This is the accessible text file for GAO report number GAO-05-757 
entitled 'Coast Guard: Progress Being Made on Addressing Deepwater 
Legacy Asset Condition Issues and Program Management, but Acquisition 
Challenges Remain' which was released on July 22, 2005. 

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Report to Congressional Requesters: 

United States Government Accountability Office: 

GAO: 

July 2005: 

Coast Guard: 

Progress Being Made on Addressing Deepwater Legacy Asset Condition 
Issues and Program Management, but Acquisition Challenges Remain: 

GAO-05-757: 

GAO Highlights: 

Highlights of GAO-05-757, a report to congressional requesters: 

Why GAO Did This Study: 

The Coast Guard has been asserting that its deepwater legacy assets are 
failing at an unsustainable rate. After the events of September 11, 
2001, the Coast Guards deepwater missions expanded to include a 
greater emphasis on ports, waterways, and coastal security. These 
heightened responsibilities required changes to the Deepwater 
implementation plan to provide the assets with greater operational 
capabilities. To address these needs, in 2002, the Coast Guard began a 
multiyear acquisition program to replace or modernize its deepwater 
assets that is currently estimated to cost $19 to $24 billion. More 
recently, it began studying options for replacing or modernizing the 
assets more rapidly in an effort to avoid some of the costs that might 
be involved in keeping aging assets running for longer periods.

This report addresses three questions related to this effort: (1) How 
has the condition of the Coast Guards deepwater legacy assets changed 
during fiscal years 2000 through 2004? (2) What actions has the Coast 
Guard taken to maintain, upgrade, and better manage its deepwater 
legacy assets? and (3) What are the management challenges the Coast 
Guard faces in acquiring new assets, especially if a more aggressive 
acquisition schedule is adopted?

What GAO Found: 

Available Coast Guard condition measures indicate that the condition of 
most Coast Guard legacy aircraft and cutters generally declined during 
fiscal years 2000-2004, but these measures are inadequate to capture 
the full extent of the decline in the condition with any precision. 
GAOs field visits and interviews with Coast Guard staff, as well as 
reviews of other evidence, showed significant problems in a variety of 
asset systems and equipment that are not currently captured in the 
Coast Guards condition measures. 

The Coast Guard has already taken actions to help keep its deepwater 
legacy assets operational. For example, to help meet mission 
requirements, Coast Guard staff are performing more extensive 
maintenance between deployments, but even so, aircraft and cutters 
continue to lose mission capabilities. Responding to these continued 
concerns, as well as to matters raised during this review and in prior 
GAO reports, the Coast Guard has begun to explore additional strategies 
and approaches to better determine and improve the mission capabilities 
of its legacy assets. These actions include (1) developing a more 
proactive approach for prioritizing maintenance and capability 
enhancement projects needed on its legacy assets; (2) developing 
measures that more clearly demonstrate the extent to which assets 
conditions affect mission capabilities; and (3) for one command, 
proposing a new strategy to sustain one of its oldest classes of 
cutters. These ongoing efforts, while promising, are too new to allow 
GAO to assess whether they will allow the Coast Guard to better 
determine and improve the mission capabilities of its legacy assets.

If the Coast Guard adopts a more aggressive acquisition schedule, it 
will likely continue to face a number of challenges to effectively 
manage the Deepwater program. GAO has warned that the Coast Guards 
acquisition strategy of relying on a prime contractor (system 
integrator) to identify and deliver the assets needed carries 
substantial risks. GAO found that well into the contracts second year, 
key components for managing the program and overseeing the system 
integrators performance had not been effectively implemented. While 
the Coast Guard has been addressing these problemsfor example, putting 
more emphasis on competition as a means to control costsmany areas 
have not been fully addressed. A more aggressive acquisition schedule 
would only heighten the risks. 

Two Coast Guard Deepwater Legacy Assets in Action: 

[See PDF for image]

[End of figure]

www.gao.gov/cgi-bin/getrpt?GAO-05-757.

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Margaret Wrightson at 
(415) 904-2200 or wrightsonm@gao.gov.

[End of section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

Legacy Assets Show Declining Condition, but Measures Are Imprecise and 
Fail to Capture Impact on Mission Capabilities: 

Actions to Better Manage Legacy Assets Are Under Way, but Effects Will 
Not Be Known for Some Time: 

Management Challenges Faced in Acquiring New Assets Remain Significant: 

Concluding Observations: 

Agency Comments: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: Information on Deepwater Legacy Aircraft and Cutters: 

HC-130 Long-Range Surveillance Aircraft: 

HU-25 Medium-Range Surveillance Aircraft: 

HH-60 Medium-Range Recovery Helicopter: 

HH-65 Short-Range Recovery Helicopter: 

378-Foot High-Endurance Cutter: 

270-Foot Medium-Endurance Cutter: 

210-Foot Medium-Endurance Cutter: 

110-Foot and 123-Foot Patrol Boats: 

Appendix III: GAO Contact and Staff Acknowledgments: 

GAO Related Products: 

Tables: 

Table 1: Deepwater Legacy Aircraft and Cutter Fleet, as of early June 
2005: 

Table 2: Synopsis of Deepwater Legacy Assets' Condition: 

Table 3: Estimated Costs for Deferred Maintenance of Deepwater Aircraft 
and Cutters, Fiscal Years 2002-2004: 

Table 4: Approved Upgrades for Deepwater Legacy Aircraft and Cutters: 

Table 5: Summary of Deepwater Areas Needing Management Attention as 
Reported by GAO: 

Table 6: HC-130 Fleet Performance Data for Fiscal Years 2000-2004: 

Table 7: HC-130 Fleet Maintenance Data forFiscal Years 2000-2004, in 
Fiscal Year 2004 Dollars: 

Table 8: HU-25 Fleet Performance Data for Fiscal Years 2000-2004: 

Table 9: HU-25 Fleet Maintenance Data for Fiscal Years 2000-2004, in 
Fiscal Year 2004 Dollars: 

Table 10: HH-60 Fleet Performance Data for Fiscal Years 2000-2004: 

Table 11: HH-60 Fleet Maintenance Data for Fiscal Years 2000-2004, in 
Fiscal Year 2004 Dollars: 

Table 12: HH-65 Fleet Performance Data for Fiscal Years 2000-2004: 

Table 13: HH-65 Fleet Maintenance Data for Fiscal Years 2000-2004, in 
Fiscal Year 2004 Dollars: 

Table 14: 378-Foot Cutter Fleet Performance Data for Fiscal Years 2000- 
2004: 

Table 15: 378-Foot Cutter Fleet Maintenance Data for Fiscal Years 2000- 
2004, in Fiscal Year 2004 Dollars: 

Table 16: 270-Foot Cutter Fleet Performance Data for Fiscal Years 2000- 
2004: 

Table 17: 270-Foot Cutter Fleet Maintenance Data for Fiscal Years 2000- 
2004, in Fiscal Year 2004 Dollars: 

Table 18: 210-Foot Cutter Fleet Performance Data for Fiscal Years 2000- 
2004: 

Table 19: 210-Foot Cutter Fleet Maintenance Data for Fiscal Years 2000- 
2004, in Fiscal Year 2004 Dollars: 

Table 20: Patrol Boat Fleet Performance Data for Fiscal Years 2000- 
2004: 

Table 21: Patrol Boat Fleet Maintenance Data for Fiscal Years 2000- 
2004, in Fiscal Year 2004 Dollars: 

Abbreviations: 

AC&I: acquisition, capital, and investment: 

CAMS: Capital Asset Management Strategy: 

DHS: Department of Homeland Security: 

FRAM: Fleet Rehabilitation and Modernization: 

HSP: Hull Sustainment Project: 

ICGS: Integrated Coast Guard Systems: 

IDS: Integrated Deepwater System: 

IPT: integrated product team: 

MCH: multimission cutter helicopter: 

MEP: Mission Effectiveness Project: 

POTF: percent of time free: 

SINTSS: Systems Integrated Near Term Support Strategy: 

United States Government Accountability Office: 

Washington, DC 20548: 

July 22, 2005: 

The Honorable Don Young: 
Chairman, Committee on Transportation and Infrastructure: 
House of Representatives: 

The Honorable Frank A. LoBiondo: 
Chairman, Coast Guard and Maritime Transportation Subcommittee: 
House of Representatives: 

The Honorable Olympia J. Snowe: 
Chair: 
The Honorable Maria Cantwell: 
Ranking Minority Member: 
Subcommittee on Fisheries and the Coast Guard: 
United States Senate: 

The Coast Guard's Integrated Deepwater System (or Deepwater) 
acquisition program has experienced several changes since its inception 
in 2002. The Deepwater program is intended to be a long-term (20-year) 
replacement or modernization of certain legacy assets,[Footnote 1] many 
of which are at or approaching the end of their estimated service 
lives. As originally conceived, Deepwater was designed around producing 
aircraft and cutters that would function in the Coast Guard's 
traditional at-sea roles, such as interdicting illicit drug shipments 
or rescuing mariners from difficulty at sea. The events of September 
11, 2001, changed all of that. Suddenly, the missions for these assets 
expanded to include a greater emphasis on ports, waterways, and coastal 
security. These heightened responsibilities forced the Coast Guard to 
revise its Deepwater implementation plan to provide the replacement 
assets with greater operational capabilities. Further change has come 
more recently with the Coast Guard asserting that its deepwater legacy 
assets are "failing at an unsustainable rate" and examining options for 
accelerating their replacement, thereby avoiding some of the costs that 
might be involved in upgrading these assets sufficiently to keep them 
running for longer periods. 

These changes have created some uncertainty about how the Deepwater 
program is developing. In its fiscal year 2006 budget request, the 
Administration is requesting $966 million for the Deepwater program-- 
$242 million more than Congress appropriated for the program for fiscal 
year 2005. Part of this request ($239.5 million) is for maintenance and 
upgrades to some deepwater legacy assets, a majority of which are 
scheduled to be part of the Deepwater solution. The fiscal year 2005 
Department of Homeland Security (DHS) Appropriations Act[Footnote 2] 
required the Secretary of Homeland Security to submit a revised 
Deepwater implementation plan in conjunction with its fiscal year 2006 
budget request. However, with respect to pending fiscal year 2006 
appropriations, the House Appropriations Committee considered the Coast 
Guard's implementation plan submission to be incomplete and recommended 
reducing the Coast Guard's fiscal year 2006 Deepwater budget request of 
$966 million by nearly 50 percent.[Footnote 3] In late May 2005, the 
Coast Guard submitted further documentation to the committee in an 
effort to comply with the act's requirements. In June 2005, the Senate 
Appropriations Committee expressed concern about the lack of 
information concerning the Deepwater plan in the fiscal year 2006 
budget request but recommended funding of $905.6 million for the 
program for fiscal year 2006.[Footnote 4] As of early July 2005, the 
Coast Guard's fiscal year 2006 appropriation was still pending. 

This report, which focuses on the condition of deepwater legacy assets 
and the Coast Guard's acquisition and management challenges, is aimed 
at providing information about some of these issues. We presented our 
preliminary observations on these matters in recent testimony.[Footnote 
5] This report adds further details on the condition of the assets, as 
well as updated information on Coast Guard initiatives to better 
sustain these assets until they are replaced or upgraded. Specifically, 
our report addresses three issues related to these considerations: 

* How has the condition of the Coast Guard's deepwater legacy assets 
changed during fiscal years 2000 through 2004?

* What actions has the Coast Guard taken to maintain, upgrade, and 
better manage its deepwater legacy assets?

* What are the management challenges the Coast Guard faces in acquiring 
new assets, especially if a more aggressive acquisition schedule is 
adopted?

To address these objectives, we analyzed data and condition measures 
used by the Coast Guard for determining deepwater legacy assets' 
condition,[Footnote 6] reviewed Coast Guard actions to maintain and 
upgrade legacy assets and their systems,[Footnote 7] and met with 
operations and maintenance staff at U.S. Coast Guard headquarters and 
other Coast Guard facilities selected to provide coverage of each type 
of deepwater legacy aircraft and each class of deepwater legacy cutter. 
In addition, we met with Deepwater program staff, performance monitors, 
and contractor staff and reviewed documentation to verify the 
improvements the Coast Guard is making in its management of the 
Deepwater acquisition. We conducted our work between July 2004 and June 
2005 in accordance with generally accepted governmental auditing 
standards. Appendix I describes our objectives, scope, and methodology 
in greater detail. 

Results in Brief: 

Coast Guard condition measures show that the condition of most 
deepwater legacy assets generally declined between fiscal years 2000 
and 2004, but the Coast Guard's available condition measures are 
inadequate to capture the full extent of the decline in the condition 
of deepwater assets with any degree of precision. While there is no 
systematic, quantitative evidence sufficient to demonstrate that 
deepwater legacy assets are "failing at an unsustainable rate" as the 
Coast Guard has asserted, this does not mean that the assets are able 
to perform their missions safely, reliably, and at levels that meet or 
exceed Coast Guard standards. Evidence we gathered in ways other than 
reviewing condition measures, such as interviewing Coast Guard 
operations and maintenance staff, showed significant problems in a 
variety of the assets' systems and equipment that will need to be 
addressed if the assets are to continue performing their missions at or 
near current levels until replacement assets become operational. These 
problems are not necessarily reflected in the condition measures. For 
example, the Coast Guard's HH-65 helicopter consistently exceeded the 
Coast Guard's primary condition measure during fiscal years 2000 
through 2004, yet its engines are being replaced because of safety and 
reliability concerns. 

The Coast Guard has taken actions to keep its legacy assets 
operational. These include developing a compendium of information to 
identify the maintenance and upgrade projects needed to keep legacy 
assets operational and performing increasingly more maintenance on the 
legacy assets than it has in the past--for example, spending additional 
time on maintenance when cutters are in port between deployments. These 
additional maintenance efforts are likely helping to prevent a more 
rapid decline in the condition of these assets, but even with the 
additional maintenance, the legacy aircraft and cutters are still 
losing mission capabilities because of equipment and system failures. 
Responding to these continued concerns, as well as to matters raised 
during this review and in our prior reports, the Coast Guard has begun 
to explore additional strategies and approaches to better determine and 
improve the mission capabilities of its legacy assets. First, in an 
effort to implement our 2002 recommendation for developing a longer- 
term strategy for linking mission performance to measurable outputs and 
goals, the Coast Guard is developing a more proactive approach for 
prioritizing maintenance and capability enhancement projects needed on 
its legacy assets to increase mission capabilities. Second, after we 
informed the Coast Guard of our concern that existing measures of the 
condition of its assets were not adequate to demonstrate the extent of 
the assets' decline, the Coast Guard began to develop measures that 
more clearly demonstrate the extent to which assets' conditions impact 
mission capabilities. Finally, the Coast Guard's Pacific Area Command, 
which is heavily dependent on the deteriorating 378-foot cutters for 
certain missions, is attempting to use new strategies to help sustain 
the operation of these cutters through 2016, when they are currently 
scheduled to be replaced with newer cutters. These ongoing efforts, 
while promising, are too new to allow us to assess whether they will 
allow the Coast Guard to better determine and improve the mission 
capabilities of its legacy assets. 

The Coast Guard's fiscal year 2006 budget request of $966 million for 
the Deepwater program reflects significant revisions to the program's 
requirements, capabilities, and schedule in light of the homeland 
security mission. However, if a more aggressive acquisition schedule is 
adopted, the Coast Guard will likely continue to face a number of 
management challenges that have already affected its ability to 
effectively administer the Deepwater program. From the outset, we have 
expressed concern about the risks involved with the Coast Guard's 
acquisition strategy, which involves relying on a prime contractor (or 
"system integrator") to identify the assets needed, using tiers of 
subcontractors to design and build the actual assets. In 2004 we 
reported that well into the contract's second year, key components 
needed to manage the program and oversee the system integrator's 
performance had not been effectively implemented. We made 12 
recommendations in the areas of program management, contractor 
accountability, and cost control through competition. While the Coast 
Guard agreed with nearly all of these recommendations and has initiated 
actions to address these problems, we remain concerned that the 
Deepwater program still carries major risks. While the Coast Guard has 
fully addressed 3 of the recommendations, the remaining recommendations 
have not been fully addressed. Recent information shows continued 
challenges in the areas of overall system integration, cost and 
schedule management, and integrated product teams, which consist of 
contractor and government personnel and are the Coast Guard's principal 
tool for managing the Deepwater program. The uncertainties associated 
with the proposed revisions to the Deepwater program only heighten 
these risks. 

We provided a draft copy of this report to the Department of Homeland 
Security and the U.S. Coast Guard for review. The U.S. Coast Guard 
provided technical comments, which have been incorporated where 
appropriate. 

Background: 

As the lead federal agency for maritime homeland security within the 
Department of Homeland Security, the Coast Guard is responsible for 
homeland and nonhomeland security missions, including ensuring security 
in ports and waterways and along coastlines, conducting search and 
rescue missions, interdicting drug shipments and illegal aliens, 
enforcing fisheries laws, and responding to reports of pollution. The 
deepwater fleet, which consists of 186 aircraft and 88 cutters of 
various sizes and capabilities, plays a critical role in all of these 
missions. As shown in table 1, the fleet includes fixed-wing aircraft, 
helicopters, and cutters of varying lengths. 

