United States Government Accountability Office

GAO Testimony 

Before the Subcommittee on Coast Guard 

and Maritime Transportation, Committee 

on Transportation and Infrastructure, 

House of Representatives 

COAST GUARD

Status of Efforts to Improve 

Deepwater Program 

Management and Address 

Operational Challenges 

Statement of Stephen L. Caldwell, Acting Director 

Homeland Security and Justice Issues 

For Release on Delivery

Expected at 10:00 a.m. EST 

Thursday, March 8, 2007

 

GAO-07-575T 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

March 8, 2007

COAST GUARD

Status of Efforts to Improve Deepwater 

Program Management and Address 

Operational Challenges 

Highlights of GAO-07-575T, a report to 

before the Subcommittee on Coast Guard 

and Maritime Transportation, Committee 

on Transportation and Infrastructure, U.S. 

House of Representatives

The Coast Guard’s Deepwater

program is a 25-year, $24 billion 

plan to replace or modernize its

fleet of vessels and aircraft. While 

there is widespread

acknowledgment that many of the 

Coast Guard’s aging assets need

replacement or renovation,

concerns exist about the 

acquisition approach the Coast 

Guard adopted in launching the 

Deepwater program. From the 

outset, GAO has expressed concern

about the risks involved with the 

Coast Guard’s acquisition strategy, 

and continues to review Deepwater 

program management. 

This statement discusses (1) the 

Coast Guard’s acquisition approach

for the Deepwater program; (2) 

Coast Guard efforts to manage the

program, hold contractors 

accountable, and control costs 

through competition; (3) the status 

of the Coast Guard’s efforts to

acquire new or upgraded 

Deepwater assets; and (4) 

operational challenges the Coast

Guard is facing because of

performance and design problems

with Deepwater patrol boats. 

What GAO Recommends

This testimony contains no

recommendations. In 2004, GAO

made 11 recommendations on 

management and oversight,

contractor accountability, and cost 

control through competition. In 

addition, in April 2006 we reported 

that progress had been made, but

continued monitoring was 

warranted. 

In 2001, we described the Deepwater program as “risky” due to the unique, 

untried acquisition strategy for a project of this magnitude. The Coast Guard 

used a system-of-systems approach to replace deteriorating assets with a 

single, integrated package of assets. The Coast Guard also used a system

integrator—which relies on a contractor for requirements development, 

design, and source selection of major system and subsystem subcontractors. 

The Deepwater program is also a performance-based acquisition, meaning 

that it is structured around the results to be achieved rather than the manner 

in which the work is performed. If performance-based acquisitions are not 

appropriately planned and structured, there is an increased risk that the 

government may receive products or services that are over cost estimates, 

delivered late, and of unacceptable quality.

From the program’s outset, GAO has raised concerns about the risks 

involved with the Coast Guard’s Deepwater acquisition strategy. In 2004, 

GAO reported that program management, contractor accountability, and 

cost control were all challenges, and made recommendations in these areas. 

The Coast Guard has taken some actions to address these issues. 

Of the 10 classes of upgraded or new Deepwater aircraft and vessels, the 

delivery record for first-in-class assets (that is, the first asset to be delivered 

within each class) is mixed. Specifically, 7 of the 10 asset classes are on or 

ahead of schedule, while 3 asset classes are currently behind schedule due to

various problems related to designs, technology, or funding. 

The Coast Guard is facing operational challenges because of performance 

and design problems with Deepwater patrol boats. Specifically, in 

November 2006, performance problems led the Coast Guard to suspend all 

normal operations of the 123-foot patrol boats that had been converted from 

110-foot patrol boats. In addition, in February 2006, the Coast Guard 

suspended design work on the Fast Response Cutter, due to design risks that 

has led to a delivery delay for the vessel. 

Deepwater Vessel and Aircraft Classes 

National Security

Cutter (NSC)

Offshore Patrol 

Cutter (OPC)

Fast Response

Cutter (FRC)

Short-Range 

Prosecutor (SRP)

Long-Range 

Interceptor (LRI)

HH-65 Multi-Mission 

Cutter Helicopter

(MCH)

HH-60 Medium

Range Recovery 

Helicopter (MRR)

Maritime Patrol 

Aircraft (MPA)

HV-911 Vertical

Takeoff Unmanned

Aerial Vehicle (VUAV)

Long-Range 

Surveillance 

Aircraft (LRS)

Source: U.S. Coast Guard.

www.gao.gov/cgi-bin/getrpt?GAO-07-575T.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Stephen L. 

Caldwell at (202) 512-9610 or 

CaldwellS@gao.gov. 
Mr. Chairman and Members of the Committee: 

Thank you for inviting me here today to discuss GAO’s recent reviews of 

Coast Guard’s Deepwater program, a $24 billion effort to upgrade or 

replace existing aircraft and vessels to ensure Coast Guard’s ability to 

meet its many missions. The Deepwater program is eventually to include 

10 major classes of new or upgraded assets—5 major classes each of 

aircraft and vessels. To carry out this effort, the Coast Guard has relied on 

an acquisition strategy that gives responsibility to a contractor (systems 

integrator) for designing, integrating, and delivering a number of aircraft, 

vessels, and supporting communications equipment. Using a systems 

integrator in this fashion means that the government is acquiring 

management capacity it has historically maintained in house through a 

service contract. 

GAO has been involved in reviewing the Deepwater program since 2001,

and has informed Congress, the Department of Homeland Security (DHS), 

and the Coast Guard of risks and challenges associated with the program. 

Specifically, GAO has raised concerns related to the Coast Guard’s 

acquisition strategy for Deepwater, changes in the asset mix and delivery

schedules, as well as Coast Guard’s ability to manage the program and 

oversee the systems integrator’s performance.1

 In March 2004, we made 

recommendations to the Coast Guard to address three areas of concern: 

improving program management, strengthening contractor accountability, 

and promoting cost control through greater competition among potential

subcontractors. 

Challenges associated with specific Deepwater assets have recently 

received significant attention. For example, the Commandant made a 

decision to remove the 123-foot patrol boats, a converted legacy asset, 

from service on November 30, 2006 due to operational and safety 

concerns. This decision has created operational gaps for those missions 

the patrol boats perform and the Coast Guard is currently attempting to 

address this through a number of different strategies. 

 1

 GAO, Coast Guard: Progress Being Made on Deepwater Project, but Risks Remain, 

GAO-01-564 (Washington, D.C.: May 2, 2001); GAO, Contract Management: Coast Guard’s

Deepwater Program Needs Increased Attention to Management and Contractor 

Oversight, GAO-04-380 (Washington, D.C.: Mar. 9, 2004). 

Page 1 GAO-07-575T 
This statement offers information on the Coast Guard’s efforts to manage 

the Deepwater program and address operational challenges that have

arisen. Specifically, it discusses: 

• the Coast Guard’s acquisition approach for the Deepwater program; 

• Coast Guard efforts to manage the Deepwater program, hold 

contractors accountable, and control costs through competition; 

• the status of the Coast Guard’s efforts to acquire new or upgraded 

Deepwater assets; and 

• operational challenges the Coast Guard is facing because of 

performance and design problems with Deepwater patrol boats. 

