Background

The Coast Guard is a multi-mission, maritime military service within the  Department of Homeland Security (DHS). The Coast Guard’s  responsibilities fall into two general categories—those related to  homeland security missions, such as port security, vessel escorts, security  inspections, and defense readiness; and those related to non-homeland  security missions, such as search and rescue, environmental protection  (including oil spill response), marine safety, and polar ice operations.
To carry out these responsibilities, the Coast Guard operates a number of  vessels and aircraft and, through its Deepwater Program, is currently  modernizing or replacing those assets. At the start of Deepwater, the Coast  Guard chose to use a system-of-systems acquisition strategy that would  replace its assets with a single, integrated package of aircraft, vessels, and  communications systems through Integrated Coast Guard Systems  (ICGS), a system integrator that was responsible for designing,  constructing, deploying, supporting and integrating the assets to meet  Coast Guard requirements. The decision to use a system integrator was  driven in part because of the Coast Guard’s lack of expertise in managing  and executing an acquisition of this magnitude. In a series of reports since  2001, we have noted the risks inherent in the systems integrator approach  and have made a number of recommendations intended to improve the  Coast Guard’s management and oversight. In particular, we raised  concerns about the agency’s ability to keep costs under control in future  program years by ensuring adequate competition for Deepwater assets and  pointed to the need for better oversight and management of the system  integrator. We, as well as the DHS Inspector General and others, have also  noted problems in specific acquisition efforts, notably the National  Security Cutter and the 110-Foot Patrol Boat Modernization, which the  Coast Guard Commandant permanently halted in November 2006 because  of operational and safety concerns.

	Coast Guard Is Taking Steps To Increase Management Of The Deepwater Program

Over the past year, the Coast Guard’s Deepwater Program has been in the  midst of a major shift, from heavy reliance on a system integrator to  greater government control and a greater government role in decision- making. Coast Guard officials acknowledged that the initial approach gave  too much control to the contractor. The Coast Guard has made a number  of significant program decisions and taken actions, including:    an increase in the Coast Guard’s management role through a  reorganization of its acquisition directorate;    a restructured approach to the review and approval of individual    planned improvements to the use and quality of information on  program performance, and  initiatives to develop a workforce with the requisite acquisition and  program management skills.
Although many of the changes the Coast Guard has undertaken are  positive and may assist the program in meeting its goals, these initiatives  are in their preliminary stages, with many processes and procedures yet to  be implemented. Maintaining momentum will be important in improving  the Deepwater Program; we will continue to evaluate the Coast Guard’s  progress in all of these areas as part of our ongoing work.

		Coast Guard Has Increased Its Program Management Role of Deepwater under a Reorganized Acquisition Directorate

As of July 2007, the Coast Guard began consolidating acquisition  responsibilities into a single Acquisition Directorate, known as CG-9, and  is making efforts to standardize operations within this directorate.  Previously, Deepwater acquisitions were managed separately from other  Coast Guard acquisitions by the Deepwater Program Executive Office. The  Coast Guard’s goal for the reorganization is that it will provide greater  consistency in the Coast Guard’s oversight and acquisition approach by  concentrating acquisition activities under a single official and allowing  greater leveraging of knowledge and resources across programs. Figure 1  depicts the changes.
As part of asserting a larger management role in Deepwater, the Coast  Guard has taken additional steps, such as the following.
Integrated product teams—a key program management tool—are in the  process of being restructured and re-chartered. In the past, the teams  were led and managed by the contractor, while government team  members acted as “customer” representatives. Now, the teams are led  by Coast Guard personnel. The teams are responsible for discussing  options for problem solving relating to cost, schedule, and performance  objectives. For example, one team oversees management of the  National Security Cutter project.
The Coast Guard has formally established a technical authority for  engineering to oversee issues related to Deepwater; Coast Guard  officials told us a similar authority for C4ISR is pending. The role of the  technical authority in program acquisition is to review, approve, and  monitor technical standards and ensure that assets meet these  standards, among other duties. Previously the contractor had some  decision making power and the Coast Guard held an advisory role. In  some cases this led to bad outcomes. For example, Coast Guard  officials told us their engineering experts had raised concerns during  the National Security Cutter’s design phase about its ability to meet  service life requirements and recommended design changes, but they  were ignored. If the recommendations had been heeded, changes to the  ship’s design could have been made earlier and some additional costs  may have been avoided.
Coast Guard project managers, who manage individual Deepwater  assets, now have increased responsibility and accountability for  acquisition outcomes. Previously, the project managers’ role was less  significant. For example, the contractor, not the project manager,  provided Coast Guard management with quarterly updates on the  status of assets. Now, project manager charters for individual assets  outline project managers’ responsibilities and authorities, including  ensuring projects are on time and within budget.

