST as early as 2007, but the Coast Guard
moved forward with it until testing was complete. The Coast Guard
invested approximately $27 million to install the system on three
NSCs, purchase long lead materials for the fourth NSC, and modify one
HH-65 helicopter for the test event. The Coast Guard is now exploring
solutions in use by the Navy to replace the system. For the two
operational NSCs, officials stated that operators secure the HH-65
using legacy cutter technology.
MPA:
In a May 2009 operational assessment, an independent test authority--
the Navy's Commander Operational Test and Evaluation Force--found
that, while the MPA airframe provides increased capability for cargo
and passenger transport, the C4ISR system on the aircraft's mission
system pallet is a significant area of risk. Deficiencies included
poor performance of the two main sensors used to identify and track
targets, need for system reboots that result in system downtime--which
we observed during our visit with the pallet operators in Mobile,
Alabama in January 2011--and a lack of training equipment. The
operators told us that issues with these capabilities persist and that
other aspects of the system prevent operators from working
efficiently. For example, the operators stated that the screens on the
pallet are too small for the number of applications that normally run
simultaneously and the main camera needs to be held on target manually
because it cannot automatically locate previously identified targets.
Since our visit, the Coast Guard has installed a software upgrade
which officials stated corrected several problems inherent with the
previous version. DHS Test and Evaluation officials told us that the
Coast Guard is not permitted to buy additional pallets until
successful completion of initial operational testing, scheduled for
September 2011. These officials told us that they were optimistic that
testing would be successful.
The MPA's acquisition plan does not include a strategy to buy
additional mission system pallets; currently, the Coast Guard has
received all 12 of the pallets under contract with ICGS. According to
officials, the Coast Guard is planning to seek a full-rate production
decision for the MPA by the end of fiscal year 2012, at which point
almost one-third of the planned 36 MPA airframes will have been
purchased. Prior to a full-rate production decision, in accordance
with the Major Systems Acquisition Manual, the program must have
identified a preferred solution and an acquisition plan for buying the
pallet. Currently, the Coast Guard is assessing how to buy future
pallets. Options include continuing to buy the pallet directly from
Lockheed Martin or conducting a full and open competition to determine
if another vendor can build the pallet. Senior Coast Guard acquisition
officials stated that they determined the Coast Guard does not have
sufficient capability to build the pallet itself.
FRC:
The FRC program is planning to use the first cutter for initial
operational test and evaluation. The original delivery date for the
lead cutter was scheduled for January 2011, but that date has slipped
to December 2011. Officials told us that the delay is due to a last
minute design change, directed by the Coast Guard's engineering and
logistics technical authority, to enhance the structure of the cutter.
An early operational assessment that reviewed design plans for the FRC
was completed in August 2009 and identified 74 design issues, 69 of
which were corrected during the assessment. Officials explained that
they are confident in the reliability of the FRC design and do not
expect any major operational issues to arise during initial
operational testing and evaluation. In addition, program officials
explained that the Coast Guard has used a lead vessel for initial
operational test and evaluation in the past and is now also planning
to conduct an operational assessment on the lead FRC to reduce risk.
Officials from the Navy's Commander Operational Test and Evaluation
Force, however, stated that there are risks associated with using the
first cutter for initial operational test and evaluation; operators
are not as familiar with the system, the logistics enterprise may not
be fully operational to support the asset, and enough time may not
have passed to collect sufficient data on what operational issues need
to be addressed prior to testing.
HC-130J:
The Coast Guard currently has 6 HC-130Js in operation, but the
aircraft did not undergo any operational testing or assessments by an
independent operational test authority. As we reported last year, DHS
and Coast Guard had agreed that no further testing or documentation
was necessary for the HC-130J because production of the aircraft was
complete, and a report was developed 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.[Footnote 35] However, since our last report, the Navy
received funding to buy two additional HC-130Js for the Coast Guard.
As a result, DHS officials stated that they may revisit the decision
to not fully test the HC-130J. Officials at the Aviation Logistics
Center stated that they are concerned that initial operational test
and evaluation was never completed and that current operations
essentially serve as an assessment of capability. The mission system,
a C4ISR suite of components which is similar to the suite on the MPA,
has had problems such as unplanned reboots. These officials stated
that operational testing might have helped to identify these issues
sooner. Also, since HC-130J spare parts have not been sufficient,
these officials explained that the Coast Guard has "demissionized" two
HC-130Js to provide spare parts for the remaining four HC-130Js. These
two HC-130Js are now partially mission capable, meaning they cannot
use the electronic suite of C4ISR equipment. Coast Guard acquisition
officials told us that fiscal year 2011 funding for HC-130J spares
should allow the Coast Guard to re-missionize these assets.
Coast Guard's Quarterly Reports to Congress Do Not Fully Capture
Program Risks:
As part of its role in program execution, the Coast Guard is gaining a
better understanding of each asset's cost, schedule, and technical
risks, but not all of this information is transparent to Congress. The
Coast Guard maintains two different quarterly reports to track
information on its major acquisitions, including narrative and
mitigation actions pertaining to risks, and Coast Guard officials told
us that the same database is used to populate both reports. One is the
Quarterly Project Report which is an internal acquisition report used
by Coast Guard program managers. The other, known as the Quarterly
Acquisition Report to Congress (QARC), was required by various
appropriations laws to be submitted to the congressional
appropriations committees and to rank on a relative scale the cost,
schedule, and technical risks associated with each acquisition
project. We found that this statutory requirement is no longer in
effect.[Footnote 36] However, the Coast Guard and DHS continue to
submit the QARC pursuant to direction in committee and conference
reports and the Coast Guard's Major Systems Acquisition Manual.
[Footnote 37] These committee and conference reports generally
reiterate an expectation that the Coast Guard submit the QARC by the
15th day of the fiscal quarter.
We found that the Coast Guard's fiscal year 2010 QARCs did not always
include risks identified in the Quarterly Project Reports. The Coast
Guard's Major Systems Acquisition Manual states that the QARC
incorporates the Quarterly Project Report for each major acquisition
project.[Footnote 38] The Quarterly Project Report includes, among
other things, the top three project risks. In comparing both sets of
reports--the Quarterly Project Report and the QARC--from fiscal year
2010, we found that over 50 percent of medium and high risks
identified in the internal Quarterly Project Reports were not included
in the QARC. For example, the Coast Guard reported to Congress that
the OPC program had no risks in fiscal year 2010, but several were
identified in the internal report--including concerns about
affordability. In addition, for all of fiscal year 2010, the Coast
Guard reported no risks for the MPA project in the QARC even though
several were identified in the internal report.
Before transmittal to Congress, the QARCs are reviewed by officials
within the Coast Guard's resource directorate, the DHS Chief Financial
Officer's office, and the Office of Management and Budget. Resource
directorate officials told us they do not include risks in the QARC if
those risks contradict the Coast Guard's current budget request. For
example, the resource directorate did not include the risk related to
spare parts for the MPA in the fiscal year 2010 reports to Congress
because the Coast Guard did not request funding for spare parts. DHS
officials told us that they do not remove medium and high risks from
the report. Office of Management and Budget officials stated that they
will discuss several items with the Coast Guard, including factors
that the agency may want to consider with regard to the medium and
high risks identified in their draft submissions, but that the Office
of Management and Budget does not direct the Coast Guard to remove
medium or high risks from the reports before they are transmitted. We
could not obtain documentation to determine at what point in the
review process the decision is made to not include risks.
For all four quarters of fiscal year 2010, the QARC was submitted
consistently late. And as of May 2011, the Coast Guard had not
submitted the first quarter fiscal year 2011 report to Congress--a
delay of at least 4 months--but the second quarter fiscal year 2011
internal report was already complete. According to senior Coast Guard
acquisition directorate officials, the QARC is intended to be the
program manager's communication with Congress about risks. However,
when risks are not included, the Coast Guard is not presenting to
Congress a complete and timely picture of the risks some assets face.
Coast Guard Has Not Completed a Comprehensive Trade-Off Analysis for
the Deepwater Assets:
To support its role as systems integrator, the Coast Guard planned to
complete a fleet mix analysis in July 2009 to eliminate uncertainty
surrounding future mission performance and to produce a baseline for
the Deepwater acquisition. We previously reported that the Coast Guard
expected this analysis to serve as one tool, among many, in making
future capability requirements determinations, including future fleet
mix decisions.[Footnote 39] The analysis, which began in October 2008
and concluded in December 2009, is termed fleet mix analysis phase 1.
Officials from the Coast Guard's capabilities directorate comprised
the majority of the project team for the analysis, which also included
contractor support to assist with the analysis. As of May 2011, DHS
had not yet released phase 1 to Congress. We received the results of
the analysis in December 2010.
To conduct the fleet mix analysis, the Coast Guard assessed asset
capabilities and mission demands in an unconstrained fiscal
environment to identify a fleet mix--referred to as the "objective
fleet mix"--that would meet long-term strategic goals. The objective
fleet mix resulted in a fleet that would double the quantity of assets
in the program of record, the $24.2 billion baseline.[Footnote 40] For
example, the objective fleet mix included 66 cutters beyond the
program of record. Given the significant increase in the number of
assets needed for this objective fleet mix, the Coast Guard developed,
based on risk metrics, incremental fleet mixes to bridge the objective
fleet mix and the program of record. Table 5 shows the quantities of
assets for each incremental mix, according to the Coast Guard's
analysis.
Table 5: Alternative Fleet Mix Asset Quantities According to Coast
Guard's Phase 1 Fleet Mix Analysis:
Surface/aviation platforms: NSC;
Program of record: 8;
Fleet mix 1: 9;
Fleet mix 2: 9;
Fleet mix 3: 9;
Fleet mix 4 (objective): 9.
Surface/aviation platforms: OPC;
Program of record: 25;
Fleet mix 1: 32;
Fleet mix 2: 43;
Fleet mix 3: 50;
Fleet mix 4 (objective): 57.
Surface/aviation platforms: FRC;
Program of record: 58;
Fleet mix 1: 63;
Fleet mix 2: 75;
Fleet mix 3: 80;
Fleet mix 4 (objective): 91.
Surface/aviation platforms: HC-130;
Program of record: 22;
Fleet mix 1: 32;
Fleet mix 2: 35;
Fleet mix 3: 44;
Fleet mix 4 (objective): 44.
Surface/aviation platforms: MPA HC-144A;
Program of record: 36;
Fleet mix 1: 37;
Fleet mix 2: 38;
Fleet mix 3: 40;
Fleet mix 4 (objective): 65.
Surface/aviation platforms: HH-60;
Program of record: 42;
Fleet mix 1: 80;
Fleet mix 2: 86;
Fleet mix 3: 99;
Fleet mix 4 (objective): 106.