The information noted in this testimony is based on our review of key 

documents, including the 2005 Deepwater Acquisition Program Baseline; 

schedule information provided by the Coast Guard; Coast Guard 

memoranda regarding the 123-foot patrol boat conversion; and Coast 

Guard’s human capital plan, its award fee and award term documentation, 

and its competition monitoring plan. We conducted interviews with Coast 

Guard officials at agency headquarters in Washington, D.C.; officials in 

Coast Guard’s System Integration Program Office in Arlington, VA; and 

Coast Guard contractor staff. In addition, we interviewed Coast Guard 

officials during visits to the Pacific and Atlantic Area Commands and their 

associated Maintenance and Logistics Commands and at the Coast Guard’s 

Aircraft Repair and Supply Center. Our work was conducted from August 

2006 to February 2007 in accordance with generally accepted government 

auditing standards. In addition, GAO has been reviewing the Deepwater 

program since 2001, and some of the information in this testimony comes 

from our earlier work. Appendix I contains a list of related GAO products. 

In 2001, we described the Deepwater program as “risky” due to the unique,

untried acquisition strategy for a project of this magnitude within the 

Coast Guard. The Coast Guard used a system-of-systems approach to 

replace deteriorating assets with a single, integrated package of aircraft, 

vessels, and unmanned aerial vehicles to be linked through systems that 

provide command, control, communications, computer, intelligence, 

surveillance, and reconnaissance (C4ISR), and supporting logistics. In a 

system-of-systems, the delivery of Deepwater assets are interdependent,

thus schedule slippages and uncertainties associated with potential 

changes in the design and capabilities of any one asset increases the 

overall risk that the Coast Guard might not meet its expanded homeland 

security missions within given budget parameters and milestone dates. 

The Coast Guard also used a systems integrator—which can give the 

Summary 

Page 2 GAO-07-575T 
contractor extensive involvement in requirements development, design, 

and source selection of major system and subsystem subcontractors. The 

Deepwater program is also a performance-based acquisition, meaning that 

it is structured around the results to be achieved rather than the manner in

which the work is performed. If performance-based acquisitions are not 

appropriately planned and structured, there is an increased risk that the 

government may receive products or services that are over cost estimates, 

delivered late, and of unacceptable quality. 

In 2004 and in subsequent assessments in 2005 and 2006, we reported 

concerns about the Deepwater program related to three main areas—

program management, contractor accountability, and cost control. The 

Coast Guard’s ability to effectively manage the program has been 

challenged by staffing shortfalls and poor communication and 

collaboration among Deepwater program staff, contractors, and field 

personnel who operate and maintain the assets. Despite documented 

problems in schedule, performance, cost control, and contract

administration, measures for holding the contractor accountable resulted 

in an award fee of $4 million (of the maximum $4.6 million) for the first 

year. Through the first 4 years of the Deepwater contract, the systems 

integrator received award fees that ranged from 87 percent to 92 percent

of the total possible award fee (scores that ranged from “very good” to 

“excellent” based on Coast Guard criteria), for a total of over $16 million. 

Further, the program’s ability to control Deepwater costs is uncertain 

given the Coast Guard’s lack of detailed information on the contractor’s 

competition decisions. While the Coast Guard has taken some actions to 

improve program outcomes, our assessment of the program and its efforts 

to address our recommendations continues, and we plan to report on our 

findings later this year. 

Of the 10 classes of upgraded or new Deepwater aircraft and vessels, the 

delivery record for first-in-class assets (that is, the first of multiple aircraft

or vessels to be delivered within each class) is mixed. Specifically, 7 of the 

10 asset classes are on or ahead of schedule. Among these, five first-inclass assets have been delivered on or ahead of schedule; and two others 

remain on schedule but their planned delivery dates are in 2009 or beyond. 

Three Deepwater asset classes are currently behind schedule due to 

various problems related to designs, technology, or funding. For example, 

the Fast Response Cutter (a new vessel), which had been scheduled for 

first-in-class delivery in 2007, has been delayed by at least 2 years in part 

because work on its design was suspended until technical problems 

related to its hull and other issues can be addressed. The Vertical 

Unmanned Aerial Vehicle (a new aircraft), which had also been scheduled 

Page 3 GAO-07-575T 
for delivery in 2007, has been delayed by 6 years due to evolving 

technological developments, among other things. In addition, the Offshore 

Patrol Cutter, which had a planned delivery date in 2010, has now been 

delayed by 5 years. 

The Coast Guard is facing operational challenges because of performance 

and design problems with Deepwater patrol boats. Specifically, the 

conversion of legacy 110-foot patrol boats to upgraded 123-foot patrol 

boats was stopped at eight hulls (rather than the entire fleet of 49) due to 

deck cracking, hull buckling, and shaft alignment problems. These patrol

boat conversion problems ultimately led the Coast Guard to suspend all 

normal operations of the eight converted 123-foot patrol boats on 

November 30, 2006. The Coast Guard is now exploring options to address 

the resulting short-term operational gaps. There have also been design 

problems with the new Fast Response Cutter (FRC), intended to replace 

all 110-foot and 123-foot patrol boats. In February 2006, the Coast Guard 

suspended design work on the FRC due to design risks, such as excessive 

weight and horsepower requirements.2

 According to the Coast Guard, it 

has decided to acquire two classes of FRCs in an effort to not delay 

delivery of the FRCs further. One class is to be based on an adapted 

design from a patrol boat already on the market and another class is to be 

redesigned to address the problems in the original FRC design plans. As 

with the 123-foot patrol boats, the Coast Guard is looking at options to 

address these long-term operational gaps. 

The Coast Guard is the lead federal agency for maritime security within 

DHS. The Coast Guard is responsible for a variety of missions, including 

ensuring ports, waterways, and coastline security; conducting search and 

rescue missions; interdicting illicit drug shipments and illegal aliens; and 

enforcing fisheries laws. In 1996, in order to continue carrying out its 

responsibilities and operations, the Coast Guard initiated the Deepwater 

program to replace or upgrade its aging vessels, aircraft, and other 

essential equipment. 

Background 

As originally conceived, Deepwater was designed around producing 

aircraft and vessels that would function in the Coast Guard’s traditional atsea roles—such as interdicting illicit drug shipments or rescuing mariners 

 2

 GAO, Coast Guard: Status of Deepwater Fast Response Cutter Design Efforts, 

GAO-06-764 (Washington, D.C.: June 23, 2006).

Page 4 GAO-07-575T 
from difficulty at sea—and the original 2002 Deepwater program was 

focused on those traditional missions. After the terrorist attacks on 

September 11, 2001, the Coast Guard was also assigned homeland security

missions related to protection of ports, waterways, and coastal areas. 

Based on its revised mission responsibilities, the Coast Guard updated its 

Deepwater Acquisition Program Baseline in November 2005. The new 

baseline contained changes in the balance between new assets to be 

acquired and legacy assets to be upgraded and adjusted the delivery

schedule and costs for many of these assets. Overall, the Deepwater 

acquisition schedule was lengthened by 5 years, with the final assets now 

scheduled for delivery in 2027. 

