United States Government Accountability Office

GAO Statement for the Record to the 

Subcommittee on Oceans, Atmosphere, 

Fisheries, and Coast Guard, Committee on 

Commerce, Science, and Transportation, 

U.S. Senate

COAST GUARD

Observations on the Fiscal 

Year 2008 Budget, 

Performance, 

Reorganization, and Related 

Challenges 

Statement for the Record by Stephen L. Caldwell, 

Acting Director 

Homeland Security and Justice Issues 

For Release on Delivery

Expected at 2:30 p.m. EDT

Wednesday, April 18, 2007

 

GAO-07-489T 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

April 2007

COAST GUARD

Observations on the Fiscal Year 2008 

Budget, Performance, Reorganization, 

and Related Challenges 

Highlights of GAO-07-489T, a statement 

for the record to the Subcommittee on 

Oceans, Atmosphere, Fisheries, and 

Coast Guard, Committee on Commerce,

Science, and Transportation, U.S. Senate 

The U. S. Coast Guard is a

multimission agency responsible 

for maritime safety, security, and 

stewardship. It performs these 

missions, relating to homeland

security and non-homeland

security in U.S. ports and inland

waterways, along the coasts, and 

on international waters. 

The President’s budget request, 

including the request for the Coast

Guard, was transmitted to 

Congress on February 5, 2007. 

This testimony, which is based on 

current and past GAO work, 

synthesizes the results of this work 

as it pertains to the following: 

• budget requests and

performance goals, 

• organizational changes and

related management 

initiatives, 

• current acquisition efforts and

challenges, and 

• challenges related to

performing traditional legacy 

missions. 

What GAO Recommends

While this statement makes no 

recommendations, in the past GAO 

has made a number of

recommendations on issues

covered in this statement. The 

Coast Guard is in various stages of 

implementing these 

recommendations. 

The Coast Guard’s fiscal year 2008 budget request totals $8.7 billion, an 

increase of 3 percent over the enacted budget for fiscal year 2007 and a 

slowing of the agency’s budget increases over the past 3 fiscal years. The 

Coast Guard expects to meet its performance goals in 6 of 11 mission areas 

in fiscal year 2006, down from 8 in 2005. Trends indicate increased homeland

security activities have not prevented meeting non-homeland security goals. 

Two new reorganization efforts are under way. One creates a single 

command for all specialized deployable units, such as those for responding 

to pollution or terrorist incidents. However, experience with an effort to 

reorganize field units suggests there may be challenges in such matters as 

merging different operating approaches and addressing resource issues. The 

other effort merges the Coast Guard’s various acquisition management 

efforts under a single Chief Acquisition Officer. The reorganization of 

acquisition management is in part a response to past troubled acquisition 

efforts. This change in the acquisition structure is too new to assess. 

Current major acquisitions include Deepwater for cutters and aircraft, the 

Rescue 21 communication system, and the National Automatic Identification 

System for vessel tracking. Deepwater and Rescue 21 have had schedule 

delays and performance reductions in the past, but the Coast Guard has been 

taking actions to improve oversight. Installation of equipment for the first 

phase of the National Automatic Identification System is under way, but the 

Coast Guard is still determining which types of vessels will have to 

participate. All three programs have also accumulated sizeable carryover 

balances of unspent moneys from previous years. 

Competing funding priorities have placed aging polar icebreakers and aidsto-navigation assets at risk. Many aids-to-navigation vessels are near the end 

of their service lives. The Coast Guard is exploring alternatives for 

replacement or extending their service. Similarly, high maintenance costs 

prompted the Coast Guard to take one of two Antarctic icebreakers out of 

service, increasing reliance on the remaining one. 

Competing priorities have reduced funds to maintain or replace aging Coast Guard assets, 

such as aids-to-navigation vessels and polar icebreakers. 

Source: Coast Guard.

www.gao.gov/cgi-bin/getrpt?GAO-07-489T.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Stephen 

Caldwell at (202) 512-9610 or 

caldwells@gao.gov. 
Madame Chair and Members of the Subcommittee: 

I am pleased to provide this statement for the record about the President’s

fiscal year 2008 budget request for the Coast Guard. As you know, the 

Coast Guard has grown significantly since September 11, 2001, to help

meet its responsibility to protect America’s ports, waterways, and 

waterside facilities from terrorist attacks while maintaining responsibility 

for many other programs important to the nation’s interests, such as 

helping stem the flow of illegal drugs and illegal immigration, protecting 

important fishing grounds, and responding to marine pollution. While the 

Coast Guard budget request continues to increase in fiscal 2008, it also 

shows shifts in direction. By placing less emphasis on acquiring new assets 

and reorganizing some of its functional areas, the Coast Guard is 

attempting to rectify some of its management concerns of the past while 

better preparing itself for the challenges of the future. 

My statement today provides: 

• an overview of the Coast Guard’s fiscal year 2008 budget request and 

key performance indicators, 

• a discussion of various organizational changes and related management 

initiatives, 

• a status update on some current acquisition efforts and challenges, and 

• a look at additional challenges related to traditional legacy missions. 

My statement is based in part on prior GAO work focusing on the Coast 

Guard’s programmatic and management initiatives (a listing of related 

reports is included at the end of my statement). Additionally, we 

conducted interviews with headquarters, Pacific Area, and Sector San 

Francisco personnel, and reviewed budget, performance, and acquisition 

documents. The scope of our work did not include evaluating whether the 

proposed funding levels are commensurate with the Coast Guard’s stated 

needs. Our scope was limited due to the short time available between the 

release of the President’s fiscal year 2008 budget request and the hearing

date of mid-April. All work for this statement was conducted in 

accordance with generally accepted government auditing standards 

between February and March 2007.