Surface/aviation platforms: HH-65;
Program of record: 102;
Fleet mix 1: 140;
Fleet mix 2: 159;
Fleet mix 3: 188;
Fleet mix 4 (objective): 223.
Surface/aviation platforms: UAS, Land-Based;
Program of record: 12;
Fleet mix 1: 19;
Fleet mix 2: 21;
Fleet mix 3: 21;
Fleet mix 4 (objective): 22.
Surface/aviation platforms: UAS, Cutter-Based;
Program of record: 18;
Fleet mix 1: 15;
Fleet mix 2: 19;
Fleet mix 3: 19;
Fleet mix 4 (objective): 19.
Source: December 2009 Coast Guard data.
[End of table]
While the analysis provided insight on the performance of fleets
larger than the program of record, the analysis was not cost-
constrained. The Coast Guard estimated the total acquisition costs
associated with the objective fleet mix could be as much as $65
billion--about $40 billion higher than the approved $24.2 billion
baseline. As a result, as we reported last year, Coast Guard officials
stated that they do not consider the results to be feasible due to
cost and do not plan to use it to provide recommendations on a
baseline for fleet mix decisions.[Footnote 41] Since we last reported,
Coast Guard officials stated that phase 1 supports continuing to
pursue the program of record.
Because the first phase of the fleet mix analysis was not cost
constrained, it does not address our July 2010 recommendation that the
Coast Guard present to Congress a comprehensive review of the
Deepwater Program that clarifies the overall cost, schedule,
quantities, and mix of assets required to meet mission needs,
including trade-offs in light of fiscal constraints given that the
currently approved Deepwater Program is no longer feasible. The Coast
Guard has undertaken what it refers to as a cost-constrained analysis,
termed fleet mix analysis phase 2; however, according to the
capabilities directorate officials responsible for the analysis, the
study primarily assesses the rate at which the Coast Guard could
acquire the Deepwater program of record within a high ($1.7 billion)
and low ($1.2 billion) bound of annual acquisition cost constraints.
[Footnote 42] These officials stated that this analysis will not
reassess whether the current program of record is the appropriate mix
of assets to pursue and will not assess any mixes smaller than the
current program. Alternative fleet mixes are being assessed, but only
to purchase additional assets after the program of record is acquired,
if funding remains within the yearly cost constraints. The Coast Guard
expects to complete its phase 2 analysis in the summer of 2011. As we
reported in April 2011, because phase 2 will not assess options lower
than the program of record, it will not prepare the Coast Guard to
make the trade-offs that will likely be needed in the current fiscal
climate.[Footnote 43]
Further, despite Coast Guard statements that phase 2 was cost
constrained, there is no documented methodology for establishing the
constraints that were used in the analysis, and we found confusion
about their genesis. The acquisition directorate, according to the
study's charter, was to provide annual funding amounts, but Coast
Guard officials responsible for phase 2 told us that DHS's Program
Analysis & Evaluation office provided the lower bound and the
acquisitions directorate provided the upper bound. An official from
the Program Analysis & Evaluation office stated that DHS informally
suggested using historical funding levels of $1.2 billion to establish
an average annual rate but was unaware that the Coast Guard was using
this number as the lower bound for the study. A senior Coast Guard
acquisition directorate official stated that the directorate agreed
with using the $1.2 billion as the lower constraint and had verbally
suggested the upper bound of $1.7 billion. Based on our review of
historical budget data, $1.7 billion for Deepwater is more than
Congress has appropriated for the entire Coast Guard's acquisition
portfolio since 2007 and as such, is not likely a realistic
constraint. Coast Guard officials stated that the upper bound was not
necessarily a realistic level, rather an absolute upper bound to
establish the range of possible acquisition levels. In addition, the
Coast Guard does not have documentation of the cost constraints;
according to a Coast Guard official, these cost constraints were
verbally communicated to the contractor.
In addition to the Coast Guard's analysis, DHS's Program Analysis &
Evaluation office is conducting a study, at the request of the Office
of Management and Budget, to gain insight into alternatives to the
Deepwater surface program of record. Office of Management and Budget
officials told us that they recommended DHS conduct this study because
DHS was in a position to provide an objective evaluation of the
program and could ensure that the analysis of the trade-offs of
requirements in a cost constrained environment would align with the
Department's investment priorities. A DHS official involved in the
study stated that the analysis will examine performance trade-offs
between the NSC, OPC, a modernized 270' cutter, and the Navy's
Littoral Combat Ship.[Footnote 44] The official also explained that
the analysis is based on a current estimate of surface asset
acquisition costs, which serves as a cap to guide surface asset trade-
offs. This cutter study is expected to be completed in the summer of
2011. This official also stated that the cutter study is not expected
to contain recommendations, but Office of Management and Budget
officials told us they plan to use the results to inform decisions
about the fiscal year 2013 budget. A DHS official responsible for this
study stated that this analysis and the Coast Guard's fleet mix
analysis will provide multiple data points for considering potential
changes to the program of record, including reductions in the
quantities planned for some of the surface assets. However, as noted
above, Coast Guard capabilities directorate officials have no
intention of examining fleet mixes smaller than the current, planned
Deepwater program.
Conclusions:
Over the past 4 years, the Coast Guard has strengthened its
acquisition management capabilities in its role as lead systems
integrator and decision maker for Deepwater acquisitions. Now, the
Coast Guard needs to take broader actions to address the cost growth,
schedule delays, and expected changes to planned capabilities that
have made the Deepwater program, as presented to Congress,
unachievable. Today's climate of rapidly building fiscal pressures
underscores the importance of assessing priorities--from an
acquisition, resource, and capabilities perspective--so that more
realistic planned budgets can be submitted to Congress. Such a step
would help alleviate what has become a pattern of churn in revising
program baselines when planned funding does not materialize.
At the same time, decision makers in the Coast Guard and Congress need
accurate and timely information. Cost and schedule estimates that are
not based on current and comprehensive information do not provide an
effective basis for assessing the status of acquisition programs.
Further, the quarterly acquisition reports to Congress were intended
by the Coast Guard to convey program risks, but the Coast Guard is not
consistent in reporting cost, schedule, and technical risks and has
not submitted the reports in the time frame requested by Congress.
From a broader perspective, it is unclear how, or whether, DHS and the
Coast Guard will reconcile and use the multiple studies--the DHS
cutter study and the Coast Guard's two fleet mix analyses--to make
trade-off decisions regarding the program of record that balance
effectiveness with affordability. Without a process for doing so,
decisions may not adequately balance mission needs and affordability.
At the individual project level, knowledge-based decisions are needed
as Deepwater enters its fourth year with the Coast Guard as systems
integrator. Uncertainties about the C4ISR systems, which were intended
to be the key to making Deepwater a system of systems, continue and
are compounded as assets are designed and delivered without a coherent
vision for the overall program. This includes the MPA mission system
pallet, which is needed to carry out the full range of this aircraft's
planned missions but for which the Coast Guard has not developed an
acquisition strategy. Because DHS approved the requirements document
for the OPC despite significant unknowns concerning feasibility,
capability, and affordability, future decisions about this asset must
be based on a more rigorous knowledge base. And the ambiguities about
cutter small boat quantities suggest that this program's risk level
may need to be reassessed.
Recommendations for Executive Action:
To provide Congress with information needed to make decisions on
budgets and the number of assets required to meet mission needs within
realistic fiscal constraints, we recommend that the Secretary of
Homeland Security develop a working group that includes participation
from DHS and the Coast Guard's capabilities, resources, and
acquisition directorates to review the results of multiple studies--
including fleet mix analysis phases 1 and 2 and DHS's cutter study--to
identify cost, capability, and quantity trade-offs that would produce
a program that fits within expected budget parameters. DHS should
provide a report to Congress on the findings of the study group's
review in advance of the fiscal year 2013 budget submission.
To help the Coast Guard address the churn in the acquisition project
budgeting process and help ensure that projects receive and can plan
to a more predictable funding stream, we recommend that the Commandant
of the Coast Guard take the following two actions:
* Implement GAO's Cost Estimating and Assessment Guide's best
practices for cost estimates and schedules as required by the Major
Systems Acquisition Manual, with particular attention to maintaining
current cost estimates and ensuring contractor's schedules also meet
these best practices.
* As acquisition program baselines are updated, adopt action items
consistent with those in the Blueprint related to managing projects
within resource constraints as a Coast Guard-wide goal, with input
from all directorates. These action items should include milestone
dates as well as assignment of key responsibilities, tracking of
specific actions, and a mechanism to hold the appropriate directorates
responsible for outcomes, with periodic reporting to the Vice-
Commandant.
To help ensure that Congress receives timely and complete information
about the Coast Guard's major acquisition projects, we recommend that
the Commandant of the Coast Guard and the Secretary of the Department
of Homeland Security:
* include in the project risk sections of the Quarterly Acquisition
Report to Congress the top risks for each Coast Guard major
acquisition, including those that may have future budget implications
such as spare parts; and:
* submit the Quarterly Acquisition Report to Congress by the 15th day
of the start of each fiscal quarter.
Because DHS approved the OPC operational requirements document
although significant uncertainties about the program's feasibility,
capability, and affordability remained, we recommend that the
Secretary of DHS take the following two actions:
* ensure that all subsequent Coast Guard decisions regarding
feasibility, capability, and affordability of the OPC's design are
thoroughly reviewed by DHS in advance of the program's next
acquisition decision event (ADE 2A/B); and:
* determine whether a revised operational requirements document is
needed before the program's next acquisition decision event (ADE 2A/B).
To increase confidence that the assets bought will meet mission needs,
we recommend that the Commandant of the Coast Guard take the following
three actions:
* As the Coast Guard reevaluates and revises its C4ISR project
documentation--including the operational requirements document,
acquisition program baseline, and life-cycle cost estimate--determine
whether the system-of-systems concept for C4ISR is still the planned
vision for the program. If not, ensure that the new vision is
comprehensively detailed in the project documentation.
* Develop and finalize a strategy for the acquisition of the MPA
mission system pallets before a full-rate production decision is made.
* Specify the quantities of cutter small boats that the Coast Guard
plans to purchase, given that the current project plan does not
clearly do so, and categorize the appropriate acquisition level in
accordance with a life-cycle cost that reflects these planned
quantities.
Matter for Congressional Consideration:
To help ensure that it receives timely and complete information about
the Coast Guard's major acquisition projects, Congress should consider
enacting a permanent statutory provision that requires the Coast Guard
to submit a quarterly report within 15 days of the start of each
fiscal quarter on all major Coast Guard acquisition projects and
require the report to rank for each project the top five risks and, if
the Coast Guard determines that there are no risks for a given
project, to state that the project has no risks. In addition, Congress
should consider restricting the availability of the Coast Guard's
Acquisition, Construction and Improvements appropriation after the
15th day of any quarter of any fiscal year until the report is
submitted.
