Coast Guard:

Change in Course Improves Deepwater Management and Oversight, but Outcome Still Uncertain

GAO-08-745: Published: Jun 24, 2008. Publicly Released: Jun 24, 2008.

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The Coast Guard's Deepwater Program, under the Department of Homeland Security (DHS), has experienced serious performance and management problems. Deepwater is intended to replace or modernize Coast Guard vessels, aircraft, and the communications and electronic systems that link them together. As of fiscal year 2008, over $4 billion has been appropriated for Deepwater. The Coast Guard awarded a contract in June 2002 to a lead system integrator, Integrated Coast Guard Systems (ICGS), to execute the program using a system-of-systems approach. In response to a Senate report accompanying a Department of Homeland Security appropriations bill, 2008, this GAO report assesses whether the changes the Coast Guard is making to its management and acquisition approach to Deepwater will put it in a position to realize better outcomes. GAO reviewed key program documents and interviewed Coast Guard and contractor personnel.

Coast Guard leadership is making positive changes to its management and acquisition approach to the Deepwater Program that should put it in a position to realize better outcomes, although challenges to its efforts remain. The Coast Guard has increased accountability by bringing Deepwater under a restructured acquisition function and investing its government project managers with management and oversight responsibilities formerly held by ICGS. Coast Guard project managers and technical experts--as opposed to contractor representatives--now hold the greater balance of management responsibility and accountability for program outcomes. However, like other federal agencies, the Coast Guard has faced obstacles in building an adequate government workforce. It has various initiatives under way to develop and retain a workforce capable of managing this complex acquisition program, but faced with an almost 20 percent vacancy rate, it is relying on support contractors, such as cost estimators, in key positions. The Coast Guard's decision to manage Deepwater under an asset-based approach, rather than as an overall system-of-systems, has resulted in increased government control and visibility over acquisitions. Agency officials have begun to hold competitions for Deepwater assets outside of the ICGS contract. While the asset-based approach is beneficial, certain cross-cutting aspects of Deepwater, such as the program's communications and intelligence components and the numbers of each asset needed, still require a systems-level approach. The Coast Guard recognizes this but is not yet fully positioned to manage these aspects. The Coast Guard has begun to follow the disciplined, project management framework of its Major Systems Acquisition Manual (MSAM), which requires documentation and high-level executive approval of decisions at key points in a program's life cycle. But the consequences of not following this approach in the past are now evident, as Deepwater assets have been delivered without a determination of whether their planned capabilities would meet mission needs. The MSAM process currently allows limited initial production to proceed before the majority of design activities have been completed. In addition, a disconnect between MSAM requirements and current practice exists because DHS had earlier delegated to the Coast Guard all Deepwater acquisition decisions, resulting in little departmental oversight. Coast Guard project managers and decision makers are now receiving information intended to help manage project outcomes, but some key information is unreliable. The earned value management data reported by ICGS lacks sufficient transparency to be useful to Coast Guard program managers, and subcontractor Northrop Grumman's system for producing the data may need to be re-certified to ensure its reliability. Officials state that they are addressing these issues through joint efforts with the Navy and the Defense Contract Management Agency.

Status Legend:

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

    Recommendations for Executive Action

    Recommendation: To help ensure that the initiatives to improve Deepwater management and oversight continue as intended and to facilitate decision-making across the department, the Secretary of Homeland Security should direct the Under Secretary for Management to rescind the delegation of Deepwater acquisition decision authority.

    Agency Affected: Department of Homeland Security

    Status: Closed - Implemented

    Comments: In GAO report GAO-08-745, issued June 2008, we recommended that the Department of Homeland Security rescind the delegation of acquisition decision authority on Deepwater-- granted by a December 22, 2003 memorandum from the department's Investment Review Board-- to help ensure that the initiatives to improve Deepwater management and oversight continue as intended and to facilitate decision-making across the department. On September 25, 2008 the Department of Homeland Security's Under Secretary for Management issued an acquisition decision memorandum rescinding the delegation of Key Decision Point authority for the Integrated Deepwater Systems program and all acquisitions within the program. This action implements our recommendation.

    Recommendation: To improve knowledge-based decision-making for its acquisitions, the Commandant of the Coast Guard should revise the procedures in the Major Systems Acquisition Manual related to the authorization of low-rate initial production by requiring a formal design review to ensure that the design is stable as well as a review before authorizing initial production.

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

    Status: Closed - Implemented

    Comments: In GAO report GAO-08-745, issued June 2008, we recommended that the Commandant of the Coast Guard revise procedures for the authorization of low-rate initial production by requiring a formal design review before beginning low-rate production. In the Coast Guard's October 2008 revision of the Major Systems Acquisition Manual, which establishes the procedures for major acquisitions, a new review was added to provide high level approval to commence low-rate production that coincides with completion of the program's critical design review. This revision implements our recommendation.

    Recommendation: To improve program management of surface assets contracted to Northrop Grumman Ship Systems, the Commandant of the Coast Guard should develop an approach to increase visibility into that contractor's earned value management data reporting before entering into any further contractual relationships, such as for long lead material for and production of the fourth NSC.

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

    Status: Closed - Implemented

    Comments: In their written comments to GAO-08-745 the Coast Guard partially concurred with the recommendation to increase visibility into Northrop Grumman's earned value management data, stating that the data is not necessary for firm fixed-price contracts for long-lead materials for the National Security Cutter (NSC). The Coast Guard has since provided evidence that the long-lead time material contract for NSC 4 was firm fixed-price, and that they plan to continue with that type of contract for the materials for NSCs 5 and 6. It also provided language for the NSC 4 construction contract that expands the Coast Guard's visibility into earned value management by requiring the contractor to report to the appropriate level of detail and providing for access to further information when requested.

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