The Coast Guard is in the midst of the largest acquisition program in its history--one that has experienced serious performance and management problems. The Deepwater program is intended to replace or modernize the Coast Guard's fleet of vessels, aircraft, and information management capabilities in order to carry out its missions along our coastlines and farther out at sea. Deepwater incorporates acquisition of 15 major classes of new or upgraded assets--5 major classes each of vessels and aircraft, and 5 other projects, including command, control, communications, computers, intelligence, surveillance, and reconnaissance (C4ISR) systems. To carry out this acquisition, the Coast Guard contracted with a system integrator, Integrated Coast Guard Systems (ICGS). Since 2001, we have reviewed the Deepwater program and have informed Congress, the Department of Homeland Security (DHS), and the Coast Guard of the risks and uncertainties inherent with such a large acquisition. In March 2004, we made recommendations to the Coast Guard to address three broad areas of concern: improving program management, strengthening contractor accountability, and promoting cost control through greater competition among potential subcontractors. In April 2006 and June 2007, we issued follow-on reports describing efforts the Coast Guard had taken to address the recommendations. Congress asked us to determine (1) how decisions are made regarding whether to purchase assets under the contract with ICGS or directly with another vendor; (2) the costs and performance trade-offs, if any, associated with the Coast Guard's acquisition strategy for the Fast Response Cutter (FRC); (3) cost, schedule, and performance issues associated with changes to the National Security Cutter (NSC); and (4) actions the Coast Guard has taken to address the open recommendations from our March 2004 report.

The Coast Guard has changed how decisions are made about purchasing Deepwater assets. It is moving from a "system-of-systems" acquisition model-- with the contractor, ICGS, as the system integrator--to a more traditional acquisition strategy in which the Coast Guard will take a more direct role and manage the acquisition of each asset separately. The Coast Guard obligated approximately $35 million on the ICGS design for the FRC, but concerns prompted officials to put the acquisition on hold. To fill its urgent need for patrol boats, the Coast Guard plans to award a contract for a commercially available design of the FRC. Coast Guard officials said this approach will help ensure competition and meet their tight time frames. The new requirements for this design of the FRC have some differences. These include a top speed that is 2 knots slower--28 instead of 30 knots--and allowance of a manual small-boat launch and recovery system that Coast Guard officials said is not as safe and requires more crew to operate than the preferred stern ramp system. Changes to the NSC have had cost, schedule, and performance ramifications. The estimated costs for the first three ships have generally doubled from the initial projected costs due to a number of contributing factors, including requirements changes as a result of September 11, Hurricane Katrina damages, and some program management actions by the Coast Guard. Delivery of the ship could be delayed. An aggressive trial schedule leaves little time for dealing with the unexpected, and most certifications have yet to be completed. Coast Guard officials expect the ship to meet all performance parameters, but will not know for certain until the ship undergoes trials. Further, Coast Guard engineers have concerns that most of the ship's available weight margin has been consumed during construction, meaning that subsequent changes to the ship will require additional redesign and engineering to offset the additional weight. We have closed two of the five open recommendations from our previous report, pertaining to the Coast Guard's use of models and metrics to measure the contractor's progress toward improving operational effectiveness and establishing criteria for when to adjust the total ownership cost baseline. The Coast Guard has taken actions on the three recommendations that remain open, such as designating Coast Guard officials as the lead on integrated product teams, developing a draft maintenance and logistics plan for the Deepwater assets, and potentially eliminating the award term provision from the ICGS contract. However, at this time, the actions are not sufficient to allow us to close them.

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