Coast Guard:

Action Needed as Approved Deepwater Program Remains Unachievable

GAO-12-101T: Published: Oct 4, 2011. Publicly Released: Oct 4, 2011.

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John P. Hutton
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This testimony discusses our recent work on the Coast Guard's Deepwater acquisition, which represents the majority of the Coast Guard's efforts to recapitalize its fleet of vessels and aircraft. This statement is based on our July 28, 2011, report, Coast Guard: Action Needed as Approved Deepwater Program Remains Unachievable. This report discusses areas in which the Coast Guard has strengthened its acquisition management capabilities but also emphasizes actions the Coast Guard needs to take to address the cost growth, schedule delays, and capability shortfalls that have made the approved Deepwater Program unachievable. Today's climate of rapidly building fiscal pressures underscores the importance of assessing priorities--from a Coast Guard-wide perspective--so that more realistic budgets can be submitted to Congress. Such a step would help alleviate what has become a pattern of churn in revising program baselines when unrealistic planned funding does not materialize, which contributes to schedule delays and can lead to other issues such as unhealthy competition for funding. We also recognize several steps that the Coast Guard has taken to improve the management of the Deepwater Program. For example, the Coast Guard has updated its Major Systems Acquisition Manual to better reflect best practices and has significantly reduced its relationship with the prior lead systems integrator, Integrated Coast Guard Systems, by awarding fixed-price contracts outside of the prior construct. To continue this improvement, our July 2011 report made several recommendations with which the Department of Homeland Security (DHS) concurred. We have reviewed the Coast Guard's recapitalization efforts since 2001 and have built an extensive body of work over the last 10 years that has focused on the need for the Coast Guard to improve its acquisition workforce, contractor management, and oversight capability. For the July 2011 report, we assessed (1) the extent to which the Deepwater Program's planned cost and schedule baselines have been exceeded and the credibility of cost estimates and schedules for selected assets; (2) the progression of the execution, design, and testing of the assets within the Deepwater Program; and (3) whether the Coast Guard has undertaken a fleet mix study that addresses trade-offs in a cost-constrained environment.

The Deepwater Program continues to exceed the cost and schedule baselines approved by DHS in 2007, but we found that several factors preclude a solid understanding of the true cost and schedule of the program. Based upon approved baselines, as of May 2011, the total Deepwater Program could cost as much as $29.3 billion, an increase of more than 20 percent in 4 years. This $29.3 billion includes the latest revised baseline for assets that have updated cost and schedule estimates since the 2007 baseline. As we reported last year, these revised baselines reflect the Coast Guard's and DHS's efforts to understand acquisition costs of Deepwater vessels and aircraft and to gain insight into the drivers of the cost growth. However, additional cost growth is looming because the Coast Guard has yet to develop revised baselines for all assets, including the Offshore Patrol Cutter--the largest cost driver in the program, comprising approximately $8 billion of the $24.2 billion 2007 baseline. In addition, Coast Guard officials stated that some of the more recently approved acquisition program baselines fall short of true funding needs. This not only exacerbates the uncertainty surrounding the total cost of the Deepwater acquisition, but also contributes to the approved Deepwater Program no longer being achievable. In addition to cost growth, forthcoming delays identified in the Coast Guard's fiscal years 2012-2016 capital investment plan indicate that the final asset delivery dates approved in the 2007 Deepwater baseline and some of the revised baselines are no longer achievable for most assets. Coast Guard-wide support is required to fully plan, present, and fund an achievable program. In October 2010, the Assistant Coast Guard Commandant for Acquisition identified the need to develop and implement effective decision making to maximize results and manage risks within resource constraints. Action items to accomplish this are laid out in the Acquisition Directorate's Blueprint for Continuous Improvement (Blueprint), which was signed by the Commandant. Acquisition officials responsible for implementing the Blueprint action items acknowledged that successful implementation requires buy-in from leadership. However, senior Coast Guard budget officials responsible for capital investment planning told us that they are not held responsible for accomplishing the objectives outlined in the Blueprint. In July 2010, we recommended that the Coast Guard complete, and present to Congress, a comprehensive review of the Deepwater Program. Specifically, we recommended that the review clarify the overall cost, schedule, quantities, and mix of assets required to meet mission needs, including trade-offs in light of fiscal constraints, given that the currently approved Deepwater baseline was no longer feasible. The Coast Guard's efforts, as of July 2011, have not addressed this recommendation. To support its role as systems integrator, the Coast Guard planned to complete a fleet mix analysis in July 2009 to eliminate uncertainty surrounding future mission performance and to produce a baseline for the Deepwater acquisition. However, the first phase of the Coast Guard's analysis, completed in December 2009 and termed fleet mix analysis phase 1, was not cost-constrained and is, according to Coast Guard officials, not feasible.

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