Coast Guard's Acquisition Management:

Deepwater Project's Justification and Affordability Need to Be Addressed More Thoroughly

RCED-99-6: Published: Oct 26, 1998. Publicly Released: Nov 2, 1998.

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Pursuant to a congressional request, GAO reviewed the extent to which the Coast Guard has: (1) accurately depicted the need to replace or modernize its deepwater ships and aircraft; and (2) aligned the estimated cost of its Deepwater Project with its overall budget for capital projects.

GAO noted that: (1) although the Coast Guard is correct in starting now to explore how best to modernize or replace its deepwater ships and aircraft, the Deepwater Project's only formal justification developed to date does not accurately or fully depict the need for replacement or modernization; (2) this justification concluded that most deepwater ships and aircraft would need to be phased out starting in the next 2 to 9 years; (3) however, subsequent analyses by the Coast Guard and others have shown that deepwater aircraft likely have a much longer life; (4) the justification asserted that these ships and aircraft were incapable of performing future missions or meeting future demand, but GAO was unable to validate these assertions from the information available; (5) the Coast Guard withdrew the justification on the basis of concerns expressed by the Office of Management and Budget and is now developing more accurate and updated information; (6) several of these studies are still under way, even as contracting teams have already begun work on developing their initial deepwater proposals; (7) any delays in communicating this updated information to the contractors could adversely affect the quality of the proposals submitted; (8) while the Coast Guard's acquisition approach seems an appropriate way to avoid a costly one-for-one replacement of ships and aircraft, the agency could face major financial obstacles in proceeding with a Deepwater Project costing as much as initially proposed for planning purposes; (9) at a projected $500 million a year, expenditures for the project would take virtually all of the Coast Guard's projected spending for all capital projects, which currently include the construction of new buoy tenders and motorized lifeboats; (10) the Coast Guard expects more than $165 million of the annual funding to come from new user fees for domestic ice-breaking and navigational services that the Coast Guard currently provides; (11) however, the congressional subcommittees with jurisdiction over the Coast Guard's budget have expressed opposition to such fees, and the House and Senate have prohibited the Coast Guard from planning or implementing any new user fees; (12) if hoped-for funding does not occur, the Coast Guard may be left having either to reduce the scope of the project or to stretch out the procurement period; and (13) many other government procurement projects have demonstrated that when agencies attempt to address a problem by stretching out the procurement period, administrative and other costs increase, resulting in lower value for the amount of money spent.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: According to information provided by the Coast Guard, it agreed that specific information regarding methodologies and data sources should be available throughout the acquisition process. In addition, according to the Coast Guard, it fully supports the use of empirical data and quantitative analysis to support acquisition projects. Its information is based on operating experience with the assets, and specific technical reviews of the assets by highly trained experts. Since the Coast Guard's move to the new Department of Homeland Security, its acquisition manual will now formally stipulate the need for this information.

    Recommendation: The Secretary of Transportation should direct the Office of the Assistant Secretary for Administration and the Coast Guard to revise acquisition guidelines to ensure that mission analysis reports and mission needs statements disclose the methodologies and data sources used. Also, expand guidelines and emphasize the importance of using more systematic data collection techniques, such as structured interviews, sampling techniques, and empirical data.

    Agency Affected: Department of Transportation

  2. Status: Closed - Implemented

    Comments: According to information provided by the Coast Guard, it will strive to ensure that mission analysis reports for future projects are based on accurate and complete data on the condition of current assets. As a result of the Coast Guard moving to the new Department of Homeland Security, it revised existing acquisition guidelines to stipulate that new projects must be based on complete, accurate, and data-rich information on the condition of its current systems and assets.

    Recommendation: The Secretary of Transportation should direct the Office of the Assistant Secretary for Administration and the Coast Guard to revise acquisition guidelines to better ensure that mission analysis projects for future projects are based on accurate and complete data on the condition of current assets, as appropriate for the assets or systems in question. Such revisions should stress the importance of using rigorous engineering or other data-based evaluations to estimate the remaining service life of assets rather than using estimates made when the assets were produced or modified.

    Agency Affected: Department of Transportation

  3. Status: Closed - Implemented

    Comments: In December 1999, the Coast Guard prolonged the formal contractual link with the contractor teams to allow additional information to be developed and incorporated into their proposed system concepts. By January 2001, the Coast Guard had issued an updated mission analysis report showing that (1) the service life of the various aircraft classes could be extended by about 11 to 28 years over original estimates, assuming that increased maintenance and upgrades occur, and (2) the service life of two of the four ship classes could be extended by an additional 5 years, assuming that increased maintenance and upgrades occur. The Coast Guard provided this information to its contractors so that they could use it in developing their proposals.

    Recommendation: The Secretary of Transportation should direct the Office of the Assistant Secretary for Administration and the Coast Guard to expedite the development and issuance of updated information from internal studies to contractors involved in developing proposals for the Deepwater Project. Information should include, but not necessarily be limited to the remaining service life of ships and aircraft, gaps between current and needed capabilities, and future service levels.

    Agency Affected: Department of Transportation

  4. Status: Closed - Implemented

    Comments: When the Coast Guard became part of the new Department of Homeland Security (DHS) in March 2003, that department required all acquisitions to be reviewed and approved in advance by the department's Office of Acquisitions. As such, acquisition decisions on the Deepwater project, including changes in delivery dates of key assets, are subject to review by the department. The Coast Guard also keeps DHS and Congress apprised of its major acquisition programs with its monthly major acquisition status reports to DOT, and a semi-annual report to Congress through DOT.

    Recommendation: The Secretary of Transportation should direct the Commandant of the Coast Guard to submit his decision on this matter to the Department of Transportation's (DOT) Transportation System Acquisition Review Council or other appropriate offices within DOT for approval.

    Agency Affected: Department of Transportation

  5. Status: Closed - Implemented

    Comments: At this point, according to the Coast Guard, it is not possible for the agency to know, with reasonable specificity, what its outyear funding levels will be, and no single potential funding level holds any greater validity than the existing level. The Coast Guard fully recognizes the potential for variation from this planning figure, and in December 1999, instructed each contracting team to determine the optimal and minimal funding stream required to build their proposed system. While the information provided by the industry teams is proprietary, the Deepwater Project manager told GAO that each team's analysis reasonably supported the baseline funding of $500 million for the outyears.

    Recommendation: The Secretary of Transportation should direct the Commandant of the Coast Guard to evaluate whether contracting teams should be instructed to base their proposals for the Deepwater Project on the assumption that the funding level will be lower than $500 million a year.

    Agency Affected: Department of Transportation

  6. Status: Closed - Implemented

    Comments: The Coast Guard has adopted OMB's A-11 processes for planning, budgeting, and acquisition of capital assets, and has revised its Major System Acquisition Manual to reflect OMB Circular A-11 and other federal acquisition policy changes.

    Recommendation: The Secretary of Transportation should direct the Office of the Assistant Secretary for Administration and the Coast Guard to develop a method to better ensure that existing acquisition requirements are carried out, such as documenting the gap between current and needed capabilities. Such actions could include the use of tools like checklists of key requirements or certification that requirements have been met.

    Agency Affected: Department of Transportation

 

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