Upon its completion, the Deepwater program is to consist of 5 new classes 

of vessels, 1 new class of fixed-wing aircraft, 1 new class of unmanned 

aerial vehicles, 2 classes of upgraded helicopters, and 1 class of upgraded 

fixed-wing aircraft.3

 The 215 new vessels consist of five new asset 

classes—the National Security Cutter (NSC), Offshore Patrol Cutter 

(OPC), Fast Response Cutter (FRC), Long-Range Interceptor (LRI), and 

Short-Range Prosecutor (SRP). The 240 aircraft are composed of two new 

aircraft classes, the Vertical Unmanned Aerial Vehicle (VUAV) and the 

Maritime Patrol Aircraft (MPA); and three upgraded asset classes—the 

Long-Range Surveillance Aircraft (LRS), Medium-Range Recovery 

Helicopter (MRR), and the Multi-Mission Cutter Helicopter (MCH). 

Table 1 provides an overview, by asset class, of the Deepwater vessels to 

be acquired and table 2 provides an overview of the Deepwater aircraft to

be acquired or upgraded. As noted in Table 1, the 140-foot FRC was 

designated as a replacement vessel for the 110-foot and 123-foot patrol 

boats. 

 3

 In addition to these asset classes, Coast Guard plans to procure surveillance data from 

another unmanned aerial vehicle, the RQ-4A. Because this is not to be acquired as a capital

investment, we do not include it among the assets to be acquired or upgraded. 

Page 5 GAO-07-575T 
Table 1: Deepwater Vessel Classes to be Acquired

National Security

Cutter (NSC)

Current number 

of assets planned

Asset being replaced 

or upgraded

Missions • Maritime safety

• Maritime security

• Protection of 

 natural resources

• National defense

• Maritime safety

• Maritime security

• Protection of 

 natural resources

• National defense

• Maritime safety

• Maritime security

• Protection of 

 natural resources

• National defense

• Maritime safety

• Maritime security

• Maritime safety

• Maritime security

8

378-foot highendurance cutters210-foot and 270-foot

medium-endurance 

cutters 

110-foot and 123-foot

patrol boats 

None

(new asset)

None

(new asset)

25 58 91 33

Offshore Patrol 

Cutter (OPC)

Fast Response

Cutter (FRC)

Short-Range 

Prosecutor (SRP)

Long-Range 

Interceptor (LRI)

Source: GAO analysis of Coast Guard documentation.

Page 6 GAO-07-575T 
Table 2: Deepwater Aircraft Classes to be Upgraded or Acquired

HH-65 Multi-Mission 

Cutter Helicopter

(MCH)

Current number 

of assets planned

Asset being replaced 

or upgraded

Missions • Maritime safety 

• Maritime security

• Protection of 

 natural resources

• Maritime safety 

• Maritime security

• Protection of 

 natural resources

• Maritime safety 

• Maritime security

• Protection of 

 natural resources

• Maritime safety 

• Maritime security

• Protection of 

 natural resources

• National defense

• Maritime safety 

• Maritime security

• Protection of 

 natural resources

102

Upgraded asset 

(HH-65)

Upgraded asset 

(HH-60)

HU-25 Falcon None

(new asset)

Upgraded asset 

(HC-130)

42 36 45 22

HH-60 Medium

Range Recovery 

Helicopter (MRR)

Maritime Patrol 

Aircraft (MPA)

HV-911 Vertical

Takeoff Unmanned

Aerial Vehicle (VUAV)

Long-Range 

Surveillance Aircraft 

(LRS)

Source: GAO analysis of Coast Guard documentation.

Since 2001, we have reviewed the Deepwater program and have informed 

Congress, DHS, and Coast Guard of the problems, risks, and uncertainties 

inherent with such a large acquisition that relies on a systems integrator to 

identify the assets needed and then using tiers of subcontractors to design 

and build the assets. In March 2004, we made recommendations to the 

Coast Guard to address three broad areas of concern: improving program 

management, strengthening contractor accountability, and promoting cost 

control through greater competition among potential subcontractors (see 

table 3). 4

 4 GAO-04-380

Page 7 GAO-07-575T 
Table 3: Status of GAO Recommendations to the U.S. Coast Guard Regarding Management of the Deepwater Program, as of

April 28, 2006

Areas of concern Recommendations to the U.S. Coast Guard Recommendation status

Put in place a human capital plan to ensure adequate staffing of 

the Deepwater program 

Partially implementeda

(human capital plan was

revised) 

Improve integrated product teams (IPTs) responsible for managing 

the program by providing better training, approving charters for 

sub-IPTs, and improving systems for sharing information between 

teams

Partially implemented 

Key components of 

management and oversight 

Provide field operators and maintenance personnel with timely 

information and training on how the transition to Deepwater assets

will occur and how maintenance responsibilities are to be divided 

between the systems integrator and Coast Guard personnel

Partially implemented 

Develop measurable award fee criteria consistent with guidance 

from the Office of Federal Procurement Policy 

Implemented

Provide for better input from U.S. Coast Guard performance 

monitors

Implemented

Hold the systems integrator accountable in future award fee 

determinations for improving effectiveness of the IPTs

Implemented

Establish a baseline for determining whether the acquisition

approach is costing the government more than the traditional asset 

replacement approach 

Will not be implemented

Establish a time frame for when the models and metrics will be in 

place with the appropriate degree of fidelity to be able to measure

contractor’s progress toward improving operational effectiveness

Partially implemented 

Procedures for ensuring 

contractor accountability 

Establish criteria to determine when to adjust the project baseline 

and document the reasons for change 

Partially implemented 

For subcontracts over $5 million awarded by the systems

integrator to the two major subcontractors, require notification to 

the Coast Guard about decision to perform the work in-house 

rather than contracting it out 

Control of future costs through Implemented

competition 

Develop a comprehensive plan for holding the systems integrator 

accountable for ensuring adequate competition among suppliers

Partially implemented 

Source: GAO-04-380 and GAO-06-546. 

Note: aWhile the Coast Guard has revised its human capital plan, it has not yet addressed the rest of 

the recommendation, which is to ensure adequate staffing for the Deepwater program. 

Page 8 GAO-07-575T 
In 2001, we described the Deepwater program as “risky” due to the unique,

untried acquisition strategy for a project of this magnitude within the 

Coast Guard. The approach included the development of a system-ofsystems, a single systems integrator, and a performance-based contract. 

Rather than using the traditional approach of replacing classes of ships or 

aircraft through a series of individual acquisitions, the Coast Guard chose 

to use a system-of-systems acquisition strategy that would replace its 

deteriorating assets with a single, integrated package of aircraft, vessels, 

and unmanned aerial vehicles, to be linked through systems that provide 

C4ISR, and supporting logistics.5

 Through this approach, the Coast Guard 

hoped to avoid “stovepiping” the acquisition of vessels and aircraft, which 

might lead to a situation where they could not operate optimally together.