Agency Comments and Our Evaluation:
DHS provided us with written comments on a draft of this report. In
its comments, DHS concurred with all of the recommendations. The
written comments are reprinted in appendix II. We also provided draft
sections of the report to Office of Management and Budget officials,
who provided us technical comments via e-mail; we incorporated their
comments as appropriate.
With respect to our first recommendation, that DHS form a working
group to review the results of the fleet mix and cutter studies and
report to Congress in advance of the fiscal year 2013 budget, DHS
agreed to initiate the review and analysis of the studies and report
to Congress on the findings. However, DHS added that given available
resources, competing priorities and demands, and the Office of
Management and Budget's timeline for fiscal year 2013 budget
submission, this will occur as soon as reasonably practical. We
understand that department officials have multiple demands on their
time, but we believe that DHS should make every effort to report to
Congress on the findings of this review before submitting its next
budget. The Deepwater assets account for billions in acquisition
dollars, and Office of Management and Budget officials told us that
they plan to use the results of the DHS cutter study to inform the
fiscal year 2013 budget. The working group's findings could provide
the Congress with important insights into costs, capabilities, and
quantity trade-offs prior to receiving the department's budget request.
In concurring with our recommendation to implement GAO's Cost
Estimating and Assessment Guide's best practices for cost estimates
and schedules as required by the Major Systems Acquisition Manual, the
Coast Guard noted that implementing some of these best practices may
not always be cost effective in a production environment. However, the
Coast Guard agreed to establish an appropriate cost estimate update
frequency for each project and review Integrated Master Schedules and
make schedule adjustments as needed. Sustained attention to the Cost
Estimating and Assessment Guide's practices will be very important,
particularly as one of the largest acquisitions of the Deepwater
program--the OPC--is expected to proceed to ADE-2A/B in fall 2011.
DHS also agreed with our recommendation that as the Coast Guard
updates its acquisition program baselines, these baselines must
conform to known resource constraints. However, in responding to this
recommendation, DHS and the Coast Guard did not address plans for
developing action items to manage projects within resource constraints
as a Coast Guard-wide goal, citing instead the existing senior-level
resource governance process and annual budget process. We recognize
that part of the standard budget development process includes trade-
off decisions regarding recapitalization versus operation and
maintenance funding. However, under this standard process, DHS and the
Coast Guard have continued to face the problem of approved acquisition
programs not being feasible. We also recognize that the Blueprint for
Continuous Improvement is an acquisition directorate document that
does not reflect resource priorities across the entire budget.
However, this key document is signed by the Commandant, and the
October 2010 version does include several budget-related action items,
such as establishing project priorities. Our recommendation, to adopt
action items "consistent" with those in the Blueprint regarding
managing projects within resource constraints--with input from all
directorates--reflects our belief that the Coast Guard needs to be
more proactive in addressing its mismatch of expected funding levels
and actual funding needs for approved acquisition programs.
With respect to our recommendations concerning the comprehensiveness
and timeliness of the Coast Guard's quarterly acquisition reports to
Congress, DHS agreed to report the top risks for each major
acquisition and to submit the reports to Congress by the 15th day of
the start of each fiscal quarter. However, DHS stated that OMB policy
limits the Coast Guard's ability to report project risks that are pre-
decisional or address out-year funding plans. We made this
recommendation because no risks had been included in the quarterly
reports to Congress for two programs in fiscal year 2010. DHS also
noted that the it strives to submit the reports on time, but that this
is difficult, especially given the time required to coordinate its
release outside of the department. We believe that when risks are not
included and the reports are not transmitted in a timely manner,
Congress will not have a complete and timely picture of the risks some
assets face.
DHS agreed to thoroughly review all subsequent Coast Guard decisions
regarding feasibility, capability, and affordability of the OPC's
design in advance of the program's ADE 2A/B. DHS also agreed with our
recommendation to determine whether a revised operational requirements
document is needed before ADE 2A/B. In its response, DHS stated that
an independent validation study, directed by the Deputy Secretary as
part of the approval of the OPC operational requirements document,
found that the key parameters of range, speed, and sea-keeping were
reasonable, accurate, and adequately documented. We have not yet
reviewed this study.
DHS also agreed with our three recommendations to increase confidence
that the assets bought will meet mission needs. With respect to C4ISR,
DHS stated that the Coast Guard remains committed to the system-of-
systems concept and plans to provide DHS with an affordable and
executable C4ISR acquisition program baseline that leverages work
already completed. With respect to the mission system pallet, DHS
stated that the Coast Guard plans to present a revised mission system
pallet acquisition strategy to the DHS Acquisition Review Board for
the full-rate production decision planned for the fourth quarter
fiscal year 2012. This will follow initial operational test and
evaluation of the current configuration of both the Maritime Patrol
Aircraft and the mission system pallet. Finally, DHS stated that the
Coast Guard will work with the department to determine the appropriate
acquisition level for the small boats project. DHS also noted that the
current approved project plan is for 27 small boats which have a life-
cycle cost estimate that categorizes the project as a non major
acquisition. The response, however, did not address the fact that the
approved project plan recognizes the potential to buy up to 101 small
boats. We maintain that, moving forward, the Coast Guard needs to
specify the quantities of small boats it plans to purchase to ensure
that the project's acquisition level is appropriately categorized.
Coast Guard also provided technical comments which we incorporated
into the report as appropriate, such as when we were provided with
documentation to support the comments. The Coast Guard requested that
we remove the term "Deepwater" and replace it with "major
acquisitions." We did not make this change because, at the time of
this report, Congress had not yet passed the fiscal year 2012
appropriations act which may address DHS's and Coast Guard's proposal
to eliminate the term "Integrated Deepwater System" from its annual
appropriation. Furthermore, the program baseline for one of the Coast
Guard's largest major acquisitions--the OPC--still remains part of the
2007 Deepwater acquisition program baseline.
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 VI.
Signed by:
John P. Hutton:
Director:
Acquisition and Sourcing Management:
List of Congressional Committees:
The Honorable John D. Rockefeller, IV:
Chairman:
The Honorable Kay Bailey Hutchison:
Ranking Member:
Committee on Commerce, Science, and Transportation:
United States Senate:
The Honorable Joseph I. Lieberman:
Chairman:
The Honorable Susan M. Collins:
Ranking Member:
Committee on Homeland Security and Governmental Affairs:
United States Senate:
The Honorable Mary Landrieu:
Chairman:
The Honorable Dan Coats:
Ranking Member:
Subcommittee on Homeland Security:
Committee on Appropriations:
United States Senate:
The Honorable Claire McCaskill:
Chairman:
Subcommittee on Contracting Oversight:
Committee on Homeland Security and Governmental Affairs:
United States Senate:
The Honorable Darrell E. Issa:
Chairman:
The Honorable Elijah Cummings:
Ranking Member:
Committee on Oversight and Government Reform:
House of Representatives:
The Honorable John L. Mica:
Chairman:
The Honorable Nick J. Rahall, II:
Ranking Member:
Committee on Transportation and Infrastructure:
House of Representatives:
The Honorable Robert B. Aderholt:
Chairman:
The Honorable David E. Price:
Ranking Member:
Subcommittee on Homeland Security:
Committee on Appropriations:
House of Representatives:
[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, 2009,
2010, and 2011.[Footnote 45] Additional scope and methodology
information on each objective of this report follows.
To determine the extent to which the Deepwater Program's planned cost
and schedule baselines have been exceeded, 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 reviewed
budget documents and compared them against revised program baselines
to identify any differences in reported cost and schedule estimates.
To assess cost estimating and scheduling practices of selected
Deepwater Programs, we selected the Maritime Patrol Aircraft (MPA),
National Security Cutter (NSC), and command, control, communications,
computers, intelligence, surveillance, and reconnaissance (C4ISR)
programs. We reviewed the MPA program's cost estimate and schedule
because this program has the highest life-cycle cost estimate of all
Deepwater assets and has experienced schedule delays. We also reviewed
the NSC program's schedule because the program has the second highest
life-cycle cost estimate and has also experienced schedule delays. The
Coast Guard was not able to provide us with a current NSC life-cycle
cost estimate because the program is revising the estimate. As a
result, we selected the C4ISR life-cycle cost estimate to review
because the estimate was complete but the program did not yet have a
Department of Homeland Security-approved acquisition program baseline
and there was uncertainty concerning the direction of the program. In
performing our analysis, we focused on the schedules and cost
estimates available at the time of our review and evaluated them using
the criteria set forth in GAO's cost guide.[Footnote 46] In assessing
the program's cost estimates, we used the GAO cost guide to evaluate
the estimating methodologies, assumptions, and results to determine
whether the life-cycle cost estimates were comprehensive, accurate,
well-documented, and credible. We also used the GAO guide to determine
the extent to which each schedule was prepared in accordance with the
best practices that are fundamental to having a reliable schedule. We
discussed the results of our assessments with the program offices and
cost estimators. We supplemented these analyses by interviewing Coast
Guard officials from the capabilities, acquisition, and resources
directorates to determine any challenges the Coast Guard is facing in
achieving these baselines as well as some of the potential
implications of schedule and cost breaches. Further, we analyzed five
capital investment plans that were included in the 2008 through 2012
budgets, breach memos, and the acquisition directorate's October 2010
Blueprint for Continuous Improvement to identify any funding issues
and the extent to which they were factors leading to breaches in
established program baselines. We also interviewed Coast Guard program
staff and DHS officials from the Cost Analysis Division and
Acquisition Program Management Division to corroborate program
information.
To determine the progression of the execution, design, and testing of
Deepwater assets, we reviewed the following documents: Coast Guard's
Major Systems Acquisition Manual, asset operational requirements
documents, acquisition strategies and plans, acquisition program
baselines, program briefings to the Coast Guard's Executive Oversight
Council and associated meeting minutes, acquisition decision
memorandums, test reports, and contracts. We also reviewed Quarterly
Project Reports, and Quarterly Acquisition Reports to Congress, and
various appropriations laws and related committee and conference
reports regarding the reports to Congress. For fiscal year 2010, we
compared the program risks identified in the Quarterly Project Reports
to the risks identified in the Quarterly Acquisition Reports to
Congress. We also reviewed the dates the fiscal year 2010 Quarterly
Acquisition Reports to Congress had been transmitted to Congress. We
interviewed officials responsible for collecting and reviewing
information for these reports including officials from the Coast
Guard's acquisition and resources directorates, DHS's Chief Financial
Officer's office, and the Office of Management and Budget. For design
and testing, we also interviewed Coast Guard officials from the
capabilities, resources, and acquisition directorates as well as the
Navy's Commander Operational Test and Evaluation Force and DHS's
Science and Technology Test & Evaluation and Standards Division. In
addition, we met with Coast Guard operators at the Aviation Training
Center in Mobile, Alabama, and Coast Guard officials at the Aviation
Logistics Center. In addition, we also met with contractor and Coast
Guard officials at Northrop Grumman Shipbuilding facilities in
Pascagoula, Mississippi to discuss NSC construction and with a
Bollinger Shipyards' official in Lockport, Louisiana to discuss Fast
Response Cutter construction and toured their respective shipyards. We
also met with Coast Guard officials at Lockheed Martin facilities in
Moorestown, New Jersey; and the Command, Control, and Communications
Center in Portsmouth, Virginia to discuss their role in the C4ISR
project.