Table 1: Deepwater Legacy Aircraft and Cutter Fleet, as of early June 
2005: 

[See PDF for image]

[A] Because of scheduled depot-level maintenance and upgrades that the 
deepwater aircraft have received or will receive, the service lives can 
be extended beyond the original estimated service lives. For the HH-65 
helicopter, a Coast Guard aviation official told us that the aircraft 
had no original estimated service life in terms of flight hours, but 
rather can continue to be operated as long as the structure of the 
aircraft is sound. 

[End of table] 

Some Coast Guard deepwater cutters were built in the 1960s. 
Notwithstanding extensive overhauls and other upgrades, a number of the 
cutters are nearing the end of their estimated service lives. 
Similarly, while a number of the deepwater legacy aircraft have 
received upgrades in engines, operating systems, and sensor equipment 
since they were originally built, they too have limitations in their 
operating capabilities. 

In 1996, the Coast Guard began developing what came to be known as the 
Integrated Deepwater System (IDS) acquisition program as its major 
effort to replace or modernize these aircraft and cutters. This 
Deepwater program is designed to replace some assets--such as 
deteriorating cutters--with new cutters and upgrade other assets--such 
as some types of helicopters--so they can meet new performance 
requirements.[Footnote 8]

The Deepwater program represents a unique approach to a major 
acquisition in that the Coast Guard is relying on a prime contractor-- 
the system integrator--to identify and deliver the assets needed to 
meet a set of mission requirements the Coast Guard has 
specified.[Footnote 9] In 2002, the Coast Guard awarded a contract to 
Integrated Coast Guard Systems (ICGS) as the system integrator for the 
Deepwater program. ICGS has two main subcontractors--Lockheed Martin 
and Northrop Grumman--that in turn contract with other subcontractors. 
Rather than using the traditional approach of replacing classes of 
ships or aircraft through a series of individual acquisitions, the 
Coast Guard chose to employ a "system of systems" acquisition strategy 
that would replace its deteriorating deepwater assets with a single, 
integrated package of new or modernized assets. This system-of-systems 
approach is designed to provide an improved, integrated system of 
aircraft, cutters, and unmanned aerial vehicles to be linked 
effectively through systems that provide command, control, 
communications, computer, intelligence, surveillance, reconnaissance, 
and supporting logistics. The Deepwater program's three overarching 
goals are to maximize operational effectiveness, minimize total 
ownership cost,[Footnote 10] and satisfy the customer--the operational 
commanders, aircraft pilots, cutter crews, maintenance personnel, and 
others who will use the assets. 

The revised Deepwater schedule calls for acquisition of new assets 
under the Coast Guard's Deepwater program to occur over an 
approximately 20-year period at an estimated cost of $19 billion to $24 
billion.[Footnote 11] By 2007, for example, the Coast Guard is to 
receive the first 418-foot National Security Cutter, which will have 
the capability to conduct military missions related to homeland 
security. Current plans call for 6 to 8 of these cutters to replace the 
12 existing 378-foot cutters. However, in order to carry out its 
mission effectively, the Coast Guard will also need to keep all of the 
legacy assets operational until they can be replaced or upgraded. 

We have been reviewing the Deepwater program for several years, 
pointing out difficulties and expressing concern over a number of 
facets of the program. In our 2001 report, we identified several areas 
of risk for Deepwater.[Footnote 12] First, the Coast Guard faced 
potential risk in the overall management and day-to-day administration 
of the contract. At the time, we reported on the major challenges such 
as developing and implementing plans for establishing effective human 
capital practices, having key management and oversight processes and 
procedures in place, and tracking data to measure system integrator 
performance. In addition, we expressed concerns about the potential 
lack of competition during the program's later years and the reliance 
on a single system integrator for procuring the Deepwater assets. We 
also reported there was little evidence that the Coast Guard had 
analyzed whether the approach carried any inherent risks for ensuring 
the best value to the government and, if so, what to do about them. 

We reviewed the program again in 2004 and found many of the same 
concerns.[Footnote 13] Specifically, we reported that key components 
needed to manage the program and oversee the system integrator's 
performance had not been effectively implemented. The Coast Guard's 
primary tool for overseeing the system integrator, the integrated 
product teams (IPTs) were struggling to effectively collaborate and 
accomplish their missions because of changing membership, 
understaffing, insufficient training, and inadequate communication 
among members. Also, the Coast Guard had not adequately addressed the 
frequent turnover of personnel in the program and the transition from 
existing assets to those assets that will be part of the Deepwater 
program moving forward. Further, the Coast Guard's assessment of the 
system integrator's performance in the first year of the contract 
lacked rigor, and the factors that formed the basis for the award fee 
determination were supported only by subjective performance monitor 
comments and not by quantifiable measures. This resulted in the system 
integrator receiving a high performance rating and an award fee of $4.0 
million out of a maximum of $4.6 million despite documented problems in 
schedule, performance, cost controls, and contract administration. 

At the time of our March 2004 report,[Footnote 14] the Coast Guard had 
begun to develop models to measure the extent to which Deepwater was 
achieving operational effectiveness and reduced total ownership cost, 
but it had not made a decision as to which specific suite of models 
would be used. Further, Coast Guard officials were not able to project 
a time frame for when the Coast Guard would be able to hold the 
contractor accountable for progress toward the goals of maximizing 
operational effectiveness, minimizing total ownership cost, and 
customer satisfaction. Furthermore, the Coast Guard had not measured 
the extent of competition among suppliers of Deepwater assets or held 
the system integrator accountable for taking steps to achieve 
competition. The Coast Guard's lack of progress on these issues has 
contributed to our concerns about the Coast Guard's ability to rely on 
competition as a means to control future programmatic costs. 

Finally, we found that the Coast Guard had not updated the Deepwater 
integrated acquisition schedule despite numerous changes, making it 
difficult to determine the degree to which the program was on track 
with its original plan. In response to these concerns, we made a number 
of recommendations to improve Deepwater management and oversight of the 
system integrator. The Coast Guard welcomed our observations and 
concurred with our recommendations and has begun to take actions to 
address them. 

Legacy Assets Show Declining Condition, but Measures Are Imprecise and 
Fail to Capture Impact on Mission Capabilities: 

Coast Guard condition measures show that the condition of most 
deepwater legacy assets generally declined between 2000 and 2004, but 
the Coast Guard's available measures are inadequate to capture the full 
extent of the decline in the condition of deepwater assets with any 
degree of precision and are insufficient for determining the impact on 
mission capabilities. Further, other evidence we gathered, such as 
information from discussions with maintenance and operations personnel, 
points to conditions that may be more severe than the available 
measures indicate. The Coast Guard acknowledges that it needs better 
condition measures, but it has not yet finalized or implemented such 
measures. The Coast Guard anticipates having the new measures finalized 
by the end of 2005. 

Coast Guard's Condition Measures Show General Decline in Condition of 
Deepwater Assets, with Some Fluctuations: 

During fiscal years 2000 through 2004, the Coast Guard's various 
condition measures showed a general decline, although there were year- 
to-year fluctuations (see table 2). For deepwater legacy aircraft, a 
key summary measure of the condition--the availability index (the 
percentage of time aircraft are available to perform their missions)-- 
showed that except for the HU-25 medium-range surveillance aircraft, 
the assets continued to perform close to or above fleet availability 
standards over the 5-year period. In contrast, other condition measures 
for aircraft, such as cost per flight hour and labor hours per flight 
hour, generally reflected some deterioration. For cutters, a key 
summary measure of condition--percent of time free of major 
casualties[Footnote 15]--fluctuated but generally remained well below 
target levels. The number of major casualties generally rose from 
fiscal years 2000 through 2003 and then dropped slightly in fiscal year 
2004.[Footnote 16] (Appendix II provides further details on condition 
measures for each of the deepwater legacy aircraft and cutters.)

Table 2: Synopsis of Deepwater Legacy Assets' Condition: 

Deepwater legacy asset: HC-130 aircraft; 
Synopsis of general asset condition: The percentage of time the HC-130 
fleet was available to perform missions nearly met or exceeded the 
Coast Guard's target level during fiscal years 2000 through 2003, but 
dropped below the target level in fiscal year 2004. 

Deepwater legacy asset: HU-25 aircraft; 
Synopsis of general asset condition: The percentage of time the HU-25 
fleet was available to perform missions varied from year to year but 
was consistently below the Coast Guard's target level during fiscal 
years 2000 through 2004. 

Deepwater legacy asset: HH-60 aircraft; 
Synopsis of general asset condition: The percentage of time the HH-60 
fleet was available to perform missions met or was just below the Coast 
Guard's target level during fiscal years 2000 though 2004. 

Deepwater legacy asset: HH-65 aircraft; 
Synopsis of general asset condition: The percentage of time the HH-65 
fleet was available to perform missions consistently exceeded the Coast 
Guard's target level during fiscal years 2000 through 2004. 

Deepwater legacy asset: 378-foot high-; endurance cutters; 
Synopsis of general asset condition: The percentage of time the 378-
foot cutter fleet has operated free of deficiencies in mission-
essential equipment remained substantially below the Coast Guard's 
target level during fiscal years 2000 through 2004. 

Deepwater legacy asset: 270-foot and; 210-foot medium-endurance 
cutters; 
Synopsis of general asset condition: The percentage of time the 210-
foot and 270-foot cutter fleets have operated free of deficiencies in 
mission-essential equipment was well below the Coast Guard's target 
level during fiscal years 2000 through 2004, but it showed slight 
improvement in fiscal year 2004. 

Deepwater legacy asset: 110-foot and 123-foot patrol boats[A]; 
Synopsis of general asset condition: The percentage of time the patrol 
boat fleet has operated free of deficiencies in mission-essential 
equipment was below but near the Coast Guard's target level during 
fiscal years 2000 and 2001, but it declined in more recent years. 

Source: GAO analysis of data provided by the U.S. Coast Guard. 

[A] Data on the 123-foot patrol boats were not compiled until fiscal 
year 2004. That year's data were added to the 110-foot patrol boat data 
to arrive at totals for the patrol boat fleet. 

[End of table]

Another, albeit less direct, measure of an asset's condition is 
deferred maintenance--the amount of scheduled maintenance on an asset 
that must be postponed in order to pay for unscheduled repairs. Such 
deferrals can occur when the Coast Guard does not have enough money to 
absorb unexpected maintenance expenditures and still perform all of its 
scheduled maintenance, thus creating a backlog. For example, in spring 
2004, while on a counterdrug mission, the 210-foot cutter Active 
experienced problems in the condition of its flight deck that were to 
be corrected during its scheduled depot-level maintenance. However, 
because of a shortage of maintenance funds, the maintenance was 
deferred and the flight deck was not repaired. As a result, the cutter 
lost all shipboard helicopter capability, significantly degrading 
mission readiness. 

As table 3 shows, deferred maintenance does not show a clear pattern 
across all classes of deepwater legacy assets. For the deepwater legacy 
aircraft, the overall amount of estimated deferred maintenance 
increased each year during fiscal years 2002 through 2004, from $12.3 
million to about $24.6 million. However, most of the increase came for 
one type of asset, the HH-60 helicopter, and the increase came mainly 
from deferring maintenance past the 48-month interval requirement-- 
thereby increasing the scheduled maintenance workload--and not from 
having to divert money to deal with unscheduled maintenance. For the 
deepwater cutters, the amount of estimated deferred maintenance 
increased from fiscal year 2002 to 2003, but then it dropped 
significantly in fiscal year 2004. The decrease in fiscal year 2004 
came mainly because the Coast Guard received supplemental funding 
allowing it to address both scheduled and unscheduled maintenance. 
Thus, the drop in the estimate of deferred maintenance costs for fiscal 
year 2004 is not necessarily an indicator that the condition of the 
legacy assets was improving; it could be the result of the Coast Guard 
having more money to address the maintenance needs. 

Table 3: Estimated Costs for Deferred Maintenance of Deepwater Aircraft 
and Cutters, Fiscal Years 2002-2004: 

Deepwater legacy asset: HC-130; 
Fiscal year 2002: $4,691,000; 
Fiscal year 2003: $7,016,000; 
Fiscal year 2004: $5,737,000. 

Deepwater legacy asset: HU-25; 
Fiscal year 2002: 0; 
Fiscal year 2003: $201,000; 
Fiscal year 2004: 0. 

Deepwater legacy asset: HH-60; 
Fiscal year 2002: $7,630,000; 
Fiscal year 2003: $9,436,000; 
Fiscal year 2004: $18,824,000. 

Deepwater legacy asset: HH-65; 
Fiscal year 2002: 0; 
Fiscal year 2003: 0; 
Fiscal year 2004: 0. 

Deepwater legacy asset: Subtotal for aircraft; 
Fiscal year 2002: $12,321,000; 
Fiscal year 2003: $16,653,000; 
Fiscal year 2004: $24,561,000. 

Deepwater legacy asset: 378-foot cutters; 
Fiscal year 2002: $2,556,000; 
Fiscal year 2003: $8,135,000; 
Fiscal year 2004: $3,000,000. 

Deepwater legacy asset: 270-foot cutters; 
Fiscal year 2002: $2,070,000; 
Fiscal year 2003: $870,000; 
Fiscal year 2004: 0. 

Deepwater legacy asset: 210-foot cutters; 
Fiscal year 2002: $786,000; 
Fiscal year 2003: $1,137,000; 
Fiscal year 2004: 0. 

Deepwater legacy asset: 110-foot patrol boats; 
Fiscal year 2002: $1,618,000; 
Fiscal year 2003: $1,961,000; 
Fiscal year 2004: $500,000. 

Deepwater legacy asset: Subtotal for cutters; 
Fiscal year 2002: $7,030,000; 
Fiscal year 2003: $12,103,000; 
Fiscal year 2004: $3,500,000. 

Deepwater legacy asset: Total for all deepwater assets; 
Fiscal year 2002: $19,351,000; 
Fiscal year 2003: $28,756,000; 
Fiscal year 2004: $28,061,000. 

Source: U.S. Coast Guard. 

Note: The Coast Guard estimates the cost for aircraft deferred 
maintenance by multiplying a percentage of average depot maintenance 
costs by the number of aircraft overdue for depot maintenance 
overhauls, plus the annual cost for extension inspections each year. 
The Coast Guard generally does not track deferred maintenance costs by 
cutter class but compiled these data at GAO's request for fiscal years 
2002 through 2004. The Coast Guard estimated the costs of only the 
planned cutter maintenance that had to be deferred to the following 
year and not the amount of maintenance that should have been conducted 
and was not funded. 

[End of table]

Current Condition Measures Not Sufficiently Robust to Link Condition 
with Impact on Mission Capabilities: 

At the time we began our work, the Coast Guard's measures generated 
some limited information on the condition of its legacy assets, but the 
measures were not sufficiently robust to link the assets' declining 
condition to degradation in mission capabilities or performance. As a 
result, the picture that emerges regarding the condition of the 
deepwater legacy assets based on current Coast Guard condition measures 
should be viewed with some caution. While there is no systematic, 
quantitative evidence sufficient to demonstrate that deepwater legacy 
assets are "failing at an unsustainable rate," as the Coast Guard has 
asserted, this does not mean the assets are in good condition or have 
been performing their missions safely, reliably, and at levels that 
meet or exceed Coast Guard standards. We identified two factors that 
need to be considered to put these condition measures into proper 
context. 

The first factor deals with limitations in the measures themselves. 
Simply put, the Coast Guard's measures of asset condition do not fully 
capture the extent of the problems. As such, they may understate the 
decline in the legacy assets' condition. More specifically, the Coast 
Guard measures we assessed focus on events, such as equipment 
casualties or flight mishaps, but do not measure the extent to which 
these and other incidents degrade mission capabilities. The following 
is an example in which Coast Guard measures we assessed are not 
sufficiently robust to systematically capture degradation in mission 
capabilities: 

* The 378-foot cutter Jarvis recently experienced a failure in one of 
its two main gas turbines shortly after embarking on a living marine 
resources and search and rescue mission. While Jarvis was able to 
accomplish its given mission, albeit at reduced speed, this casualty 
rendered the cutter unable to respond to any emergency request it might 
have received--but did not in this case--to undertake a mission 
requiring higher speeds, such as drug interdiction. The Coast Guard 
condition measures are not robust enough to capture these distinctions 
in mission capability. 

The second factor that needs to be kept in mind is the compelling 
nature of the other evidence we gathered outside of the Coast Guard's 
condition measures. This evidence, gleaned from information collected 
during our site visits and discussions with maintenance personnel, 
indicated deteriorating and obsolete systems and equipment as a major 
cause of the reduction in mission capabilities for a number of 
deepwater legacy aircraft and cutters. Such problems, however, are not 
captured by the Coast Guard's condition measures. One example of this 
involves the HH-65 short-range recovery helicopter. While this 
helicopter consistently exceeded availability standards established by 
the Coast Guard over the 5-year period we examined, it is currently 
operating with engines that have become increasingly subject to power 
failures, which may potentially render the fleet unable to meet mission 
requirements. As a result, Coast Guard pilots employ a number of work- 
arounds, such as dumping fuel or occasionally leaving the rescue 
swimmer on scene if the load becomes too heavy. Further, because of 
increasing safety and reliability problems, the Coast Guard has also 
implemented a number of operational restrictions--such as not allowing 
the helicopter to land on helipads--to safeguard crew and passengers 
and prevent mishaps until all of the fleet's engines can be replaced. 