Despite the Coast Guard’s intention to avoid stovepiping in the acquisition 

process, we found that the Deepwater program has not been as integrated 

as hoped. Our past work on Deepwater noted that decisions on aircraft 

were made by one subcontractor, while decisions regarding vessels were 

made by another subcontractor. These separate lines of decision-making 

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. Our more recent work on the Fast 

Response Cutter (FRC)—which is discussed in more detail later—

indicated that changes in the design and delivery date for the FRC could 

affect the operations of the overall system-of-systems approach. Because 

the delivery of Deepwater assets are interdependent within the system-ofsystems acquisition approach, schedule slippages and uncertainties 

associated with potential changes in the design and capabilities of the new 

assets have increased the risks of the Coast Guard failing to meet its 

expanded homeland security missions within given budget parameters and 

milestone dates. 

In June 2002, the Coast Guard awarded the Deepwater contract to 

Integrated Coast Guard Systems (ICGS). ICGS—a business entity jointly 

Coast Guard’s 

Acquisition Approach 

to the Deepwater 

Program 

System of Systems 

Systems Integrator

 5

 C4ISR refers to command, control, communications, computer, intelligence, surveillance, 

and reconnaissance. 

Page 9 GAO-07-575T 
owned by Northrop Grumman and Lockheed Martin—is responsible for 

designing, constructing, deploying, supporting, and integrating the 

Deepwater assets to meet Coast Guard requirements. 

Government agencies have turned to the systems integrator approach 

when they believe they do not have the in-house capability to design, 

develop, and manage complex acquisitions.6

 This type of business 

arrangement can give the contractor extensive involvement in

requirements development, design, and source selection of major system 

and subsystem subcontractors. Giving contractors more control and 

influence over the government’s acquisitions in a systems integrator role 

creates a potential risk that program decisions and products could be 

influenced by the financial interest of the contractor—which is 

accountable to its shareholders—which may not match the primary 

interest of the government, maximizing its return on taxpayer dollars. The 

systems integrator arrangement creates an inherent risk, as the contractor

is given more discretion to make certain program decisions. Along with 

this greater discretion comes the need for more government oversight and 

an even greater need to develop well-defined outcomes at the outset. 

Performance-based 

Acquisition 

The Deepwater program has been designated as a performance-based 

acquisition. When buying services, federal agencies are currently required

to employ—to the maximum extent feasible—this concept, wherein 

acquisitions are structured around the results to be achieved as opposed 

to the manner in which the work is to be performed. That is, the 

government specifies the outcome it requires while leaving the contractor

to propose decisions about how it will achieve that outcome. 

Performance-based contracts for services are required to include a 

performance work statement; measurable performance standards (i.e., in 

terms of quality, timeliness, quantity, etc.) as well as the method of 

assessing contractor performance against these standards; and 

performance incentives, where appropriate. If performance-based 

acquisitions are not appropriately planned and structured, there is an 

increased risk that the government may receive products or services that

are over cost estimates, delivered late, and of unacceptable quality. 

 6

 This management approach of using a systems integrator has been used on other 

government programs that require system-of-systems integration, such as the Army’s 

Future Combat System, a networked family of weapons and other systems.

Page 10 GAO-07-575T 
Some of the problems the Coast Guard is experiencing with the Deepwater 

program are similar to problems we have reported on in other complex, 

developmental systems.7 These problems stem from: 

• Program requirements that are set at unrealistic levels, then changed 

frequently as recognition sets in that they cannot be achieved. As a 

result, too much time passes; threats may change; and/or members of 

the user and acquisition communities may simply change their minds. 

The resulting program instability causes cost escalation, schedule 

delays, fewer quantities, and reduced contractor accountability. 

• Program decisions to move into design and production without 

adequate standards or knowledge. 

• Contracts, especially service contracts, that often do not have 

measures in place at the outset in order to control costs and facilitate 

accountability. 

• Contracts that typically do not accurately reflect the complexity of 

projects or appropriately allocate risk between the contractors and the 

taxpayers. 

• Agency acquisition workforces that are challenged because of size, 

skills, insufficient knowledge, and succession planning. 

• Incentive and award fees that are often paid based on contractor 

efforts versus positive results, such as cost, quality, and schedule. 

• Inadequate government oversight that results in little to no 

accountability for recurring and systemic problems. 

Since the inception of the Deepwater program, we have expressed 

concerns about the risks involved with the Coast Guard’s system-ofsystems acquisition approach and the Coast Guard’s ability to manage and 

oversee the program. Our concerns have centered on three main areas: 

program management, contractor accountability, and cost control through 

competition. We have made a number of recommendations to improve the 

program—most of which the Coast Guard has agreed with and is working 

to address. However, while actions are under way, a project of this 

magnitude will likely continue to experience other problems as more 

becomes known. 

In 2004, we reported that the Coast Guard had not effectively implemented 

key components needed to manage and oversee the systems integrator. 

Deepwater Indicative of 

Broader, Systematic

Acquisition Challenges 

Preliminary 

Observations on 

Deepwater Program 

Management, 

Contractor 

Accountability, and 

Cost Control 

Program Management 

 7

 GAO, High Risk Series: An Update, GAO-07-310 (Washington, D.C.: January 2007). 

Page 11 GAO-07-575T 
Specifically, we reported at that time and subsequently on issues related to

integrated product teams (IPT), the Coast Guard’s human capital strategy, 

and communication with field personnel (individuals responsible for 

operating and maintaining the assets). Our preliminary observations on 

the Coast Guard’s progress in improving these program management 

areas, based on our ongoing work, follow. 

In 2004, we found that IPTs, the Coast Guard’s primary tool for managing 

the Deepwater program and overseeing the contractor, had not been 

effective due to changing membership, understaffing, insufficient training,

lack of authority for decision making, and inadequate communication. We 

recommended the Coast Guard take actions to address IPT effectiveness. 

We subsequently reported that IPT decision-making was to a large extent 

stovepiped, and some teams lacked adequate authority to make decisions 

within their realm of responsibility.8

 Coast Guard officials stated that they

believed collaboration among the subcontractors was problematic and 

that the systems integrator wielded little influence to compel decisions 

among them. For example, proposed design changes to assets under 

construction were submitted as two separate proposals from both 

subcontractors rather than one coherent plan. More recently, Coast Guard 

performance monitors reported this approach complicated the 

government review of design changes because the two proposals often 

carried overlapping work items, thereby forcing the Coast Guard to act as 

the systems integrator in those situations. Although some efforts have 

been made to improve the effectiveness of the IPTs—such as providing 

them with more timely charters and entry-level training—our preliminary 

observations are that more improvements are needed. 

Integrated Product Teams 

Despite changes to the metrics, the Coast Guard’s ability to assess IPT 

performance continues to be problematic. Former assessments of IPT 

effectiveness simply focused on measures such as frequency of meetings, 

attendance, and training. As a result, IPTs received positive assessments 

while the assets under their realm of responsibility—such as the National 

Security Cutter—were experiencing problems. While the Coast Guard’s 

new IPT measurements include outcome-based metrics, such as cost and 

schedule performance of assets, Deepwater’s overall program 

management quarterly reports, which are prepared by Coast Guard in 

 8

 GAO, Coast Guard: Progress Being Made on Addressing Legacy Asset Condition Issues 

and Program Management, but Acquisition Challenges Remain, GAO-05-757 

(Washington, D.C.: July 22, 2005). 

