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entitled 'Coast Guard: Replacement of HH-65 Helicopter Engine' which 
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Report to the Chairman, Committee on Commerce, Science, and 
Transportation, U.S. Senate:

United States General Accounting Office:

GAO:

March 2004:

Coast Guard:

Replacement of HH-65 Helicopter Engine:

GAO-04-595:

United States General Accounting Office:

Washington, DC 20548:

March 24, 2004:

The Honorable John McCain Chairman, Committee on Commerce, Science, and 
Transportation, United States Senate:

Dear Mr. Chairman:

Over the last several years, the Coast Guard has experienced what it 
considers to be serious reliability and safety problems with its 
workhorse HH-65 helicopter used for key missions, such as search and 
rescue, migrant and drug interdiction, and homeland security.[Footnote 
1] Annually, the HH-65 contributes to saving 375 lives and assists on 
2,065 drug interdiction cases, according to the Coast Guard. An 
increasing trend in the number and seriousness of safety-related HH-65 
incidents in recent months, highlighted by some the Coast Guard deemed 
to be serious life-threatening incidents, prompted a Coast Guard 
decision in January 2004 to replace the existing engine and the 
associated engine control system[Footnote 2] in this helicopter with a 
different engine, which it believes will improve safety and reliability 
and substantially reduce incidents.[Footnote 3]

In light of the Coast Guard's decision to replace the existing engine, 
and as part of our already ongoing work on the safety and reliability 
of the HH-65 helicopter, you asked us to determine (1) whether the 
Coast Guard's decision to replace the existing HH-65 helicopter engine 
was fact-and risk-based; (2) the management and efficiency 
implications, if any, of the Coast Guard's approach for addressing the 
safety and reliability issues with the existing HH-65 engine and 
acquiring the replacement engine; and (3) the extent to which the 
replacement decision aligns with the Coast Guard's long-term helicopter 
needs under its Deepwater program.[Footnote 4] On March 12, 2004, we 
briefed your staff on the preliminary results of our work to date. 
Enclosure I contains the materials we presented at that time. Even 
though the results of our work are preliminary, we are reporting now to 
give the Coast Guard an opportunity to amply consider our findings as 
it proceeds with its HH-65 engine modification and replacement 
initiatives.

We conducted our work from June 2003 through March 2004 in accordance 
with generally accepted government auditing standards.

Results in Brief:

The Coast Guard made a decision that was both fact-and risk-based for 
replacing the engine on the HH-65 helicopter. Recently, the number of 
reported in-flight power losses and incidents has grown dramatically. 
The Coast Guard reported 37 incidents in the first 3½ months of fiscal 
year 2004, when it made the engine replacement decision. That number 
had risen to 67 incidents as of March 1, 2004. In fiscal year 2003, 
pilots had reported a total of 32 incidents.[Footnote 5] We verified 
the data used to support the recent trends and incidents cited by the 
Coast Guard as a basis for making the engine replacement decision. 
Further, our interviews with pilots and our review of incident reports 
disclosed widespread Coast Guard concerns with the safety risks of 
flying the HH-65 helicopter because of the lack of reliability of its 
engine and engine control system. For example, some pilots and crew 
characterized flying the helicopter akin to "playing Russian roulette," 
indicating that failures could occur at any time in flight. They also 
stated that they routinely employ atypical work-around solutions, such 
as dumping fuel and leaving a rescue swimmer behind, to accomplish 
missions when power failures and other engine-related problems occur. 
The Coast Guard also performed a risk analysis, using information on 
frequency of occurrence, severity of incidents, and assumptions about 
their relative importance that showed that the current situation 
warranted the highest possible risk category, sufficient to ground the 
fleet unless substantive steps were taken to improve safety and 
reliability. The Coast Guard's determination of the need for immediate 
engine and engine control system replacement was also based on the 
belief that improvements being made to the existing engine by the 
manufacturer and the Coast Guard were not working fast enough. 
Similarly, HH-65 helicopter upgrades under the Coast Guard's Deepwater 
program are not scheduled to begin until fiscal year 2006, and during 
the interim period, the Coast Guard did not want to further jeopardize 
the safety of its pilots and crew or those who depend on the Coast 
Guard during search and rescue operations.