To assess the current status of the Coast Guard's fleet mix analysis
and determine how the Coast Guard and DHS are using the analysis to
inform acquisition decisions, we reviewed key documents including
charters and statement of works for the two fleet mix analysis phases.
We also reviewed the December 2009 final report for the fleet mix
analysis phase 1. We interviewed Coast Guard officials from the
capabilities, resources, and acquisition directorates and Coast Guard
officials overseeing work for phase 1 and phase 2. Additionally, we
interviewed a senior DHS official from the office of Program Analysis
and Evaluation and Office of Management and Budget officials to
identify the scope of the Office of Management and Budget-directed
cutter study and to understand similarities and differences between
that study and the Coast Guard's fleet mix analysis.
We conducted this performance audit between September 2010 and July
2011 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: Comments from the Department of Homeland Security and
Coast Guard:
U.S. Department of Homeland Security:
Washington, DC 20528:
July 25, 2011:
John P. Hutton:
Director, Acquisition and Sourcing Management:
U.S. Government Accountability Office:
441 G Street, NW:
Washington, DC 20548:
Re: Draft Report GA0-11-743, "Coast Guard: Action Needed As Approved
Deepwater Program Remains Unachievable"
Dear Mr. Hutton:
Thank you for the opportunity to review and comment on this draft
report. The U.S. Department of Homeland Security (DHS) appreciates the
U.S. Government Accountability Office's (GAO's) work in planning and
conducting its review and issuing this report.
The Department is pleased to note the report's positive acknowledgment
that the U.S. Coast Guard (USCG) "has strengthened its acquisition
capabilities in its role as lead systems integration and decision
maker for Deepwater acquisitions." The report also recognizes USCG
"has taken a number of steps to manage the Deepwater projects
including reorganizing its acquisition directorate, applying the
knowledge-based acquisition policies and practices outlined in its
Major Systems Acquisitions Manual and developing baselines for each
asset, [all of which] have given USCG better insight into asset-level
capabilities and costs."
DHS and USCG have benefited from GAO oversight and used it to help
ensure continued progress in USCG acquisition programs. For example,
based in part on GAO input, a fixed-price incentive contract for the
production and delivery of National Security Cutter (NSC) 4 was
awarded in December 2010, increasing competition, decreasing risk to
the government, and allowing costs for the NSC program to be more
predictable in the future.
The draft report contains 10 recommendations directed at DHS, with
which DHS concurs. As discussed below, actions have been taken or are
currently in process to address each of these recommendations.
Specifically:
Recommendation 1: The Secretary of Homeland Security should: "develop
a working group that includes participation from DHS and the USCG
capabilities, resources, and acquisition directorates to review the
results of multiple studies”including fleet mix analysis phase 1 and 2
and DHS' cutter study”to identify cost, capability, and quantity
tradeoffs that would produce a program that fits within expected
budget parameters. DHS should provide a report to Congress on the
findings of the study group's review in advance of the Fiscal Year
(FY) 2013 budget submission."
Response: Concur. DHS will form a working group to review the results
of studies that will assist DHS in identifying cost, capability, and
quantity tradeoffs to meet current and anticipated future fiscal
constraints. DHS will initiate the review and analysis and report on
the findings, as appropriate, and as soon as reasonably practical
given available resources, competing priorities and demands, and the
Office of Management and Budget's timeline for the FY 2013 budget
submission.
Recommendation 2: The Commandant of the USCG should: "implement GAO's
Cost Estimating and Assessment Guide's best practices for cost
estimates and schedules as required by the Major Systems Acquisition
Manual with particular attention to maintaining current cost estimates
and ensuring contractor's schedules also meet these best practices."
Response: Concur. The USCG Major Systems Acquisition Manual (MSAM)
directs Project Managers to utilize the GAO Cost Estimating and
Assessment Guide (GAO Guide) for developing cost estimates, while
complying with all current DHS guidance.
However, in USCG's experience, certain GAO Guide practices/techniques
regarding the timing of updates are not always cost effective in a
production environment where many processes are repeated and
historical (actual) schedule performance is available. To best
implement the recommendation, for each project, the USCG will
establish an appropriate cost estimate update frequency. The USCG will
also review the Integrated Master Schedule as required by the
MSAM, and make schedule adjustments as needed.
Recommendation 3: The Commandant of the USCG should: "as acquisition
program baselines are updated, adopt action items consistent with
those in the Blueprint related to managing projects within resource
constraints as a USCG-wide goal, with input from all directorates.
These action items should include milestone dates as well as
assignment of key responsibilities, tracking of specific actions, and
a mechanism to hold the appropriate directorates responsible for
outcomes, with periodic reporting to the Vice-Commandant."
Response: Concur, DHS agrees that the USCG's updated acquisition
program baselines must conform to known resource constraints. We note
however, that the Blueprint for Acquisition reform does not define how
the USCG accomplishes or articulates its resource priorities from a
holistic perspective across the entire budget. A separate, but linked,
resource governance process, overseen by the USCG's most senior
leadership, including the Vice-Commandant, is used to prioritize
resource needs including requests for all funding (including
acquisition funds), across the entire service. The USCG balances its
resource priorities across recapitalization and front-line
operations ” the USCG makes tradeoffs as part of the annual budget
process to achieve an optimal balance between the two. This process
involves input from all USCG directorates. This effort is ongoing, and
is part of the USCG's Planning, Programming, Budgeting, and
Execution cycle.
Recommendation 4: The Commandant of the USCG and the Secretary of
Homeland Security should: "include the top risks for each USCG major
acquisition in the project risk sections of the quarterly acquisition
report to Congress, including those that may have future budget
implications such as spare parts."
Response: Concur. USCG agrees to report the top risks for each
approved project, subject to the limitation noted in the last sentence
of this paragraph. USCG is satisfied that the reports provided to
Congress are consistent with applicable laws regarding communications
about appropriations requests or Executive policy about information
used in the President's Budget justifications. OMB Circular A-11
Section 22 provides policy on the release of information related to
the communication of budget-related negotiations and out-year
deliberations within the Executive Branch. The Executive Branch's
internal deliberations regarding the various issues and options that
are considered in the process leading to the President's decisions
remain a matter of internal record. Thus, the USCG is limited in its
ability to report project risks that are pre-decisional, deliberative
budget information, or out-year funding plans that are not included as
part of the current President's Budget.
Recommendation 5: The Commandant of the USCG and the Secretary of
Homeland Security should: "submit the quarterly acquisition report to
Congress by the 15th day of the start of each fiscal quarter."
Response: Concur. DHS agrees the quarterly acquisition report should
be submitted to Congress by the 15th day and strives to do so.
However, we note that 15 days is a very difficult timeframe to produce
a quality report, given the time necessary to produce the report and
coordinate its release outside the Department.
Recommendation 6: The Secretary of Homeland Security should: "ensure
that all subsequent USCG decisions regarding feasibility, capability,
and affordability of the OPC's design are thoroughly reviewed by DHS
in advance of the program's next acquisition decision event (ADE
2AJB)."
Response: Concur. Consistent with DHS Acquisition Management Directive
102-01, all subsequent USCG decisions regarding feasibility,
capability, and affordability of the OPC's design will be thoroughly
reviewed by DHS in advance of the program's next acquisition decision
event (ADE 2A/B).
Recommendation 7: The Secretary of Homeland Security should:
"determine whether a revised operational requirements document is
needed before the program's next acquisition decision event (ADE
2A/B)."
Response: Concur. DHS has taken an in-depth review of the OPC
requirements document in advance of ADE 2A/B. Specifically, in the 6
months prior to the approval of the operations requirements document
(ORD), the Office of Policy closely reviewed the requirements through
their own internal analysis. When the Deputy Secretary approved the
ORD on October 20, 2010, a follow-on, independent, validation study of
three key performance parameters within the ORD was directed. DHS
Acquisition Program Management Division led the follow-on analysis
that found that key parameters of range, speed (maneuverability), and
sea-keeping to be reasonable, accurate, and adequately documented.
Recommendation 8: The Commandant of the USCG should: "as the USCG
reevaluates and revises its C4ISR project documentation including the
operational requirements document, acquisition program baseline, and
life cycle cost estimate - determine whether the system-of-systems
concept for C4ISR is still the planned vision for the program. If not,
ensure that the new vision is comprehensively detailed in the project
documentation."
Response: Concur. The USCG remains committed to the system-of-systems
approach for efficient and effective mission execution. The C4ISR
project is revising its acquisition strategy and plans to deliver
interoperable C4ISR capabilities to assets associated with the legacy
Deepwater construct. The project will provide DHS with an affordable
and executable C4ISR acquisition program baseline that leverages work
already completed for the second project segment.
Recommendation 9: The Commandant of the USCG should: "develop and
finalize a strategy for the acquisition of the Maritime Patrol
Aircraft (MPA) Mission Systems Pallet (MSP) before a full rate
production decision is made."
Response: Concur. USCG will conduct Initial Operational Test and
Evaluation (IOT&E) on both the MPA and the MSP, beginning in 4th
quarter FY 2011, before seeking a full rate production decision in FY
2012. During IOT&E, evaluators from the U.S. Navy Commander
Operational Test and Evaluation Forces will complete a rigorous
operational evaluation of the current configuration of the MPA and
MSP, both of which have had a number of improvements incorporated to
improve reliability and functionality. The revised MSP acquisition
strategy will be presented to the DHS Acquisition Review Board for the
full-rate production decision (ADE-3) planned for 4th quarter FY 2012.
Recommendation 10: The Commandant of the USCG should: "specify the
quantities of cutter small boats that the USCG plans to purchase,
given that the current project plan does not clearly do so, and
categorize the appropriate acquisition level in accordance with a life-
cycle cost that reflects these planned quantities."