Page 12 GAO-07-575T 
collaboration with ICGS, show that the connection between IPT 

performance and program results continues to be misaligned.

9

 For 

example, the first quarterly report to incorporate the new measurements, 

covering the period October to December 2006, indicates that the IPTs’ 

performance for all domains is “on-schedule or non-problematic” even 

while some assets’ cost or schedule performance is rated “behind schedule 

or problematic.”10 Further, even though the Deepwater program is 

addressing fundamental problems surrounding the 123-foot patrol boat 

and FRC, IPTs no longer exist for these assets. In some cases, Coast Guard 

officials stated they have established work groups outside of the existing 

IPT structure to address identified issues and problems related to assets, 

such as the NSC. 

We also reported in 2004 that the Coast Guard had not adequately staffed 

its program management function for Deepwater. Although its Deepwater 

human capital plan set a goal of a 95 percent or higher “fill rate” annually 

for both military and civilian personnel, funded positions were below this 

goal. We recommended that the Coast Guard follow the procedures in its 

Deepwater human capital plan to ensure that adequate staffing was in 

place and that turnover of Coast Guard military personnel was proactively 

addressed. The Coast Guard subsequently revised its Deepwater human 

capital plan in February 2005 to emphasize workforce planning, including

determining needed knowledge, skills, and abilities and developing ways 

to leverage institutional knowledge as staff rotate out of the program. We 

reported in 2005 that the Coast Guard also took some short-term steps to 

improve Deepwater program staffing, such as 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. 

Human Capital 

However, more recently we have learned that while the Coast Guard has 

revised a human capital plan, key human capital management objectives 

outlined in the revised plan have not been fully implemented. Thus, key 

human capital management objectives outlined in the revised plan have 

not been accomplished and the staffing levels needed to accomplish the 

 9

 The program management reports were produced on a monthly basis in the past; now

they are produced on a quarterly basis. 

10 IPTs are focused on the development and fielding of a particular product (e.g., the NSC) 

and are organized by domain. Examples of domains are air, surface, C4ISR, and legacy 

assets. 

Page 13 GAO-07-575T 
known workload have not been achieved. In one example, a manager cited

the need for five additional staff per asset under his domain to satisfy the 

current workload in a timely manner: contracting officer’s technical 

representative, scheduler, cost estimator, analyst, and configuration 

manager. Further, a February 2007 independent analysis found that the 

Coast Guard does not possess a sufficient number of acquisition personnel 

or the right level of experience needed to manage the Deepwater 

program.11 The Coast Guard has identified an acquisition structure reorganization that includes human capital as one component of the reform. 

In 2004, we found that the Coast Guard had not adequately communicated 

to operations and maintenance personnel in field locations about 

decisions on how the new and old assets were to be integrated during the 

transition and whether Coast Guard or systems integrator personnel—or 

both—would be responsible for maintenance. We recommended that the 

Coast Guard provide timely information and training on the transition to 

Deepwater assets. In 2006, we reported that the Coast Guard had taken 

some steps to improve communications between Deepwater program and 

field personnel, including having field personnel as members on some 

IPTs. However, we continued to express concerns that field personnel 

were not receiving important information regarding training, maintenance, 

and integration of new Deepwater assets. 

Communication with 

Operations and Maintenance 

Personnel 

During our ongoing work, the field personnel involved in operating and

maintaining the assets and Deepwater program staff we interviewed 

expressed continued concern that maintenance and logistics plans had not 

been finalized. Another official commented that there continues to be a 

lack of clarity defining roles and responsibilities between the Coast Guard 

and systems integrator for maintenance and logistics. Coast Guard 

officials stated in fall 2006 that the systems integrator was contractually 

responsible for developing key documents related to plans for the 

maintenance and logistics for the NSC and Maritime Patrol Aircraft. 

However, Deepwater program officials stated that because the Coast 

Guard was not satisfied with the level of detail provided in early drafts of 

these plans, it was simultaneously developing “interim” plans that it could 

rely on while the systems integrator continued to develop its own 

versions. 

 11 Defense Acquisition University, Quick Look Study: United States Coast Guard 

Deepwater Program, (Fort Belvoir, VA.): Feb. 5, 2007 

Page 14 GAO-07-575T 
Our 2004 review revealed that the Coast Guard had not developed 

quantifiable metrics to hold the systems integrator accountable for its 

ongoing performance. For example, the process by which the Coast Guard 

assessed performance to make the award fee determination after the first 

year of the contract lacked rigor. At that time, we also found that the Coast 

Guard had not yet begun to measure contractor performance against 

Deepwater contract requiremets—the information it would need by June

2006 to decide whether to extend the systems integrator’s contract award 

term by up to another 5 years. Additionally, we noted that the Coast Guard 

needed to establish a solid baseline against which to measure progress in 

lowering total ownership cost—one of the three overarching goals of the 

Deepwater program. Furthermore, the Coast Guard had not developed 

criteria for potential adjustments to the baseline. 

In 2004 we found the first annual award fee determination was based 

largely on unsupported calculations. Despite documented problems in 

schedule, performance, cost control, and contract administration 

throughout the first year, the program executive officer awarded the 

contractor an overall rating of 87 percent, which fell in the “very good” 

range as reported by the Coast Guard award fee determining official. This 

rating resulted in an award fee of $4 million of the maximum $4.6 million. 

The Coast Guard continued to report design, cost, schedule, and delivery 

problems, and evaluation of the systems integrator’s performance 

continued to result in award fees that ranged from 87 percent to 92 

percent of the total possible award fee (with 92 percent falling into the 

“excellent” range), or $3.5 to $4.8 million annually, for a total of over $16 

million the first 4 years on the contract. 

Concerns Remain with 

Holding Systems 

Integrator Accountable 

Award Fee Criteria 

The Coast Guard continues to refine the award fee criteria under which it 

assesses the systems integrator’s performance. The current award fee 

criteria demonstrate the Coast Guard’s effort to use both objective and 

subjective measures and to move toward clarity and specificity with the 

criteria being used. For example, the criteria include 24 specific milestone 

activities and dates to which the systems integrator will be held 

accountable for schedule management. However, we recently observed 

two changes to the criteria that could affect the Coast Guard’s ability to 

hold the contractor accountable. First, the current award fee criteria no 

longer contain measures that specifically address IPTs, despite a 

recommendation we made in 2004 that the Coast Guard hold the systems 

integrator accountable for IPT effectiveness. The Coast Guard had agreed 

with this recommendation and, as we reported in 2005, it had incorporated

award fee metrics tied to the systems integrator’s management of 

Deepwater, including administration, management commitment, 

Page 15 GAO-07-575T 
collaboration, training, and empowerment of the IPTs. Second, a new 

criterion to assess both schedule and cost management states that the 

Coast Guard will not take into account milestone or cost impacts 

determined by the government to be factors beyond the systems 

integrator’s control. However, a Coast Guard official stated that there are 

no formal written guidelines that define what factors are to be considered

as being beyond the systems integrator’s control, what process the Coast 

Guard is going to use to make this determination, or who is ultimately 

responsible for making those determinations. 