		Coast Guard has Restructured Review Process for Deepwater Assets

The Coast Guard is moving away from the ICGS contract and the systems-  of-systems model to a more traditional acquisition strategy, where the  Coast Guard will manage the acquisition of each asset separately. Agency  officials told us that they are in the process of re-evaluating their long term  relationship with ICGS, including an assessment of the value of continuing  this contractual relationship. The government is under no further  obligation to acquire services under this contract, as the minimum  specified quantity of services was met during the 5-year base term.  However, Coast Guard officials told us they may continue to issue task  orders under the contract for specific efforts, such as logistics, or for  assets that are already well under way. The Coast Guard recently  demonstrated this new approach by holding its own competition for the  Fast Response Cutter-B (FRC-B), in lieu of obtaining the asset through the  ICGS contract. The Coast Guard issued a request for proposals in June  2007 for the design, construction, and delivery of a modified commercially  available patrol boat. Coast Guard officials told us they are currently  evaluating proposals and expect to award the contract by the third quarter  of fiscal year 2008, with the lead cutter expected for delivery in 2010. The  Coast Guard plans to hold other competitions outside of the ICGS contract  for additional assets in the future, including the Offshore Patrol Cutter.
The Coast Guard’s transition to an asset-by-asset acquisition strategy is  enabling increased government visibility and control over its acquisitions.  Cost and schedule information are now captured at the individual asset  level rather than at the overall, system-of-systems program level. For  example, while cost and schedule breaches in the past were to be reported  at the Deepwater system-of-systems level only, the Coast Guard is now  reporting breaches by asset, as occurred recently with the cost increase on  the C-130J long range surveillance aircraft and the first National Security  Cutter.
In implementing this new acquisition approach, the Coast Guard also plans  to start following the processes set forth in its Major Systems Acquisition  Manual (MSAM), which include acquisition milestones, documentation  requirements, and cost estimates for individual assets. Previously, the  Coast Guard was authorized to deviate from the MSAM requirements for  the Deepwater Program. Reviews were required on a schedule-driven  basis—planned quarterly or annually—as opposed to the more disciplined,  event-driven process outlined in the MSAM. In addition, the Coast Guard  scheduled key decision points only occasionally and focused primarily at  the Deepwater Program as a whole, as opposed to at an individual asset  level. Coast Guard officials told us that little, if any, documentation of key  decisions was maintained. The MSAM process requires reports on specific  elements of program knowledge at milestones in the acquisition process,  supplemented by annual briefings. For example, reports on the maturity of  technology and estimates of an asset’s life cycle cost are required at  Milestone 2, before an asset enters the capability development and  demonstration phase. Figure 2 depicts the key phases and milestones of  the MSAM process.
Although the Coast Guard’s decision to follow a more formalized and  asset-driven acquisition process is a positive step, the Coast Guard faces  challenges in implementing the process. The transition to the MSAM  process is estimated to take at least 2 years to complete, as the Coast  Guard is determining where Deepwater assets are in the process and is  having to create basic documentation that was not required under the  prior process—such as statements of requirements and technology  assessments—to bring assets into compliance. For example, the National  Security Cutter is in the production phase, but the Coast Guard is  reviewing what documentation should be completed for milestones that  already passed. Coast Guard officials also acknowledged the hurdles they  face in bringing C4ISR efforts under the MSAM process, as this asset may  require a broader Deepwater-level approach to tie individual assets  together.
GAO’s work on best practices for major acquisitions has demonstrated  that a knowledge-based approach to decision making, where specific  knowledge is gathered and measured against standards at key points in the  acquisition process to inform decisions about the path forward, can  significantly improve program outcomes. While the MSAM process  contains some characteristics of a knowledge-based approach, there are  key differences that could affect acquisition outcomes. For example, the  Milestone 2 decision to approve low-rate initial production precedes the  majority of the design activities in the capability development and  demonstration phase. We will continue to evaluate the Coast Guard’s  process as compared to established commercial best practices in our  ongoing work.
The MSAM requires, as part of the acquisition approval process, the Coast  Guard to report to DHS on all major program decisions beginning with the  start of an acquisition program. Coast Guard and DHS officials told us that  the processes and procedures for coordinating acquisitions with DHS’s  Investment Review Board, which is tasked with reviewing major  acquisition programs, are currently undergoing revision. According to the  Coast Guard, DHS approval of acquisition decisions is not technically  necessary because the department delegated oversight responsibility for  the Deepwater Program to the Coast Guard in 2003. Recently, however,  the Coast Guard has increased communication and coordination through  good will and informal procedures such as personal working relationships.  We are currently conducting work on DHS’s investment review process for  this committee and will release our findings later this year.