Actions to Better Manage Legacy Assets Are Under Way, but Effects Will 
Not Be Known for Some Time: 

The Coast Guard has already undertaken two main types of actions to 
keep its legacy assets operational: developing a compendium of 
information for making decisions regarding maintenance and upgrades 
needed, and performing increasingly more maintenance on these assets 
between deployments. These efforts are likely helping to prevent a more 
rapid decline in the condition of the assets, but the condition of 
these assets has nonetheless generally continued to worsen. In response 
to both the continued decline in the condition of its legacy assets, as 
well as to various observations we have made to the Coast Guard about 
its need to develop more objective information on mission capability 
needs and more precise condition measures, the Coast Guard has begun to 
undertake additional efforts. These additional efforts include 
developing a knowledge-based model to provide more objective data on 
where to best spend budget dollars to achieve the greatest enhancements 
in mission capabilities, improving the condition measures it uses to 
more clearly quantify the impact declining conditions have on mission 
capabilities, and, at the Pacific Area Command, applying new business 
rules and strategies to better sustain the 378-foot high-endurance 
cutters through 2016. These ongoing efforts, while promising, are 
largely untested, and so it is too soon to tell whether they will allow 
the Coast Guard to better determine and improve the mission 
capabilities of its legacy assets. 

Coast Guard Has Developed and Is Using a Compendium of Needs: 

Since 2002, the Coast Guard has annually issued a Systems Integrated 
Near Term Support Strategy compendium. Among other things, this 
compendium consolidates information needed to make planning and 
budgeting decisions regarding maintenance and upgrades to sustain 
legacy assets. Its purpose is to serve as a tool for senior Coast Guard 
management in setting priorities and planning budgets. From this 
strategic document, the Coast Guard has identified a number of upgrades 
to improve the capabilities of the deepwater legacy aircraft and 
cutters. The most recent compendium (for fiscal year 2006) lists more 
than $1 billion worth of upgrades to the deepwater legacy assets. The 
planned upgrades identified in the compendium that have been approved 
and received initial funding account for an estimated $856 million the 
Coast Guard anticipates it will need to complete those projects. The 
approved upgrades for deepwater legacy assets are shown in table 4. 

Table 4: Approved Upgrades for Deepwater Legacy Aircraft and Cutters: 

Deepwater legacy asset: HC-130 aircraft; 
Synopsis of planned upgrades: The Coast Guard is beginning to replace 
aircraft's dated and difficult-to-support surface search radar system; 
Estimated costs and time frames of upgrades: The radar system 
replacement is projected to cost $78 million and be completed in fiscal 
year 2008. A total of $9 million has been allocated through fiscal year 
2005. 

Deepwater legacy asset: HH-60 aircraft; 
Synopsis of planned upgrades: The Coast Guard has begun a service life 
extension plan and a replacement of the obsolete avionics suite; 
Estimated costs and time frames of upgrades: The service life extension 
program is estimated to cost $16 million and be completed by fiscal 
year 2009. The avionics replacement program is projected to cost $121 
million and be completed by fiscal year 2010. A total of $32.8 million 
has been allocated through fiscal year 2005 for these upgrades. 

Deepwater legacy asset: HH-65 aircraft; 
Synopsis of planned upgrades: Serious safety and reliability problems 
with the engine led the Coast Guard to place operational restrictions 
on the HH-65 fleet in October 2003; 
Estimated costs and time frames of upgrades: The Coast Guard plans to 
re-engine 84 HH-65 aircraft at a projected cost of $349 million, now 
estimated to be completed by February 2007. A total of $160.7 million 
has been allocated through fiscal year 2005. 

Deepwater legacy asset: 270-foot and 210-foot medium-endurance cutters; 
Synopsis of planned upgrades: During fiscal year 2005 these cutters are 
to enter a legacy asset sustainment project known as the Mission 
Effectiveness Project (MEP) aimed at increasing their service lives 
until their replacement by a new cutter. The MEP includes upgrading 
major engineering subsystems such as evaporators, sewage systems, and 
gyrocompasses; 
Estimated costs and time frames of upgrades: The MEP is projected to 
cost a total of $292 million and be completed by fiscal year 2015. The 
medium-endurance cutters will ultimately be replaced by the Offshore 
Patrol Cutter. A total of $12.5 million has been allocated through 
fiscal year 2005. 

Deepwater legacy asset: Total; 
Estimated costs and time frames of upgrades: A total of $856 million is 
needed to fund these projects, of which $215 million has been allocated 
through fiscal year 2005. 

Source: GAO analysis of data provided by the U.S. Coast Guard. 

Note: While no funds have been allocated for upgrades to the HU-25 
aircraft, the 378-foot cutters, or the 110-foot and 123-foot patrol 
boats, since all of these deepwater legacy assets are scheduled to be 
replaced, each of these assets has upgrades listed in the Systems 
Integrated Near Term Support Strategy compendium. The HU-25 aircraft 
has an engine replacement project estimated to cost $78.1 million; the 
378-foot cutter has an MEP estimated to cost $137.8 million; and the 
patrol boats have three projects--replacement of the fin stabilizer 
system that is estimated to cost $10.4 million, an MEP that is 
estimated to cost $162 million, and replacement of the ship service 
generators that is estimated to cost $20.7 million. If the Coast Guard 
were to request funding for all of these sustainment projects, it would 
cost an additional $409 million. 

[End of table]

Among the projects already begun is the re-engining of the HH-65 
helicopters to address safety and reliability concerns. The Coast Guard 
is also upgrading several other aviation systems in an effort to 
improve aircraft capabilities. Enhancements are also planned for 
certain classes of deepwater cutters. For example, during fiscal year 
2005, the Coast Guard is beginning a maintenance effectiveness project 
on the 210-foot and 270-foot cutters. This project includes replacing 
major engineering subsystems with the goal of extending the cutters' 
service lives until their replacement by the Offshore Patrol Cutter. Of 
the $856 million total estimated costs needed for the planned upgrades 
to the deepwater legacy assets listed above, $215 million has been 
allocated through fiscal year 2005, and the Coast Guard has requested 
another $217.3 million in its fiscal year 2006 budget. The remaining 
estimated costs of $423.7 million would have to be funded beyond fiscal 
year 2006. 

Increasing Amounts of Maintenance Are Being Performed, but Loss of 
Mission Capabilities Continues: 

Coast Guard personnel consistently reported to us that crew members 
have to spend increasingly more time between missions to prepare for 
the next deployment. For example, due to the aging main landing gear on 
the HH-65 helicopter, Coast Guard official stated that maintenance 
crews spend extensive time servicing, troubleshooting and fixing them 
in pre-deployment maintenance. Comparable accounts were given by 
personnel working on cutters. For example, officers of the 270-foot 
cutter Northland told us that because of dated equipment and the 
deteriorating condition of its piping and other subsystems, crew 
members have to spend increasingly more time and resources while in 
port to prepare for their next deployment. While we could not verify 
these increases in time and resources because the Coast Guard does not 
capture data on these additional maintenance efforts, the need for 
increasing amounts of maintenance was a message we consistently heard 
from the operations and maintenance personnel with whom we met. 

Such efforts are likely helping to prevent a more rapid decline in the 
condition of these deepwater legacy assets, but it is important to note 
that even with the increasing amounts of maintenance, these assets are 
still losing mission capabilities because of deteriorating equipment 
and system failures. For example, in fiscal year 2004, the 378-foot 
cutter Chase lost 98 counterdrug mission days because of a number of 
patrol-ending casualties--including the loss of ability to raise and 
lower boats and run major electrical equipment--requiring $1.2 million 
in emergency maintenance. In addition, the 378-foot cutter Hamilton 
lost 27 counterdrug mission days in the fall of 2004 when it required 
emergency dry dock maintenance because of hydraulic oil leaking into 
the reduction gear. 

Coast Guard Is Developing a Strategy to Better Prioritize Upgrades and 
Maximize Asset Capabilities: 

In the past, we have recommended that the Coast Guard develop a long- 
term strategy to set and assess levels of mission performance.[Footnote 
17] We found this was an important step for the Coast Guard to take 
because it links legacy asset investments to asset capabilities, 
mission priorities, and goals so that the Coast Guard can better decide 
how limited budget dollars should be spent. The Coast Guard has 
recently begun to apply the principles behind such a strategy to (1) 
better prioritize the projects needed to upgrade legacy assets that 
will be part of the Deepwater program and (2) obtain the greatest 
overall mix of capabilities for its assets within its budget in order 
to maximize mission performance. The tool it is developing is called 
the Capital Asset Management Strategy (CAMS). 

CAMS, once fully implemented, is expected to help the Coast Guard to 
better manage its assets by linking funding decisions to asset 
condition. Unlike the Coast Guard's current compendium, CAMS is 
designed to provide analyses on the capability trade-offs for upgrades 
and maintenance projects across asset classes, thereby allowing the 
Coast Guard to determine which combination of projects will provide the 
most capability for the dollars invested. For example, when Coast Guard 
officials are trying to decide among potential project upgrades such as 
an HC-130 weather radar replacement, an HH-65 sliding cabin door 
replacement, or a 110-foot patrol boat fin stabilizer replacement, 
CAMS, once fully implemented, could provide the officials with a 
recommended mix of project upgrades that would achieve the greatest 
capability enhancements based on the available budget. 

CAMS analyses are to be based on legacy asset condition and readiness 
data, asset retirement and replacement timelines, asset degradation 
estimates, project production rates, cost data, and mission utility 
rankings. Mission utility rankings will grade an asset's importance to 
specific missions, such as search and rescue or counterdrug operations. 
Rankings may also be assigned to an asset's critical subsystems or may 
be altered based on an asset's geographic location. For example, a 378- 
foot cutter may be critical to the success of fisheries patrols in the 
Pacific but may not be as important for alien/migrant interdiction 
operations in the Caribbean. However, according to Coast Guard 
headquarters officials, the Coast Guard remains cautious about 
employing such a strategy because an investment strategy of this nature 
could lead to cutters that are no longer multmission capable and are 
unable to respond to an emergency due to reduced capabilities. In 
addition, the Coast Guard plans to rank its missions within CAMS based 
on their relative importance.[Footnote 18] Each of these elements is to 
form the basis for recommendations regarding which combination of 
upgrade and maintenance projects will provide the greatest enhancements 
to fleet capabilities. 

According to Coast Guard staff, CAMS recommendations are not a 
replacement for the existing budget development process, but rather are 
to augment and make more consistent the information currently provided 
to decision makers. Because the recommendations are to be based, in 
part, on user assumptions, CAMS recommendations are to be reviewed by 
several internal Coast Guard officials before any final funding 
requests are made. Further, in order to prevent user "gaming"--making 
assumptions in such a way as to ensure a positive recommendation or 
outcome for a particular project--the Coast Guard is developing a 
series of job aids, manuals, and training courses to ensure data 
integrity and consistency. 

Coast Guard officials expect to have CAMS fully implemented by 
September 2005 and intend to use it while developing the Coast Guard's 
fiscal year 2008 budget submission. Although it is too soon to assess 
the effectiveness of CAMS, we view this approach as a good faith effort 
toward knowledge-based budgeting for legacy asset sustainment. 

Coast Guard is Developing More Robust Condition Measures: 

At the time we began our work, in August 2004, the majority of the 
Coast Guard's condition measures were not sufficiently robust to link 
an asset's condition with its impact on mission capabilities. As we 
discussed with Coast Guard officials, without such condition measures, 
the extent and severity of the decline in the existing deepwater legacy 
assets and their true condition cannot be fully determined. On the 
basis of our inquiries and a series of discussions we held with 
cognizant Coast Guard officials, the Coast Guard has begun developing 
improved measures to more accurately capture data on the extent to 
which its deepwater legacy assets are degraded in their mission 
capabilities. However, because these measures have not been finalized 
or fully implemented, we were unable to assess their effectiveness. The 
Coast Guard anticipates having the new measures finalized by the end of 
2005. 

Coast Guard naval engineers told us that they had begun developing a 
"percent of time fully mission capable" measure to reflect the degree 
of mission capability, as well as measures to track cutter readiness. 
As part of this measure, the Coast Guard is developing mission 
criticality codes, which would rank the degree of importance of each 
piece of a cutter's equipment to each possible mission that the cutter 
could perform. These codes would then be linked to electronic casualty 
reports for each cutter, which would provide the cutter engineers and 
operators with information on the impact that the equipment casualties 
would have on each possible mission. This casualty report/mission 
criticality linkage will then be factored into the calculation of the 
percent of time fully mission capable measure for each cutter class and 
mission type. Coast Guard officials could then review this measure to 
determine, for example, the degree of capability that its 270-foot 
medium endurance cutter fleet has to conduct search and rescue missions 
at any given time. We agree that measures like this are needed--and as 
soon as possible. 

According to Coast Guard officials, while the availability index will 
remain the Coast Guard's primary measure for aircraft condition and 
operational readiness, the Coast Guard is working to improve its 
dispatch reliability index measure, which provides causal information 
on delayed, aborted, or canceled missions.[Footnote 19] The Coast Guard 
can use the dispatch reliability index--in conjunction with data 
captured by unit-level and depot-level maintenance staff and entered 
into the Coast Guard's Electronic Aircraft Logbook and Aviation 
Logistics Management Information System, respectively--to determine 
which components and systems are failing most frequently and thus 
causing degradation in aircraft availability and mission performance. 
According to Coast Guard officials, data provided from these systems 
rival the information that will be produced by the cutter community's 
proposed percent of time fully mission capable measure. Because the 
dispatch reliability index measure and the electronic aircraft logbook 
are relatively new and have only recently been fully implemented Coast 
Guard-wide, we have not assessed their effectiveness. However, we view 
these tools as a positive step toward providing Coast Guard decision 
makers with more detailed information on the primary factors leading to 
mission degradation. 

New Initiative for Maintaining 378-Foot Cutters Is Under Way: 

One effort is under way at the Coast Guard's Pacific Area Command to 
improve maintenance practices for its 378-foot cutters, which are among 
the oldest cutters in its fleet.[Footnote 20] Pacific Area officials 
have recognized that a different approach to maintaining and sustaining 
legacy cutters may be needed since they are dependent on 378-foot 
cutters for meeting missions, such as defense operations and fisheries 
patrols. As a first step, Pacific Area officials have undertaken an 
initiative applying what they refer to as "new business rules and 
strategies" to better maintain the 378-foot high-endurance cutters 
through 2016, when they are scheduled to be fully replaced by National 
Security Cutters. Under the original Deepwater proposal, the final 378- 
foot cutter was to be decommissioned in 2013, but by 2005, that date 
had slipped to 2016. To help keep these cutters running through this 
date, Pacific Area officials are applying such rules and strategies as 
(1) ensuring that operations and maintenance staffs work closely 
together to determine priorities, (2) recognizing that maintaining or 
enhancing cutter capabilities will involve trade-off determinations, 
and (3) accepting the proposition that with limited funding not all 
cutters will be fully capable to perform all types of missions as they 
near the end of their useful lives. Pacific Area officials believe that 
in combination, these rules and strategies will result in more cost- 
effective maintenance and resource allocation decisions--recognizing 
that difficult decisions will still have to be made to balance 
maintenance and operations. However, according to Coast Guard 
headquarters officials, if such strategies are employed, careful 
planning must occur to avoid placing a cutter in an operational 
emergency where it is incapable of adequately responding. 

One example of the bridging strategies Pacific Area officials are 
exploring is the development of what Pacific Area officials refer to as 
a "class within a class" approach. Under this strategy, the individual 
cutters within the 378-foot high-endurance cutter fleet would be 
designated to perform specific mission types based on an assessment of 
their condition and mission capabilities.[Footnote 21] Cutters 
possessing full mission capabilities could be assigned to the more 
demanding defensive operations, while cutters in poorer condition and 
less than fully capable would be assigned to less demanding missions, 
such as fisheries enforcement. According to Pacific Area officials, 
this strategy is designed to more effectively spend the maintenance 
funds available for the 378-foot cutters, since current funding levels 
for the 378-foot cutters make it very difficult for Pacific Area to 
maintain all 10 of its 378-foot cutters as fully mission capable. 

Pacific Area Command's new initiative has the potential for assisting 
the Coast Guard in making more informed choices regarding the best use 
of their resources, but according to Pacific Area officials, the 
approach will likely require that the Coast Guard allocate additional 
maintenance funds. Further, because the approach has not been fully 
implemented, it is too soon to tell whether the approach will provide 
the results intended. Coast Guard headquarters officials stated that 
before such a strategy can be implemented further analysis is required, 
to include: (1) determining the estimated savings associated with 
creating multiple 378-foot cutter classes; (2) analyzing other cost 
saving concepts, such as decommissioning cutters or rotating crews; (3) 
obtaining further information on the effect on Coast Guard mission 
readiness; and (4) assessing the operational risk associated with 
operating cutters that are no longer multimission capable. Officials 
from Coast Guard headquarters officials further stated that they are 
exploring the possibility of increasing the funds available for 
operating expenses for the 378-foot high-endurance cutters in fiscal 
year 2007. 