The Deepwater program management plan included three overarching 

goals of the Deepwater program: increased operational effectiveness, 

lower total ownership cost, and customer satisfaction to be used for 

determining whether to extend the contract period of performance, known 

as the award term decision. We reported in 2004 that the Coast Guard had 

not begun to measure the systems integrator’s performance in these three 

areas, even though the information was essential to determining whether 

to extend the contract after the first 5 years.12 We also reported that the 

models the Coast Guard was using to measure operational performance 

lacked the fidelity to capture whether improvements may be due to Coast

Guard or contractor actions, and program officials noted the difficulty of 

holding the contractor accountable for operational effectiveness before 

Deepwater assets are delivered. We made a recommendation to Coast 

Guard to address these issues. 

Award Term Evaluation 

According to a Coast Guard official, the Coast Guard evaluated the 

contractor subjectively for the first award term period in May 2006, using 

operational effectiveness, total ownership costs, and customer satisfaction 

as the criteria. The result was a new award term period of 43 of a possible 

60 months. To measure the system’s operational effectiveness, the Coast 

Guard has developed models to simulate the effect of the Deepwater 

assets’ capabilities on its ability to meet its missions and to measure the 

“presence” of those assets. However, in its assessment of the contractor, 

the Coast Guard assumed full operational capability of assets and 

communications and did not account for actual asset operating data.

Furthermore, the models still lacked the fidelity to capture whether 

operational improvements are attributable to Coast Guard or contractor 

actions. As a result the contractor received credit for factors that may 

 12 An award term contract is a contract in which the contractor is rewarded for excellent 

performance with an extension of the contract period instead of an additional fee. 

Page 16 GAO-07-575T 
have been beyond its control—although no formal process existed for 

approving such factors. Total ownership cost was difficult to measure, 

thus the contractor was given a neutral score, according to Coast Guard 

officials.13 Finally, the contractor was rated “marginal” in customer 

satisfaction. 

The Coast Guard has modified the award term evaluation criteria to be 

used to determine whether to grant a further contract extension after the 

43-month period ends in January 2011. The new criteria incorporate more 

objective measures. 

• While the three overall Deepwater program objectives (operational 

effectiveness, total ownership costs, and customer satisfaction) carried 

a weight of 100 percent under the first award term decision, they will 

represent only about a third of the total weight for the second award 

term decision. The criteria include items such as new operational 

effectiveness measures that will include an evaluation of asset-level 

key performance parameters, such as endurance, operating range, and 

detection range. 

• The new award term criteria have de-emphasized measurement of total 

ownership cost, concentrating instead on cost control. Program 

officials noted the difficulty of estimating ownership costs far into the 

future, while cost control can be measured objectively using actual 

costs and earned value data. In 2004, we recommended that the Coast 

Guard establish a total ownership cost baseline that could be used to 

periodically measure whether the Deepwater system-of-systems 

acquisition approach is providing the government with increased 

efficiencies compared to what it would have cost without this 

approach. Our recommendation was consistent with the cost baseline 

criteria set forth in the Deepwater program management plan. The 

Coast Guard agreed with the recommendation at the time, but 

subsequently told us it does not plan to implement it. 

Establishing a solid baseline against which to measure progress in 

lowering total ownership cost is critical to holding the contractor 

accountable. The Coast Guard’s original plan, set forth in the Deepwater 

program management plan, was to establish as its baseline the dollar value 

of replacing assets under a traditional, asset-by-asset approach as the 

“upper limit for total ownership cost.” In practice, the Coast Guard 

Establishing Criteria and 

Documenting Changes to the 

Baseline 

 13 The award term determination rated total ownership cost as “good.” 

Page 17 GAO-07-575T 
decided to use the systems integrator’s estimated cost of $70.97 billion 

plus 10 percent (in fiscal year 2002 dollars) for the system-of-systems 

approach as the baseline. In 2004, we recommended that the Coast Guard 

establish criteria to determine when the total ownership cost baseline 

should be adjusted and ensure that the reasons for any changes are 

documented.

Since then, the Coast Guard established a process that would require DHS 

approval for adjustments to the total ownership cost baseline. The 

Deepwater Program Executive Officer maintains authority to approve 

baseline revisions at the asset or domain level. However, depending on the 

severity of the change, these changes are also subject to review and 

approval by DHS. In November 2005, the Coast Guard increased the total

ownership cost baseline against which the contractor will be evaluated to

$304 billion.14 Deepwater officials stated that the adjustment was the result 

of incorporating the new homeland security mission requirements and 

revising dollar estimates to a current year basis. Although the Coast Guard 

is required to provide information to DHS on causal factors and propose 

corrective action for a baseline breach of 8 percent or more, the 

8 percent threshold has not been breached because the threshold is 

measured against total program costs and not on an asset basis.15 For 

example, the decision to stop the conversion of the 49 110-foot patrol 

boats after 8 hulls did not exceed the threshold; nor did the damages and 

schedule delay to the NSC attributed to Hurricane Katrina. During our 

ongoing work, Coast Guard officials acknowledged that only a 

catastrophic event would ever trigger a threshold breach. According to a 

Coast Guard official, DHS approval is pending on shifting the baseline 

against which the systems integrator is measured to an asset basis. 

Limited Knowledge of Cost 

Control Achieved Through 

Competition 

Our 2004 report also had recommendations related to cost control through 

the use of competition. We reported that, although competition among 

subcontractors was a key mechanism for controlling costs, the Coast 

Guard had neither measured the extent of competition among the 

suppliers of Deepwater assets nor held the systems integrator accountable 

 14 For a variety of reasons, including the Coast Guard’s expanded homeland security 

mission, the baseline was increased from $70.97 billion plus 10 percent (fiscal year 2002

dollars) to $304 billion (fiscal year 2006 dollars). 

15 According to DHS officials, a baseline breach occurs when a cost or schedule threshold 

is exceeded or when a performance threshold cannot be met. 

Page 18 GAO-07-575T 
for taking steps to achieve competition.16 As the two first-tier 

subcontractors to the systems integrator, Lockheed Martin and Northrop 

Grumman have sole responsibility for determining whether to provide the 

Deepwater assets themselves or hold competitions—decisions commonly 

referred to as “make or buy.” We noted that the Coast Guard’s hands-off 

approach to make-or-buy decisions and its failure to assess the extent of 

competition raised questions about whether the government would be able 

to control Deepwater program costs. 

The Coast Guard has taken steps to establish a reporting requirement for 

the systems integrator to provide information on competition on a semiannual basis. The systems integrator is to provide detailed plans, policies, 

and procedures necessary to ensure proper monitoring, reporting, and 

control of its subcontractors. Further, reports are to include total 

procurement activity, the value of competitive procurements, and the 

subcontractors’ name and addresses. The systems integrator provided the

first competition report in October 2006. However, because the report did 

not include the level of detail required by Coast Guard guidelines, a Coast 

Guard official deemed that the extent of competition could not be 

validated by the information provided and a request was made to the 

systems integrator for more information. We will continue to assess the 

Coast Guard’s efforts to hold the systems integrator accountable for 

ensuring an adequate degree of competition. 