		Coast Guard is Working to Improve the Use and Quality of Program Information

The proper functioning of an acquisition organization and the viability of  the decisions made through its acquisition process are only as good as the  information it receives. In the past, much of the Deepwater Program  information was collected on an ad-hoc basis and focused more at the  Deepwater Program level, as opposed to the individual asset level. The  Coast Guard is now putting processes in place to improve the use and  quality of its information on program performance through a number of  different efforts.
The Coast Guard recently developed Quarterly Project Reports, a  compilation of cost and schedule information that summarizes the  status of each acquisition for reporting through the Coast Guard chain  of command as well as to DHS and the Congress.
The Coast Guard also plans to analyze program information using the  “probability of project success” tool. Coast Guard acquisition officials  told us they will use this tool to grade each asset on 19 different  elements, including acquisition process compliance and progress and  earned value management data, to assess the risk of assets failing to  meet their goals. This information is intended to enable senior Coast  Guard management officials to review project risks and status at a  glance. At this time, the Coast Guard has completed reports on ten  Deepwater assets.
The Coast Guard is working to improve the quality and reporting of  earned value management data. For example, officials have developed  standard operating procedures for earned value reporting and analysis  to create consistency among Deepwater assets. As part of these  procedures, Coast Guard analysts have begun to review the earned  value management data provided by contractors and provide the  results to project managers. The Coast Guard is also exploring how it  can use the Defense Contract Management Agency to validate  contractor earned value systems. Certification would provide the Coast  Guard greater assurance that contractor data are accurate.

		Actions Underway to Hire and Develop an Acquisition Workforce for Deepwater and Other Major Coast Guard Programs