Response: Concur. USCG will work with DHS to determine the appropriate
acquisition level for the project. The current approved project plan
is to acquire 19 OTH-IVs and 8 LRI-IIs. Per the DHS Acquisition
Management Directive102-01, each project is classified as a DHS Level 3
non-major acquisition because the LCCEs for 19 OTH-IV cutters boats
($49.85M) and for 8 LRI-II cutter boats ($42.22M) (or combined into an
overarching Cutter Boats Project for the OTH-IVs and LRI-IIs) are
below the $300M threshold.
Again, thank you for the opportunity to review and comment on this
draft report. Technical comments on this report were provided under
separate cover. We look forward to working with you on future Homeland
Security engagements.
Sincerely,
Signed by;
Jim H. Crumpacker:
Director:
Departmental GAO/OIG Liaison Office:
[End of section]
Appendix III: Assessments of MPA and C4ISR Cost Estimates:
This appendix provides the results of our analysis of the extent to
which the processes and methodologies used to develop and maintain the
MPA and C4ISR cost estimates meet the characteristics of high-quality
cost estimates.[Footnote 47] The four characteristics of high-quality
estimates are explained and mapped to the 12 steps of such estimates
in table 6.
Table 6: The 12 Steps of High-Quality Cost Estimating Mapped to the
Steps of a High-Quality Cost Estimate:
Characteristic: Well-documented;
Explanation: The documentation should address the purpose of the
estimate, the program background and system description, its schedule,
the scope of the estimate (in terms of time and what is and is not
included), the ground rules and assumptions, all data sources,
estimating methodology and rationale, the results of the risk
analysis, and a conclusion about whether the cost estimate is
reasonable. Therefore, a good cost estimate--while taking the form of
a single number--is supported by detailed documentation that describes
how it was derived and how the expected funding will be spent in order
to achieve a given objective. For example, the documentation should
capture in writing such things as the source data used and their
significance, the calculations performed and their results, and the
rationale for choosing a particular estimating method or reference.
Moreover, this information should be captured in such a way that the
data used to derive the estimate can be traced back to and verified
against their sources, allowing for the estimate to be easily
replicated and updated. Finally, the cost estimate should be reviewed
and accepted by management to ensure that there is a high level of
confidence in the estimating process and the estimate itself;
Step:
Step 1: Define the estimate's purpose, scope, and schedule;
Step 3: Define the program characteristics;
Step 5: Identify ground rules and assumptions;
Step 6: Obtain the data;
Step 10: Document the estimate;
Step 11: Present the estimate to management for approval.
Characteristic: Comprehensive;
Explanation: The cost estimates should include both government and
contractor costs of the program over its full life-cycle, from
inception of the program through design, development, deployment, and
operation and maintenance to retirement of the program. They should
also completely define the program, reflect the current schedule, and
be technically reasonable. Comprehensive cost estimates should provide
a level of detail appropriate to ensure that cost elements are neither
omitted nor double counted, and they should document all cost-
influencing ground rules and assumptions. Establishing a product-
oriented work breakdown structure is a best practice because it allows
a program to track cost and schedule by defined deliverables, such as
a hardware or software component;
Step:
Step 2: Develop the estimating plan;
Step 4: Determine the estimating structure;
Step 5: Identify ground rules and assumptions[A].
Characteristic: Accurate;
Explanation: The cost estimates should provide for results that are
unbiased, and they should not be overly conservative or optimistic.
Estimates are accurate when they are based on an assessment of most
likely costs, adjusted properly for inflation, and contain few, if
any, minor mistakes. In addition, the estimates should be updated
regularly to reflect material changes in the program, such as when
schedules or other assumptions change, and actual costs so that the
estimate is always reflecting current status. Among other things, the
estimate should be grounded in documented assumptions and a historical
record of cost estimating and actual experiences on other comparable
programs;
Step:
Step 7: Develop the point estimate[B];
Step 12: Update the estimate to reflect actual costs and changes.
Characteristic: Credible;
Explanation: The cost estimates should discuss any limitations of the
analysis because of uncertainty or biases surrounding data or
assumptions. Major assumptions should be varied, and other outcomes
recomputed to determine how sensitive they are to changes in the
assumptions. Risk and uncertainty analysis should be performed to
determine the level of risk associated with the estimate. Further, the
estimate's results should be crosschecked, and an independent cost
estimate conducted by a group outside the acquiring organization
should be developed to determine whether other estimating methods
produce similar results. For management to make good decisions, the
program estimate must reflect the degree of uncertainty, so that a
level of confidence can be given about the estimate. Having a range of
costs around a point estimate is more useful to decision makers
because it conveys the level of confidence in achieving the most
likely cost and also informs them on cost, schedule, and technical
risks;
Step:
Step 7: Compare the point estimate to an independent cost estimate[C];
Step 8: Conduct sensitivity analysis;
Step 9: Conduct risk and uncertainty analysis.
Source: GAO-09-3SP.
[A] This step applies to two of the characteristics--well-documented
and comprehensive.
[B] A point estimate is a single cost estimate number representing the
most likely cost.
[C] This step applies to two of the characteristics--credible and
accurate.
[End of table]
Tables 7 and 8 provide the detailed results of our analysis of the MPA
and C4ISR program cost estimates. "Not met" means the Coast Guard
provided no evidence that satisfies any of the criterion. "Minimally"
means the Coast Guard provided evidence that satisfies a small portion
of the criterion. "Partially" means the Coast Guard provided evidence
that satisfies about half of the criterion. "Substantially" means the
Coast Guard provided evidence that satisfies a large portion of the
criterion. "Fully met" means the Coast Guard provided evidence that
completely satisfies the criterion.
Table 7: Analysis of the MPA Cost Estimate:
Four characteristics of high-quality cost estimates: Well-documented;
Criterion met: Substantially;
Key examples of rationale for assessment: The methodology, source of
data, and equations are provided for each cost element. However, it is
not possible for an unfamiliar analyst to recreate the estimate with
the provided documentation. For instance, while the source of the data
was provided, the actual data were not shown.
Four characteristics of high-quality cost estimates: Comprehensive;
Criterion met: Substantially;
Key examples of rationale for assessment: All costs appear to be
included in the estimate. The ground rules and assumptions are
included, but the assumptions are not tracked to the risk assessment.
The technical information is available but not in one main document.
Four characteristics of high-quality cost estimates: Accurate;
Criterion met: Partially;
Key examples of rationale for assessment: The point estimate presented
did not show the confidence level although the 80 percent level is
also presented. There are not any apparent errors in the calculations
and the program demonstrated procedures are in place to validate the
estimates. However actual costs were not tracked and variances were
not documented or explained.
Four characteristics of high-quality cost estimates: Credible;
Criterion met: Substantially;
Key examples of rationale for assessment: In addition to performing a
risk analysis, the program conducted a sensitivity analysis, cross-
checked cost drivers and completed an independent cost estimate. While
several cost drivers were identified, no sensitivity was done to
determine the impact of funding cuts on the program.
Source: GAO analysis based on information provided by the Coast Guard.
[End of table]
Table 8: Analysis of C4ISR Cost Estimate:
Four characteristics of high-quality cost estimates: Well-documented;
Criterion Met: Substantially;
Key examples of rationale for assessment: The methodology, source of
data, and equations are provided for each cost element. Further, it is
possible for an unfamiliar analyst to recreate the estimate with the
provided documentation, but knowledge of how to use the software is
necessary. While the source of the data was provided, the actual data
were not shown and the briefing to management did not provide a time-
phased summary of costs or include recommendations for consideration.
Four characteristics of high-quality cost estimates: Comprehensive;
Criterion Met: Substantially;
Key examples of rationale for assessment: All costs appear to be
included in the estimate except for government labor costs. The ground
rules and assumptions are included, but the cost effects of
assumptions failing are not examined in the risk analysis. Finally,
while substantial technical information is available to the cost
estimators, it is not consolidated in one main document and has not
yet been approved by management.
Four characteristics of high-quality cost estimates: Accurate;
Criterion Met: Partially;
Key examples of rationale for assessment: The point estimate presented
for the life-cycle cost estimate represents a 46 percent confidence
level while the cost estimate for development was listed at the 32
percent level. Upon review of the cost estimate documentation, we
found no apparent errors in the calculations. Further, the program
demonstrated that procedures were in place to validate the estimates.
However actual costs were not tracked and compared to original cost
estimates. As a result, variances were not documented or explained.
Four characteristics of high-quality cost estimates: Credible;
Criterion Met: Minimally;
Key examples of rationale for assessment: Although a full risk
analysis was completed, the cost estimate is optimistic as the LCCE is
presented at the 46 percent confidence level and the development cost
estimate is only at the 32 percent confidence level. No contingency
reserves were provided to bring the cost estimate to a higher level of
confidence. In addition, the program did not do sensitivity analysis
even though cost drivers were identified and major funding cuts have
occurred causing the program to be in a cost breach situation.
Finally, cross-checks have not been completed and an independent cost
estimate is planned but has not yet occurred.
Source: GAO analysis based on information provided by the Coast Guard.
[End of table]
[End of section]
Appendix IV: Assessments of MPA and NSC Schedules:
[End of section]
Tables 9 and 10 provide the results of our analysis of the extent to
which the processes and methodologies used to develop and maintain
schedules for the Maritime Patrol Aircrafts 12-14 and NSC 3 meet the
nine best practices associated with effective schedule estimating.
"Not met" means the program provided no evidence that satisfies any of
the criterion. "Minimally" means the Coast Guard provided evidence
that satisfies a small portion of the criterion. "Partially" means the
Coast Guard provided evidence that satisfies about half of the
criterion. "Substantially" means the Coast Guard provided evidence
that satisfies a large portion of the criterion. "Fully met" means the
Coast Guard provided evidence that completely satisfies the criterion.
Table 9: Analysis of the MPA 12-14 Contractor's Schedule:
Best practice: 1. Capturing all activities;
Criterion met: Partially;
GAO analysis: Our analysis found that while the production schedule
contains government and contractor activities for the procurement of
three aircraft, the schedule does not have enough detail or
information to meaningfully manage the work or monitor progress. If
the schedule is not sufficiently detail planned, then opportunities
for process improvement (e.g., identifying redundant activities) and
risk mitigation will be missed. Moreover, if the schedule does not
fully and accurately reflect the project, it will not serve as an
appropriate basis for analysis and may result in unreliable completion
dates, time extension requests, and delays.
Our analysis also found that no activities in the schedule are mapped
to a work breakdown structure. In addition, all activities within the
schedule are marked as planned, even though the schedule start date is
July 31, 2010, 5 months prior to the date we received the schedule for
assessment. As such, there is no way to know how far along the plan
is, what has been accomplished on time, what activities are late or in
progress, and which activities are crucial to the timely delivery of
aircraft and completion of the contract or program.