Management Challenges Faced in Acquiring New Assets Remain Significant: 

In its fiscal year 2006 budget request, the Administration requested 
$966 million for the Deepwater program---$242 million more than 
Congress appropriated for the program in fiscal year 2005. This request 
reflects significant revisions to the Deepwater program's requirements, 
capabilities, and schedule necessitated by the Coast Guard's new 
homeland security mission. Recently, the House Appropriations Committee 
recommended $500 million for the Deepwater program, $466 million less 
than the Administration requested.[Footnote 22] The committee expressed 
concern about the path the program has taken and the lack of 
information provided to Congress as the primary reasons for this 
recommendation. Specifically, the committee did not believe that the 
Coast Guard's revised implementation plan provided enough programmatic 
information such as asset delivery timelines and funding projections 
for each year through the program's completion. 

In late May 2005, the Coast Guard submitted documentation to the 
committee in response to the committee's request. In June 2005, the 
Senate Appropriations Committee expressed concern about the lack of 
information concerning the Deepwater plan in the fiscal year 2006 
budget request but recommended funding of $905.6 million for the 
program for fiscal year 2006.[Footnote 23] As of early July 2005, the 
fiscal year 2006 appropriation for the Deepwater program was still 
pending, and so the funding level is still not known. Since the 
inception of the Deepwater program, we have expressed concerns about 
the degree of risk in the acquisition approach and the Coast Guard's 
ability to manage and oversee the program. In 2004 we reported that, 
well into the contract's second year, key components needed to manage 
the program and oversee the system integrator's performance had not 
been effectively implemented.[Footnote 24] We also reported that the 
degree to which the program was on track could not be determined 
because the Coast Guard was not updating its schedule.[Footnote 25] We 
detailed improvements needed in a number of areas, shown in table 5. 
These concerns have a direct bearing on any consideration to increase 
the program's pace. Because the Coast Guard was having difficulty 
managing the Deepwater program at the pace it had anticipated, 
increasing the pace by expediting the acquisitions would only 
complicate the problem. 

Table 5: Summary of Deepwater Areas Needing Management Attention as 
Reported by GAO: 

Area of concern: Key components of management and oversight are not 
effectively implemented: 

Recommendations to the U.S. Coast Guard: Improve integrated product 
teams responsible for managing the program by providing better 
training, approving charters, and improving systems for sharing 
information between teams; 
Ensure adequate staffing of the Deepwater program; 
Provide field personnel with guidance and training on transitioning to 
new Deepwater assets; 
Update the original acquisition schedule to support future budget 
requests, starting with the fiscal year 2006 request. 

Area of concern: Procedures for ensuring contractor accountability are 
inadequate: 

Recommendations to the U.S. Coast Guard: 
Develop measurable award fee criteria consistent with guidance from the 
Office of Federal Procurement Policy; 
Provide for better input from U.S. Coast Guard technical 
representatives; 
Hold system integrator accountable for improving effectiveness of 
integrated product teams; 
Establish a time frame for putting steps in place to measure 
contractor's progress toward improving operational effectiveness; 
Establish a baseline for determining whether the acquisition approach 
is costing the government more than a traditional asset replacement 
approach; 
Establish criteria to determine when to adjust the project baseline and 
document the reasons for change. 

Area of concern: Control of future costs through competition remains at 
risk because of weak oversight: 

Recommendations to the U.S. Coast Guard: 
Develop a comprehensive plan for holding the system integrator 
accountable for ensuring adequate competition among suppliers; 
For subcontracts over $5 million awarded by the system integrator to 
the two major subcontractors, require notification to the Coast Guard 
about decisions to perform the work in- house rather than contracting 
it out. 

Source: GAO. 

[End of table]

The Coast Guard agreed with nearly all of our recommendations and has 
made progress in implementing them. Specifically, the Coast Guard has 
fully addressed three of the recommendations and has actions under way 
on others. However, in light of continuing management challenges, it 
will likely take some time for the Coast Guard to fully address the 
remaining recommendations. While actions are under way, management 
challenges remain that are likely to take some time for the Coast Guard 
to fully address. 

Improvement of Program Management and Contractor Oversight Is Mixed: 

We have seen mixed success in the Coast Guard's efforts to improve 
management of the program and contractor oversight. Three of the four 
areas of concern--improving integrated project teams (IPT), ensuring 
adequate staff for the program, and planning for human capital 
requirements for field units receiving new assets--have yet to be fully 
addressed. 

Strengthening Integrated Product Teams: 

Although the Deepwater program has made some efforts to improve the 
effectiveness of IPTs, we continue to see evidence that more 
improvements are needed--such as greater coordination--for the teams to 
effectively do their jobs. These teams, the Coast Guard's primary tool 
for managing the program and overseeing the contractor, are generally 
chaired by a subcontractor representative and consist of members from 
subcontractors and the Coast Guard. The teams are responsible for 
overall program planning and management, asset integration, and 
overseeing delivery of specific Deepwater assets. Since our March 2004 
report, the teams have been restructured, and 20 teams have charters 
setting forth their purpose, authority, and performance goals. And new, 
entry-level training is being provided to team members. 

Despite this progress, however, the needed changes are not yet 
sufficiently in place. A recent assessment by the Coast Guard of the 
system integrator's performance found that roles and responsibilities 
in some teams continue to be unclear. Decision making is to a large 
extent stovepiped, and some teams still lack adequate authority to make 
decisions within their realm of responsibility. One source of 
difficulty for some team members has been the fact that each of the two 
major subcontractors has used its own databases and processes to manage 
different segments of the program. Decisions on air assets are made by 
Lockheed Martin, while decisions regarding surface assets are made by 
Northrop Grumman. This approach can lessen the likelihood that a system-
of-systems outcome will be achieved if decisions affecting the entire 
program are made without the full consultation of all parties involved. 
Deepwater program officials told us that more attention is being paid 
to taking a system-wide approach and that the Coast Guard has 
emphasized the need to ensure that the two major subcontractors 
integrate their management systems. We will continue to monitor the 
Coast Guard's progress in implementing this recommendation during our 
pending review of the revised Deepwater plan. 

Ensuring Adequate Staffing for the Deepwater Program: 

The Coast Guard has taken steps to more fully staff the Deepwater 
program, with mixed effects. In February 2005, the Deepwater program 
executive officer approved a revised human capital plan. The plan 
emphasizes workforce planning, including determining needed knowledge, 
skills, and abilities and developing ways to leverage institutional 
knowledge as staff rotate out of the program. This analysis is intended 
to help determine what gaps exist between needed skills and existing 
skills and to develop a plan to bridge these gaps. The Coast Guard has 
also taken some short-term steps to improve Deepwater program staffing, 
hiring contractors to assist with program support functions, shifting 
some positions from military to civilian to mitigate turnover risk, and 
identifying hard-to-fill positions and developing recruitment plans 
specifically for them. Finally, the Deepwater program and the Coast 
Guard's acquisition branch have begun using an automated system for 
forecasting military rotation cycles, a step Deepwater officials 
believe will help with long-range strategic workforce planning and 
analysis. 

Despite these actions, however, vacancies remain in the program, and 
some measures that may have highlighted the need for more stability in 
the program's staff have been removed from the new human capital plan. 
As of January 2005, 244 positions were assigned to the program, with 
206 of these filled, resulting in a 16 percent vacancy rate. A year 
ago, 209 staff were assigned to the program. Further, the new human 
capital plan removes a performance goal that measured the percentage of 
billets filled at any given time. Coast Guard officials stated that the 
prior plan's goal of a 95 percent or higher fill rate was unduly 
optimistic and was a poor measure of the Coast Guard's ability to meet 
its hiring goals. For example, billets for military personnel who plan 
to rotate into the program in the summer are created at the beginning 
of the budget year, leading the measure to count those positions as 
vacant from the beginning of the budget year until summer. Other 
performance measures that were included in the prior plan to measure 
progress in human capital issues have also been removed. For example, 
to help ensure that incoming personnel received acquisition training 
and on-the-job training, a billet was included in the prior plan to 
serve as a floating training position that replacement personnel could 
use for a year before the departure of military incumbents. The Coast 
Guard did not fund this position, and the new plan removes the billet. 
According to the Coast Guard, these measures were removed because the 
revised Deepwater plan focuses on the long-range strategic human 
capital issues associated with the execution of the acquisition over 
the entire period, whereas the prior plan had a short-term operational 
focus. We will continue to monitor the Coast Guard's progress in 
implementing this recommendation during our pending review of the 
revised Deepwater plan. 

Improving Communication with Personnel Who Will Use the New Assets: 

The Coast Guard recognizes the critical need to inform the operators 
who are to use the Deepwater assets of progress in the program, and 
officials stated that on the basis of our recommendations, they have 
made a number of improvements in this area. A November 2004 analysis of 
the Deepwater program's communication process, conducted in 
coordination with the National Graduate School, found that the 
communication and feedback processes were inadequate. Emphasis has now 
been placed on outreach to field personnel, with a multipronged 
approach involving customer surveys, face-to-face meetings, and 
presentations. We have not yet evaluated the effectiveness of the new 
approach. 

Human capital requirements for the Deepwater program--such as crew 
numbers and schedules, training, and support personnel--will have an 
increasing impact on the program's ability to meet its goals as the 
pace at which assets are delivered to field units picks up. Recent 
assessments by Coast Guard performance monitors show this to be an area 
of concern.[Footnote 26] Coast Guard officials have expressed concern 
about whether the system integrator is appropriately considering human 
capital in systems engineering decisions. The system integrator is 
required to develop a workforce management plan for Deepwater, as well 
as "human factors engineering" plans for each Deepwater asset and for 
the overall system of systems. The Coast Guard rejected the 
contractor's workforce management plan and several of the proposed 
human factors engineering plans as being inadequate. The rejections 
were due, in part, to the lack of an established and integrated system- 
level engineering approach that shows how issues relating to human 
capabilities and limitations of actually performing with the system 
will be approached. One performance monitor noted that as of late 2004, 
requirements for staffing and training of maintenance facilities and 
organizations had yet to be determined. According to the Coast Guard, 
emphasis on a system integrator for addressing human capital 
considerations is necessary to ensure that Deepwater goals are met, 
especially as they pertain to operational effectiveness and total 
ownership cost. We will continue to monitor the Coast Guard's progress 
in implementing this recommendation during our pending review of the 
revised Deepwater plan. 

Updating the Acquisition Schedule: 

The Coast Guard has recently undertaken efforts to update the original 
2002 Deepwater acquisition schedule--an action that we suggested in our 
June 2004 report.[Footnote 27] The original schedule had milestone 
dates showing when work on an asset would begin and when delivery would 
be expected, as well as the integrated schedules of critical linkages 
between assets, but we found that the Coast Guard was not maintaining 
an updated and integrated version of the schedule.[Footnote 28] As a 
result, the Coast Guard could not demonstrate whether individual 
components and assets were being integrated and delivered on schedule 
and in critical sequence. As recently as October 2004, Deepwater 
performance monitors likewise expressed concern that the Coast Guard 
lacked adequate visibility into the program's status and that lack of 
visibility into the schedules for component-level items prevented 
reliable forecasting and risk analysis. The Coast Guard has since taken 
steps to update the outdated schedule and has indicated that it plans 
to continue to update the schedule each month for internal management 
purposes, and semiannually to support its budget planning efforts. We 
think this is an important step toward improving the Coast Guard's 
management of the program because it provides a more tangible picture 
of progress, as well as a baseline for holding contractors accountable. 
We will continue our oversight of the Coast Guard to ensure progress is 
made and to monitor how risks are mitigated. 

Procedures for Ensuring System Integrator Accountability Are More 
Rigorous, but Concerns Remain: 

We have seen progress in terms of the rigor with which the Coast Guard 
is periodically assessing the system integrator's performance, but 
concerns remain about the broader issues of accountability for 
achieving the overarching goals of minimizing total ownership cost and 
maximizing operational effectiveness. 

Improving Criteria for Assessing Performance: 

Improvements continue to be made to the criteria for assessing the 
system integrator's performance. In March 2004, we reported that the 
process for assessing performance against specific contract tasks 
lacked rigor. The criteria for doing so have since been revised to more 
clearly reflect those that are objective, (that is, measured through 
automated tools against established measures) and those that are 
subjective, meaning the narrative comments by Coast Guard performance 
monitors. Weights have been assigned to each set of evaluation factors, 
and the Coast Guard continues to refine the distribution of the weights 
to reach an appropriate balance between automated results and the 
eyewitness observations of the performance monitors. Coast Guard 
officials told us that they have also provided additional guidance and 
training to performance monitors. We found that efforts have been made 
to improve the consistency of the format used for their input in 
assessments of the system integrator's performance. Coast Guard 
officials said that they are continuing to make improvements to ensure 
that performance monitors' relevant observations are appropriately 
considered in making award fee determinations. 

It is important to note that although performance monitor comments are 
considered subjective, they are valuable inputs to assessing the system 
integrator's performance, particularly when they are tied to measurable 
outcomes. According to Coast Guard officials, the Coast Guard will 
continue to refine the award fee factors as the program progresses. In 
some cases, we noted that the performance monitors' assessments 
differed vastly from the results of automated, data-driven assessments. 
For example, while schedule management is discussed in the Coast 
Guard's midterm assessment of the system integrator's performance as a 
major area of challenge and risk, the objective measure showed 100 
percent compliance in this area. Another measure assesses the extent to 
which integrated product teams consider the impact of their decisions 
on the overall cost and effectiveness of the Deepwater program. 
Performance monitors reported that because system-level guidance had 
not been provided to the teams responsible for specific assets, they 
had a limited ability to see the whole picture and understand the 
impact of decisions on total ownership cost and operational 
effectiveness. However, the automated measure was again 100 percent 
compliance. Coast Guard officials said that, in some cases, the data- 
driven measures do not accurately reflect the contractor's performance. 
We will continue to monitor changes to the Coast Guard's measures for 
assessing the system integrator's performance. 

Holding the System Integrator Accountable for Effectiveness of Product 
Teams: 

Changes have been made to the award fee measures that place additional 
emphasis on the system integrator's responsibility for making 
integrated product teams effective. Award fee criteria now incorporate 
specific aspects of how the integrator is managing the program, 
including administration, management commitment, collaboration, 
training, and empowerment of these teams. However, as discussed above, 
concerns remain about whether the teams are effectively accomplishing 
their goals. 

Evaluation of Operational Effectiveness and Total Ownership Cost: 

While the Coast Guard has developed models to measure the system 
integrator's performance in operational effectiveness and total 
ownership cost, concrete results have not yet emerged. Minimizing total 
ownership cost and maximizing operational effectiveness are two of the 
overarching goals of the Deepwater program. The system integrator's 
performance in these two areas will be a critical piece of information 
when the Coast Guard makes a decision about whether to award the 
contractor the first contract option period of 5 years. Initial 
decision making is to start in June 2006. 

With regard to the operational effectiveness of the program, measuring 
the system integrator's impact has yielded limited results to date 
because few of the new assets are operational. The Coast Guard has 
developed modeling capabilities to simulate the effect of the new 
capabilities on its ability to meet its missions. However, until 
additional assets become operational, progress toward this goal will be 
difficult to determine. 

With regard to total ownership cost, the Coast Guard does not plan to 
implement our recommendation, despite concurring with it at the time of 
our March 2004 report. The Coast Guard has not adhered to its original 
plan, set forth in the Deepwater program management plan, of 
establishing as its baseline a cost not to exceed the dollar value of 
replacing the assets under a traditional approach (e.g., on an asset- 
by-asset basis rather than a system-of-systems approach). In addition 
to providing for greater synergies between air, sea, sensor and 
communications assets and equipment, the system-of-systems approach was 
to yield cost savings when compared with a traditional acquisition 
approach. Although the Coast Guard initially established a cost 
baseline consistent with the program management plan's approach, the 
Coast Guard has not updated it to reflect changes made to the system 
integrator's cost estimate baseline, and therefore is not being used to 
evaluate the contractor's progress in holding down total ownership 
cost. As a result, the cost baseline being used to measure total 
ownership cost is not the Coast Guard's, but rather is the system 
integrator's own cost estimate. As we reported in March 2004, we 
believe that measuring the system integrator's cost growth compared 
with its own cost proposal will tell the government nothing about 
whether it is gaining efficiencies by turning to the system-of-systems 
concept rather than the traditional asset-by-asset approach. Although 
the Deepwater program has undergone a number of alterations since the 
contract was awarded in 2002, the Coast Guard has not studied whether 
the system-of-systems approach is still more cost effective as opposed 
to a traditional acquisition approach. Thus, the Coast Guard will lack 
this information as it prepares to decide whether to award the first 
contract option beginning in June 2006. 