Page 1 GAO-07-489T 
The Coast Guard’s fiscal year 2008 budget request is moderately higher 

than its fiscal year 2007 budget, but it increased at a lower rate, mainly 

reflecting a slowing in requests for funding acquisition, construction, and 

improvement (AC&I) projects. The 2008 overall budget request of $8.73

billion is approximately 3 percent higher than the 2007 enacted budget, but 

unlike in prior years, the AC&I budget decreased by 19 percent. According 

to Coast Guard officials, this decrease is in part due to some recognized 

problems with ongoing acquisition programs and the desire to strengthen 

operating capabilities, including contract and acquisition oversight. While 

the AC&I budget request is down, a substantial pool of unspent funds 

appropriated for acquisition projects in previous years remains available 

to the Coast Guard. Current unobligated balances in these projects total 

$1.96 billion, of which $1.63 billion is associated with Integrated 

Deepwater System acquisitions. The Coast Guard expects to meet its 

performance goals in 6 of the 11 mission areas in fiscal 2006 (as compared 

to meeting performance goals in 8 of 11 missions in fiscal 2005). 

Performance trends over the past 5 years also show that increased 

homeland security activities have not prevented the Coast Guard from 

meeting its non-homeland security mission goals. The Coast Guard 

continues to develop ways to better understand the links between 

resources it expends and the results it achieves. 

Summary 

The budget request reflects a continued emphasis on reorganization 

efforts, all of which carry ongoing challenges. These efforts began with the

combination of marine safety offices and Coast Guard groups into sectors 

in 2006. While the Coast Guard has completed its organizational changes 

to place local units under sector commands, not all of the units have been

able to move to a single location, a key ingredient in bringing about the 

improved integration expected from the realignment. Funding was not 

provided in the fiscal year 2008 budget to complete the desired colocation.

A reorganization effort that is to begin this year is designed to bring the 

different mobile deployable units responsible for such actions as pollution

response, law enforcement, port security, and counterterrorism under a 

single command rather reporting to three different authorities. The Coast 

Guard hopes to gain more effective management, oversight, and 

coordination of these deployable forces. Challenges here include 

addressing “buy-in” and related issues from units affected by the changes, 

ensuring that mission performance of sectors that previously made use of 

these units for everyday activities is not compromised, and effectively 

establishing and operating the new centralized command. A third 

organizational effort to improve Coast Guard operations—in this case, to

improve its troubled acquisition contract management—is the merging of 

the various acquisition management efforts under a Chief Acquisitions 

Page 2 GAO-07-489T 
Officer. One challenge in making this move effective is the need to build a 

more robust cadre of acquisition management professionals. 

Three major Coast Guard acquisition projects are making progress at 

varying rates, but challenges remain for all three in the future. The record 

for Deepwater has been mixed. Seven of 10 asset classes being acquired 

are on or ahead of schedule. Three classes, however, are behind schedule 

for various reasons and several factors add to the uncertainty about the 

delivery schedule of other Deepwater assets. Contract management issues, 

accountability of the contractor, and cost control through competition 

have been recurring challenges for the Coast Guard. Separate from 

Deepwater, the National Automatic Identification System (NAIS), a 

program designed to allow the Coast Guard to monitor and track vessels 

as far as 2,000 nautical miles off the U.S. coast, is under way, and 

infrastructure for the first phase of the system is currently being installed. 

The Coast Guard is considering whether to require more types of vessels 

to install and operate tracking equipment—an issue that affects the extent 

to which the system will provide information on the location of vessels of 

interest. The Coast Guard’s timeline for achieving full operating capability 

for its search and rescue communications system, Rescue 21, was delayed

from 2006 to 2011, and the estimated total acquisition cost increased from 

1999 to 2005, but according to Coast Guard officials, many of the issues 

that led to these problems are being addressed. Coast Guard acquisition 

officials said they are providing more oversight to the contractor after we 

reported on contract management shortcomings. According to Coast 

Guard officials, the contracts that would set specific schedules and 

budgets for the last 25 regions in which the system will be installed have 

yet to be signed. Also, there has been a reduction in promised 

improvements to limit communications gaps; originally, Rescue 21 was 

intended to limit communications gaps to 2 percent, and that target was 

reduced to less than 10 percent. 

Some of the Coast Guard’s non-homeland security missions are facing 

challenges based on competition for resources with homeland securityoriented funding needs. Many domestic icebreaking and aids-to-navigation

vessels are also reaching the end of their designed service lives. While 

these vessels have been able to meet mission goals to date, without major 

rehabilitation or replacement, their ability to carry out their designated 

missions will likely decline in the future. The Coast Guard is currently 

examining options for addressing this issue. Similarly, the inability to 

obtain needed maintenance funding has led the Coast Guard to take one 

Polar-class icebreaker out of service to keep its remaining aging Polarclass vessel, the Polar Sea, operational. With only one icebreaker capable

Page 3 GAO-07-489T 
of keeping access to Antarctica open, there is a greater possibility that 

mechanical problems or other maintenance issues could affect this 

mission. 

The U.S. Coast Guard is a multimission, maritime military service within 

the Department of Homeland Security (DHS). To accomplish its 

responsibilities, the Coast Guard is organized into two major commands 

that are responsible for overall mission execution—one in the Pacific area

and the other in the Atlantic area. These commands are divided into 9 

districts, which in turn are organized into 35 sectors that unify command 

and control of field units and resources, such as multimission stations and 

patrol boats. In fiscal year 2005, the Coast Guard had over 46,000 full-time 

positions—about 39,000 military and 7,000 civilians. In addition, the 

agency had about 8,100 reservists who support the national military 

strategy or provide additional operational support and surge capacity 

during times of emergency, such as natural disasters. Furthermore, the 

Coast Guard also had about 31,000 volunteer auxiliary personnel help with

a wide array of activities, ranging from search and rescue to boating safety 

education. The Coast Guard has responsibilities that fall under two broad 

missions—homeland security and non-homeland security. The Coast 

Guard responsibilities are further divided into 11 programs, as shown in 

table 1. 

Background 

Page 4 GAO-07-489T 
Table 1: Homeland Security and Non-Homeland Security Programs by Mission Area 

Mission and program Activities and functions of each program

Homeland security missions 

• Ports, waterways, and coastal security Conducting harbor patrols, vulnerability assessments, intelligence gathering and

analysis, and other activities to prevent terrorist attacks and minimize the damage 

from attacks that occur. 

• Undocumented migrant interdiction Deploying cutters and aircraft to reduce the flow of undocumented migrants

entering the United States by maritime routes. 

• Defense readiness Participating with the Department of Defense (DOD) in global military operations,

deploying cutters and other boats in and around harbors to protect DOD force

mobilization operations. 