The Coast Guard has acknowledged the need for a workforce that can  effectively manage its major acquisitions—including Deepwater—a  challenge common within the federal government. With the July 2007  creation of the Acquisition Directorate, the Coast Guard has taken steps to  develop a workforce with the requisite acquisition and program  management skills, while trying to reduce reliance on support contractors.
The Coast Guard’s 2008 acquisition human capital strategic plan sets forth  a number of acquisition workforce challenges, including    a shortage of civilian acquisition staff,   lack of an acquisition career path for Coast Guard military personnel,    difficulty in tracking acquisition certifications, and    absence of policy guidance on the use of support contractors in the  acquisition process.
To address these challenges, the Coast Guard has begun initiatives that  leverage expertise and best practices from other organizations, including  use of GAO’s Framework for Assessing the Acquisition Function at  Federal Agencies. These initiatives include     establishing an Office of Acquisition Workforce Management to    contracting for development of a strategic tool to forecast acquisition  workforce needs in terms of numbers and skill sets;     utilizing hiring flexibilities such as reemployed annuitants, relocation  bonuses, and direct hire authority; and     developing certification requirements for the entire Acquisition  Directorate (not just for project managers) to help develop what it calls  “bench strength” in the acquisition workforce.
Some of these initiatives have begun to see concrete results; for example,  key Acquisition Directorate leadership positions have been filled and,  through use of hiring flexibilities, over 100 vacant civilian acquisition  positions have been filled, 40 of them using direct hire authority. However,  as Table 1 shows, the Acquisition Directorate still has not fully staffed its  billets, including a range of positions—such as contract specialists,  financial analysts, systems engineers, and program management staff— that the directorate has designated as “hard-to-fill.”
The Acquisition Directorate has also identified a need for about 189  contractor billets for fiscal year 2008. These support contractors fill a  range of positions, such as contracting support and logisticians. Despite  the Coast Guard’s stated goal of reducing its reliance on support  contractors, acquisition management officials told us that use of  contractors will likely continue for the foreseeable future and is  contingent upon the Coast Guard’s ability to build its core staff.
Other initiatives are still in the early stages, and it is too soon to evaluate  their outcomes. For example, the Coast Guard is developing a workforce  forecasting tool, which it plans to use to answer key questions about its  strategic acquisition workforce needs. This tool requires significant up- front data collection and management training efforts to be used  effectively. The Coast Guard is also evaluating a similar tool developed by  the Air Force and will determine which tool best suits their needs in the  future.

	Coast Guard Continues to Face Challenges in Balancing Its Homeland Security and Non-Homeland Security Missions

The new and modernized assets the Coast Guard expects to acquire under  the Deepwater Program are intended to be used to help meet a wide range  of missions. After the September 11, 2001, terrorist attacks, the Coast  Guard’s priorities and focus had to shift suddenly and dramatically toward  protecting the nation’s vast and sprawling network of ports and  waterways. Coast Guard cutters, aircraft, boats, and personnel normally  used for non-homeland security missions were shifted to homeland  security missions, which previously consumed only a small portion of the  agency’s operating resources. Although we have previously reported that  the Coast Guard is restoring activity levels for many of its non-homeland  security missions, the Coast Guard continues to face challenges in  balancing its resources between the homeland and non-homeland security  missions. In addition to the growing demands for homeland security  missions, there are indications that the Coast Guard’s requirements are  also increasing for selected non-homeland security missions.

