Coast Guard:

As Deepwater Systems Integrator, Coast Guard Is Reassessing Costs and Capabilities but Lags in Applying Its Disciplined Acquisition Approach

GAO-09-682: Published: Jul 14, 2009. Publicly Released: Jul 14, 2009.

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The Deepwater Program includes efforts to build or modernize ships and aircraft and to procure other capabilities. In 2002, the Coast Guard contracted with Integrated Coast Guard Systems (ICGS) to manage the acquisition as systems integrator. After a series of project failures, the Coast Guard announced in April 2007 that it would take over the lead role, with future work on individual assets bid competitively, and a program baseline of $24.2 billion was set. In June 2008, GAO reported on the Coast Guard's progress and made several recommendations, which the Coast Guard and the Department of Homeland Security (DHS) have addressed. In response to a Senate report accompanying the DHS Appropriations Bill, 2009, GAO addressed (1) efforts to manage Deepwater, (2) changes in cost and schedule of the assets, and (3) efforts to build an acquisition workforce. GAO reviewed Coast Guard and DHS documents and interviewed officials.

The Coast Guard has assumed the role of systems integrator for the overall Deepwater Program by reducing the scope of the work on contract with ICGS and assigning these functions to Coast Guard stakeholders. As part of its systems integration responsibilities, the Coast Guard has undertaken a fundamental reassessment of the capabilities, number, and mix of assets it needs and expects to complete this analysis by the summer of 2009. At the individual Deepwater asset level, the Coast Guard has improved and begun to apply the disciplined management process contained in its Major Systems Acquisition Manual (MSAM), but did not meet its goal of complete adherence to this process for all Deepwater assets by the end of March 2009. For example, key acquisition management activities--such as operational requirements documents and test plans--are not in place for assets with contracts or orders recently awarded (such as the Fast Response Cutter and C4ISR) or in production, placing the Coast Guard at risk of cost growth or schedule slips. In addition, the MSAM does not appear to be consistent with recent DHS policy that requires entities responsible for operational testing to be independent of the system's users. Due in part to the Coast Guard's increased insight into what it is buying, the anticipated cost, schedules, and capabilities of many Deepwater assets have changed since the $24.2 billion baseline was established in 2007. Coast Guard officials have stated that this baseline reflected not a traditional cost estimate, but rather the anticipated contract costs as determined by ICGS. As the Coast Guard has developed its own cost baselines for some assets, it has become apparent that some of these assets it is procuring will likely cost more than anticipated--up to $2.7 billion more based on information to date. This represents approximately 39 percent cost growth for the assets with revised cost estimates. As more cost baselines are developed and approved, further cost growth is likely. Updated baselines also indicate that schedules have slipped for several of the assets. In addition, the current structure of the Coast Guard's budget submission to Congress does not include details at the asset level, such as estimates of total costs and total numbers to be procured, as do those of the Department of Defense, which acquires similar systems. One reason the Coast Guard hired a contractor as a systems integrator was because it recognized that it lacked the experience and depth in workforce to manage the acquisition internally. The Coast Guard acknowledges that it still faces challenges in hiring and retaining qualified acquisition personnel and that this situation poses a risk to the successful execution of its acquisition programs. According to human capital officials in the acquisition directorate, as of April 2009, the acquisition branch had 16 percent of positions unfilled, including key jobs such as contracting officers and systems engineers. Even as it attempts to fill its current vacancies, the Coast Guard plans to increase the size of its acquisition workforce significantly; the fiscal year 2010 budget request includes funding for 100 new acquisition workforce positions. In the meantime, the Coast Guard has been increasing its use of support contractors.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In their comments on this report the agency concurred with our recommendation. On June 2, 2010, the Coast Guard submitted an update of the actions taken to close the recommendation. The Coast Guard stated that the Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance (C4ISR) and Fast Response Cutter (FRC) projects had completed the required acquisition documentation for their current phases in the acquisition life cycle framework and therefore were in compliance with both the Coast Guard's Major Systems Acquisition Manual (MSAM) and Department of Homeland Security (DH) acquisition directives. Prior to the award of the task order for the second increment of C4ISR, referred to as the Discrete Segment 2 option, the C4ISR project either completed all required documents or provided completed documents for DH review or approval. DH reviewed the C4ISR project status and concurred with execution of the contract option. At the same time, DH committed to work together with the Coast Guard to resolve weaknesses identified in key project documents. Prior to the award of the first FRC low rate initial production (LRIP) option, the FRC project either completed all required documents or provided completed documents for DH review or approval. DH reviewed FRC project status at Acquisition Decision Event-2B (LRIP) on December 4, 2009 and approved the LRIP contract award. On February 26, 2010, DH issued the ADE-2B Acquisition Decision Memo documenting this approval, which delegated approval authority for the remaining LRIP options to the Under Secretary for Management and established exit criteria for the Full Rate Production/Deployment decision (ADE-3).

    Recommendation: The Commandant of the Coast Guard should not exercise further options under the Fast Response Cutter contract and under the task order for the second increment of C4ISR until these projects are brought into full compliance with the MSAM and DHS acquisition directives.

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

  2. Status: Closed - Implemented

    Comments: In their comments on this report the agency concurred with the recommendation to coordinate with the Department of Homeland Security (DHS) on which organization should act as operational test authority. In November 2010 the Coast Guard released an updated version of their Major Systems Acquisition Manual that aligns Coast Guard policies on the operational test authority with that of the Department and ensures the independence of the operational test authority.

    Recommendation: The Commandant of the Coast Guard should consult with the DHS Office of Test & Evaluation and Standards to determine whether the MSAM conflicts with DHS's directive regarding the entity named as the independent operational test authority and, if so, take steps to reconcile the inconsistency.

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

  3. Status: Closed - Implemented

    Comments: In comments on the report, the agency indicated that it would take this recommendation under advisement as the Coast Guard was in compliance with the DHS policy that governs the budget submission format. In their fiscal year 2013 budget submission the Coast Guard did provide a table that included total acquisition costs for a number of its assets, but did not consistently include the total quantities planned. In addition to the budget submission, DHS provided to the Congress a report entitled "Capital Investment Plan: FYs 2013-2017." This document provides the total acquisition costs and quantities for the majority of the systems that made up the Deepwater program but was released only to the House and Senate appropriation committees overseeing DHS and was also marked "For Official Use Only" limiting its distribution, and therefore its utility, to decision makers. Presentation of information on the full costs and quantities of the systems that made up the Deepwater program in the Coast Guard's budget submission can provide the information to a wider audience and better assist Congress in providing funding and conducting oversight. For its fiscal year 2014 budget submission, the Coast Guard provided a table that included both total acquisition costs and total quantities planned for a number of its assets. In addition, DHS provided a link to its "Capital Investment Plan: FYs 2014-2018" through its website, thus making it publicly available. Through these actions the Coast Guard has implemented the recommendation.

    Recommendation: As the Coast Guard prepares future budget submissions for Deepwater, the Commandant of the Coast Guard should include the total acquisition costs for the assets and total quantities planned.

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


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