Non-homeland security missions 

• Search and rescue Operating multimission stations and a national distress and response

communication system, conducting search and rescue operations for mariners in

distress. 

• Living marine resources Enforcing domestic fishing laws and regulations through inspections and fishery

patrols. 

• Aids to navigation Managing U.S. waterways and providing a safe, efficient, and navigable marine

transportation system, maintaining the extensive system of navigation aids,

monitoring marine traffic through vessel traffic service centers. 

• Ice operations Conducting polar operations to facilitate the movement of critical goods and 

personnel in support of scientific and national security activity, conducting 

domestic icebreaking operations to facilitate year-round commerce, conducting

international ice operations to track icebergs below the 48th north latitude. 

• Marine environmental protection Preventing and responding to marine oil and chemical spills, preventing the illegal

dumping of plastics and garbage in U.S. waters, preventing biological invasions by

aquatic nuisance species. 

• Marine safety Setting standards and conducting vessel inspections to better ensure the safety of 

passengers and crew aboard commercial vessels, partnering with states and 

boating safety organizations to reduce recreational boating deaths. 

• Illegal drug interdiction Deploying cutters and aircraft in high drug-trafficking areas and gathering 

intelligence to reduce the flow of illegal drugs through maritime transit routes. 

• Other law enforcement (foreign fish 

enforcement) 

Protecting U.S. fishing grounds by ensuring that foreign fishermen do not illegally

harvest U.S. fish stocks. 

Source: Coast Guard. 

Note: The Coast Guard’s homeland security and non-homeland security missions are delineated in 

section 888 of the Homeland Security Act of 2002 (P. L. 107-296, 116 Stat. 2135, 2249 (2002)). 

Starting with the fiscal year 2007 budget, however, the Office of Management and Budget (OMB) 

designated the Coast Guard’s drug interdiction and other law enforcement as non-homeland security

missions for budgetary purposes.

For these 11 programs, the Coast Guard has developed performance 

measure to communicate agency performance and provide information for 

the budgeting process to Congress, other policymakers, and taxpayers. 

The Coast Guard’s performance measures are published in various 

Page 5 GAO-07-489T 
documents, including the Coast Guard’s fiscal year Budget-in-Brief. The 

Coast Guard’s Budget-in-Brief reports performance information to assess 

the effectiveness of the agency’s performance as well as a summary of the 

agency’s most recent budget request. This, and other documents, reports 

the performance measures for each of the Coast Guard’s programs, as well 

as descriptions of the measures and explanations of performance results.

To continue executing its missions, the Coast Guard has programs to 

acquire a number of assets such as vessels, aircraft, and command, 

control, communications, computer, intelligence surveillance, and 

reconnaissance (C4ISR) systems. The Coast Guard’s Deepwater program 

is a 25-year, $24 billion effort to upgrade or replace existing vessels and 

aircraft in order to carry out its missions along our coastlines and farther 

out at sea. The program is eventually to include 10 major classes of new or 

upgraded vessels and aircraft. The Coast Guard also has an acquisition 

program called the National Automatic Identification System to identify 

and track vessels bound for or within U.S. waters. Another acquisition 

program is called Rescue 21, a program to replace the Coast Guard’s 30-

year-old search and rescue communications systems. Rescue 21 was to be

used not only for search and rescue, but to support other Coast Guard 

missions, including those involving homeland security. 

The Coast Guard’s fiscal year 2008 budget request reflects a smaller 

increase than in years past. Requests for new capital spending are down, 

as the agency slows the pace of new acquisitions for Deepwater and other

capital projects. Instead, several of the budget initiatives being emphasized 

reflect a reorganization of internal operations and support command 

infrastructure. Although the Coast Guard met fewer performance targets 

than last year, overall performance trends for most mission programs 

remain positive. That is, many of the measures that Coast Guard uses to 

evaluate performance have improved since last year, even though the 

agency did not meet as many of its performance targets in 2006 as in the 

year before.

Budget Places More 

Emphasis on 

Operational 

Expenses; Overall 

Performance Trends 

Remain Positive 

Page 6 GAO-07-489T 
The Coast Guard’s budget request in fiscal year 2008 is $8.73 billion, 

approximately $275 million, or 3.3 percent, more than in fiscal year 2007 

(see fig. 1).1

 About $5.9 billion, or approximately 68 percent, is for 

operating expenditures (OE). This funding supports its 11 statutorily 

identified mission programs; increases in cost of living, fuel, and 

maintenance costs; and previous administration and congressional 

initiatives. The greatest change from the previous year is in the AC&I 

request, which at $949 million reflects about a 19 percent decrease from 

fiscal year 2007. According to Coast Guard officials, no new 

appropriations are requested in fiscal year 2008 for several Deepwater 

assets until business case reviews can be completed to assess the viability 

of technology and contracting oversight. The remaining part of the request

consists primarily of funds requested for retiree pay and health care fund 

contributions. If the Coast Guard’s total budget request is granted, overall 

funding will have increased by over 55 percent since 2002, an increase of 

$3.1 billion.

Overall Budget Request Is 

3.3 Percent Higher than 

Previous Year’s

 1

GAO’s analysis of the Coast Guard’s fiscal year 2008 budget request is presented in

nominal terms. Supplemental funding received for Operation Iraqi Freedom and Hurricane 

Katrina are not included in the analysis, except where noted. 

Page 7 GAO-07-489T 
Figure 1: Coast Guard Budget from Fiscal Year 2002 to Fiscal Year 2008 

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

Dollars in millions (in nominal terms)

Source: GAO analysis of Coast Guard data.

Total

OE

ACI

2008

Actual Enacted Requested

2002 2003 2004 2005 2006 2007

5,602

3,757

702

6,811

4,920

720

7,012

4,718

1,007

7,525

5,250

1,080

7,963

5,434

846

8,451

5,568

1,130

8,726

5,894

949

Note: The Coast Guard’s budget consists of discretionary and mandatory funding line items. The 

operating expenses and acquisition, construction, and improvements line items make up the biggest 

portion of discretionary funding. Other line items in the Coast Guard’s discretionary budget include 

environmental compliance and restoration, health care contributions, research and development, and 

reserve training costs. Retiree pay is the largest item the Coast Guard’s mandatory funding budget, 

and the Coast Guard is requesting $1.18 billion for retiree pay in 2008. Other mandatory funding line 

items include boating safety, oil spill liability trust fund, and the gift fund. 

