Coast Guard:

Strategies for Procuring New Ships, Aircraft, and Other Assets

T-RCED-99-116: Published: Mar 16, 1999. Publicly Released: Mar 16, 1999.

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Pursuant to a congressional request, GAO discussed the Coast Guard's plans for modernizing its ships, aircraft, and other capital assets needed to carry out its missions, as well as the agency's plans and strategies to fund these needs, focusing on the Coast Guard's progress in: (1) justifying the Deepwater Capability Replacement Project and addressing GAO's concerns about its affordability; and (2) developing strategies and plans for funding its capital needs within a constrained fiscal environment.

GAO noted that: (1) the Coast Guard has not yet sufficiently justified the Deepwater Project, in that accurate and complete information is lacking on the performance shortcomings of its ships and aircraft and the resource hours needed to fulfill its missions; (2) proceeding without these key data increases the risk that contractors will develop alternatives that are not the most cost-effective to meet the needs of the project; (3) the Coast Guard and its contractors are developing this information, but some of it will not be available until later this year; (4) GAO also reported that if the cost of the Deepwater Project approaches the agency's initial estimate of $500 million annually, it would consume more than the agency now spends for all capital projects and leave little funding for other critical needs; (5) Coast Guard officials believe that competition among contractors will reduce the cost of the Deepwater Project and more closely align its potential cost with probable funding levels; (6) however, until the Coast Guard develops its new justification for the project in early 2000 and contractors provide their cost estimates for various alternatives, the Coast Guard will not know whether the affordability issue has been adequately addressed; (7) the costs of the Deepwater Project, together with funds needed to complete all other ongoing capital projects, may outstrip the Coast Guard's ability to pay for them; (8) the Office of Management and Budget (OMB) proposes freezing the Coast Guard's budget for capital spending at $485 million annually through fiscal year 2004; (9) if the Deepwater Project requires annual funding levels of $500 million, this cost, coupled with the costs of ongoing capital projects, would exceed the OMB target by about $300 million in 2002; (10) with good planning, renewed efforts to reduce costs, and better information on the useful life of its ships and aircraft, the Coast Guard may be able to prioritize its needs and minimize future capital needs; and (11) the Coast Guard is now developing a new plan and budget strategies for dealing with its capital funding needs in an environment of fiscal constraint, but putting these approaches in place may take several years and their effectiveness is uncertain.

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