Establishing Criteria and Documenting Changes to the Baseline: 

Coast Guard officials stated that the contract total ownership cost and 
operational effectiveness baseline is adjusted based on approved 
decision memorandums from the Agency Acquisition Executive, the Vice 
Commandant of the Coast Guard. Such memorandums were originally 
approved by the program executive officer on a case-by-case basis. As 
we reported in March 2004,[Footnote 29] establishing a solid baseline 
against which to measure progress in lowering total ownership cost is 
critical to holding the contractor accountable. 

Coast Guard Reports Taking Steps to Hold the System Integrator 
Accountable for Competition: 

The Coast Guard reported that it is taking steps to address our 
recommendations concerning cost control through competition among 
second-tier suppliers and notification of "make" decisions.[Footnote 
30] While we have not assessed the effectiveness of the Coast Guard's 
actions regarding competition among second-tier suppliers, we are 
satisfied with its efforts regarding notification of make decisions. It 
should be noted, though, that we have not assessed the effectiveness of 
the following actions. 

* Competition among second-tier suppliers. Coast Guard officials told 
us that in making the decision about whether to award the first 
contract option, the government will specifically examine the system 
integrator's ability to control costs by assessing the degree to which 
competition is fostered at the major subcontractor level. The 
evaluation will consider the subcontractors' project management 
structure and processes to control costs, as well as how market surveys 
of similar assets and major subsystems are implemented. The Coast Guard 
is focusing its attention on those areas that were priced after the 
initial competition for the Deepwater contract was completed, such as 
the HH-65 re-engining and the C-130J missionization.[Footnote 31] For 
example, a new process implemented for the C-130J missionization was a 
requirement for competition in subcontracting and government approval 
of all subcontracts exceeding $2 million in order for the Coast Guard 
to monitor the integrator's competition efforts. 

* Notification of make decisions. According to the Federal Acquisition 
Regulation, the prime contractor is responsible for managing contract 
performance, including planning, placing, and administering 
subcontracts as necessary to ensure the lowest overall cost and 
technical risk to the government.[Footnote 32] The Federal Acquisition 
Regulation further provides that when "make-or-buy programs" are 
required, the government may reserve the right to review and agree on 
the contractor's make-or-buy program when necessary to ensure 
negotiation of reasonable contract prices, among other things. We 
recommended that the Coast Guard be notified of make-or-buy decisions 
over $5 million in order to facilitate controlling costs through 
competition. We suggested the $5 million threshold because Lockheed 
Martin, one of the major subcontractors, considers that amount to be 
the threshold for considering its suppliers major. The Coast Guard has 
asked the system integrator, on a voluntary basis, to provide 
notification 1 week in advance of a make decision of $10 million or 
more based on the criteria in the make-or-buy program provisions of the 
Federal Acquisition Regulation. According to Coast Guard officials, to 
date, no make decision has exceeded $10 million since the request was 
made. The details implementing this recommendation have not yet been 
worked out, such as specifically who in the Coast Guard will monitor 
the subcontractors' make decisions to ensure that the voluntary 
agreement is complied with. We will continue to monitor the Coast 
Guard's progress in implementing this recommendation during our pending 
review of the revised Deepwater plan. 

Concluding Observations: 

Our work suggests the costly and important Deepwater program will need 
constant monitoring and management attention to successfully accomplish 
its goals. In this respect, we identified three points that should be 
kept in mind in considering how to proceed with the program. 

* First, the need to replace or upgrade deteriorating legacy assets is 
considerable. While the Coast Guard currently lacks measures that 
clearly demonstrate how this deterioration affects its ability to 
perform deepwater-related missions, it is clear that the deepwater 
legacy assets are insufficient for the task. As the Coast Guard 
continues to develop condition measures that are more robust and able 
to link the assets' condition with mission capabilities, and as it 
further develops and implements its Capital Asset Management System, it 
will be in a better position to make more informed decisions regarding 
where its budget should be spent to maximize the capabilities of its 
legacy assets as the Coast Guard transitions to the Integrated 
Deepwater System. 

* Second, there are signs that as the Deepwater program moves ahead, 
the Coast Guard will continue to report more problems with sustaining 
existing assets, together with the attendant need for additional 
infusions of funding to deal with them. Some of these problems, such as 
those on the 378-foot cutters, are included in the compendium the Coast 
Guard uses to set sustainment priorities and plan budgets, but the 
Coast Guard has not allocated funds because the problems pertain to 
assets that are among the first to be replaced. However, projects to 
address these problems are nevertheless likely to be needed. While the 
Coast Guard is moving to improve the information it uses to set budget 
priorities through development of CAMS, the system has not been 
implemented, and therefore, it is too soon to tell how effective the 
system will be. We will continue to work with the Coast Guard to 
monitor its progress on CAMS as a means for ensuring that there is a 
more systematic and comprehensive approach to keeping Congress abreast 
of the potential bill for sustaining these assets. 

* Third, although the need to replace and upgrade assets is strong, 
there still are major risks in the Coast Guard's acquisition approach. 
The cost increases and schedule slippages that have already occurred 
are warning signs. While the Coast Guard has initiated actions to 
address problems we have raised involving system integration, cost and 
schedule management, and integrated product teams, we remain concerned 
that the program still carries major risks. We will continue to work 
with the Coast Guard to determine how best to manage these risks so 
that the Deepwater missions can be accomplished in the most cost- 
effective way. 

Agency Comments: 

We requested comments on a draft of this report from the Department of 
Homeland Security and the U.S. Coast Guard. The U.S. Coast Guard 
provided technical comments, which have been incorporated into the 
report where appropriate. 

We are providing copies of this report to the Secretary of the 
Department of Homeland Security, the Commandant of the U.S. Coast 
Guard, and interested congressional committees. The report will also be 
made available to others upon request. In addition, the report will be 
available at no charge on GAO's Web site at http//www.gao.gov. 

For information about this report, please contact me at (415) 904-2200, 
or wrightsonm@gao.gov. Contact points for our Offices of Congressional 
Relations and Public Affairs may be found on the last page of this 
report. Individuals making key contributions to this report are listed 
in appendix III. 

Signed by: 

Margaret T. Wrightson: 
Director, Homeland Security and Justice Issues: 

[End of section]

Appendix I: Objectives, Scope, and Methodology: 

This report examines the condition of the U. S. Coast Guard's Deepwater 
legacy assets and the acquisition management challenges the Coast Guard 
faces. Our work focused on three key questions: (1) How has the 
condition of the Coast Guard's deepwater legacy assets changed during 
fiscal years 2000 through 2004? (2) What actions has the Coast Guard 
taken to maintain, upgrade, and better manage its deepwater legacy 
assets? (3) What are the management challenges the Coast Guard faces in 
acquiring new assets, especially if a more aggressive schedule is 
adopted?

In assessing how the condition of the deepwater legacy assets has 
changed during fiscal years 2000 through 2004, we analyzed what Coast 
Guard officials told us were the best available condition measures. For 
deepwater aircraft, we obtained concurrence from Coast Guard Office of 
Aeronautical Engineering officials that the appropriate measures to use 
for aircraft condition included the availability index (percentage of 
time aircraft were available to complete missions), cost per flight 
hour, labor hours per flight hour, programmed flight hours per year, 
scheduled versus unscheduled maintenance expenditures, and estimated 
deferred maintenance. For cutters, we obtained concurrence from the 
Office of Naval Engineering and the Office of Cutter Forces that the 
appropriate measures to use for cutter condition were the number of 
major (category 3 and 4) casualties, the percent of time free of major 
casualties, scheduled versus unscheduled maintenance, and estimated 
deferred maintenance. We also reviewed data on mishaps and the dispatch 
reliability index for aircraft, and lost cutter days and unscheduled 
maintenance days for cutters, but we did not use these measures because 
the data were either not relevant to our analysis, incomplete, not 
available for the entire time period covered by our review, or not 
sufficiently reliable for our purposes. We supplemented our analyses of 
these measures with documentation from relevant reports and studies, as 
well as from interviews of asset program managers and crews for each 
type of deepwater legacy aircraft and cutter. For aircraft, we 
collected data from the Aircraft Repair and Supply Center in Elizabeth 
City, North Carolina; and visited selected air stations in Kodiak, 
Alaska; Miami, Florida; and Elizabeth City, North Carolina; to provide 
coverage of each of the four types of Deepwater aircraft--HC-130 and HU-
25 fixed wing aircraft, and the HH-60 and HH-65 rotary aircraft. For 
cutters, we collected data at the Maintenance and Logistics Commands in 
Alameda, California; and Norfolk, Virginia; and visited selected Coast 
Guard facilities in Kodiak, Alaska; Portsmouth, Virginia; and Miami, 
Florida; to provide coverage of each of the three types of Deepwater 
vessels--high-endurance cutters, medium-endurance cutters, and patrol 
boats. We also reviewed Coast Guard policies and standards, including 
the Coast Guard Cutter Employment Standards, Coast Guard Aircraft 
Employment Standards for Days Employed Aboard Ship and Days Away from 
Home Station, and the Coast Guard Environmental Health and Safety 
Manual. In addition, to assess the reliability of the Coast Guard's 
data and condition measures, we questioned knowledgeable officials and 
reviewed existing documentation about the data and the systems that 
produced the data. On the basis of our assessments, we determined that 
the data were sufficiently reliable for the purposes of this report. 

To determine the actions that the Coast Guard has undertaken to 
maintain, upgrade, and better manage its deepwater legacy assets, we 
reviewed documentation such as the Systems Integrated Near Term Support 
Strategy (SINTSS), which is a compendium of information on proposed 
asset sustainment projects, and spoke with various Coast Guard program 
officials from the Offices of Naval and Aeronautical Engineering, as 
well as the Atlantic Area Maintenance and Logistics Command, regarding 
the need to perform increasing maintenance on assets between 
deployments. To determine additional efforts that Coast Guard plans to 
undertake to better manage these assets, we met with Coast Guard 
officials from the Office of Naval Engineering to discuss the 
development of measures that the Coast Guard hopes will more accurately 
measure the impact that the declining condition of its legacy assets 
has on mission capabilities and reviewed documentation relevant to 
these measures. We also reviewed plans and guidance for the newly 
developed Capital Asset Management Strategy (CAMS), which the Coast 
Guard intends to use in establishing priorities for determining which 
Deepwater asset maintenance and sustainment projects to fund. In 
addition, we also met with officials at the Pacific Area Command and 
Maintenance and Logistics Command to discuss their fleet sustainment 
initiative for keeping the high-endurance cutters operational until 
their replacement by the National Security Cutter. 

To determine what management challenges the Coast Guard faces in 
acquiring new assets, we followed up on actions the Coast Guard has 
taken to implement the 11 recommendations in our report Contract 
Management: Coast Guard's Deepwater Program Needs Increased Attention 
to Management and Contractor Oversight (GAO-04-380), of March 9, 2004; 
and the 1 recommendation from our report Coast Guard: Deepwater Program 
Acquisition Schedule Update Needed, (GAO-04-695), of June 14, 2004. We 
received briefings and held several meetings with the Deepwater Program 
Executive Officer, the Deputy Program Executive Officer, and a number 
of Deepwater staff, including contracting officers. We also held a 
discussion with representatives of the system integrator to get their 
views on progress made in implementing the recommendations. We analyzed 
documentation supporting the Coast Guard's midterm assessment of the 
contractor's system integration and management performance in the third 
year of the contract, including written comments by the performance 
monitors. We also held discussions with Deepwater program performance 
monitors. We recently began an assessment of the third year of 
performance. However, we were not able to thoroughly review the 
documentation in time to include our observations in this report. We 
reviewed information on Deepwater integrated product teams, including 
membership lists and briefings provided by the Coast Guard on measures 
of effectiveness for the teams. We analyzed the Coast Guard's plans to 
increase communications to field operators, including its August 2004 
Integrated Deepwater Systems Internal Communications Plan, and received 
a briefing on how the plan is being implemented. We compared the 
September 2003 Deepwater Human Capital Plan with the February 2005 
revised plan to identify changes that had been made and discussed 
Deepwater program office staffing numbers and plans with Coast Guard 
officials. Finally, we discussed with Coast Guard officials steps the 
Coast Guard has taken to hold the system integrator accountable for 
"make" versus "buy" decisions by the two major subcontractors and 
reviewed a January 2005 letter on this subject from the Director of 
Subcontracts for Integrated Coast Guard Systems to the subcontractors. 

We performed our review from July 2004 to June 2005 in accordance with 
generally accepted government auditing standards at various Coast Guard 
offices and facilities. 

[End of section]

Appendix II: Information on Deepwater Legacy Aircraft and Cutters: 

HC-130 Long-Range Surveillance Aircraft: 

HC-130 Fleet Overview: 

The HC-130 is a long-range, fixed-wing, multimission aircraft used for 
search and rescue, drug interdiction, alien and migrant interdiction, 
living marine resources, and defense readiness and logistics missions. 
Manufactured by Lockheed Martin Aero, the HC-130 aircraft entered Coast 
Guard service beginning in 1972. There are currently 27 HC-130 aircraft 
within the Coast Guard. The estimated service life is approximately 30 
years or 40,000 flight hours. 

Performance Trends: 

The HC-130 fleet's performance data show that while there was a decline 
in fiscal year 2004, fleet availability has steadily improved since 
2000 and remains near the Coast Guard's 71 percent availability 
standard. Similarly, the number of labor hours per flight hour remained 
fairly stable from fiscal year 2000 to 2003 but increased slightly in 
fiscal year 2004. Programmed flight hours have also remained reasonably 
stable, with some year-to-year fluctuations after a decline in fiscal 
year 2001. These performance measures are summarized in table 6. 

Table 6: HC-130 Fleet Performance Data for Fiscal Years 2000-2004: 

Fiscal year: 2000; 
Availability index[A]: 63.5%; 
Programmed flight hours[B]: 20,805; 
Labor hours per flight hour[C]: 15.3. 

Fiscal year: 2001; 
Availability index[A]: 65.9%; 
Programmed flight hours[B]: 19,027; 
Labor hours per flight hour[C]: 16.0. 

Fiscal year: 2002; 
Availability index[A]: 71.0%; 
Programmed flight hours[B]: 18,824; 
Labor hours per flight hour[C]: 16.7. 

Fiscal year: 2003; 
Availability index[A]: 73.3%; 
Programmed flight hours[B]: 19,006; 
Labor hours per flight hour[C]: 16.9. 

Fiscal year: 2004; 
Availability index[A]: 68.6%; 
Programmed flight hours[B]: 18,800; 
Labor hours per flight hour[C]: 20.0. 

Source: U.S. Coast Guard. 

[A] The availability index indicates the percentage of time that 
aircraft assigned to Coast Guard air stations are available to perform 
Coast Guard missions. The historical availability standard is 71 
percent, driven in part by the Coast Guard's goal of each air station 
with at least three aircraft having at least one aircraft ready to 
launch within 30 minutes of a distress signal. 

[B] Programmed flight hours are the number of hours per year assigned 
to a particular type of aircraft based on budget considerations for 
operation and maintenance costs. 

[C] Labor hours per flight hour represent the average of the number of 
maintenance labor hours expended by field units versus the number of 
flight hours produced by those units, for each asset class. 

[End of table]

Maintenance Trends: 

The HC-130 fleet's maintenance costs have generally increased during 
fiscal years 2000 through 2004. Overall, the fleet's cost per flight 
hour and scheduled maintenance expenditures have risen, driven by an 
increase in the scope of depot-level maintenance to improve the fleet's 
material condition. Also, depot-level maintenance schedule delays have 
led to a backlog, thereby increasing the amount of fleet deferred 
maintenance, as shown in table 7. 

Table 7: HC-130 Fleet Maintenance Data forFiscal Years 2000-2004, in 
Fiscal Year 2004 Dollars: 

Fiscal year: 2000; 
Cost per flight hour[A]: $1,347; 
Estimated scheduled maintenance expenditures: $8,415,000; 
Estimated unscheduled maintenance expenditures[B]: $9,051,000; 
Estimated deferred maintenance costs: $4,549,000. 

Fiscal year: 2001; 
Cost per flight hour[A]: $1,637; 
Estimated scheduled maintenance expenditures: $9,769,000; 
Estimated unscheduled maintenance expenditures[B]: $7,226,000; 
Estimated deferred maintenance costs: $14,295,000. 

Fiscal year: 2002; 
Cost per flight hour[A]: $2,202; 
Estimated scheduled maintenance expenditures: $9,309,000; 
Estimated unscheduled maintenance expenditures[B]: $6,354,000; 
Estimated deferred maintenance costs: $4,976,000. 

Fiscal year: 2003; 
Cost per flight hour[A]: $2,077; 
Estimated scheduled maintenance expenditures: $12,891,000; 
Estimated unscheduled maintenance expenditures[B]: $7,593,000; 
Estimated deferred maintenance costs: $7,223,000. 

Fiscal year: 2004; 
Cost per flight hour[A]: $2,357; 
Estimated scheduled maintenance expenditures: $18,641,000; 
Estimated unscheduled maintenance expenditures[B]: $10,142,000; 
Estimated deferred maintenance costs: $5,737,000. 