The Coast Guard’s budget request for homeland security missions 

represents approximately 35 percent of the overall budget.2

 Figure 2 

illustrates the percentage of funding requested for homeland security 

versus non-homeland security funding, and figure 3 shows the funding 

levels by each mission program. 

 2

Beginning with the fiscal year 2007 budget, the Office of Management and Budget 

designated the Coast Guard’s drug interdiction and other law enforcement programs as 

non-homeland security missions for budgetary purposes. If these two programs are 

included as homeland security missions, overall homeland security funding in the fiscal 

year 2008 budget request is approximately 52 percent of the total budget. 

Page 8 GAO-07-489T 
Figure 2: Amount (in millions of dollars) and Percentage of Homeland Security 

versus Non-Homeland Security Funding 

35%

65%

Source: GAO analysis of Coast Guard data.

Non-homeland security

($5,650.50)

Homeland security

($3,075.90)

Page 9 GAO-07-489T 
Figure 3: Coast Guard Fiscal Year 2008 Budget Request by Mission Program 

Millions of dollars

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

Source: GAO analysis of Coast Guard data.

Non-homeland security Homeland security

Search and rescue

Marine safety

Aids to navigation

Ice operations

Marine environmental

Living marine resources

Other law enforcement

Illegal drug interdiction

Undocumented migrant

interdiction

Ports, waterways, and

coastal security

Defense readiness

protection

Budget Includes 

Reallocations to Match 

Reorganization 

Two key budget initiatives—both reallocations rather than increases—

reflect reorganization efforts. First, a major budget reallocation within the 

operating expenditures category establishes a single unified command for 

the agency’s deployable specialized forces. These are the Coast Guard’s 

response teams that can deploy wherever needed for natural disasters, 

terrorism incidents, and other concerns. According to senior Coast Guard 

officials, this initiative entails a onetime, budget-neutral reallocation of 

$132.7 million from the Atlantic and Pacific Area Commands to a new 

deployable operations command, which will be located in Ballston, 

Virginia. No new funds have been requested for this initiative. This 

initiative is discussed in more detail later in this testimony. The second 

reallocation involves an $80.5 million transfer from AC&I into the 

operating expense appropriation. The operational aspect of this 

reallocation is associated with creating a new consolidated acquisition 

function, also discussed in further detail below. Coast Guard officials said

this reallocation consolidates all personnel funding into the operating 

expense appropriation and enables the Coast Guard to manage one 

Page 10 GAO-07-489T 
personnel system for the entire agency. They said although this

reallocation is budget neutral in 2008, future budget requests may include 

financial incentives that will enable the Coast Guard to develop a more 

robust cadre of acquisition professionals. 

Acquisition Budget 

Request Declines, but 

Substantial Unobligated 

Balances Are Also

Available 

The 19 percent decrease in fiscal year 2008 for AC&I reflects a slowing in 

the pace of acquisition efforts, which, according to Coast Guard officials, 

is an attempt to address technology issues and contracting oversight 

associated with Deepwater programs such as the Vertical Unmanned 

Aerial Vehicle and Fast Response Cutter. The Coast Guard also recognizes 

that it is carrying significant unobligated balances for a number of its 

acquisition projects. These balances reflect money appropriated but not 

yet spent for projects included in previous years’ budgets. During our 

work for this testimony, we reviewed budget data and Coast Guard 

documentation showing the current status of the agency’s unobligated 

balances. We found, for example, that the current unobligated balances 

total $1.96 billion for all acquisition projects. The Deepwater acquisition 

alone has $1.6 billion in total unobligated balances, which is nearly double 

the Coast Guard’s fiscal year 2008 request for the Deepwater project. 

Other acquisition programs, such as the Nationwide Automatic 

Identification System and Rescue 21, also have unobligated balances, but 

these are considerably lower (see table 2). The unobligated balance for 

Rescue 21, for example, is $30.5 million. 

Table 2: Total Unobligated Balances for Selected Acquisition Projects (dollars in 

millions) 

Acquisition project

Fiscal year 2008 

request 

Unobligated

balance

Integrated Deepwater Systems $836.9 $1,632.6 

Shore Facilities and Aids to 

Navigation

37.9 156.8

Nationwide Automatic Identification 

System 

12.0 36.0

Rescue 21 80.8 30.5 

Vessels and Critical Infrastructure 

Projects 

9.2 30.3

Source: GAO analysis of Coast Guard data. 

These unobligated balances have accumulated for a variety of reasons as 

the Coast Guard has found itself unable to spend previous-year acquisition 

appropriations. For example, we and others have documented technical 

Page 11 GAO-07-489T 
design issues involving the Coast Guard’s 123-foot patrol boat and the Fast 

Response Cutter. These problems have led to major delays in some 

programs and outright cancellations in others. We asked Coast Guard 

officials about their plans to spend these unobligated balances either in 

fiscal year 2008 or beyond, but at this point they were unable to provide us

with detailed plans for doing so. To the agency’s credit, steps have been 

taken to address the issue, including reporting quarterly acquisition 

spending levels. Since these unobligated balances represent a significant 

portion of the Coast Guard’s entire budget, the degree to which the Coast

Guard spends these balances in fiscal year 2008 could have a substantial 

impact on the overall level of capital spending for the year. 

According to senior Coast Guard officials, each acquisition project is now 

receiving more scrutiny and oversight of how previous funds are spent. 

The Coast Guard is not requesting additional funds for the Offshore Patrol 

Cutter, Fast Response Cutter, and Vertical Unmanned Aerial Vehicle in the 

fiscal year 2008 budget request until business case reviews are completed

to assess the viability of the technology and contracting oversight. 