		Homeland Security Mission Requirements Continue to Increase

The Coast Guard’s heightened responsibilities to protect America’s ports,  waterways, and waterside facilities from terrorist attacks owe much of  their origin to the Maritime Transportation Security Act of 2002 (MTSA).  This legislation, enacted in November 2002, established a port security  framework that was designed, in part, to protect the nation’s ports and  waterways from terrorist attacks by requiring a wide range of security  improvements. The SAFE Port Act, which was enacted in October 2006,  made a number of adjustments to programs within the MTSA-established  framework, creating additional programs or lines of efforts and altering  others. The additional requirements found in the SAFE Port Act have  added to the resource challenges already faced by the Coast Guard, some  of which are described below:     Inspecting domestic maritime facilities: Pursuant to Coast Guard  guidance, the Coast Guard has conducted annual inspections of  domestic maritime facilities to ensure that they are in compliance with  their security plans. The SAFE Port Act added additional requirements  that inspections be conducted at least twice per year and that one of  these inspections be conducted unannounced. More recently, the Coast  Guard has recently issued guidance requiring that unannounced  inspections be more rigorous than before. Fulfilling the requirement of  additional inspections and potentially more rigorous inspections, may  require additional resources in terms of Coast Guard inspectors.
Inspecting foreign ports: In response to a MTSA requirement, the  Coast Guard established the International Port Security Program to  assess and, if appropriate, make recommendations to improve security  in foreign ports. Congressional directives have called for the Coast  Guard to increase the pace of its assessments of foreign ports.  However, to increase its pace, the Coast Guard may have to hire and  train new staff, in part because a number of experienced personnel are  rotating to other positions as part of the Coast Guard’s standard  personnel rotation policy. Coast Guard officials also said that they have  limited ability to help countries build on or enhance their own capacity  to implement security requirements because the program does not  currently have the resources or authority to directly assist countries  with more in-depth training or technical assistance.
Fulfilling port security operational requirements: The Coast  Guard conducts a number of operations at U.S. ports to deter and  prevent terrorist attacks. Operation Neptune Shield, first released in  2003, is the Coast Guard’s operations order that sets specific security  activities (such as harbor patrols and vessel escorts) for each port and  specifies the level of security activities to be conducted at each port. As  individual port security concerns change, the level of security activities  also change, which affects the resources required to complete the  activities. Many ports are having difficulty meeting their port security  requirements, with resource constraints being a major factor.
Meeting security requirements for additional Liquified Natural  Gas (LNG) terminals: The Coast Guard is also faced with providing  security for vessels arriving at four domestic onshore LNG import  facilities. However, the number of LNG tankers bringing shipments to  these facilities will increase considerably because of expansions that  are planned or under way. As a result of these changes, Coast Guard  field units will likely be required to significantly expand their security  workloads to conduct new LNG security missions.
Boarding and inspecting foreign vessels: Security compliance  examinations and boardings, which include identifying vessels that  pose either a high risk for noncompliance with international and  domestic regulations or a high relative security risk to the port, are a  key component in the Coast Guard’s layered security strategy. An  increasing number of vessel arrivals in U.S. ports may impact the pace  of operations for conducting security compliance examinations and  boardings in the future. For example, in the 3-year period from 2004  through 2006, vessel arrivals rose by nearly 13 percent and, according  to the Coast Guard, this increase is likely to continue. Moreover,  officials anticipate that the increase in arrivals will also likely include  larger vessels, such as tankers, that require more time and resources to  examine. At present, it is unclear to what extent increased demands on  resources may impact the ability of Coast Guard field units to complete  these activities on vessels selected for boarding.
Establishing interagency operational centers: The SAFE Port Act  called for establishment of interagency operational centers, directing  the Secretary of DHS to establish such centers at all high-priority ports  no later than 3 years after the Act’s enactment. The Coast Guard  estimates the total acquisition cost of upgrading 24 sectors that  encompass the nation’s high priority ports into interagency operations  centers will be approximately $260 million. Congress funded a total of  $60 million for the construction of interagency operational centers for  fiscal year 2008. The Coast Guard has not requested any additional  funding for the construction of these centers as part of its fiscal year  2009 budget request. However, as part of its fiscal year 2009 budget  request, the Coast Guard is requesting $1 million to support its  Command 21 acquisition project (which includes the continued  development of its information management and sharing technology in  command centers). So, while the Coast Guard’s estimates indicate  that it will need additional financial resources to establish the  interagency operational centers required by law, its current budget and  longer term plans do not include all of the necessary funding.
Updating area maritime security plans: MTSA, as amended,  required that the Coast Guard develop, in conjunction with local public  and private port stakeholders, Area Maritime Security Plans. The plans  describe how port stakeholders will deter a terrorist attack or other  transportation security incident or secure the port in the event such an  attack occurs. These plans were initially developed and approved by  the Coast Guard by June 2004. MTSA also requires that the plans be  updated at least every 5 years. The SAFE Port Act added a requirement  to the plans that specified that they identify salvage equipment able to  restore operational trade capacity. The Coast Guard, working with  local public and private port stakeholders, is required to revise its plans  and have them completed and approved by June 2009. This planning  process may require a significant investment of Coast Guard resources,  in the form of time and human capital at the local port level for existing  plan revision and salvage recovery development as well as at the  national level for the review and approval of all the plans by Coast  Guard headquarters.