Source: GAO analysis of U.S. Coast Guard data. 

Note: Cost per flight hour, estimated maintenance expenditures and 
deferred maintenance cost data in this and other aircraft fleet 
maintenance data tables were adjusted for inflation using U.S. 
Department of Labor producer price indices for aircraft maintenance and 
repair, and are presented in fiscal year 2004 dollars. 

[A] The cost per flight hour measure represents the variable costs of 
spare parts and depot-level maintenance associated with operating each 
aircraft type. This figure is derived by dividing historical aircraft 
part demand data by the number of hours flown during the same period. 
The current year data are combined with that of the 2 previous fiscal 
years, adjusted for inflation, to calculate a weighted average. The 
model does not address deferred maintenance or inventory holes but 
reports how much it costs to operate each fleet for a given number of 
hours in a given fiscal year. 

[B] The Coast Guard does not normally track aviation unscheduled 
maintenance expenditures in relation to scheduled maintenance 
expenditures. However, at GAO's request, Coast Guard officials 
estimated the unscheduled maintenance expenditures for each type of 
deepwater aircraft based on the classification of air station requests 
for certain spare parts. 

[End of table]

Sustainment Issues: 

Obsolescence of the HC-130's Surface Search Radar System: 

According to Coast Guard officials, there is an urgent need to replace 
the HC-130's APS-137 surface search radar system. The radar system-- 
part of the aircraft's original configuration--is subject to frequent 
failures and is quickly becoming unsupportable, according to the Coast 
Guard officials. Replacement parts are very difficult to locate. While 
HC-130 flight crews will work around any failures, without the system, 
the flight crews are reduced to looking out windows for targets, 
thereby greatly reducing mission capabilities for performing search and 
rescue, alien-migrant interdiction, and drug interdiction missions. In 
the conference report accompanying the Coast Guard's fiscal year 2005 
appropriation, the conferees directed $9 million for the radar 
system.[Footnote 33] Total system replacement costs are estimated to be 
$78 million and are to be completed in fiscal year 2008. 

Avionics Modernization and Wing-Rewiring Projects: 

The Coast Guard has identified several additional HC-130 sustainment 
projects in its latest Systems Integrated Near Term Support Strategy. 
Included in these projects are an avionics modernization and a related 
wing-rewiring project. According to the Coast Guard, the HC-130's 
avionics suite utilizes 1960s technology that is costly to maintain and 
will soon be unsupportable because of a lack of spare and repair parts. 
This cockpit modernization project is aimed at enabling the HC-130 
aircraft to better support maritime safety and security and national 
defense and logistics missions. The Coast Guard estimates this project 
will cost $305 million and take 4 years to complete. The wing-rewiring 
project is designed to provide more power to an upgraded avionics suite 
and to ward off potential safety issues due to deteriorating wiring, 
such as electrical shorts and probability of fire. Coast Guard 
officials estimate the project will cost nearly $11 million and will 
take 5 years to complete. 

HC-130 Center Wing Box Structural Issues: 

Five of the 27 operational HC-130s have recently been placed under 
operational restrictions at the request of the aircraft's manufacturer, 
Lockheed Martin Aero, because of a problem associated with the 
aircraft's center wing box. The restrictions include limitations on 
weight, airspeeds, maneuvering, and mission endurance. As of early June 
2005, the Coast Guard was awaiting the release of inspection criteria 
from Lockheed Martin. Nevertheless, the Coast Guard estimates that the 
inspections will cost $2 million for the 5 aircraft. This problem is 
not limited to Coast Guard aircraft, but is affecting HC-130s 
worldwide. The remaining Coast Guard HC-130s are not subject to the 
operational restrictions but will likely have to undergo similar 
limitations and inspections beginning in fiscal year 2006. 

HU-25 Medium-Range Surveillance Aircraft: 

HU-25 Fleet Overview: 

The HU-25 is a medium-range, fixed-wing, multimission aircraft used for 
search and rescue, drug interdiction, alien/migrant interdiction, 
fisheries law enforcement, defense readiness, and essential logistics 
missions. Manufactured by Falcon Jet, the HU-25 entered the Coast Guard 
aviation fleet in 1982. The Coast Guard's fleet contains 23 aircraft. 
The Coast Guard maintained a fleet of 26 operational HU-25 aircraft in 
fiscal year 2000 but reduced the fleet because of budgetary constraints 
in fiscal year 2002. The original estimated service life was 20 years 
or 20,000 flights (landings) or 30,000 flight hours. 

Performance Trends: 

The HU-25 fleet's programmed flight hours have fluctuated during fiscal 
years 2000 through 2004 with changes in fleet size. In fiscal year 
2004, the fleet flew 86 percent of the fiscal year 2001 programmed 
flight hours with 29 percent fewer aircraft. Moreover, the fleet's 
availability index has generally improved during fiscal years 2000 
through 2003, in large part because of the enhanced reliability of the 
HU-25's ATF-3 engine. Though it consistently remained below the Coast 
Guard's 71 percent availability standard, it has improved from fiscal 
year 2000 levels. The fleet's labor hours per flight hour have also 
remained fairly consistent since fleet reduction. Table 8 provides a 
summary of the HU-25's key performance measures. 

Table 8: HU-25 Fleet Performance Data for Fiscal Years 2000-2004: 

Fiscal year: 2000; 
Availability index: 59.0%; 
Programmed flight hours: 16,322; 
Labor hours per flight hour: 10.9. 

Fiscal year: 2001; 
Availability index: 57.4%; 
Programmed flight hours: 15,616; 
Labor hours per flight hour: 13.4. 

Fiscal year: 2002; 
Availability index: 62.4%; 
Programmed flight hours: 11,200; 
Labor hours per flight hour: 12.9. 

Fiscal year: 2003; 
Availability index: 67.2%; 
Programmed flight hours: 14,122; 
Labor hours per flight hour: 12.9. 

Fiscal year: 2004; 
Availability index: 65.8%; 
Programmed flight hours: 13,500; 
Labor hours per flight hour: 13.5. 

Source: U.S. Coast Guard. 

[End of table]

Maintenance Trends: 

The maintenance measures for the HU-25 show varied results. During 
fiscal years 2000 through 2004, the fleet's cost per flight hour has 
generally declined, scheduled and unscheduled maintenance expenditures 
fluctuated, and the amount of deferred maintenance dropped 
significantly. Table 9 provides a summary of the key maintenance 
measures. 

Table 9: HU-25 Fleet Maintenance Data for Fiscal Years 2000-2004, in 
Fiscal Year 2004 Dollars: 

Fiscal year: 2000; 
Cost per flight hour: $1,980; 
Estimated scheduled maintenance expenditures: $17,616,000; 
Estimated unscheduled maintenance expenditures: $16,572,000; 
Estimated deferred maintenance costs: $12,338,000. 

Fiscal year: 2001; 
Cost per flight hour: $1,979; 
Estimated scheduled maintenance expenditures: $15,184,000; 
Estimated unscheduled maintenance expenditures: $18,979,000; 
Estimated deferred maintenance costs: $4,230,000. 

Fiscal year: 2002; 
Cost per flight hour: $1,917; 
Estimated scheduled maintenance expenditures: $13,264,000; 
Estimated unscheduled maintenance expenditures: $11,065,000; 
Estimated deferred maintenance costs: 0. 

Fiscal year: 2003; 
Cost per flight hour: $1,833; 
Estimated scheduled maintenance expenditures: $18,447,000; 
Estimated unscheduled maintenance expenditures: $9,868,000; 
Estimated deferred maintenance costs: $207,000. 

Fiscal year: 2004; 
Cost per flight hour: $1,897; 
Estimated scheduled maintenance expenditures: $16,524,000; 
Estimated unscheduled maintenance expenditures: $11,961,000; 
Estimated deferred maintenance costs: 0. 

Source: GAO analysis of U.S. Coast Guard data. 

[End of table]

Sustainment Issues: 

Engines: 

According to Coast Guard officials, the HU-25's Honeywell ATF-3 engines 
are complex, have been historically unreliable, and are time-consuming 
to maintain--requiring as long as 4 days to re-install a repaired 
engine. Some of the engine problems have been mitigated by improvements 
in sensor capabilities that allow the aircraft to fly at higher 
altitudes for longer periods of time during surveillance missions. 
Flying at higher altitudes reduces the amount of saltwater introduced 
into the engines, thereby reducing corrosion and placing less stress on 
the engines. According to Coast Guard officials, this has contributed 
to increasing engine reliability and improvements in HU-25 fleet 
availability. 

Sensors: 

The sensors on the six HU-25D models were recently upgraded at a cost 
of $43 million in acquisition, capital, and investment (AC&I) funding. 
Five of the six upgraded HU-25D aircraft are stationed at air station 
Miami. According to the air station's commanding officer, the upgraded 
sensors, while critical to mission success, also have a relatively high 
rate of inoperability. Sensor inoperability is a function of the 
aircraft's poor air conditioning system. When the cabin becomes too 
warm, the sensors fail. Air conditioning system and sensor failure does 
not present a safety of flight issue but does degrade mission 
capability. According to Coast Guard officials this problem is limited 
to the HU-25D models. 

HH-60 Medium-Range Recovery Helicopter: 

HH-60 Fleet Overview: 

The HH-60 helicopter is used for ports, waterways, and coastal 
security; drug interdiction; alien/migrant interdiction; defense 
readiness; search and rescue; ice operations; living marine resources; 
and marine environmental protection missions. Manufactured by Sikorsky 
Aircraft Corporation, the HH-60 entered into the Coast Guard fleet in 
1990. The Coast Guard has a total of 41 HH-60 aircraft. The original 
estimated service life was approximately 20 years. 

Performance Trends: 

The HH-60's deteriorating subsystems, such as the avionics suite, are 
requiring increasing amounts of maintenance and thereby reducing fleet 
performance. Nevertheless, the HH-60 fleet has maintained a relatively 
high availability level, remaining close to or exceeding the Coast 
Guard's 71 percent availability standard since fiscal year 2000. The 
fleet's number of programmed flight hours has experienced some year-to- 
year fluctuations but has been relatively stable. At the same time, 
increasing subsystem failures are requiring more unit-level 
maintenance, as reflected by the fleet's general rise in the number of 
labor hours per flight hour. Further, Coast Guard officials have told 
us that flight crews and maintenance personnel have to work harder and 
longer to maintain the fleet's high availability levels. Table 10 
provides a summary of the key performance measures. 

Table 10: HH-60 Fleet Performance Data for Fiscal Years 2000-2004: 

Fiscal year: 2000; 
Availability index: 71.4%; 
Programmed flight hours: 24,109; 
Labor hours per flight hour: 16.5. 

Fiscal year: 2001; 
Availability index: 70.8%; 
Programmed flight hours: 22,115; 
Labor hours per flight hour: 18.6. 

Fiscal year: 2002; 
Availability index: 68.1%; 
Programmed flight hours: 24,915; 
Labor hours per flight hour: 20.2. 

Fiscal year: 2003; 
Availability index: 72.4%; 
Programmed flight hours: 26,014; 
Labor hours per flight hour: 19.8. 

Fiscal year: 2004; 
Availability index: 69.8%; 
Programmed flight hours: 24,832; 
Labor hours per flight hour: 21.5. 

Source: U.S. Coast Guard. 

[End of table]

Maintenance Trends: 

In constant dollars, the HH-60 fleet's estimated scheduled and 
unscheduled maintenance expenditures generally trended downward during 
fiscal years 2000 through 2004, while the cost per flight hour has 
fluctuated. In contrast, the amount of HH-60 deferred maintenance 
incurred by the Coast Guard has nearly doubled since fiscal year 2000. 
HH-60 fleet product line managers attribute this increase to budget 
constraints and an expansion in the scope of the HH-60 overhauls 
without a corresponding increase in the number of maintenance 
personnel. Table 11 provides a summary of the key maintenance measures. 

Table 11: HH-60 Fleet Maintenance Data for Fiscal Years 2000-2004, in 
Fiscal Year 2004 Dollars: 

Fiscal year: 2000; 
Cost per flight hour: $1,062; 
Estimated scheduled maintenance expenditures: $18,968,000; 
Estimated unscheduled maintenance expenditures: $17,897,000; 
Estimated deferred maintenance costs: $10,067,000. 

Fiscal year: 2001; 
Cost per flight hour: $1,294; 
Estimated scheduled maintenance expenditures: $20,787,000; 
Estimated unscheduled maintenance expenditures: $15,450,000; 
Estimated deferred maintenance costs: $11,374,000. 

Fiscal year: 2002; 
Cost per flight hour: $1,568; 
Estimated scheduled maintenance expenditures: $17,848,000; 
Estimated unscheduled maintenance expenditures: $15,845,000; 
Estimated deferred maintenance costs: $8,094,000. 

Fiscal year: 2003; 
Cost per flight hour: $1,516; 
Estimated scheduled maintenance expenditures: $17,189,000; 
Estimated unscheduled maintenance expenditures: $12,017,000; 
Estimated deferred maintenance costs: $9,715,000. 

Fiscal year: 2004; 
Cost per flight hour: $1,387; 
Estimated scheduled maintenance expenditures: $17,254,000; 
Estimated unscheduled maintenance expenditures: $12,596,000; 
Estimated deferred maintenance costs: $18,824,000. 

Source: GAO analysis of U.S. Coast Guard data. 

[End of table]

Sustainment Issues: 

HH-60 Avionics Replacement: 

According to HH-60 flight crews and maintenance staff, the reliability 
of the aircraft's 1970s era avionics system is steadily declining. The 
system's increasing failure rate is directly affecting the HH-60 
fleet's mission capabilities, as avionics system failures are occurring 
every 11 flight hours, on average. Further, according to the Coast 
Guard, HH-60 avionics repair vendors will phase out system component 
repairs in fiscal year 2007. For these reasons, the Coast Guard has 
implemented an HH-60 avionics upgrade to replace the current system 
with a state-of-the-art open architecture system that Coast Guard 
officials claim will meet the future needs of HH-60 missions. The Coast 
Guard estimates that this program will cost about $84 million and will 
be completed in fiscal year 2010. The Coast Guard has allocated $30.8 
million through fiscal year 2005 for the program. 

The HH-60 Service Life Extension Program: 

The Coast Guard has developed a service life extension program for the 
HH-60 fleet to upgrade structural components such as beams, fittings, 
and frames, and will increase depot-level maintenance production to 
nine aircraft per year. According to the Coast Guard, the program will 
extend the service life of the HH-60 fleet through 2022. 

HH-65 Short-Range Recovery Helicopter: 

HH-65 Fleet Overview: 

The HH-65 is a twin-engine, short-range recovery helicopter used for 
ports, waterways and coastal security; drug interdiction; alien-migrant 
interdiction; defense readiness; search and rescue; ice operations; and 
marine environmental missions. The HH-65 entered Coast Guard service 
beginning in 1984. The helicopter's airframe is manufactured by 
Eurocopter, and most HH-65s are equipped with Honeywell-manufactured 
LTS-101-750 engines. However, these engines are currently being 
replaced (see details below). The Coast Guard maintains 95 aircraft in 
the fleet. The original estimated service life for the HH-65 aircraft 
was 20 years, but according to Coast Guard aviation staff, the engine 
replacement program should extend the service live beyond that 
estimate. 

Performance Trends: 

Despite safety and reliability concerns related to its engines, the HH- 
65 fleet has consistently maintained an availability level above the 71 
percent Coast Guard standard during fiscal years 2000 through 2004. 
Moreover, the number of fleet programmed flight hours has steadily 
increased since fiscal year 2000. The fleet's labor hours per flight 
hour have remained stable since fiscal year 2001. However, it should be 
noted that the number of fleet mishaps, particularly engine-related 
mishaps, increased sharply in 2004, primarily because of the engine and 
engine control system's poor reliability. Table 12 provides a summary 
of the key performance measures. 

Table 12: HH-65 Fleet Performance Data for Fiscal Years 2000-2004: 

Fiscal year: 2000; 
Availability index: 76.6%; 
Programmed flight hours: 46,451; 
Labor hours per flight hour: 11.4. 

Fiscal year: 2001; 
Availability index: 75.0%; 
Programmed flight hours: 45,212; 
Labor hours per flight hour: 13.0. 

Fiscal year: 2002; 
Availability index: 73.4%; 
Programmed flight hours: 50,840; 
Labor hours per flight hour: 13.0. 

Fiscal year: 2003; 
Availability index: 75.5%; 
Programmed flight hours: 51,380; 
Labor hours per flight hour: 13.6. 

Fiscal year: 2004; 
Availability index: 80.9%; 
Programmed flight hours: 51,745; 
Labor hours per flight hour: 13.3. 

Source: U.S. Coast Guard. 

[End of table]

Maintenance Trends: 

The HH-65 fleet has sustained a comparatively high level of 
availability even though maintenance data show that the fleet has had 
challenges related to poor engine performance. Fleet cost per flight 
hour steadily increased during fiscal years 2000 through 2004. The 
Coast Guard has not deferred any maintenance for the HH-65 fleet from 
fiscal year 2000 through 2004. Table 13 provides a summary of the key 
maintenance measures. 