Performance Trends 

Generally Positive and 

Non-Homeland Security 

Measures Generally Sound 

Despite the fact that Coast Guard met fewer performance targets than last

year, overall performance trends for most mission programs remain 

positive. Performance in 7 of 11 Coast Guard mission areas increased in 

the last year, but the Coast Guard also set performance targets at a higher

level than it did last year. Coast Guard’s performance did not improve 

sufficiently for the Coast Guard to meet as many of its higher performance 

targets in 2006 as it did in 2005. In fiscal year 2006, the Coast Guard 

reported that 5 of its 11 programs met or exceeded program performance 

targets. In addition, agency officials reported that the Coast Guard 

expected to meet the target for 1 additional program when results become 

available in August 2007, potentially bringing the total met targets to 6 out

of 11 (see fig. 4). In comparison, last year we reported that in fiscal year 

2005, Coast Guard met 8 out of 11 targets. In fiscal year 2006, the agency

narrowly missed performance targets for 3 programs—Search and Rescue, 

Living Marine Resources, and Aids to Navigation. In fiscal year 2005, it 

missed only 1 of these 3, Living Marine Resources. The Coast Guard more 

widely missed performance targets for 2 programs, Defense Readiness and 

Marine Safety. In fiscal year 2005, Coast Guard met its Marine Safety 

target, but missed on Defense Readiness. See appendix I for more 

information on Coast Guard performance results.

Page 12 GAO-07-489T 
Figure 4: Number of Performance Targets the Coast Guard Met, or Anticipates 

Meeting, for the Coast Guard’s 11 Programs for Fiscal Years 2002 through 2006 

0

1

2

3

4

5

6

7

8

9

10

11

Number of performance targets the Coast Guard met and anticipates meeting

2002 2003 2004 2005 2006

Programs with final data available

Programs with final data not yet available

Source: GAO analysis of Coast Guard data.

4

7

6

8

5

1

Congressional committees have previously expressed concern that Coast 

Guard’s shift in priorities and focus toward homeland security missions 

following the events of September 11, 2001, may have affected the 

agency’s ability to successfully perform its non-homeland security 

missions. However, the Coast Guard’s performance on its non-homeland 

security indicators has not changed substantially over the past 5 years. 

This past year, we also completed an examination of some of the 

performance indicators themselves.3

 We found that while the Coast 

Guard’s non-homeland security measures are generally sound and the data

used to collect them are generally reliable, there are challenges associated

with using performance measures to link resources to results. Such 

challenges include comprehensiveness (that is, using a single measure per 

mission area may not convey complete information about overall 

 3

GAO, Coast Guard: Non-Homeland Security Performance Measures Are Generally

Sound, but Opportunities for Improvement Exist, GAO-06-816 (Washington, D.C.: August

2006). 

Page 13 GAO-07-489T 
performance) and external factors outside agency control, (such as 

weather conditions, which can affect the amount of ice that needs to be 

cleared or the number of mariners who must be rescued). The Coast 

Guard continues to work on these measures through such efforts as the 

following: 

• Standardized reporting. The Coast Guard is currently developing a 

way to standardize the names and definitions for all Coast Guard 

activities across the agency, creating more consistent data collection 

throughout the agency. 

• Measurement readiness. The Coast Guard is developing a tool to track 

the agency’s readiness capabilities with up-to-date information on 

resource levels at each Coast Guard unit as well as the certification and

skills of all Coast Guard uniformed personnel. 

• Framework for analyzing risk, readiness, and performance. The 

Coast Guard is developing a model for examining the links among risk, 

readiness management, and agency performance. This model is 

intended to help the Coast Guard better understand why events and 

outcomes occur, and how these events and outcomes are related to 

resources. 

While the Coast Guard appears to be moving in the right direction and is 

about done with some of these efforts, it remains too soon to determine 

how effective the Coast Guard’s larger efforts will be at clearly linking 

resources to performance results. These initiatives are not expected to be

fully implemented until 2010.4

 4

For more details on the Coast Guard’s efforts to match resources to performance results, 

see appendix III in GAO-06-816. 

Page 14 GAO-07-489T 
The 2008 budget request reflects a multiyear effort to reorganize the Coast 

Guard’s command and control and mission support structures. Three 

efforts are of note here—reorganizing shore-based forces into sector 

commands, placing all deployable specialized forces under a single 

nationwide command, and consolidating acquisitions management 

programs. Each of these efforts faces challenges that merit close attention.

Coast Guard 

Continues to Make 

Organizational 

Changes Designed to 

Improve Operational 

Effectiveness and 

Resource 

Management 

Further Action Needed to 

Ensure Operational 

Benefits from Sector 

Reorganization 

As we reported for the last 2 years, the Coast Guard has implemented a 

new field command structure that is designed to unify previously disparate 

Coast Guard units, such as air stations and marine safety offices, into 35

different integrated commands, called sectors. At each of these sectors, 

the Coast Guard has placed management and operational control of these 

units and their associated resources under the same commanding officer. 

Coast Guard officials told us that this change helped their planning and 

resource allocation efforts. For instance, Coast Guard field officials told us

the sector command structure has been valuable in helping to meet new 

homeland security responsibilities, and in facilitating their ability to 

manage incidents in close coordination with other federal, state, and local 

agencies. Our follow-up work found, however, that work remains to 

ensure the Coast Guard is able to maximize the potential benefits of sector 

realignment. In particular, Coast Guard officials reported that some 

sectors had yet to colocate their vessel tracking system (VTS) centers with 

the rest of their operational command centers. According to field officials,

the lack of colocation has hindered communications between staff that 

formerly were from different parts of the agency.

According to Coast Guard officials, competing acquisition priorities are 

limiting the progress in obtaining funding needed to colocate these 

facilities. The fiscal year 2008 budget does not provide funds to colocate 

the VTS centers and command centers. Coast Guard headquarters officials 

told us they would work to address this challenge as part of the capital 

investment plan to build interagency operational centers for port security, 

Page 15 GAO-07-489T 
as required under the SAFE Port Act, but they had not yet developed 

specific plans, timelines, and cost estimates.5

Unified Command 

Structure for Deployable 

Forces Is Being Developed 

The Coast Guard is planning to reorganize its deployable specialized 

forces under a single unified command, called the Deployable Operations 

Group (DOG). This change is reportedly budget neutral in the fiscal year 

2008 request, but it bears attention for operational effectiveness reasons. 

According to Coast Guard officials, the agency is making this change

based on lessons learned from the federal response to Hurricane Katrina. 