The Coast Guard is using a two-track approach for dealing with safety 
and reliability problems with the HH-65 in the short term, and this 
approach has a number of notable management and efficiency 
implications. With regard to the first track, which involves installing 
a modified version of the existing engine, the Coast Guard has already 
bought 61 modified engines and plans to purchase 38 more for $4 million 
before testing is completed on any of the modified engines.[Footnote 6] 
According to the Coast Guard, serious problems occurred with the 
modified engine during early testing, and further engine modifications 
were made.[Footnote 7] Moreover, installation of the first 61 modified 
engines is not scheduled to be completed on selected HH-65 helicopters 
until November 2004--at a time when installation of the replacement 
engines is scheduled to be underway on other HH-65 helicopters. Hence, 
the remaining 38 modified engines may not be needed until November 2004 
at the earliest, depending on the results of the testing program. In 
light of these circumstances, we believe that proceeding with the 38-
engine purchase is premature, at least until testing is completed in 
April 2004. Also, given that installation of the replacement engine 
likely will have already started by the time the 38 engines are ready 
for installation, a further Coast Guard review of the cost 
effectiveness of purchasing and installing these engines should be 
considered, in our opinion. The second track of the Coast Guard's 
approach, which is to acquire a replacement engine, involves using a 
contractor to select and acquire the engine, rather than the Coast 
Guard managing the effort itself.[Footnote 8] The Coast Guard believes 
that this approach will both take advantage of the contractor's 
acquisition expertise and reduce the Coast Guard's legal risks by 
providing independence to the acquisition decision--thereby reducing 
potential disputes and protests over the engine replacement decision. 
However, as the Coast Guard recognizes, this approach most likely will 
cost more because of the contractor's charges for profit and overhead, 
which could add 15 percent to total costs. Also, relying on the 
contractor adds another layer of administration and carries the risk of 
additional time to negotiate acquisition decisions, even after the 
initial contract award is made.

Whether the requirements for the replacement engine will be aligned 
with Deepwater requirements for this helicopter is unclear because the 
requirements for all Deepwater aircraft and vessels are still under 
review in light of the Coast Guard's expanded homeland security 
responsibilities.[Footnote 9] If the two are not aligned, there are 
significant implications and risks related to the amount of money spent 
on engine replacements and the amount of time needed for replacement. 
For example, if the replacement engine does not meet power requirements 
for the Deepwater helicopter, a second new engine may have to be 
installed, largely negating the estimated $150 million to $250 million 
investment in the first replacement engine. Also, the Coast Guard would 
have to go through two replacement cycles--one for the first 
replacement engine and a second for the engine needed to meet Deepwater 
requirements. This could result in fewer helicopters being available to 
fulfill mission responsibilities.

Scope and Methodology:

Our work for this report involved reviewing and analyzing a variety of 
Coast Guard documents, decision papers, and data elements, as well as 
conducting site visits to Coast Guard air stations and other 
facilities. To assess the re-engine decision and replacement engine 
acquisition approach, we reviewed the Coast Guard decision memo and 
related documents, aircraft mishap data, and contractor data, and 
interviewed contractor and Coast Guard officials, including those in 
the offices of the Chief of Staff, Budget, Safety, HH-65, and Deepwater 
programs, Aircraft Repair and Supply Center, and Aviation Training 
Center. We also talked with pilots, crew, and other personnel who 
operate and maintain the HH-65. We verified the reported mishap data 
and conducted an assessment of the procedures and internal controls 
established for the database. To assess the management and efficiency 
implications, if any, of the Coast Guard's approach to acquiring the 
replacement engine, we reviewed Coast Guard documents and a legal 
analysis as well as interviewed Coast Guard officials from the Chief of 
Staff's office. To assess the alignment between the short-and long-term 
requirements, we reviewed Coast Guard planning documents, performance 
objectives, and information prepared for potential contractors, and 
interviewed Coast Guard and contractor officials.

Agency Comments:

We provided a draft of this report to the Department of Homeland 
Security and the Coast Guard for review and comment. Generally, the 
Coast Guard agreed with the facts presented in the report. Coast Guard 
officials provided a number of technical comments and clarifications, 
which we incorporated to ensure the accuracy of our report. The Coast 
Guard agreed with our position regarding the timing of and need for 
purchasing the additional 38 modified (LTS-101-850) engines for the HH-
65 helicopter. The Coast Guard agreed that purchasing the 38 additional 
modified engines before testing on them is completed would be 
premature, and the agency does not plan to do so, according to 
cognizant officials. In addition, Coast Guard officials said that based 
on these test results and the timetable for the HH-65 engine 
replacement effort, they plan to review the decision to purchase the 38 
engines.