Our review of available data show that as of January 2007, of the 10 

classes of Deepwater assets to be acquired or upgraded, 4 are ahead of 

schedule; 3 remain on schedule (but for 1 of these, design problems have 

arisen); and 3 are behind scheduled delivery and face design, funding, or 

technology challenges. Using the 2005 Deepwater Acquisition Program 

Baseline as the baseline, figure 1 indicates, for each asset class, whether 

delivery of the first-in-class (that is, the first of several to be produced in 

its class) is ahead of schedule, on schedule, or behind schedule, as of 

January 2007. 

Deepwater Asset 

Delivery Schedule 

Shows Mixed Results

 16 See GAO-04-380. 

Page 19 GAO-07-575T 
Figure 1: Comparison of the Estimated Delivery Dates for the First-in-Class 

Deepwater Assets from the 2005 Deepwater Acquisition Baseline and as of January 

2007 

2000

2005

2010

2015

2020

OPC FRC VUAV NSC LRI SRP MPA LRS MRR MCH

Year that first-in-class asset is delivered

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

Asset

Delivery as of 2005 Acquisition Program Baseline

Delivery as of January 2007

Among the Deepwater assets, 3 of the 5 aircraft classes are upgrades to 

existing legacy systems, and these are all on or ahead of schedule; 1 new 

aircraft class is ahead of schedule; and the remaining new aircraft class is 

6 years behind schedule. With respect to Deepwater vessels, all 5 asset 

classes are new, and of these, 2 are behind schedule, and a third, while on 

schedule, faces structural modifications. The remaining 2 new maritime 

assets are small vessels that are on or ahead of schedule at this time. 

Assets That Are on or 

Ahead of Schedule as of 

January 2007 

The status of each asset class, and our preliminary observations on the 

factors affecting their status, is discussed below. 

The LRI is a 36-foot small boat that is to be carried and deployed on each 

NSC and OPC. Coast Guard has one LRI on contract for delivery in August

2007, to match delivery of the first NSC. 

Long-Range Interceptor 

Page 20 GAO-07-575T 
According to the Coast Guard, the SRP is on schedule at this time and 8 

have been delivered to date. Coast Guard is currently planning to pursue 

construction and delivery of the remaining SRPs outside of the systems 

integrator contract. By doing so, the Coast Guard expects to achieve a cost 

savings. 

Short-Range Prosecutor 

The MPA is a commercial aircraft produced in Spain that is being acquired 

to replace the legacy HU-25 aircraft and will permit the Coast Guard to 

carryout missions such as search and rescue, marine environmental 

protection, and maritime security. The first MPA was delivered to the 

Coast Guard in December 2006 and the second and third are due for 

delivery by April 2007. Pilots and aircrew participated in training classes in 

Spain, and Coast Guard is to take responsibility for the development and 

implementation of MPA’s maintenance and logistics. 

Maritime Patrol Aircraft 

The LRS is an upgraded legacy fixed-wing aircraft that includes 6 C-130Js 

and 16 C-130Hs. The first aircraft entered the modification process in 

January 2007, and five additional aircraft are to be modified by July 2008. 

In fiscal year 2008, funding has been requested to upgrade the C-130H 

radar and avionics, and for the C-130J fleet introduction. 

Long-Range Surveillance 

Aircraft 

The MRR is an upgraded legacy HH-60 helicopter. It began receiving a 

series of upgrades beginning in fiscal year 2006, which will continue into 

fiscal year 2012, including the service life extension program and radar 

upgrades. 

Medium-Range Recovery 

Helicopter

The MCH is an upgraded legacy HH-65 helicopter. According to Coast 

Guard officials, the MCH assets will not have a single delivery date, as the 

process involves three phases of upgrades. Phase I is the purchase and 

delivery of new engines and engine control systems, Phase II is a servicelife extension program, and Phase III includes communications upgrades. 

A Coast Guard official stated that 84 of the 95 HH-65s should be re-engined 

by June 2007, and all 95 should be finished by October 2007. The fiscal 

year 2008 congressional budget justification states that Phase II began in

fiscal year 2007 and will end in fiscal year 2014, and that Phase III is to 

begin in fiscal year 2008 and is to end in fiscal year 2014. 

Multi-Mission Cutter Helicopter 

According to Coast Guard documentation, the first NSC is on schedule for 

delivery in August 2007 despite required modifications regarding its 

structural integrity. In particular, the Coast Guard Commandant recently 

stated that internal reviews by Coast Guard engineers, as well as by 

independent analysts, have concluded that the NSC, as designed, will need 

structural reinforcement to meet its expected 30-year service life. In 

National Security Cutter 

Page 21 GAO-07-575T 
addition, the DHS Office of Inspector General recently reported that the 

NSC design will not achieve a 30-year service life based on an operating 

profile of 230 days underway per year in general Atlantic and North Pacific 

sea conditions and added that Coast Guard technical experts believe the 

NSC’s design deficiencies will lead to increased maintenance costs and 

reduced service life.17

To address the structural modifications of the NSC, Coast Guard is taking 

a two-pronged approach. First, Coast Guard is working with contractors to 

enhance the structural integrity of the hulls of the remaining six NSCs that

have not yet been constructed. Second, after determining that the NSC’s 

deficiencies are not related to the safe operation of the vessel in the near 

term, Coast Guard has decided to address the structural modifications of 

the hulls of the first two cutters as part of planned depot-level 

maintenance after they are delivered. The Commandant stated that he

decided to delay the repairs to these hulls to prevent further delays in 

construction and delivery. 

Deepwater Assets Behind 

Schedule as of January 

2007 

Coast Guard officials have stated that further work on the development of 

the OPC is on hold and the Coast Guard did not request funding for the 

OPC in fiscal years 2007 or 2008. Delivery of the first OPC has been 

delayed by 5 years—from 2010 to 2015. 

Offshore Patrol Cutter

Concerns about the viability of the design of the FRC have delayed the 

delivery of the first FRC by at least 2 years. Coast Guard suspended design 

work on the FRC in late February 2006 because of design risks. Because 

the Coast Guard has suspended design work, Coast Guard officials now 

estimate that the first FRC delivery will slip to fiscal year 2010, at the 

earliest 

Fast Response Cutter 

According to the Coast Guard, evolving technological developments and 

the corresponding amount of funding provided in fiscal year 2006 have 

delayed the delivery of the VUAV by 6 years—from 2007 to 2013. As a 

result, the Coast Guard has adjusted the VUAV development plan. The 

Vertical Unmanned Aerial 

Vehicle 

 17 DHS OIG-07-23. 

Page 22 GAO-07-575T 
fiscal year 2008 DHS congressional budget justification indicates that the 

Coast Guard does not plan to request funding for the VUAV through fiscal 

year 2012. Coast Guard originally intended on matching the NSC and 

VUAV delivery dates so that the VUAV could be launched from the NSC to 

provide surveillance capabilities beyond the cutter’s visual range or 

sensors. However, with the delay in the VUAV’s development schedule, it

no longer aligns with the NSC’s initial deployment schedule. Specifically, 

Coast Guard officials stated that the VUAV will not be integrated with the 

NSC before fiscal year 2013, 6 years later than planned. Coast Guard 

officials stated that they are discussing how to address the operational 

impacts of having the NSC operate without the VUAV. In addition, Coast 

Guard officials explained that since the time of the original contract 

award, the Department of Defense has progressed in developing a 

different unmanned aerial vehicle—the Fire Scout—that Coast Guard 

officials say is more closely aligned with Coast Guard needs. Coast Guard 

has issued a contract to an independent third party to compare the 

capabilities of its planned VUAV to the Fire Scout. 