They said the response highlighted the need to improve effectiveness of 

day-to-day operations and to enhance flexibility and interoperability of 

forces responding to security threats and natural disasters. Currently, 

there are five different types of Coast Guard specialized forces, totaling 

about 2,500 personnel. Their roles and missions vary widely, ranging from 

conducting antiterrorism operations to conducting environmental 

response and cleanup operations (see table 3). 

 5

Pub. L. No. 109-347, 120 Stat. 1884 (2006). 

Page 16 GAO-07-489T 
Table 3: Coast Guard Deployable Specialized Forces, Mission Area and Primary 

Operational Activity, and Force Size 

Specialized force 

Mission area and primary 

operational activities Force size 

National strike force (NSF) Marine environmental 

protection

• Domestic and international 

response for oil spills 

• Hazardous material cleanup 

• Chemical, biological, and 

radiological response 

3 strike teams / 328 

personnel 

Tactical law enforcement 

teams (TACLET)

Law enforcement 

• Maritime interception 

operations 

2 units / 180 personnel 

Port security units (PSU) Defense readiness 

• Expeditionary port security 

8 units / 1,144 personnel 

Maritime safety and security 

teams (MSST) 

Ports, waterways, and coastal

security 

• Domestic port security 

• Antiterrorism 

12 units / 924 personnel 

Maritime security response 

team (MSRT)

Ports, waterways, and coastal

security 

Counterterrorism 

1 unit / 208 personnel 

Source: Coast Guard. 

The Coast Guard’s existing structure divides operational control of 

specialized forces into three different command authorities—

headquarters, Pacific Area, and Atlantic Area. Under the planned 

realignment, these forces would be available under a single operational 

command, with the expectation of more effective resource management, 

oversight, and coordination.6

 The Coast Guard plans to establish operating 

capability for this unified approach by July 20, 2007, with an initial 

command center located in Ballston, Virginia. Officials told us they were 

well under way in planning for this reorganization. Officials expect about

100 staff will be assigned to the center when it reaches its initial operating

 6

Although the deployable forces will be reorganized under a single command authority, 

officials told us the units would remain based in their current locations. However, 

personnel on these teams may be rotated or cross-deployed with other specialized teams. 

For example, an MSST located at Seattle will remain based in that location, but the

personnel attached to that MSST may be rotated or mixed with other MSST units to meet

ongoing needs.

Page 17 GAO-07-489T 
capability, growing to about 150 personnel once the command structure is 

completed. According to officials, all administrative staff selected for the

center will be drawn from headquarters, district, and area levels. 

We have not studied this reorganization, but our prior work on other 

aspects of Coast Guard operations suggests that the Coast Guard may face 

a number of implementation challenges. Some may be similar to those that

Coast Guard faced when it created its sector commands, such as obtaining

buy-in from personnel that will be affected by the reorganization or 

addressing realignment issues at the district level. Another challenge is to 

ensure that the change does not adversely affect mission performance at 

the sector and field unit levels. Currently, for example, sector commanders 

make use of available local MSST units—made available by district and 

area commanders—to help meet shortfalls in resource availability for 

everyday missions, such as conducting high-risk vessel escorts and harbor

security patrols. If these units were not available to support mission needs, 

additional strain could be put on the performance of these local units. 

These changes to the command structure are part of plans that extend

beyond fiscal year 2008. In his recent State of the Coast Guard speech, the 

Commandant of the Coast Guard unveiled a proposal to combine the 

Coast Guard’s Atlantic and Pacific Area command functions into a single 

Coast Guard operations command for mission execution. In addition, the 

Coast Guard plans to establish a new mission support command, which 

will have responsibility for nationwide maintenance, logistics, and supply 

activities. According to Coast Guard officials, the current structure is not

well suited to responding to post-September 11 transnational threats. For 

example, Coast Guard officials said the current structure at times works 

against the Coast Guard in operations with Joint Interagency Task Forces, 

whose operating areas are not the same as the Coast Guard’s established 

area boundaries. Coast Guard officials told us a working group had 

developed a blueprint of the new operational force structure, but the 

Coast Guard is not ready to release it. Guard officials told us they 

expected the reorganization would be implemented during the current 

Commandant’s 4-year term. 

Consolidation of 

Acquisitions Oversight 

Management Challenged 

By Staffing Shortfalls 

The Coast Guard also plans to consolidate its acquisitions management 

offices, placing all major acquisitions programs and oversight functions 

under the control of a single acquisitions officer. The goals of this 

consolidation are to improve Coast Guard oversight of acquisitions, better 

balance contracting officers and acquisition professionals among its major 

acquisition projects, and address staff retention and shortage problems 

Page 18 GAO-07-489T 
associated with the acquisitions management program. However, the

Coast Guard has not adequately staffed the acquisitions management 

program to meet its current workload, and maintaining an appropriate 

staff size will be challenging, despite the reorganization. For example, 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.7

 Headquarters 

officials told us the reorganization would address retention problems by 

creating a new acquisitions specialty career ladder that could attract new 

pools of talent. Still, given its past history of staff shortages and difficulties

retaining acquisition staff, the Coast Guard will face challenges 

maintaining an appropriately sized acquisition staff, at least in the near 

term. Coast Guard headquarters officials told us the Deepwater program 

had pushed other important acquisitions priorities aside, and this new 

organization would help the Coast Guard advance these other priorities, 

such as boats, piers, and other shoreside physical infrastructure. In our 

view, it is unclear how the reorganization of the acquisition function will 

improve the prospects for these other programs, given Coast Guard’s 

priorities and ongoing constraints on funding. 

The reorganized acquisition office is expected to merge the now standalone Deepwater acquisition project with the existing acquisition 

directorate and research and development centers. The new office is 

expected to be led by a new Coast Guard Chief Acquisition Officer who 

will have responsibility over all procurement projects and by a deputy who 

will deal largely with Deepwater issues. At the program management level,

Coast Guard is establishing four program managers to lead each 

acquisitions area, including (1) surface assets; (2) air assets; (3) command, 

control, communications, computers, intelligence, surveillance, and 

reconnaissance; and (4) small boats and shore-based infrastructure, such

as command centers and boathouses. The Coast Guard plans to begin 

implementing this reorganization in July 2007. It is too early to tell if the 

Coast Guard’s reorganization will enable it to achieve its goals—notably, 

better balance of acquisitions support between Deepwater and the Coast 

Guard’s other acquisitions programs. 