		Non-Homeland Security Mission Requirements also Continue to Increase

While the Coast Guard continues to be in the center of the nation’s  response to maritime-related homeland security concerns, it is still  responsible for rescuing those in distress, protecting the nation’s fisheries,  keeping vital marine highways operating efficiently, and responding  effectively to marine accidents and natural disasters. Some of the Coast  Guard’s non-homeland security missions are facing the same challenges  faced by its homeland security missions with regard to increased mission  requirements. Examples of these additional requirements include (1)  revising Area Maritime Security Plans so they also cover natural disasters,  (2) revising oil spill regulations to better protect the Oil Spill Liability  Trust Fund from risks related to certain vessels with disproportionately  low limits of liability, (3) patrolling and enforcing a Presidential  declaration regarding new protected areas such as the Northwestern  Hawaiian Islands Coral Reef Ecosystem Reserve, and (4) increasing polar  activities commensurate with increased resource exploitation and vessel  traffic in the artic.

	Concluding Observations

In closing, we would like to emphasize several key points as we continue  to oversee the various Coast Guard initiatives discussed today. First, now  that the Coast Guard has made the decision to assume a greater  management and oversight role of the Deepwater Program, sustained  effort on a number of fronts will be needed for some time to come.  Whether the Coast Guard will achieve its goals is largely contingent on  continued strong leadership and a commitment to adhering to a  knowledge-based acquisition approach that was lacking in the past. In  addition, the Coast Guard originally turned to the private sector to manage  Deepwater, in part, because the government lacked requisite expertise.  Thus, the Coast Guard’s ability to build an adequate acquisition workforce  is critical, and over time the right balance must be struck between  numbers of government and contractor personnel.
Similarly, the right balance must be struck between homeland and non- homeland security missions. In the aftermath of the September 11, 2001  terrorist attacks, the Coast Guard understandably shifted its focus to  homeland security missions at the expense of non-homeland security  missions. Congress passed and the President signed legislation that  supported and reinforced this shift that further increased Coast Guard  missions related to security. Our recent work on the Coast Guard’s  homeland security programs has indicated that these missions continue to  increase demands on resources. To further complicate the Coast Guard’s  resource and mission balancing act, unexpected events such as terrorist  attacks or natural disasters could result in major shifts in resources and  operations. Thus, the Coast Guard will continue to face the challenge  inherent in being a multi-mission force.
Mr. Chairman, this concludes our testimony. We would be happy to  respond to any questions Members of the Committee may have.

	GAO Contacts and Acknowledgments

For further information about this testimony, please contact John P.  Hutton, Director, Acquisition and Sourcing Management, at (202) 512-4841,  huttonj@gao.gov or Stephen L. Caldwell, Director, Homeland Security and  Justice, (202) 512-9610, caldwells@gao.gov.
Other individuals making key contributions to this testimony include  Michele Mackin, Assistant Director; Greg Campbell, Wayne Ekblad,  Jessica Gerrard-Gough, Maura K. Hardy, Dawn Hoff, J. Kristopher Keener,  Angie Nichols-Friedman, Scott Purdy, Ralph Roffo, Sylvia Schatz, April  Thompson, and Tatiana Winger.

Appendix I: Deepwater

In 2005, the Coast Guard revised its Deepwater acquisition program  baseline to reflect updated cost, schedule, and performance measures. The  revised baseline accounted for, among other things, new requirements  imposed by the events of September 11. The initially envisioned designs  for some assets, such as the Offshore Patrol Cutter and Vertical Unmanned  Aerial Vehicle, are being rethought. Other assets, such as the National  Security Cutter and Maritime Patrol Aircraft, are in production.
Table 2 shows the 2005 baseline and current status of selected Deepwater  assets.