Because MPA program management relies on contractor schedule data to
update the government program-level integrated master schedule data,
the government integrated master schedule will be unreliable. That is,
if forecasted production milestone dates in the contractor schedules
are unreliable, those dates will remain unreliable when inserted into
a government program-level integrated master schedule.
Best practice: 2. Sequencing all activities;
Criterion met: Minimally;
GAO analysis: Our analysis found significant issues with the
sequencing logic within the schedule, which reduce the credibility of
the calculated dates. For example, we found 112 activities (58 percent
of remaining activities) with missing predecessor or successor logic,
including 24 activities (12 percent) missing both predecessor and
successor logic. Missing predecessor or successor links reduce the
credibility of the calculated dates and have a cascading effect on
other best practices. For example, if an activity that has no logical
successor slips, the schedule will not reflect the effect on the
critical path, float, or scheduled start dates of downstream
activities.
Our analysis also found 100 activities (52 percent) with lags: 34
activities (18 percent) have positive lags and 66 activities (34
percent) have negative lags, or leads. Lags represent the passing of
time between activities but are often misused to put activities on a
specific date or to insert a buffer for risk. In particular, finish-to-
start logic ties with lags are generally not necessary and probably
take the place of some actual work. Negative lags (or leads) are
discouraged, as negative time is not demonstrable. Leads can often be
replaced by additional tasks and appropriate finish-to-start logic.
Leads are pervasive within the MPA schedule, but leads obfuscate
management's view of activities that need to occur in logical sequence.
In addition, the schedule contains six Must Finish On and three Must
Start On constraints. Must Finish On and Must Start On constraints are
considered "hard" constraints because--regardless of actual
accomplished effort, assigned resources, or plan variations to date--
these constrained dates will never move. The use of hard constraints
is essentially the same as marking a date on a calendar, and therefore
defeats the purpose of using a dynamic scheduling tool. Hard
constraints are artificial and make the constrained activities appear
to be on time when they may not be.
Best practice: 3. Assigning resources to all activities;
Criterion met: Minimally;
GAO analysis: Program officials stated that the schedule was not
resource loaded, and our analysis confirmed that resources are not
appropriately assigned to activities. Assigning resources to
activities ensures that resources are used to determine activity
durations because resource requirements directly relate to the
duration of an activity. Labor, material, equipment, burdened rates,
and funding requirements are examined to determine the feasibility of
the schedule, so that resources provide a benchmark of the total and
per-period cost of the project. If the current schedule does not allow
for insight into current or projected overallocation of resources,
then the risk of the program slipping is significantly increased.
Best practice: 4. Establishing the duration of all activities;
Criterion met: Partially;
GAO analysis: A significant portion of activities (71 percent) within
the MPA production schedule meet best practices for activity duration,
being 44 days (or 2 working months) or less. Several long-duration
tasks represent procurement activities, for instance equipment
procurement and parts production. Representing external procurement
activities by long durations instead of simple delivery milestones is
considered a best practice. This way, management can monitor progress
and not be surprised at the sudden appearance of a delivery milestone
that may have been off track for awhile. However, other long-duration
activities have vague names and do not convey in any detail the work
that needs to be performed. Management should examine these latter
activities closely to see if it is possible to break them in smaller
increments to improve the management of those activities. In general,
activity durations should be as short as possible to facilitate
objective measurement of accomplished effort.
In addition, while the schedule correctly accounts for holidays that
occur in the prime contractor's country and therefore affect
production, it does not account for U.S. holidays that would affect
U.S. government activities.
Best practice: 5. Integrating schedule activities horizontally and
vertically;
Criterion met: Minimally;
GAO analysis: Vertical integration--that is, the ability to
consistently trace work breakdown structure elements between detailed
and summary master schedules--is demonstrated somewhat because lower
level tasks and milestones roll up into higher level summary tasks.
However, because the schedule lacks enough detail to meaningfully
manage the work and monitor progress, lower level detail work cannot
be clearly traced to upper-tiered milestones. As a result, it is
difficult, if not impossible, for the schedule to be used by different
teams to work to the same schedule expectations.
Issues with missing dependencies, overuse of lags, and date
constraints prevent the program schedule from complying with the
requirement of horizontal integration--that is, the overall ability of
the schedule to depict relationships between different program
elements and product hand-offs. Finally, the MPA schedule does not
reflect any product hand-offs or receipts related to the pallet system
and the C4ISR system, two systems integral to the MPA mission. Unless
the schedule is fully horizontally integrated, the effects of slipped
tasks on succeeding work cannot be determined. Horizontal integration
demonstrates that the overall schedule is rational, planned in a
logical sequence, accounts for interdependencies between work and
planning packages, and provides a way to evaluate current status.
Best practice: 6. Establishing the critical path for all activities;
Criterion met: Not met;
GAO analysis: MPA officials stated that there is no critical path
through the program schedule, and our analysis of the production
schedule confirms that a realistic critical path cannot be calculated.
Unless all activities are included in the schedule and properly
linked, it is not possible to generate a true critical path. Without
clear insight into a critical path at the project level, management
will not be able to monitor critical or near-critical detail
activities that may have a detrimental impact on downstream activities
if delayed.
Best practice: 7. Identifying reasonable float;
Criterion met: Minimally;
GAO analysis: Program officials stated that they are not monitoring
float within the schedule, although float may be monitored informally
through communication with the contractor.
As noted above, the network is missing over one half of its
relationships and numerous constraints are affecting float
calculations. As such, the schedule is displaying unrealistically high
float. The majority of unrealistic float resides in the summary work
element Aircraft Assembly. According to the schedule, approximately 30
percent of all activities within the Aircraft Assembly category are
able to slip 100-199 days without affecting the delivery of the 14th
aircraft unit. Unrealistic float is directly related to incomplete
sequencing logic. Without reliable float estimates management may be
unable to allocate resources from noncritical activities to activities
that cannot slip without affecting the project finish date.
Best practice: 8. Conducting a schedule risk analysis;
Criterion met: Not met;
GAO analysis: Officials stated that they have not conducted a schedule
risk analysis on the schedule and are uncertain whether or not such
analysis was conducted on the contractor schedule. Officials stated
that getting to this level of analysis would be difficult because they
do not have dedicated schedulers in the program office. Officials
stated that because they have negotiated a firm fixed price contract,
the government has put the risk onto the contractor. Additionally,
milestone payments are tied directly to contractor performance.
However, risks to government activities can have a severe impact on
the schedule. For example, program office officials believed an
operational assessment could be performed for MPA in lieu of a full-
up operational test and evaluation. DHS officials disagreed with this
approach, and required the program to perform additional testing
beyond an operational assessment. As a result, the program breached
its schedule and the full-rate production decision was delayed. MPA
program officials also stated that an unstable budget is a large risk
to the program.
Regardless of contract type or award fee structure, a comprehensive
schedule risk analysis is an essential tool for decision makers. A
schedule risk analysis can be used to determine a level of confidence
in meeting the completion date or whether proper reserves have been
incorporated into the schedule. A schedule risk analysis will
calculate schedule reserve, which can be set aside for those
activities identified as high risk. Without this reserve, the program
faces the risk of delays to the scheduled completion date if any
delays were to occur on critical path activities. However, if the
schedule risk analysis is to be credible, the program must have a
quality schedule that reflects reliable logic and clearly identifies
the critical path--conditions that the MPA program schedule does not
meet.
Best practice: 9. Updating the schedule using logic and durations to
determine the dates;
Criterion met: Not met;
GAO analysis: As noted earlier, all activities within the schedule are
marked as planned. In other words, even though the schedule's start
date is July 2010, 6 months prior to our analysis, no activities have
been updated with actual progress. Because no effort has been made to
status actual progress, it is impossible to use the schedule to
determine what activities have been completed, are in progress, are
late, or are planned to start on time. Moreover, program officials
stated that they were not expecting monthly updates to the schedule--
even though the production contract requires at least monthly updates.
Finally, program officials stated that they do not compare the current
schedule to a baseline schedule. As a best practice, the schedule
should be continually monitored to determine when forecasted
completion dates differ from the planned dates, which can be used to
determine whether schedule variances will affect downstream work.
Maintaining the integrity of the schedule logic is not only necessary
to reflect true status, but is also required before conducting a
schedule risk analysis.
Source: GAO analysis based on information provided by the Coast Guard.
[End of table]
Table 10: Analysis of the NSC 3 Program Schedule:
Best practice: 1. Capturing all activities;
Criterion met: Partially met;
GAO analysis: The program schedule does not reflect all activities as
defined in the program's work breakdown structure. For example, the
schedule does not include the C4ISR activities as defined in the
December 2008 approved acquisition program baseline and the program
work breakdown structure. Moreover, the schedule only captures the
work for the production of the third cutter (NSC 3), yet the NSC
program of record includes a total eight cutters to be delivered by
fiscal year 2016.
Program officials acknowledged that technical issues in the schedule
may be due to conversion errors and as such could negatively affect
the integrity of the schedule. For example, during our meeting with
the program office, the schedule status date shown in the schedule was
inaccurate.
Coast Guard officials said they do not have the capability to assess
the schedule in its native format, and therefore do not know if issues
identified in the schedule are related to the software conversions or
some other issue. For this reason, it is ultimately the responsibility
of the government program office to develop and maintain the
integrated master schedule. However, outside of the contractor
schedule there is no other program schedule. In fact, the program
office officials stated they considered it a waste of resources
developing a government schedule in addition to the schedule
maintained by the contractor. Instead, program office officials stated
that the fixed price contracting vehicle governing the program is
enough incentive for Northrop Grumman to deliver a reliable schedule.
Because the integrated master schedule includes all government,
contractor, and external party effort, the government program office
is ultimately responsible for the development and maintenance of the
integrated master schedule. A program integrated master schedule is
not simply the prime contractor's schedule; the integrated master
schedule is a comprehensive plan of all government, contractor, and
subcontractor work that needs to be performed. Without an integrated
master schedule that accounts for all planned government and
contractor effort, management is not able to reliably estimate planned
dates beyond the current schedule's end date of September 2012.
Best practice: 2. Sequencing all activities;
Criterion met: Partially met;
GAO analysis: While the number of activities with missing dependencies
is extremely low, the schedule contains a significant number of date
constraints. 1,948 (50 percent) of the remaining activities are
constrained. Of these, 1,944 are "Start No Earlier Than" constraints
and 4 are "Finish No Later Than" constraints. "Start No Earlier Than"
constraints are considered "soft" constraints in that they allow the
activity to slip into the future based on what happens to their
predecessor activities. "Finish No Later Than" constraints are also
considered "soft" date constraints because they prevent activities
from finishing earlier than their constraint date.