 7

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

Program, (Fort Belvoir, Virginia, 2007). 

Page 19 GAO-07-489T 
While some Coast Guard major acquisition projects continue to face 

challenges, especially the Deepwater program, several of these projects 

are making progress. The record for Deepwater has been mixed, with 7 of 

10 asset classes on or ahead of schedule. Three classes, however, are 

behind schedule for various reasons and several factors add to the 

uncertainty about the delivery of other Deepwater assets. Contract 

management issues that we have reported on previously continue to be 

challenges to the Coast Guard. Installation of equipment for the initial 

phase of NAIS, an acquisition that is designed to allow the Coast Guard to 

monitor and track vessels as far as 2,000 nautical miles off the U.S. coast, 

is currently under way, but without changes to existing regulations, some 

vessels will be able to avoid taking part in the system. The Coast Guard’s 

timeline for achieving full operating capability for its search and rescue 

communications system, Rescue 21, was delayed from 2006 to 2011, and

the estimated total acquisition cost increased from 1999 to 2005, but 

according to Coast Guard officials, many of the issues that led to these 

problems are being addressed. Coast Guard acquisition officials said they 

are providing more oversight to the contractor after we reported on 

contract management shortcomings. 

Acquisition 

Challenges Continue 

as Several Programs 

Make Progress 

Coast Guard Continues to 

Face Acquisition 

Challenges with 

Deepwater Program 

The Coast Guard continues to face challenges in managing the Deepwater

program. The delivery record for assets is mixed and technology and

funding uncertainties, recent changes to Coast Guard plans for procuring 

Deepwater assets, as well as the 25-year time frame for asset delivery add

to uncertainties about the delivery schedule for future Deepwater assets. 

We have reported concerns about management of the Deepwater program 

for several years now and have made recommendations aimed at 

improving the program. The Coast Guard continues to address these 

recommendations as it seeks to better manage the Deepwater program. In 

addition to these program management issues, performance and design 

problems for certain Deepwater assets have created additional operational 

challenges for the Coast Guard. The Coast Guard is taking steps to 

mitigate these problems, but challenges remain. Below is a summary of 

our recent Deepwater work.8

 8

For a more complete description of our reviews of the Deepwater program, see GAO,

Coast Guard: Preliminary Observations on Deepwater Program Assets and Management 

Challenges, GAO-07-446T (Washington, D.C.: Feb. 15, 2007).

Page 20 GAO-07-489T 
The Coast Guard’s Deepwater program is a 25-year, $24 billion plan to 

replace or upgrade its fleet of vessels and aircraft. Upon completion, the 

Deepwater program is to consist of 5 new classes of vessels—the National 

Security Cutter (NSC), Offshore Patrol Cutter (OPC), Fast Response 

Cutter (FRC), Short-Range Prosecutor (SRP), and Long-Range Interceptor 

(LRI); 1 new class of fixed-wing aircraft—the Maritime Patrol Aircraft 

(MPA); 1 new class of unmanned aerial vehicles—the Vertical Unmanned 

Aerial Vehicle (VUAV); 2 classes of upgraded helicopters—the MediumRange Recovery Helicopter (MRR) and the Multi-Mission Cutter 

Helicopter (MCH); and 1 class of upgraded fixed-wing aircraft—the LongRange Surveillance Aircraft (LRS).9

 Figure 5 illustrates the 10 classes of 

Deepwater assets. 

Deepwater Asset Delivery 

Schedule Is Mixed and 

Somewhat Uncertain 

Figure 5: 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.

Our preliminary observations indicated that, as of January 2007, of the 10

classes of Deepwater assets to be acquired or upgraded, the delivery 

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

vessels to be delivered in each class) was mixed. Specifically, 7 of the 10 

asset classes were on or ahead of schedule. Among these, 5 first-in-class 

assets had been delivered on or ahead of schedule; and 2 others remained 

on schedule but their planned delivery dates were in 2009 or beyond. In 

contrast, 3 Deepwater asset classes were behind schedule due to various 

 9

In addition to these asset classes, the Deepwater program includes other projects such as 

Command, Control, Communications, Computers, Intelligence, Surveillance and 

Reconnaissance (C4ISR) systems. For example, the 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 21 GAO-07-489T 
problems related to designs, technology, or funding. Using the 2005 

Deepwater Acquisition Program Baseline as the baseline, figure 6 

indicates, for each asset class, whether delivery of the first in class asset 

was ahead of schedule, on schedule, or behind schedule as of January 

2007. 

Figure 6: 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

As part of our ongoing work, we are analyzing Coast Guard planning 

documents to evaluate the current estimates of Deepwater asset delivery

dates. Several factors add to the uncertainty about the delivery schedule of 

Deepwater assets. First, the Coast Guard is still in the early phases of the 

25-year Deepwater acquisition program and the potential for changes in 

the program over such a lengthy period of time make it difficult to forecast

the ability of the Coast Guard to acquire future Deepwater assets 

according to its published schedule. For example, technology changes 

since the award of the original Deepwater contract in 2002 have already, in 

part, delayed delivery of the VUAV, and the Coast Guard is currently 

studying the potential use of an alternative unmanned aerial vehicle. 

Second, changes to funding levels can impact the future delivery of 

Page 22 GAO-07-489T 
Deepwater assets. For example, despite earlier plans, the fiscal year 2008

Department of Homeland Security congressional budget justification 

indicates that the Coast Guard does not plan to request funding for some 

Deepwater assets in FY 2008, such as the OPC and the VUAV. Acquisition 

of these two Deepwater assets has now been delayed until FY 2013, at the 

earliest. Finally, the Coast Guard has recently made a number of program 

management and asset-specific changes that could impact the delivery

schedules for its Deepwater assets. For example, the Coast Guard has 

begun to bring all acquisition efforts under one organization. Further, the 

Coast Guard announced that it has terminated acquisition of the FRC-B, an 

off-the-shelf patrol boat that is intended to serve as an interim replacement

for the Coast Guard’s deteriorating fleet of 110-foot patrol boats, through 

the system integrator and plans to assign responsibility for the project to 

the Coast Guard’s acquisition directorate. These types of programmatic 

changes will take time to implement, and thus add to uncertainty about the 

specific delivery dates of certain Deepwater assets. 