In addition to the overall management problems, there have been 

problems with the performance and design of Deepwater patrol boats and

its replacement vessel, the FRC, that pose significant operational 

challenges for the Coast Guard. 

Performance and 

Design Problems 

Creating Operational 

Challenges 

Performance Problems 

with the Converted 123-

foot Patrol Boats 

Between January 2001 and November 2006, numerous events led up to the 

failure of the Coast Guard’s bridging strategy to convert the legacy 

110-foot patrol boats into 123-foot patrol boats. In January 2001, an

independent study found that the 110-foot patrol boats based in south 

Florida and Puerto Rico were experiencing severe hull corrosion and that 

their structural integrity was deteriorating rapidly.

18 To address these 

issues, the Coast Guard’s original (2002) Deepwater plan included a 

strategy to convert all 49 of the 110-foot patrol boats into 123-foot patrol 

boats and to strengthen the hulls. Also, the plan was to provide additional 

capabilities, such as stern launch and recovery capabilities and enhanced 

C4ISR. While Coast Guard originally planned to convert all 49 of its 110-

foot patrol boats to 123-foot patrol boats, it halted the patrol boat 

conversion program after 8 boats because of continued deck cracking, hull 

 18 CSC Advanced Marine, Evaluation of the 110’ WPB Class Cutter Fleet (January 2001). 

Page 23 GAO-07-575T 
buckling, and the inability of these converted patrol boats to meet postSeptember 11, 2001 mission requirements. The Commandant then decided 

to remove these 8 converted boats from service on November 30, 2006 

because of operational and safety concerns. 

The Coast Guard is taking actions to mitigate the operational impacts 

resulting from the removal of the 123-foot patrol boats from service. 

Specifically, in recent testimony, the Commandant of the Coast Guard 

stated that Coast Guard has taken the following actions: 

• multi-crewing certain 110-foot patrol boats with crews from the 

123-foot patrol boats that have been removed from service so that 

patrol hours for these vessels can be increased; 

• deploying other Coast Guard vessels to assist in missions formerly 

performed by the 123-foot patrol boats; and 

• securing permission from the U.S. Navy to continue using 179-foot 

cutters on loan from the Navy for an additional 5 years (these were 

originally to be returned to the Navy in 2008) to supplement the Coast 

Guard’s patrol craft. 

Design Problems with the 

Fast Response Cutter 

The FRC—which was intended as a long-term replacement for the legacy

110-foot patrol boats—has experienced design problems that have 

operational implications. As we recently reported, the Coast Guard 

suspended design work on the FRC due to design risks such as excessive 

weight and horsepower requirements.19 Specifically, beginning in January 

2005, Coast Guard engineers raised concerns about the viability of the 

FRC design (which involved building the FRC’s hull, decks, and bulkheads 

out of composite materials rather than steel). Then, in February 2006, the

Coast Guard suspended FRC design work after an independent design 

review by third-party consultants demonstrated, among other things, that 

the FRC would be far heavier and less efficient than a typical patrol boat 

of similar length, in part, because it would need four engines to meet Coast 

Guard speed requirements 

To address the design problems and schedule delays that have occurred 

with the FRC, the Coast Guard is proceeding with a “dual-path approach” 

for acquiring new patrol boats. The first component of the dual-path 

approach is to have the Deepwater systems integrator purchase a 

 19 GAO-06-764. 

Page 24 GAO-07-575T 
commercial off-the-shelf patrol boat design that can be adapted for Coast 

Guard use. The purpose of designing the first class of FRCs based on an 

adaptation of a patrol boat already on the market is to expedite delivery. 

According to Coast Guard officials, unlike the original plans, this FRC 

class is not expected to meet all performance requirements originally 

specified, but is intended as a way to field an FRC more quickly than 

would otherwise occur and that can, therefore, serve as an interim 

replacement for the deteriorating fleet of 110-foot patrol boats. 

The second component of the dual-path approach would be to completely

redesign an FRC to address the problems in the original FRC design plans. 

However, due to continuing questions about the feasibility of its planned 

composite hull, the Coast Guard has delayed a decision about its 

development or acquisition until it receives results from a business case 

analysis comparing the use of composite versus steel hulls., as well as a 

study by DHS’s Science and Technology Directorate on composite hull 

technology. Until recently, the Coast Guard anticipated delivery of the 

redesigned FRC in 2010. However, the decision to not request funding for

this redesigned FRC in fiscal year 2008, and to await the results of both 

studies before moving forward, will likely further delay delivery of the 

redesigned FRC. In regard to the suspension of FRC design work, as of our 

June 2006 report, Coast Guard officials had not yet determined how 

changes in the design and delivery date for the FRC would affect the 

operations of the overall system-of-systems approach. 

Mr. Chairman, this concludes my testimony. I would be happy to respond

to any questions Members of the Committee may have. 

Page 25 GAO-07-575T 
For further information about this testimony, please contact Stephen L. 

Caldwell, Acting Director, Homeland Security and Justice, (202) 512-9610, 

caldwells@gao.gov; or John Hutton, Acting Director, Acquisition and 

Sourcing Management, (202) 512-4841, huttonj@gao.gov. 

GAO Contacts and 

Acknowledgments 

Other individuals making key contributions to this testimony include 

Penny Berrier Augustine, Amy Bernstein, Christopher Conrad, Adam 

Couvillion, Kathryn Edelman, Melissa Jaynes, Crystal M. Jones, Michele 

Mackin, Jessica Nierenberg, Raffaele Roffo, Leslie Sarapu, Karen Sloan,

and Jonathan R. Tumin. 

Page 26 GAO-07-575T 
Page 27 GAO-07-575T 

Related GAO Products 

Coast Guard: Preliminary Observations on Deepwater Program Assets 

and Management Challenges, GAO-07-446T (Washington, D.C.: February 

15, 2007). 

Coast Guard: Coast Guard Efforts to Improve Management and Address 

Operational Challenges in the Deepwater Program, GAO-07-460T 

(Washington, D.C.: February 14, 2007). 

Homeland Security: Observations on the Department of Homeland 

Security’s Acquisition Organization and on the Coast Guard’s 

Deepwater Program, GAO-07-453T (Washington, D.C.: February 8, 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: Preliminary Observations on the Condition of Deepwater

Legacy Assets and Acquisition Management Challenges, GAO-05-307T

(Washington, D.C.: Apr. 20, 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). 

Coast Guard: Progress Being Made on Deepwater Project, but Risks 

Remain, GAO-01-564 (Washington, D.C.: May, 2, 2001) 

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