Table 13: HH-65 Fleet Maintenance Data for Fiscal Years 2000-2004, in 
Fiscal Year 2004 Dollars: 

Fiscal year: 2000; 
Cost per flight hour: $908; 
Estimated scheduled maintenance expenditures: $36,034,000; 
Estimated unscheduled maintenance expenditures: $18,377,000; 
Estimated deferred maintenance costs: 0. 

Fiscal year: 2001; 
Cost per flight hour: $976; 
Estimated scheduled maintenance expenditures: $31,793,000; 
Estimated unscheduled maintenance expenditures: $17,690,000; 
Estimated deferred maintenance costs: 0. 

Fiscal year: 2002; 
Cost per flight hour: $1,089; 
Estimated scheduled maintenance expenditures: $33,296,000; 
Estimated unscheduled maintenance expenditures: $21,458,000; 
Estimated deferred maintenance costs: 0. 

Fiscal year: 2003; 
Cost per flight hour: $1,107; 
Estimated scheduled maintenance expenditures: $36,623,000; 
Estimated unscheduled maintenance expenditures: $22,388,000; 
Estimated deferred maintenance costs: 0. 

Fiscal year: 2004; 
Cost per flight hour: $1,312; 
Estimated scheduled maintenance expenditures: $31,431,000; 
Estimated unscheduled maintenance expenditures: $22,815,000; 
Estimated deferred maintenance costs: 0. 

Source: GAO analysis of U.S. Coast Guard data. 

[End of table]

Sustainment Issues: 

The HH-65 Re-engining Program: 

The increasing trend in the number and seriousness of safety-related HH-
65 incidents prompted a Coast Guard decision in January 2004 to replace 
the existing engines and the associated engine control systems within 
24 months. However, the Coast Guard now anticipates that the re- 
engining of all 84 operational HH-65 helicopters will take until 
February 2007. Total program costs are estimated to be nearly $350 
million, or about $3.7 million per helicopter. 

As of June 7, 2005, 5 HH-65 aircraft have been successfully re-engined, 
14 are under production at the Coast Guard's Aircraft Repair and Supply 
Center, and an additional aircraft is under production at the American 
Eurocopter's facility in Columbus, Mississippi. Upon completion of this 
test case, the Coast Guard will determine if the American Eurocopter 
facility is suitable to serve as the site for a second re-engining 
production line. 

Other Multimission Cutter Helicopter Conversion Elements: 

According to the Coast Guard, the HH-65 was selected for conversion to 
the Deepwater program's multimission cutter helicopter (MCH) beginning 
in fiscal year 2007. As such, the converted HH-65 helicopters will be 
part of the Deepwater program moving forward. There are several steps 
constituting the full MCH conversion, of which the current HH-65 re- 
engining program is one element. Other elements include the replacement 
of the HH-65's landing gear and tail rotors. The HH-65's new engine 
should allow the helicopter to support an increase in maximum gross 
weight. However, the current landing gear cannot support such an 
increase. The current tail rotors also need to be replaced because the 
product manufacturer is discontinuing production of the rotors, though 
supplies on hand should last until May 2005. 

Other elements of the MCH conversion, such as an upgrade of the 
avionics, will increase the aircraft's service life and capabilities. 
These conversion elements are scheduled for integration beginning in 
fiscal year 2007. 

378-Foot High-Endurance Cutter: 

378-foot High-Endurance Cutter Fleet Overview: 

The 378-foot cutters are the largest cutters in the deepwater fleet, 
with a crew size of 19 officers and 147 enlisted. The Coast Guard has 
12 of the 378-foot cutters in its deepwater fleet, with 10 of these 
stationed in the Pacific Area Command and the remaining 2 in the 
Atlantic Area Command. The 378-foot cutters typically operate 185 days 
away from home port per year. The 378-foot cutters are used in a number 
of missions, such as defense operations; maritime security/law 
enforcement; search and rescue; living marine resources; ports, 
waterway, and coastal security; alien-migrant interdiction; and drug 
interdiction. These cutters were commissioned by the Coast Guard during 
1967 to 1972 and have an estimated service life of about 40 years, 
affected in part by the Fleet Rehabilitation and Modernization (FRAM) 
program, which is discussed in further detail below. 

Performance Trends: 

The 378-foot cutters are considered by the Coast Guard to generally be 
deteriorating in condition, and this assertion is supported by the 
Coast Guard's data measures. Major casualties[Footnote 34] per cutter 
have increased from fiscal year 2000 through 2004, and the percent of 
time free (POTF) of major casualties has fluctuated, but it has 
remained well below the target of 72 percent. Table 14 provides a 
summary of the key performance measures. 

Table 14: 378-Foot Cutter Fleet Performance Data for Fiscal Years 2000- 
2004: 

Fiscal year: 2000; 
Major casualties per cutter: 10.7; 
POTF of major casualties: 30%. 

Fiscal year: 2001; 
Major casualties per cutter: 15.3; 
POTF of major casualties: 22%. 

Fiscal year: 2002; 
Major casualties per cutter: 15.3; 
POTF of major casualties: 38%. 

Fiscal year: 2003; 
Major casualties per cutter: 17.1; 
POTF of major casualties: 26%. 

Fiscal year: 2004; 
Major casualties per cutter: 17.3; 
POTF of major casualties: 7%. 

Source: U.S. Coast Guard. 

[End of table]

Maintenance Trends: 

Both scheduled and unscheduled maintenance expenditures for the 378- 
foot cutters have been on a general upward trend during fiscal years 
2000 through 2004, with some fluctuations. The increasing age of these 
cutters, along with equipment obsolescence, appears to be driving these 
costs. Table 15 provides a summary of the key maintenance measures. 

Table 15: 378-Foot Cutter Fleet Maintenance Data for Fiscal Years 2000- 
2004, in Fiscal Year 2004 Dollars: 

Fiscal year: 2000; Scheduled maintenance costs: $13,376,901; 
Unscheduled maintenance costs: $2,641,025; 
Total maintenance costs: $16,017,925. 

Fiscal year: 2001; 
Scheduled maintenance costs: $19,842,996; 
Unscheduled maintenance costs: $4,230,497; 
Total maintenance costs: $24,073,493. 

Fiscal year: 2002; 
Scheduled maintenance costs: $15,109,120; 
Unscheduled maintenance costs: $3,416,032; 
Total maintenance costs: $18,525,152. 

Fiscal year: 2003; 
Scheduled maintenance costs: $15,523,775; 
Unscheduled maintenance costs: $6,487,666; 
Total maintenance costs: $22,011,440. 

Fiscal year: 2004; 
Scheduled maintenance costs: $17,131,625; 
Unscheduled maintenance costs: $4,686,052; 
Total maintenance costs: $21,817,677. 

Source: GAO analysis of U.S. Coast Guard data. 

Note: The data in this and other cutter maintenance expenditure tables 
are adjusted for inflation using U.S. Department of Labor producer 
price indexes for ship repair, conversion, reconversion, and the U.S. 
military. 

[End of table]

Sustainment Issues: 

The average age of the 378-foot cutters is 36.3 years. Each 378-foot 
cutter underwent the FRAM at approximately 20 years of age, beginning 
in the late 1980s and ending in 1992. As part of the FRAM, each cutter 
received an overhaul, costing anywhere from $70 million to $90 million, 
that Pacific Area Command officials estimated would add about 15 
additional years of service--a mark that many of the cutters are 
beginning to reach. Many major propulsion and hull systems, however, 
were merely overhauled but not upgraded or replaced, and these systems 
are now at or near the end of their useful service life. In addition, 
the Coast Guard regularly compiles a list of the top 10 maintenance 
issues affecting each cutter class. The most recent top 10 list has 
identified service boilers, the gyrocompass navigation system, and 
propulsion shafting and shaft bearings, among other things, as the most 
critical sustainment issues for the 378-foot cutters. 

270-Foot Medium-Endurance Cutter: 

270-Foot Medium-Endurance Cutter Fleet Overview: 

The Coast Guard's 270-foot cutter fleet consists of 13 cutters, all of 
which are stationed in the Atlantic Area Command. These cutters were 
commissioned between 1983 and 1991, have an estimated service life of 
30 years, and operate with a crew of 13 officers and 85 enlisted 
personnel. The 270-foot cutters typically operate 185 days away from 
home port each year and are used for maritime security/law enforcement; 
search and rescue; living marine resources; ports, waterway, and 
coastal security; alien-migrant interdiction; drug interdiction; and 
defense missions. 

Performance Trends: 

Officials at Coast Guard headquarters stated that the condition of the 
270-foot medium endurance cutters is generally worsening, and key 
condition measures seem to bear this out, though there were some 
improvements in fiscal year 2004. Major casualties per cutter saw a 
major increase from fiscal year 2000 to 2001, remained fairly steady 
during fiscal years 2002 and 2003, and then decreased in fiscal year 
2004. The POTF of major casualties fluctuated during fiscal years 2000 
through 2004 but remained well below the POTF target rate of 72 
percent. Table 16 provides a summary of the key performance measures. 

Table 16: 270-Foot Cutter Fleet Performance Data for Fiscal Years 2000- 
2004: 

Fiscal year: 2000; 
Major casualties per cutter: 11.7; 
POTF of major casualties: 38%. 

Fiscal year: 2001; 
Major casualties per cutter: 15.1; 
POTF of major casualties: 35%. 

Fiscal year: 2002; 
Major casualties per cutter: 14.2; 
POTF of major casualties: 47%. 

Fiscal year: 2003; 
Major casualties per cutter: 14.7; 
POTF of major casualties: 32%. 

Fiscal year: 2004; 
Major casualties per cutter: 11.9; 
POTF of major casualties: 42%. 

Source: U.S. Coast Guard. 

[End of table]

Maintenance Trends: 

Scheduled maintenance expenditures fluctuated for the 270-foot medium- 
endurance cutters from fiscal years 2000 to 2004, with a major increase 
in fiscal year 2003. Coast Guard officials attribute this increase in 
expenditures to the age and poor structural condition of the cutters, 
the replacement of obsolete equipment, and upgrades. The increased 
cutter maintenance that occurred in fiscal year 2003 was sourced from 
supplemental appropriations. Unscheduled maintenance expenditures saw a 
small amount of fluctuation for the 270-foot cutters during fiscal 
years 2000 through 2004. Table 17 provides a summary of the key 
maintenance measures. 

Table 17: 270-Foot Cutter Fleet Maintenance Data for Fiscal Years 2000- 
2004, in Fiscal Year 2004 Dollars: 

Fiscal year: 2000; 
Scheduled maintenance costs: $9,175,918; 
Unscheduled maintenance costs: $1,419,443; 
Total maintenance costs: $10,595,360. 

Fiscal year: 2001; 
Scheduled maintenance costs: $10,253,382; 
Unscheduled maintenance costs: $1,365,576; 
Total maintenance costs: $11,618,957. 

Fiscal year: 2002; 
Scheduled maintenance costs: $8,814,319; 
Unscheduled maintenance costs: $1,527,919; 
Total maintenance costs: $10,342,238. 

Fiscal year: 2003; 
Scheduled maintenance costs: $15,744,978; 
Unscheduled maintenance costs: $1,690,038; 
Total maintenance costs: $17,435,015. 

Fiscal year: 2004; 
Scheduled maintenance costs: $6,098,884; 
Unscheduled maintenance costs: $1,620,839; 
Total maintenance costs: $7,719,723. 

Source: GAO analysis of U.S. Coast Guard data. 

[End of table]

Sustainment Issues: 

The average age of the 270-foot cutters is 18.0 years. During fiscal 
year 2005, the Coast Guard began a Mission Effectiveness Project (MEP) 
on the medium-endurance cutters (270-foot and 210-foot) in order to 
extend their service lives. The MEP includes replacement of the major 
systems, such as evaporators and gyrocompasses, as well as other 
auxiliary systems. The first 270-foot cutter entered the MEP in May 
2005 at a cost of $7.5 million, funded from the Deepwater program's 
acquisition, construction, and improvement account. Overall, the 270- 
foot cutter MEP is projected to cost $193.5 million, and the work will 
extend 10 years, into fiscal year 2015. In addition, regularly 
scheduled maintenance should continue to address the principal 
maintenance problems for the 270-foot cutters as identified in the top 
10 list, including the air conditioning and refrigeration systems, the 
main propulsion control and monitoring system, and the auxiliary 
saltwater and sewage piping systems. 

210-Foot Medium-Endurance Cutter: 

210-Foot Medium-Endurance Cutter Fleet Overview: 

The Coast Guard's 210-foot cutter fleet consists of 14 cutters, 11 of 
which are stationed in the Atlantic Area Command, and the remaining 3 
are based in the Pacific Area Command. These cutters were commissioned 
between 1964 and 1969, have an estimated service life of 43 to 49 years 
and operate with a crew of 12 officers and 63 enlisted personnel. The 
210-foot cutters typically operate 185 days away from home port each 
year, during which time they perform missions such as maritime 
security/law enforcement; search and rescue; living marine resources; 
ports, waterway, and coastal security; alien-migrant interdiction; and 
drug interdiction. 

Performance Trends: 

Officials at Coast Guard headquarters stated that the condition of the 
210-foot medium endurance cutters is generally worsening, and key 
condition measures seem to bear this out, though there were some 
improvements in fiscal year 2004. Major casualties per cutter saw a 
major increase from fiscal year 2000 to 2001, a smaller increase during 
fiscal years 2002 and 2003, and then a decrease in fiscal year 2004. 
The POTF of major casualties has generally declined for the 210-foot 
cutters during fiscal years 2000 through 2004, and consistently 
remained well below the POTF target rate of 72 percent. Table 18 
provides a summary of the key performance measures. 

Table 18: 210-Foot Cutter Fleet Performance Data for Fiscal Years 2000- 
2004: 

Fiscal year: 2000; 
Major casualties per cutter: 7.1; 
POTF of major casualties: 52%. 

Fiscal year: 2001; 
Major casualties per cutter: 11.1; 
POTF of major casualties: 48%. 

Fiscal year: 2002; 
Major casualties per cutter: 12.1; 
POTF of major casualties: 40%. 

Fiscal year: 2003; 
Major casualties per cutter: 12.6; 
POTF of major casualties: 37%. 

Fiscal year: 2004; 
Major casualties per cutter: 11.1; 
POTF of major casualties: 41%. 

Source: U.S. Coast Guard. 

[End of table]

Maintenance Trends: 

Scheduled maintenance expenditures fluctuated for the 210-foot medium- 
endurance cutters from fiscal years 2000 to 2004, with a major increase 
in fiscal year 2003. Coast Guard officials attribute this increase in 
expenditures to the age and poor structural condition of the cutters, 
the replacement of obsolete equipment, and upgrades. The increased 
cutter maintenance that occurred in fiscal year 2003 was sourced from 
supplemental appropriations. Unscheduled maintenance expenditures saw a 
small amount of fluctuation during fiscal years 2000 through 2004. 
Table 19 provides a summary of the key maintenance measures. 

Table 19: 210-Foot Cutter Fleet Maintenance Data for Fiscal Years 2000- 
2004, in Fiscal Year 2004 Dollars: 

Fiscal year: 2000; 
Scheduled maintenance costs: $9,994,463; 
Unscheduled maintenance costs: $1,899,895; 
Total maintenance costs: $11,894,358. 

Fiscal year: 2001; 
Scheduled maintenance costs: $8,801,109; 
Unscheduled maintenance costs: $1,783,393; 
Total maintenance costs: $10,584,502. 

Fiscal year: 2002; 
Scheduled maintenance costs: $6,168,837; 
Unscheduled maintenance costs: $1,443,401; 
Total maintenance costs: $7,612,238. 

Fiscal year: 2003; 
Scheduled maintenance costs: $15,209,055; 
Unscheduled maintenance costs: $1,541,610; 
Total maintenance costs: $16,750,666. 

Fiscal year: 2004; 
Scheduled maintenance costs: $6,362,468; 
Unscheduled maintenance costs: $1,176,492; 
Total maintenance costs: $7,538,960. 

Source: GAO analysis of U.S. Coast Guard data. 

[End of table]

Sustainment Issues: 

The average age of the 210-foot cutters is 38.3 years. The first 210- 
foot cutter will enter the MEP beginning in September 2005 at a 
projected cost of $5 million, funded from the Deepwater program's 
acquisition, construction, and improvement account. Overall, the 210- 
foot cutter MEP is projected to cost a total of $98.5 million, and the 
work will extend into fiscal year 2009. In addition, regularly 
scheduled maintenance should continue to address the principal 
maintenance problems for the 210-foot cutters as identified in the top 
10 list, such as the air conditioning system, refrigeration system, 
oily water separators, and supportability of the emergency diesel 
generators. 

