Coast Guard:

Progress Being Made on Deepwater Project, but Risks Remain

GAO-01-564: Published: May 2, 2001. Publicly Released: May 2, 2001.

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The Coast Guard is in the final stages of planning the largest procurement project in its history-the modernization or replacement of more than 90 cutters and 200 aircraft used for missions more than 50 miles from shore. This project, called the Deepwater Capability Replacement Project, is expected to cost more than $10 billion and take 20 years or longer to complete. Congress and the Coast Guard are at a major crossroads with the project. Planning is essentially complete, and Congress will soon be asked to commit to a multibillion-dollar project that will define the way the Coast Guard performs many of its missions for decades to come. The deepwater acquisition strategy is unique and untried for a project of this magnitude. It carries many risks that could potentially cause significant schedule delays and cost increases. The project faces risks in the following four areas: (1) planning the project around annual funding levels far above what the administration has told the Coast Guard it can expect to receive, (2) keeping costs under control in the contract's later years, (3) ensuring that procedures and personnel are in place for managing and overseeing the contractor once the contract is awarded, and (4) minimizing potential problems with developing unproven technology. All of these risks can be mitigated to varying degrees, but not without management attention.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In a July 2001 briefing with OMB, DOT, and GAO officials, the Coast Guard Deepwater Program Executive Officer stated that all funding requests will be for "full funding" of useful segments, and that the Coast Guard will provide OMB and Congress regular updates on the progress of the Deepwater Program. In February 2002, DOT, OMB, and the Coast Guard jointly certified to the House and Senate Appropriations Committees that funding for the Deepwater program for fiscal years 2003 through 2007 are fully funded in the Coast Guard's Capital Investment Plan and within OMB's budgetary projections. The Coast Guard awarded the Deepwater contract in June 2002.

    Recommendation: Before the4 Coast Guard signs a contract with the systems integrator for the Deepwater Project, the Secretary of Transportation should direct the Commandant of the Coast Guard to complete plans for ensuring that annual budget requests for the Deepwater project are for useful segments and that a mechanism is in place for reporting to OMB and Congress, as part of its annual budget submission, the progress that is made in achieving baseline goals of minimizing costs and improving operations due to investments in funding the Deepwater Project.

    Agency Affected: Department of Transportation

  2. Status: Closed - Implemented

    Comments: In May 2002, the Coast Guard released the "Phase 2 Program Management Plan." This plan provides the management framework, organizational structure, schedule, activities/events, tasking, and assignment of responsibilities required to meet Deepwater program objectives. In February 2002, DOT, OMB, and the Coast Guard approved a contingency procurement strategy for the recapitalization of assets and capabilities envisioned in the Deepwater program. The Coast Guard awarded the Deepwater contract in June 2002.

    Recommendation: Before the Coast Guard signs a contract with the systems integrator for the Deepwater Project, the Secretary of Transportation should direct the Commandant of the Coast Guard to complete the development of the Program Management Plan, including plans and procedures to (1) facilitate relations with subcontractors, (2) ensure that the project is adequately staffed ant that the staff is properly trained to perform their respective project management responsibilities, and (3) cover actions to be taken in the event that the Coast Guard decides not to continue its contract with the systems integrator.

    Agency Affected: Department of Transportation

  3. Status: Closed - Implemented

    Comments: As a result of this recommendation, the agency contracted with Acquisition Solutions, Inc. to conduct an independent review of the Request for Proposal (RFP). This task included a review of program documents (RFP, acquisition plan, and other documents), recommendations of the formerly convened expert panel, GAO and Department of Transportation's Office of Inspector General reports, and congressional testimony. In its July 14, 2001 report, the contractor made recommendations to strengthen the acquisition and mitigate risks. Before the report was issued, the Coast Guard incorporated all these recommendations into the RFP, which was issued on June 29, 2001.

    Recommendation: Before the Coast Guard issues the RFP for the Deepwater Project, Secretary of Transportation should direct the Commandant of the Coast Guard to carefully consider and incorporate recommendations, if any, made by the peer review panel into the deepwater acquisition plan and RFP or it the peer review panel finds serious and unmitigated risks in the Coast Guard's approach, evaluate alternative contracting strategies that could address the risks.

    Agency Affected: Department of Transportation

  4. Status: Closed - Implemented

    Comments: The industry teams have used $500 million per outyear as a planning parameter since March 1998. DOT and the Coast Guard note that OMB outyear funding targets have been converging with estimated project requirements during the last year, and they believe that OMB targets will change in the future to better match program requirements of $500 million annually. Based on GAO's concerns, the Coast Guard added a contract line item in the Request for Proposal (RFP) requiring the selected contractor to develop an alternative implementation plan after contract award, if needed, to respond to government-required changes such as outyear appropriation levels. On June 29, 2001, the Coast Guard issued the RFP for the Deepwater program.

    Recommendation: Before the Coast Guard issues the RFP for the Deepwater Project, the Secretary of Transportation should ensure that a realistic level of funding, based on OMB budget targets, the Coast Guard's capital planning process, and congressional guidance is incorporated into the RFP and used by contractors as the basis for designing their proposal systems.

    Agency Affected: Department of Transportation

  5. Status: Closed - Implemented

    Comments: In May 2002, the Coast Guard released the "Phase 2 Program Management Plan." For technical risk management, the Deepwater program has adopted and tailored DOD procedures to conduct a Technology Readiness Level assessment for new technology and for items or sub-systems that have a questionable impact on future availability, operational application, or limited/unproven test results. The Deepwater contract was awarded in June 2002.

    Recommendation: Before the Coast Guard signs a contract with the systems integrator for the Deepwater Project, the Secretary of Transportation should direct the Commandant of the Coast Guard to select a process, such as the technology readiness levels approach, for assessing the technology readiness of equipment and major systems to be delivered.

    Agency Affected: Department of Transportation

 

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