Coast Guard and Northrop Grumman officials said "Start No Earlier
Than" and "Finish No Later Than" events are used to align start and
finish dates on the NSC with other shipyard construction programs and
assist in managing facility loading. However, "Start No Earlier Than"
and "Finish No Earlier Than" constraints prevent managers from
accomplishing work as soon as possible and consume flexibility in the
project.
We found 118 (3 percent) dangling activities in the schedule;
117 are missing a successor from their finish and 1 is missing logic
that would determine its start date. Activities with dangling logic
have start and finish dates that are not determined by logic. Thus,
activities that do not have their start dates determined by logic
would have to start earlier in order to finish on time if they ran
longer than their planned durations; and activities missing successors
off their finish date could continue indefinitely and not affect the
start or finish dates of future activities.
We also found 702 (18 percent) lags in the schedule: 693 are positive
lags and 9 are negative lags. Program officials said as a result of
GAO's initial findings, they worked to reduce the 5,977 lags we found
in our initial review of the schedule. While lags represent the
passing of time between activities, they are often misused to put
activities on a specific date or to insert a buffer for risk.
Therefore, lags should be justified because they cannot vary with risk
or uncertainty.
Best practice: 3. Assigning resources to all activities;
Criterion met: Substantially met;
GAO analysis: The program schedule is resource-loaded by cost centers,
and the schedule currently includes a total of 189 cost centers that
show up as planning packages in the integrated master schedule.
Northrop Grumman officials also said resource estimates are based on
industrial engineering standards;
however, program officials did not provide any written evidence of
this engineering standard estimation process. Regarding the
availability of resources, both Coast Guard and Northrop Grumman
officials said the lack of resources is not a concern at this time
because the NSC shipbuilding effort is a small fraction of the total
work occurring at the shipyard and at present Northrop Grumman has
more manpower than can actually be employed on the ship.
Best practice: 4. Establishing the duration of all activities;
Criterion met: Partially met;
GAO analysis: Fifty-six percent of the remaining activities in the
schedule meet best practices with durations of 44 days or less. Per
Northrop Grumman officials, durations are determined using historical
data from the builds of previous NSCs and the construction of NSC-1
and NSC-2 were used to help forecast the master construction schedule
of the NSC-3.
Of the 44 percent of remaining activities that were greater than 44
days, 206 activities (7 percent) have durations longer than 200 days.
More than half of these are for level of effort activities which are
supportive in nature and therefore their durations should be
determined by the detail activities they support.
For those activities with durations greater than 44 days, management
should examine closely to see if it is possible to schedule the
activities in smaller increments to improve the management of those
activities. Care should be taken not to detail an ill-defined far-term
effort so soon that it requires constant revision as time progresses.
It should also be recognized that long-duration activities can skew
Schedule Risk Analysis results.
Best practice: 5. Integrating schedule activities horizontally and
vertically;
Criterion met: Partially met;
GAO analysis: Vertical integration--that is, the ability to
consistently trace work breakdown structure elements between detailed
and summary master schedules--is demonstrated because lower level
tasks and milestones roll up into higher level summary tasks.
But issues with the overuse of lags, and date constraints prevent the
program schedule from complying with the requirement of horizontal
integration--that is, the overall ability of the schedule to depict
relationships between different program elements and product hand-
offs. Furthermore, we tested the schedule for horizontal integration
by extending a task more than 500 days. We found that while the
overall finish date for the schedule did slip, the activity's
successor's start and finish dates did not change. Additionally, the
program schedule only reflects work for the NSC 3 vessel. Because the
schedule only reflects the work for NSC 3 and not the remaining five
cutters, the schedule cannot be used to assess the impacts of current
task slippages on future planned activities, nor can it be used to
support promised program dates beyond September 2012.
Unless the schedule is fully horizontally integrated, the effects of
slipped tasks on succeeding work cannot be determined. Horizontal
integration demonstrates that the overall schedule is rational,
planned in a logical sequence, accounts for interdependencies between
work and planning packages, and provides a way to evaluate current
status. When schedules are not horizontally integrated relationships
between different program teams cannot be seen and product handoffs
cannot be identified.
Best practice: 6. Establishing the critical path for all activities;
Criterion met: Partially met;
GAO analysis: Our analysis also found that the schedule does not
reflect a valid critical path for several reasons. First, the schedule
is missing key activities related to the C4ISR capability. Second, the
schedule is not logically sequenced in that it contains date
constraints, dangling logic, and an overuse of lags. Unless all
activities are included and properly linked, it is not possible to
generate a true critical path.
We traced five critical paths in the schedule. Though the critical
path can spread out into a number of different paths, which is the
case in this schedule, the path must be continuous from the status
date of February 20, 2011, to the project end date of September 10,
2012, which is not the case.
Northrop Grumman officials said the critical end milestone they are
most concerned about is Preliminary Delivery NSC, which has a planned
finish date of September 12, 2011, 12 months before the project finish.
Without clear insight into a critical path at the project level,
management will not be able to monitor critical or near-critical
detail activities that may have a detrimental impact on downstream
activities if delayed.
Best practice: 7. Identifying reasonable float;
Criterion met: Partially met;
GAO analysis: We found 1,152 (30 percent) of the remaining activities
versus 76 percent in our initial analysis, with negative float values
ranging from -5 days to -257 days. We also found 255 (7 percent) of
the remaining activities with float values greater than 100 days. The
program manager said float values in the schedule were considerably
reduced once they removed the two outlier events associated with a
typographical error which recorded in the schedule February 2029
finish dates.
Float estimates are directly related to the logical sequencing of
activities, therefore if the schedule is not properly sequenced float
calculations will be miscalculated. Because of the 702 lags in the
schedule, float calculations are distorted. Without reliable float
estimates management may be unable to allocate resources from
noncritical activities to activities that cannot slip without
affecting the project finish date. Furthermore, because the critical
path is directly related to the logical sequencing of events and float
calculations, if the schedule is missing dependencies or if activities
are incorrectly linked, float estimates will be miscalculated
resulting in an invalid critical path.
Best practice: 8. Conducting a schedule risk analysis;
Criterion met: Not met;
GAO analysis: Coast Guard program and Northrop Grumman officials said
schedule risk analysis was not required as part of the contract and
therefore one was not performed. Agency officials and Northrop Grumman
said a schedule risk analysis will be performed as part of the NSC 4
schedule.
In the December 2010 program management review, only one risk was
identified "test or installation phase failure." Given that the
schedule as of February 2011 has 3,920 remaining activities, one
identified risk seems improbable. For example, Northrop Grumman said
the critical end milestone they are most concerned about is ID# 655
"Preliminary Delivery of NSC." For this reason we expected to see this
milestone on the risk list, but we didn't. This critical milestone
has -5 days of float and 57 converging predecessors. This means the
task is already 5 days behind schedule as of the February 20, 2011,
status date.
Compounding the risk, converging paths decrease the probability of
meeting a milestone date. The chance that this milestone will be
accomplished on time decreases with every path that is added leading
up to the milestone. The more parallel paths in the schedule, the
greater the schedule risk. A Monte Carlo schedule risk analysis
simulation can help identify the compounded effect of these parallel
paths and quantify how much contingency reserve or buffer is needed in
the schedule to mitigation this risk.
A comprehensive schedule risk analysis is an essential tool for
decision makers. A schedule risk analysis can be used to determine a
level of confidence in meeting the completion date or whether proper
reserves have been incorporated into the schedule. A schedule risk
analysis will calculate schedule reserve, which can be set aside for
those activities identified as high risk. Without this reserve, the
program faces the risk of delays to the scheduled completion date if
any delays were to occur on critical path activities.
Best practice: 9. Updating the schedule using logic and durations to
determine the dates;
Criterion met: Substantially met;
GAO analysis: We found no tasks in the schedule that should have
started in the past that did not have actual start dates and we found
no tasks in the schedule with actual start or finish dates in the
future. We did find one task with a finish date in the past with no
actual finish date.
Northrop Grumman said delayed start dates in the schedule occur
because predecessor activities have not ended and if an activity has
an actual start date, then hours and material are charged to that
activity, which indicates that the activity has started.
Regarding baseline changes, the program manager said the NSC 3
schedule was rebaselined on May 24, 2010, and an integrated baseline
review occurred in September 2010. Per the program manager, the
baseline schedule will not be changed until a contract modification is
received; the tactical plan can change as activities start and stop,
but the baseline schedule cannot change.
Source: GAO analysis based on information provided by the Coast Guard.
[End of table]
[End of section]
Appendix V: Allocation of Deepwater Acquisition, Construction, and
Improvement Dollars in the Fiscal Years 2008, 2009, 2010, and 2011
Capital Investment Plans (Then-Year Dollars):
Figure 8: Allocation of Deepwater Acquisition, Construction, and
Improvement Dollars in the Fiscal Years 2008, 2009, 2010, and 2011
Capital Investment Plans (Then-Year Dollars):
[Refer to PDF for image: illustrated table]
1) Fiscal year 2008 - 2012:
Each year the Coast Guard presents a five-year capital investment plan
to Congress as part of the President‘s Budget request. The first year
of the plan represents the budget request for that year and the
remaining years represent future budget plans.
2) Fiscal year 2009 - 2013:
When the Coast Guard updates its capital investment plan, adjustments
are sometimes made for both the total funding level and allocations of
funds amongst the portfolios. In both the FY 2008 and 2009 capital
investment plans, the Coast Guard budgeted approximately $1 billion
for Deepwater.
3) Fiscal year 2010 - 2014:
As part of the Coast Guard‘s FY2010 budget request submission, it did
not include a plan for expected funding levels from FY 2011-2014 which
provided no insight into future budgetary plans.
4) Fiscal year 2011 - 2015:
The Coast Guard‘s FY2011 budget request of $1.1 billion allocated
approximately 9 percent of the request for the aviation portfolio and
3 percent for C4ISR. Based on previous plans, the Coast Guard had
anticipated allocating between 20 – 27 percent in FY 2011 to the
aviation portfolio and 5 – 6 percent for C4ISR. These allocation
changes were a contributing factor to breaches for the HH-60,C-130H,
and C4ISR programs.
Source: GAO analysis of Coast Guard data.
[End of figure]
[End of section]
Appendix VI: GAO Contacts and Staff Acknowledgments:
[End of section]
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; Molly Traci;
William Carrigg; Tisha Derricotte; Jennifer Echard; Laurier Fish;
Carlos Gomez; Kristine Hassinger; Jason Lee; Karen Richey; and Rebecca
Wilson.
