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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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