Coast Guard:

Action Needed As Approved Deepwater Program Remains Unachievable

GAO-11-743: Published: Jul 28, 2011. Publicly Released: Jul 28, 2011.

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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.

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.

Status Legend:

More Info
  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Matter for Congressional Consideration

    Matter: To help ensure that it receives timely and complete information about the Coast Guard's major acquisition projects, Congress may wish to 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 may wish to 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.

    Status: Closed - Not Implemented

    Comments: This matter for Congressional consideration has been overcome by events. After this report was released, Congress passed the Consolidated Appropriations Act 2012 that requires a Department of Homeland Security comprehensive acquisition status report. This report will incorporate Coast Guard data.

    Recommendations for Executive Action

    Recommendation: To increase confidence that the assets bought will meet mission needs, the Commandant of the Coast Guard should develop and finalize a strategy for the acquisition of the MPA mission system pallets before a full-rate production decision is made.

    Agency Affected: Department of Homeland Security: United States Coast Guard

    Status: Closed - Not Implemented

    Comments: The Coast Guard did not finalize a mission system acquisition strategy prior to approving the asset for full rate production. The Coast Guard is beginning to adopt a Navy mission system that will hopefully address issues.

    Recommendation: To increase confidence that the assets bought will meet mission needs, the Commandant of the Coast Guard should 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.

    Agency Affected: Department of Homeland Security: United States Coast Guard

    Status: Closed - Not Implemented

    Comments: The Coast Guard has not revisited the acquisition level for this program and indicates that they no longer plan on revisiting the oversight level for this program. The Coast Guard downgraded the cutter small boat program to a non-major acquisition focused only on outfitting the National Security Cutter with cutter small boats. However, the Coast Guard then awarded two contracts for over 100 cutter small boats that may be purchased for several cutter classes.

    Recommendation: 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, the Secretary of Homeland Security should 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.

    Agency Affected: Department of Homeland Security

    Status: Closed - Not Implemented

    Comments: DHS agreed with the recommendation, but did not take action. Based upon GAO-12-751R issued in May 2012, GAO-12-918 issued in September 2012, and the fiscal year 2014 Presidential Budget Request for the Coast Guard, DHS and the Coast Guard have not formed this working group. Further, Coast Guard officials stated that they are still pursuing the Coast Guard program of record and have not made trade-offs that recognize fiscal constraints.

    Recommendation: 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, the Commandant of the Coast Guard 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.

    Agency Affected: Department of Homeland Security: United States Coast Guard

    Status: Closed - Implemented

    Comments: The Coast Guard has an approved Life Cycle Cost Estimate (LCCE) approved for its major acquisitions, except for the H-60 program. The H-60 program is nearing completion and it would be cost prohibitive for the Coast Guard to complete a LCCE for that program. In addition, the Major Systems Acquisition Manual includes language directing the Coast Guard to use GAO's Cost Estimating and Assessment Guide in creating LCCEs, Work Breakdown Schedules, and sand charts depicting the impacts of all of the acquisition projects in the Capital Investment Plan.

    Recommendation: 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, the Commandant of the Coast Guard 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 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.

    Agency Affected: Department of Homeland Security: United States Coast Guard

    Status: Open

    Comments: DHS/Coast Guard agreed with the recommendation, but have not yet taken action.

    Recommendation: To help ensure that Congress receives timely and complete information about the Coast Guard's major acquisition projects, the Commandant of the Coast Guard and the Secretary of the Department of Homeland Security should (1) 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 (2) submit the Quarterly Acquisition Report to Congress by the 15th day of the start of each fiscal quarter.

    Agency Affected: Department of Homeland Security: United States Coast Guard

    Status: Closed - Not Implemented

    Comments: This recommendation has been overcome by events. After this report was released, Congress passed the Consolidated Appropriations Act 2012 that requires a Department of Homeland Security comprehensive acquisition status report. This report will incorporate Coast Guard data.

    Recommendation: To help ensure that Congress receives timely and complete information about the Coast Guard's major acquisition projects, the Commandant of the Coast Guard and the Secretary of the Department of Homeland Security should (1) 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 (2) submit the Quarterly Acquisition Report to Congress by the 15th day of the start of each fiscal quarter.

    Agency Affected: Department of Homeland Security

    Status: Closed - Not Implemented

    Comments: This recommendation has been overcome by events. After this report was released, Congress passed the Consolidated Appropriations Act 2012 that requires a Department of Homeland Security comprehensive acquisition status report. This report will incorporate Coast Guard data.

    Recommendation: Because DHS approved the OPC operational requirements document although significant uncertainties about the program's feasibility, capability, and affordability remained, the Secretary of DHS should 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).

    Agency Affected: Department of Homeland Security

    Status: Closed - Implemented

    Comments: The Department of Homeland Security (DHS) Under Secretary for Management addressed our concerns in the Acquisition Decision Memorandum accompanying the Offshore Patrol Cutter's ADE decision event in April 2012. In this memorandum, the DHS Investment Review Board recognized that the affordability of the Offshore Patrol Cutter is critical to the success of the project. Thus, the DHS Under Secretary for Management agreed that the Coast Guard must return to the Investment Review Board prior to contract award for a project review to ensure that the Offshore Patrol Cutter cost estimate and schedule are still valid. According to Coast Guard officials, this emphasis on affordability was based upon our recommendation. Further, the Investment Review Board affirmed that the Coast Guard has expended significant effort to develop the Offshore Patrol Cutter requirements, and to thoroughly challenge and review them while reducing the operational requirements to the minimum needed to accomplish their assigned missions.

    Recommendation: Because DHS approved the OPC operational requirements document although significant uncertainties about the program's feasibility, capability, and affordability remained, the Secretary of DHS should determine whether a revised operational requirements document is needed before the program's next acquisition decision event (ADE 2A/B).

    Agency Affected: Department of Homeland Security

    Status: Closed - Implemented

    Comments: The Department of Homeland Security (DHS) Under Secretary for Management addressed our concerns in the Acquisition Decision Memorandum accompanying the Offshore Patrol Cutter's ADE decision event in April 2012. In this memorandum, the DHS Investment Review Board recognized that the affordability of the Offshore Patrol Cutter is critical to the success of the project. Thus, the DHS Under Secretary for Management agreed that the Coast Guard must return to the Investment Review Board prior to contract award for a project review to ensure that the Offshore Patrol Cutter cost estimate and schedule are still valid. According to Coast Guard officials, this emphasis on affordability was based upon our recommendation. Further, the Investment Review Board affirmed that the Coast Guard has expended significant effort to develop the Offshore Patrol Cutter requirements, and to thoroughly challenge and review them while reducing the operational requirements to the minimum needed to accomplish their assigned missions.

    Recommendation: To increase confidence that the assets bought will meet mission needs, as the Coast Guard reevaluates and revises its computers, intelligence, surveillance, and reconnaissance (C4ISR) project documentation---including the operational requirements document, acquisition program baseline, and life-cycle cost estimate---the Commandant of the Coast Guard should 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.

    Agency Affected: Department of Homeland Security: United States Coast Guard

    Status: Open

    Comments: We have received the C4ISR baseline and are currently working to gain a better understanding of its contents.

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