110-Foot and 123-Foot Patrol Boats: 

110-Foot and 123-Foot Patrol Boat Fleet Overview: 

Overall, there are currently 49 patrol boats in the Coast Guard 
Deepwater fleet. Of these, 41 are 110 feet long, with 29 of those 
stationed in the Atlantic Area Command and the remaining 12 stationed 
in the Pacific Area Command. Six of the Atlantic Area Command's 110- 
foot patrol boats are currently serving in the Persian Gulf. These 110- 
foot patrol boats were acquired between 1986 and 1992, have estimated 
service lives of 14 to 20 years, and operate with a crew of 2 officers 
and 14 enlisted personnel. The patrol boats generally operate at 1,800 
hours per year. The 110-foot patrol boats are used in a variety of 
missions, such as defense operations; maritime security/law 
enforcement; search and rescue; living marine resources; ports, 
waterway, and coastal security; alien-migrant interdiction; and drug 
interdiction. 

The remaining 8 patrol boats either have undergone or are in the 
process of being converted into 123-foot patrol boats. These patrol 
boats are to be stationed in the Atlantic Area Command and, like the 
110-foot patrol boats, are to operate with a crew of 2 officers and 14 
enlisted personnel. The 123-foot patrol boats are slated to perform the 
same missions as the 110-foot patrol boats but will have the capability 
to generally operate 2,500 hours per year. The first converted 123-foot 
patrol boat (Matagorda) became operational in February 2005, and as of 
early June 2005, 4 additional 123-foot patrol boats are operational, 
with restrictions.[Footnote 35]

Performance Trends: 

During fiscal years 2000 through 2004, the 110-foot patrol boats have 
experienced many problems, especially hull corrosion issues, which led 
to a worsening condition. However, the Coast Guard began addressing the 
hull condition issues (see details below), which likely contributed to 
the decreases in the major casualties in fiscal years 2003 and 2004. 
Table 20 provides a summary of the key performance measures. 

Table 20: Patrol Boat Fleet Performance Data for Fiscal Years 2000- 
2004: 

Fiscal year: 2000; 
Major casualties per patrol boat: 6.2; 
POTF of major casualties: 67%. 

Fiscal year: 2001; 
Major casualties per patrol boat: 9.9; 
POTF of major casualties: 57%. 

Fiscal year: 2002; 
Major casualties per patrol boat: 12.9; 
POTF of major casualties: 47%. 

Fiscal year: 2003; 
Major casualties per patrol boat: 9.7; 
POTF of major casualties: 48%. 

Fiscal year: 2004[A]; 
Major casualties per patrol boat: 7.7; 
POTF of major casualties: 44%. 

Source: U.S. Coast Guard. 

[A] Fiscal year 2004 data include major casualties and POTF data from 
the newly converted 123-foot patrol boats. 

[End of table]

Maintenance Trends: 

Scheduled and unscheduled maintenance expenditures saw large increases 
in fiscal years 2002 and 2003. These increases appear to be closely 
related to increased major casualties, deteriorating hull conditions, 
and an increase in operational tempo. In addition, increased cutter 
maintenance occurred during this time period due to supplemental 
appropriations. Table 21 provides a summary of the key maintenance 
measures. 

Table 21: Patrol Boat Fleet Maintenance Data for Fiscal Years 2000- 
2004, in Fiscal Year 2004 Dollars: 

Fiscal year: 2000; 
Scheduled maintenance costs: $12,713,001; 
Unscheduled maintenance costs: $1,650,862; 
Total maintenance costs: $14,363,864. 

Fiscal year: 2001; 
Scheduled maintenance costs: $12,891,098; 
Unscheduled maintenance costs: $2,445,161; 
Total maintenance costs: $15,336,258. 

Fiscal year: 2002; 
Scheduled maintenance costs: $21,406,754; 
Unscheduled maintenance costs: $3,439,798; 
Total maintenance costs: $24,846,551. 

Fiscal year: 2003; 
Scheduled maintenance costs: $23,713,280; 
Unscheduled maintenance costs: $5,149,335; 
Total maintenance costs: $28,862,615. 

Fiscal year: 2004[A]; 
Scheduled maintenance costs: $18,850,450; 
Unscheduled maintenance costs: $3,625,459; 
Total maintenance costs: $22,475,909. 

Source: GAO analysis of U.S. Coast Guard data. 

[A] Fiscal year 2004 expenditure data also include maintenance 
expenditures for the newly-converted 123-foot patrol boats. 

[End of table]

Sustainment Issues: 

The average age of the patrol boats is 16.4 years. A number of the 110- 
foot patrol boats have experienced significant hull deterioration. To 
combat these corrosion problems and add other capabilities to the 110- 
foot patrol boats, the Coast Guard developed the Hull Sustainment 
Project (HSP) and the 123-foot patrol boat conversion program. 

The HSP was implemented to replace all deteriorated hull plates and 
structural members. The selected patrol boats were gutted, sandblasted, 
and thoroughly inspected, and all metal wasted beyond 15 percent was 
renewed. As of early June 2005, 9 of the original 49 110-foot patrol 
boats had completed the HSP. The Coast Guard believes that all 
remaining 110-foot patrol boats that have not had their hulls 
strengthened or replaced will eventually require such work. The Coast 
Guard is currently preparing a business case analysis in order to use 
$49.2 million in fiscal year 2005 supplemental appropriations[Footnote 
36] for a 110-foot patrol boat MEP. This project would include hull 
sustainment work. 

In addition to the HSP, 8 patrol boats deemed to be among those in the 
worst condition were placed in the 123-foot conversion program. The 
Coast Guard had the option to place an additional 4 patrol boats (for a 
total of 12) in the 123-foot conversion program but has decided not to 
exercise this option. This program was implemented to renew the 
deteriorated hull structure and to add additional capability. Among the 
expected capability improvements are: 

* enhanced and improved command, control, communications, computer, 
intelligence, surveillance, and reconnaissance capabilities;

* stern launch/recovery capability for the Short Range Prosecutor;

* renovation of some berthing areas, including relocation of aft 
berthing to a location forward and nonadjacent to the engine room; and: 

* renewing the pilot house to include a 360-degree bridge. 

As of early June 2005, 7 of the 8 patrol boats have completed the 
conversion, and 5 converted patrol boats are operational (Matagorda, 
Metompkin, Padre, Attu, and Vashon, with all patrol boats currently 
under operating restrictions). The first patrol boat to come out of the 
conversion process, the Matagorda, was delivered to the Coast Guard in 
March 2004 but experienced a number of problems that prevented it from 
becoming operational until February 2005. Specifically, upon delivery, 
the Coast Guard identified several discrepancies with the original 
performance specifications. One such discrepancy was the inability of 
the patrol boat to simultaneously launch or recover the short-range 
prosecutor while towing another vessel. In September 2004, Matagorda 
experienced hull buckling, and repairs were completed in December 2004. 
However, while en route from the shipyard to Key West, Florida, 
Matagorda encountered a storm, causing damage to the primary radar 
system and new cracks in the hull. These problems were resolved, and 
Matagorda began patrols in early February 2005. Additionally, the 
contractor that performed the work is applying lessons learned from the 
Matagorda conversion to the other patrol boats still undergoing 
conversion. Further, the contractor has increased the number of quality 
assurance personnel from one to four to improve oversight of the 
conversion process. 

The Coast Guard top 10 list mentions several maintenance concerns, in 
addition to hull corrosion, that have negatively affected the condition 
of the 110-foot patrol boats. These include difficulties in obtaining 
parts for the fin stabilizer system, steering spaces holding moisture 
(which leads to rust and corrosion), and exhaust piping leaks. In 
addition, the Coast Guard has stated that mechanical and electrical 
subsystems need to be upgraded or replaced if the patrol boats are to 
operate for another 10 to 15 years, even the newly converted 123-foot 
patrol boats. 

[End of section]

Appendix III: GAO Contact and Staff Acknowledgments: 

Staff Contact: 

Margaret Wrightson, Director (415) 904-2200. 

Acknowledgment: 

Steven Calvo, Christopher Conrad, Adam Couvillion, Michele Fejfar, 
Geoffrey Hamilton, Julie Leetch, Michele Mackin, Stan Stenersen, and 
Linda Kay Willard. 

[End of section]

GAO Related Products: 

Coast Guard's Acquisition Management: Deepwater Project's Justification 
and Affordability Need to Be Addressed More Thoroughly, GAO/RCED-99-6 
(Washington, D.C.: Oct. 26, 1998): 

Coast Guard: Budget Challenges for 2001 and Beyond, GAO/T-RCED-00-103 
(Washington, D.C.: March 15, 2000): 

Coast Guard: Progress Being Made on Deepwater Project, but Risks 
Remain, GAO-01-564 (Washington, D.C.: May 2, 2001): 

Coast Guard: Actions Needed to Mitigate Deepwater Project Risks, GAO- 
01-659T (Washington, D.C.: May 3, 2001): 

Coast Guard: Strategy Needed for Setting and Monitoring Levels of 
Effort for All Missions, GAO-03-155 (Washington, D.C.: Nov. 12, 2002): 

Coast Guard: Comprehensive Blueprint Needed to Balance and Monitor 
Resource Use and Measure Performance for All Missions, GAO-03-544T 
(Washington, D.C.: March 12, 2003): 

Contract Management: Coast Guard's Deepwater Program Needs Increased 
Attention to Management and Contractor Oversight, GAO-04-380 
(Washington, D.C.: March 9, 2004): 

Coast Guard: Replacement of HH-65 Helicopter Engine, GAO-04-595 
(Washington, D.C.: March 24, 2004): 

Coast Guard: Key Management and Budget Challenges for Fiscal Year 2005 
and Beyond, GAO-04-636T (Washington, D.C.: April 7, 2004): 

Coast Guard: Deepwater Program Acquisition Schedule Update Needed, GAO-
04-695 (Washington, D.C.: June 14, 2004): 

Coast Guard: Observations and Agency Priorities in Fiscal Year 2006 
Budget Request, GAO-05-364T (Washington, D.C.: March 17, 2005): 

Coast Guard: Preliminary Observations on the Condition of Deepwater 
Legacy Assets and Acquisition Management Challenges, GAO-05-307T 
(Washington, D.C.: April 20, 2005): 

Coast Guard: Preliminary Observations on the Condition of Deepwater 
Legacy Assets and Acquisition Management Challenges, GAO-05-651T 
(Washington, D.C.: June 21, 2005): 

FOOTNOTES

[1] For purposes of this report, we use the term "legacy assets" to 
refer to the existing fleet of deepwater aircraft and cutters. These 
legacy assets include the HC-130 (H models only), HU-25, HH-60, and HH- 
65 aircraft and the 378-foot high-endurance cutters, the 210-foot and 
270-foot medium-endurance cutters, and the 110-foot and 123-foot patrol 
boats. We did not include the 213-foot Acushnet, the 230-foot Storis, 
or the 282-foot Alex Haley as part of our analyses of the deepwater 
legacy assets because they are one-of-a-kind cutters. 

[2] Pub. L. No. 108-334, 118 Stat. 1298, 1306 (2004). 

[3] H.R. Rep. No. 109-79, at 63 (2005). 

[4] S. Rep. No. 109-83, at 60 (2005). 

[5] GAO, Coast Guard: Preliminary Observations on the Condition of 
Deepwater Legacy Assets and Acquisition Management Challenges, GAO-05-
307T (Washington, D.C.: April 20, 2005); and GAO, Coast Guard: 
Preliminary Observations on the Condition of Deepwater Legacy Assets 
and Acquisition Management Challenges, GAO-05-651T (Washington, D.C.: 
June 21, 2005). 

[6] In assessing the condition of deepwater aircraft and cutters for 
this report, we analyzed what Coast Guard officials told us were the 
best available condition measures. For deepwater aircraft, we reviewed 
the availability index (percentage of time aircraft were available to 
complete missions), cost per flight hour, labor hours per flight hour, 
programmed flight hours per year, scheduled versus unscheduled 
maintenance expenditures, and estimated deferred maintenance. For 
cutters, we reviewed the number of major casualties, the percent of 
time free of major casualties, scheduled versus unscheduled 
maintenance, and estimated deferred maintenance. To assess the 
reliability of the Coast Guard's data and condition measures, we 
questioned knowledgeable officials and reviewed existing documentation 
about the data and the systems that produced the data. We determined 
that the data were sufficiently reliable for the purposes of this 
report. 

[7] For purposes of this report, we use the term "systems" to include 
all the electrical, mechanical, heating, ventilation, and air 
conditioning, and other systems on the deepwater assets. 

[8] Current plans call for the Coast Guard to replace all of its 
deepwater legacy cutters and patrol boats, beginning with the 378-foot 
cutters. The Coast Guard also plans to replace the HU-25 aircraft, but 
it will upgrade the existing HC-130 aircraft and HH-60 and HH-65 
helicopters to extend their service lives. 

[9] The mission requirements include such things as the ability to (1) 
respond to 90 percent of all distress incidents within 2 hours; (2) 
detect and track targets of any material such that the probability of 
detection is at least 90 percent for small targets, such as a person in 
the water or a single-engine civil aircraft; and (3) respond to 
National Emergency Response Operations within 48 hours. 

[10] Total ownership cost is the sum of all costs associated with the 
research, development, procurement, personnel, training, operation, 
logistical support, and disposal of the entire Deepwater system. 

[11] The original Deepwater plan had an estimated cost of $17 billion. 

[12] GAO, Coast Guard: Progress Being Made on Deepwater Project, but 
Risks Remain, GAO-01-564 (Washington, D.C.: May 2, 2001). 

[13] GAO, Coast Guard: Deepwater Program Acquisition Schedule Update 
Needed, GAO-04-695 (Washington, D.C.: June 14, 2004); GAO, Coast Guard: 
Key Management and Budget Challenges for Fiscal Year 2005 and Beyond, 
GAO-04-636T (Washington, D.C.: April 7, 2004); and GAO, Contract 
Management: Coast Guard's Deepwater Program Needs Increased Attention 
to Management and Contractor Oversight, GAO-04-380 (Washington, D.C.: 
March 9, 2004). 

[14] GAO-04-380. 

[15] A casualty is a deficiency in mission essential equipment; a major 
casualty causes the major degradation or loss of at least one primary 
mission. 

[16] However, major casualties for the 378-foot high-endurance cutters 
continued to increase in 2004. 

[17] GAO, Coast Guard: Comprehensive Blueprint Needed to Balance and 
Monitor Resource Use and Measure Performance for All Missions, GAO-03-
544T (Washington, D.C.: March 12, 2003); and GAO, Coast Guard: Strategy 
Needed for Setting and Monitoring Levels of Effort for All Missions, 
GAO-03-155 (Washington, D.C.: Nov. 12, 2002). 

[18] A mission's relative importance will be determined by Coast Guard 
operational decision makers. These determinations will not be static, 
but rather will be reviewed and revised to reflect changing priorities. 

[19] Because this measure was not in use during the full period covered 
by our review (fiscal years 2000 through 2004), we did not include it 
as one of the measures we used for assessing the condition of deepwater 
legacy aircraft; see appendix II. 

[20] The Pacific Area Command is responsible for operations covering 74 
million square miles, ranging from South America to the Arctic Circle 
and west to the Far East. 

[21] Pacific Area officials have developed a "report card" to assist in 
assigning cutters to specific missions by collecting a variety of data 
and condition assessments from its cutter crews from which it prepares 
a color-coded assessment of (1) the condition of each cutter's critical 
systems (e.g., propulsion, electrical) to meet its current mission, and 
(2) the ability of each cutter to meet each possible future mission. 

[22] H.R. Rep. No. 109-79, at 63 (2005). 

[23] S. Rep. No. 109-83, at 60 (2005). 

[24] GAO-04-380. 

[25] GAO-04-695. 

[26] Performance monitors are contracting officers' technical 
representatives, who represent the contracting officer in monitoring 
the contractor's performance. 

[27] GAO-04-695. 

[28] Not maintaining a current and integrated schedule lessens the 
Coast Guard's ability to monitor the system integrator's performance 
and take early action to resolve risks that could become problems 
later. Maintaining such a schedule is an industry best practice; the 
Department of Defense is required to do so in order to be able to 
report any breaches in cost, schedule, or performance targets. 

[29] GAO-04-380. 

[30] A "make item" means an item or work effort to be produced or 
performed by the prime contractor or its affiliates, subsidiaries, or 
divisions. 

[31] The C-130J missionization, planned for the Coast Guard's six C- 
130J aircraft, is intended to modify and install mission-essential 
equipment to convert the aircraft into C-130J long-range surveillance 
maritime patrol aircraft. 

[32] Federal Acquisition Regulation 15.407-2, "Make or Buy Programs."

[33] H.R. Conf. Rep. No. 108-774, at 57 (2004). 

[34] A major casualty is a deficiency in mission-essential equipment 
that causes the major degradation of a primary mission or loss of at 
least one primary mission. 

[35] The patrol boats' operational restrictions require a reduction in 
speed based upon significant wave heights that might be encountered at 
sea. 

[36] Emergency Supplemental Appropriations Act for Defense, the Global 
War on Terror, and Tsunami Relief, 2005, Pub. L. No. 109-13, 119 Stat. 
231, 270 (2005). In the conference report accompanying the bill that 
was enacted into law as Public Law 109-13, the conferees agreed that 
such funds may be used for procurement of new U.S. Coast Guard 110-foot 
patrol boats or major refits, renovation, and subsystem replacement. 
H.R. Conf. Rep. No. 109-72, at 138 (2005). 

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