Copies of this report are being sent to the Secretary of the Department 
of Homeland Security, the Commandant of the Coast Guard, and other 
interested parties. The report is also available at no charge on GAO's 
Web site at http://www.gao.gov. If you have any questions about this 
report, please contact me at (415) 904-2200 or by e-mail at 
wrightsonm@gao.gov or Randall B. Williamson, Assistant Director at 
(206) 287-4860 or by e-mail at williamsonr@gao.gov. Other key 
contributors to this report were Odi Cuero, Marco Gomez, Bonnie Hall, 
Stan Kostyla, Julie Leetch, and Stan Stenersen.

Margaret T. Wrightson 
Director, Homeland Security and Justice:

Signed by Margaret T. Wrightson: 

[End of section]

Enclosure I: Briefing Slides:

[See PDF for slides]

[End of section]

FOOTNOTES

[1] The Coast Guard operates 84 HH-65 helicopters that are dispersed 
geographically across the United States to perform various missions. 
The HH-65 is the Coast Guard's only cutter deployable aircraft. 

[2] "Engine," as used throughout the report, refers to the engine and 
engine control system. The function of the overall engine and engine 
control system is to maintain rotor speed and provide engine load-
sharing under all normal flight conditions. Engine components include 
such parts as the fuel control unit, power turbine governor, and the 
airflow modulator. Engine control system components include the 
anticipator actuator, anticipator control box, and the dual collective 
potentiometer. The engine manufacturer (Honeywell) and the Coast Guard 
are each responsible for various separate engine and engine control 
system components.

[3] The Coast Guard decided on January 15, 2004, to replace the 
existing HH-65 engine within 24 months. The estimated investment for 
the replacement engine is $150 million to $250 million.

[4] The Coast Guard's Deepwater program includes replacement and 
modernization of the agency's entire fleet of cutters and aircraft. The 
procurement is expected to cost over $17 billion over 30 years. The 
Deepwater program's prime contractor acts as a system integrator with 
responsibility for identifying and delivering an integrated system of 
assets to meet the Coast Guard's missions. Apart from its HH-65 engine 
replacement decision in January 2004, the Coast Guard had already 
planned to modernize its HH-65 fleet and upgrade its capability as part 
of the Deepwater program. Planned HH-65 upgrades include a new engine 
and improved avionics for this helicopter. Under the Deepwater program 
timetable, delivery of the upgraded helicopters is scheduled to begin 
in fiscal years 2007 and be completed by 2013. 

[5] To minimize continued safety risks associated with the HH-65 
engine, the Coast Guard imposed operational restrictions on its use in 
October 2003. Operational restrictions included limiting helicopter 
landings on helipads and restricting cutter takeoffs and landings.

[6] The modified engine, referred to as the LTS-101-850, is advertised 
to provide a 14 percent power increase over the LTS-101-750 engine, 
which currently powers the HH-65. The LTS-101-750 engine, manufactured 
by Honeywell, relies on a complex engine and engine control system. 
Since its introduction in 1984, the helicopter has experienced a 
variety of engine problems, initially with the core engine and in 
recent years with the control system. Further, the performance 
requirements (for weight) for the HH-65 have grown 17 percent over time 
without a corresponding growth in engine power.

[7] On November 5, 2003, an HH-65 that was being tested with the 
modified engines at the Coast Guard's Aircraft Repair and Supply Center 
had an engine that would not start. Three days later, a similar event 
occurred on another modified engine. Subsequent investigations 
indicated that the clearance for engine-related blades was inadequate 
so that the blade tip was rubbing against the engine shroud. The 
material that rubbed away accumulated while the engine was running, and 
upon cool down, welded the blades to the shroud, causing the engine not 
to re-start.

[8] This contractor, also the system integrator for the Coast Guard's 
Deepwater program, is a business entity jointly owned by Northrop 
Grumman Ship Systems and Lockheed Martin Corporation. 

[9] In general, the requirements refer to the engine's capability with 
respect to the helicopter's weight and weather conditions. For example, 
the requirements for the replacement engine call for an engine that 
must provide at least a 10 percent power margin during hover out of 
ground effect at 9,200 pounds on a 35 degree centigrade day at sea 
level. 

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