[End of section]
Related GAO Products:
Coast Guard: Opportunities Exist to Further Improve Acquisition
Management Capabilities. [hyperlink,
http://www.gao.gov/products/GAO-11-480]. Washington, D.C.: April 13,
2011.
Coast Guard: Observations on Acquisition Management and Efforts to
Reassess the Deepwater Program. [hyperlink,
http://www.gao.gov/products/GAO-11-535T]. Washington, D.C.: April 13,
2011.
Coast Guard: Deepwater Requirements, Quantities, and Cost Require
Revalidation to Reflect Knowledge Gained. [hyperlink,
http://www.gao.gov/products/GAO-10-790]. Washington, D.C.: July 27,
2010.
Department of Homeland Security: Assessments of Selected Complex
Acquisitions. [hyperlink, http://www.gao.gov/products/GAO-10-588SP].
Washington, D.C.: June 30, 2010.
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: 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.
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.
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] The Department of Homeland Security's (DHS) fiscal year 2012
budget request to Congress included a proposal to eliminate the term
"Integrated Deepwater System" from its annual appropriation. At the
time of this report, Congress had not passed the fiscal year 2012 DHS
appropriations act; therefore, this report continues to use the term
Deepwater.
[2] ICGS is a business entity jointly owned by Northrop Grumman and
Lockheed Martin.
[3] GAO, Coast Guard: Deepwater Requirements, Quantities, and Cost
Require Revalidation to Reflect Knowledge Gained, [hyperlink,
http://www.gao.gov/products/GAO-10-790] (Washington, D.C.: July 27,
2010).
[4] GAO, GAO Cost Estimating and Assessment Guide: Best Practices for
Developing and Managing Capital Program Costs, [hyperlink,
http://www.gao.gov/products/GAO-09-3SP] (Washington, D.C.: March 2009).
[5] [hyperlink, http://www.gao.gov/products/GAO-10-790].
[6] These changes were reflected in the 2005 Integrated Deepwater
Mission Needs Statement.
[7] [hyperlink, http://www.gao.gov/products/GAO-10-790].
[8] For assets not being developed in segments, a combined ADE-2A/2B
approves the acquisition to proceed to the obtain phase.
[9] An acquisition program baseline formally summarizes the project's
critical cost, schedule, and performance parameters, expressed in
measurable, quantitative terms that must be met in order to accomplish
the project's goals. By tracking and measuring actual project
performance against this formal baseline, project management is
alerted to potential problems, such as cost growth, schedule slip, or
requirements creep, giving it the ability to take early corrective
action.
[10] [hyperlink, http://www.gao.gov/products/GAO-09-682] and
[hyperlink, http://www.gao.gov/products/GAO-10-790].
[11] The 2007 Deepwater acquisition program baseline does not include
an estimate for the lead cutter. The program acquisition unit cost is
approximately $320 million in then-year dollars.
[12] The Coast Guard's capital investment plan is a 5-year plan
presented to Congress that includes Acquisition, Construction and
Improvements. The Coast Guard updates the capital investment plan
annually, and it represents the Coast Guard's submission for the
President's Budget in any given year.
[13] A life-cycle cost estimate is intended to provide an exhaustive
and structured accounting of all resources and associated cost
elements required to develop, produce, deploy, and sustain a
particular program.
[14] The total acquisition cost of $4.7 billion is in then-year
dollars.
[15] [hyperlink, http://www.gao.gov/products/GAO-09-682] and
[hyperlink, http://www.gao.gov/products/GAO-10-790].
[16] [hyperlink, http://www.gao.gov/products/GAO-09-3SP].
[17] [hyperlink, http://www.gao.gov/products/GAO-09-3SP].
[18] The Coast Guard's program of record includes 36 MPAs and 8 NSCs.
[19] A critical path represents the chain of dependent activities with
the longest total duration. If any activity along the critical path
slips, the entire program will be delayed.
[20] In addition to the mismatch of funding, the DHS Inspector General
identified in November 2009 several weaknesses in the Coast Guard's
internal control over financial reporting in areas including financial
management and reporting, and fund balance with the U.S. Treasury. For
example, the DHS Inspector General found that the Coast Guard has not
developed a comprehensive process to ensure that fund balances with
U.S. Treasury transactions are recorded in the general ledger timely,
completely, and accurately--a condition which can increase the risk of
Anti-Deficiency Act violations.
[21] GAO, DOD Acquisition Outcomes: A Case for Change, [hyperlink,
http://www.gao.gov/products/GAO-06-257T] (Washington, D.C.: Nov. 15,
2005) and GAO, Defense Acquisitions: A Knowledge-Based Funding
Approach Could Improve Major Weapon System Program Outcomes,
[hyperlink, http://www.gao.gov/products/GAO-08-619] (Washington, D.C.:
July 2, 2008).
[22] Coast Guard officials stated that other factors causing the HC-
130H breach include schedule effects due to a more complex integration
effort than was originally planned, moving some requirements from one
segment to another segment to avoid diminishing manufacturing supply
issues (obsolescence) and integration rework, and delays in awarding
an essential hardware contract. Officials also stated that other
factors causing the HH-60 breach include schedule effects from
delaying two segments' operational test and evaluation to facilitate a
more accurate assessment of the operational capability and associated
logistical support of the upgraded aircraft in its operational
environment.
[23] The oversight council advised the team to use a $1.4 billion
constraint for fiscal year 2011-2016 followed by a 3 percent growth
per year. This budget constraint was for Deepwater and other major
Coast Guard acquisitions.
[24] Fiscal year 2012 is lower than other years because the Coast
Guard did not request funding for a NSC.
[25] DHS Acquisition Management Directive 102-01, revision no.1 was
finalized in January 2010. The directive provides guidance on planning
and executing acquisitions by providing a number of review points for
senior acquisition officials to oversee investments and by linking DHS
requirements, resourcing, and acquisition processes. For a recent GAO
report, see GAO, Coast Guard: Opportunities Exist to Further Improve
Acquisition Management Capabilities, GAO-11-480 (Washington, D.C.:
Apr. 13, 2011).
[26] The NSC requires the advanced procurement of certain materials,
such as the engines and air search radar, referred to as long lead
time materials. Northrop Grumman Shipbuilding Systems has recently
spun-off its ship unit as Huntington Ingalls Industries Inc., which
includes the shipyard in Pascagoula, Mississippi, where the NSC is
built.
[27] GAO, Federal Contracting: Opportunities Exist to Increase
Competition and Assess Reasons When Only One Offer is Received,
[hyperlink, http://www.gao.gov/products/GAO-10-833] (Washington, D.C.:
July 26, 2010).
[28] Coast Guard officials stated that the rotary wing assets are
equipped with sensors and communications gear provided by the aviation
project offices, not the C4ISR project office.
[29] The Coast Guard originally intended to convert all 49 of its 110-
foot patrol boats to 123-foot patrol boats. However, hull buckling and
other structural problems among the 8 converted patrol boats led the
Coast Guard to halt all further conversions.
[30] GAO, Department of Homeland Security: Billions Invested in Major
Programs Lack Appropriate Oversight, [hyperlink,
http://www.gao.gov/products/GAO-09-29] (Washington, D.C.: Nov. 18,
2008).
[31] 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) and [hyperlink, http://www.gao.gov/products/GAO-10-790].
[32] According to Commandant Instruction 5000.11, a project plan for a
nonmajor acquisition includes the acquisition strategy, life-cycle
cost estimate, master test plan, and project schedule. COMDTINST
5000.11, Non-Major Acquisition Process Table 1 (Apr. 22, 2009).
[33] [hyperlink, http://www.gao.gov/products/GAO-09-497].
[34] Department of Homeland Security Office of Inspector General, U.S.
Coast Guard's Acquisition of the Vertical-Takeoff-and-Landing Unmanned
Aerial Vehicle, OIG-09-82 (Washington, D.C.: June 24, 2009).
[35] [hyperlink, http://www.gao.gov/products/GAO-10-790].
[36] See Department of Transportation and Related Agencies
Appropriations Act, 2001, Pub. L. No. 106-346, § 350 (2000);
Department of Transportation and Related Agencies Appropriations Act,
2002, Pub. L. No. 107-87, § 348 (2001); Consolidated Appropriations
Resolution, 2003, div. I, Transportation and Related Agencies
Appropriations Act, 2003, Pub. L. No. 108-7, § 360. There is a
presumption that any provision in an annual appropriations act is
effective only for the covered fiscal year because appropriations acts
are, by their nature, nonpermanent legislation. For this reason, a
provision contained in an annual appropriation act is not to be
construed to be permanent legislation unless the language used or the
nature of the provision makes it clear that Congress intended it to be
permanent. B-319414, June 9, 2010. Here, the requirement for the Coast
Guard to submit a quarterly report on major acquisition projects
cannot be construed to be permanent legislation because there are no
words in the statute indicating Congress's intent to make the
reporting requirement permanent.
[37] See, e.g., H.R. Conf. Rep. No. 111-298, at 83 (2009); S. Rep. No.
111-222, at 80 (2010); COMDTINST M5000.10B, Major Systems Acquisition
Manual page 7-3 (Nov. 1, 2010).
[38] COMDTINST M5000.10B, Major Systems Acquisition Manual, page 7-3
(Nov. 1, 2010).
[39] GAO, Coast Guard: Observations on Acquisition Management and
Efforts to Reassess the Deepwater Program, [hyperlink,
http://www.gao.gov/products/GAO-11-535T] (Washington, D.C.: Apr. 13,
2011).
[40] For fleet mix analysis phase 1, the Coast Guard adjusted the
$24.2 billion program of record to account for changes in
characteristics and requirements for several of the Deepwater assets
that had occurred since the last performance gap analysis. For
example, the per-flight hours for the HC-144A were reduced from 1,200
to 800 based on an initial capabilities assessment and the number of
unmanned aircraft systems was reduced. Officials stated that these
adjustments did not result in significant changes to the program of
record.
[41] [hyperlink, http://www.gao.gov/products/GAO-10-790].
[42] Coast Guard officials stated that all cost constraints for the
fleet mix analysis phase 2 are in constant fiscal year 2012 dollars.
[43] [hyperlink, http://www.gao.gov/products/GAO-11-535T].
[44] According to a DHS official involved in this analysis, the
characteristics of the OPC are based on the operational requirements
document and the characteristics of the modernized 270' are
theoretical because this cutter does not exist.
[45] 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) and [hyperlink, http://www.gao.gov/products/GAO-09-682],
[hyperlink, http://www.gao.gov/products/GAO-10-790], and [hyperlink,
http://www.gao.gov/products/GAO-11-480].
[46] [hyperlink, http://www.gao.gov/products/GAO-09-3SP].
[47] [hyperlink, http://www.gao.gov/products/GAO-09-3SP].
[End of section]
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