Appendix II: GAO Products Related to the Deepwater Program

Coast Guard: Status of Efforts to Improve Deepwater Program  Management and Address Operational Challenges. GAO-07-575T  (Washington, D.C.: Mar. 8, 2007).
Coast Guard: Preliminary Observations on Deepwater Program   Assets and Management Challenges. GAO-07-446T (Washington, D.C.:   February 15, 2007).
Coast Guard: Status of Deepwater Fast Response Cutter Design Efforts.  GAO-06-764 (Washington, D.C.: June 23, 2006).
Coast Guard: Changes to Deepwater Plan Appear Sound, and Program  Management Has Improved, but Continued Monitoring is Warranted.  GAO-06-546 (Washington, D.C.: Apr. 28, 2006).
Coast Guard: Progress Being Made on Addressing Deepwater Legacy  Asset Condition Issues and Program Management, but Acquisition  Challenges Remain. GAO-05-757 (Washington, D.C.: Jul. 22, 2005).
Coast Guard: Preliminary Observations on the Condition of Deepwater  Legacy Assets and Acquisition Management Challenges. GAO-05-651T  (Washington, D.C.: Jun. 21, 2005).
Coast Guard: Deepwater Program Acquisition Schedule Update Needed.  GAO-04-695 (Washington, D.C.: Jun. 14, 2004).
Contract Management: Coast Guard’s Deepwater Program Needs  Increased Attention to Management and Contractor Oversight.   GAO-04-380 (Washington, D.C.: Mar. 9, 2004).
Coast Guard: Actions Needed to Mitigate Deepwater Project Risks.   GAO-01-659T (Washington, D.C.: May 3, 2001).
This is a work of the U.S. government and is not subject to copyright protection in the  United States. It may be reproduced and distributed in its entirety without further  permission from GAO. However, because this work may contain copyrighted images or  other material, permission from the copyright holder may be necessary if you wish to  reproduce this material separately.

Summary:
Why GAO Did This Study

The Deepwater Program is intended to replace or modernize 15 major classes of Coast Guard assets--including vessels, aircraft, and communications systems. At the program's start, the Coast Guard chose to use a system integrator, Integrated Coast Guard Systems, to design, build, deploy, and support Deepwater in a system-of-systems approach. In a series of reports, we have noted the risks inherent in this approach. With the Deepwater program under way, the Coast Guard's priorities and focus shifted after September 11 toward homeland security missions, such as protecting the nation's ports and waterways. The 2002 Maritime Transportation Security Act and the 2006 SAFE Port Act required a wide range of security improvements. GAO is monitoring the acquisition of Deepwater and the Coast Guard's ability to carry out its numerous missions. This testimony addresses: (1) changes the Coast Guard is making as it assumes a larger role in managing the Deepwater Program and (2) challenges the Coast Guard is facing in carrying out its various missions. To conduct this work, GAO reviewed key documents, such as Deepwater acquisition program baselines, human capital plans, and Coast Guard budget and performance documents. For information on which GAO has not previously reported, GAO obtained Coast Guard views. The Coast Guard generally concurred with the information.

What GAO Found

With a recognition that too much control had been ceded to the system integrator under the Deepwater Program, the Coast Guard began this past year to shift the way it is managing the acquisition. Significant changes pertain to: (1) increasing government management of the program as part of the Coast Guard's reorganized Acquisition Directorate; (2) acquiring Deepwater assets individually as opposed to through a system-of-systems approach; (3) improving information to analyze and evaluate progress; and (4) developing an acquisition workforce with the requisite contracting and program management skills. Many of these initiatives are just getting under way and, while they are positive steps, the extent of their impact remains to be seen. The Coast Guard will likely continue to face challenges balancing its various missions within its resources for both the short and long term. For several years, we have noted that the Coast Guard has had difficulties fully funding and executing both homeland security missions and its non-homeland security missions. GAO's recent and ongoing work has shown that the Coast Guard's requirements continue to increase in such homeland security areas as providing vessel escorts, conducting security patrols of critical infrastructure, and completing inspections of maritime facilities here and abroad. In several cases, the Coast Guard has not been able to keep up with these security demands, in that it is not meeting its own requirements for vessel escorts and other security activities at some ports. In addition, there are indications that the Coast Guard's requirements are also increasing for selected non-homeland security missions. Since 2001, we have reviewed the Deepwater Program and have informed Congress, the Department of Homeland Security, and the Coast Guard of the risks and uncertainties inherent with such a large acquisition. In March 2004, we made a series of recommendations to the Coast Guard. The Coast Guard has taken actions on many of them. Three recommendations remain open, as the actions have not yet been sufficient to allow us to close them. In past work on Coast Guard missions, GAO made recommendations related to strategic plans, human capital, performance measures, and program operations.