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

replace or upgrade assets with a single, integrated package of aircraft, 

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

provide C4ISR and supporting logistics. In a system of systems, the 

deliveries 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 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. 

Deepwater Program 

Management, Contractor 

Accountability, and Cost 

Control 

 10GAO, Coast Guard: Progress Being Made on Deepwater Project, but Risks Remain, 

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

Page 23 GAO-07-489T 
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.11 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. 

In addition to the program management issues discussed above, there

have been problems with the performance and design of Deepwater patrol 

boats that have created operational challenges for the Coast Guard. The 

Deepwater program’s bridging strategy to convert the legacy 110-foot 

patrol boats into 123-foot patrol boats has been unsuccessful. The Coast 

Guard had originally intended to convert all 49 of its 110-foot patrol boats 

into 123-foot patrol boats in order to increase the patrol boats’ annual 

operational hours and to provide additional capabilities, such as small 

boat stern launch and recovery and enhanced and improved C4ISR. 

However, the converted 123-foot patrol boats began to display deck 

cracking and hull buckling and developed shaft alignment problems, and 

the Coast Guard elected to stop the conversion process at eight hulls upon 

Deepwater Performance and 

Design Problems Creating 

Operational Challenges for 

Coast Guard 

 11GAO, 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: 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); and Coast Guard: Changes in Deepwater 

Plan Appear Sound, and Program Management Has Improved, but Continued

Monitoring is Warranted, GAO-06-546 (Washington, D.C.: Apr. 28, 2006).

Page 24 GAO-07-489T 
determining that the converted patrol boats would not meet their 

expanded post-September 11 operational requirements. 

These performance problems have had operational consequences for the 

Coast Guard. The hull performance problems with the 123-foot patrol 

boats led the Coast Guard to remove all of the eight converted normal 123-

foot patrol boats from service effective November 30, 2006. The 

Commandant of the Coast Guard has stated that having reliable, safe 

cutters is “paramount” to executing the Coast Guard’s missions.12 Thus, 

removing these patrol boats from service affects the Coast Guard’s 

operations in its missions, such as search and rescue and alien and 

migrant interdiction. 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 the Coast Guard has taken the following actions: 

• multicrewing eight of the 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; 

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

foot cutters on loan from the Navy (these were originally to be returned 

to the Navy in 2008) to supplement the Coast Guard’s patrol craft; and 

• compressing the maintenance and upgrades on the remaining 110-foot 

patrol boats.

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

patrol boats, has experienced design problems that have operational 

implications as well. As we reported in 2006, the Coast Guard suspended 

design work on the FRC due to design risks such as excessive weight and 

horsepower requirements.13 Coast Guard engineers raised concerns about 

the viability of the FRC design (which involved building the FRC’s hull, 

 12U.S. Coast Guard, Office of Public Affairs, Coast Guard Suspends Converted Patrol Boat 

Operations, (Washington, D.C., 2006). 

13GAO, Coast Guard: Status of Deepwater Fast Response Cutter Design Efforts, 

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

Page 25 GAO-07-489T 
decks, and bulkheads out of composite materials rather than steel) 

beginning in January 2005. 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. 

One operational challenge related to the FRC is that the Coast Guard will 

end up with two classes of FRCs. The first class of FRCs to be built would 

be based on an adapted design from a patrol boat already on the market to 

expedite delivery. The Coast Guard would then pursue development of a 

follow-on class that would be completely redesigned to address the 

problems in the original FRC design plans. Coast Guard officials recently 

estimated that the first FRC delivery will slip to fiscal year 2009, at the 

earliest, rather than 2007 as outlined in the 2005 Revised Deepwater 

Implementation Plan. Thus, the Coast Guard is also facing longer-term 

operational gaps related to its patrol boats. 

Initial Deployment of 

Nationwide Automatic 

Identification System Is 

Under Way, with Decisions 

Still to Come about 

Extending Coverage to 

Additional Vessels 

Outside Deepwater, one acquisition project included in the fiscal year 2008 

budget is the Nationwide Automatic Identification System, a system 

designed to of identify, track, and communicate with vessels bound for or 

within U.S. waters and forwarding that information for additional analysis. 

NAIS uses a maritime digital communication system that transmits and 

receives vessel position and voyage data. The Coast Guard describes NAIS 

as its centerpiece in its effort to build Maritime Domain Awareness, its 

ability to know what is happening on the water. 

NAIS is not expected to reach full capability until 2014, when the system 

will be able to track ships as far as 2,000 nautical miles away and 

communicate with them when they are within 24 nautical miles of the U.S.

coast. It is being implemented in three phases, the first of which is 

scheduled to be fully operational in September 2007. At that time, the 

Coast Guard expects to have the ability to track—but not communicate 

with—vessels in 55 ports and 9 coastal areas. The largest areas of the 

continental U.S. coastline that will remain without coverage after this first

phase are the Pacific Northwest and Gulf coasts. The second phase calls 

for being able to track ships out to 50 nautical miles from the entire U.S. 

coast and communicate with them as far as 24 nautical miles out. This is 

the phase addressed in the fiscal year 2008 budget. 

Page 26 GAO-07-489T 
The $12 million fiscal year 2008 AC&I request for NAIS is expected to pay 

for implementing the initial operating capability for phase two. The Coast

Guard has received approval from the Department of Homeland Security 

to issue solicitations and award contracts for this initial capability, and the 

agency has held information sessions to gauge industry interest in 

participating and to help refine its statement of work for the initial 

solicitation. The initial solicitation will provide requirements for full 

receiving and transmitting capability for two sectors within one Coast 

Guard area and one sector in another area. With this infrastructure in 

place the Coast Guard expects to be able to test identification, tracking, 

and communication performance, including such features as the ability to 

determine if the vessel transmissions are accurately reflecting the actual 

location of a vessel. 

The Coast Guard is considering whether to require additional types of 

vessels to install and use the equipment needed for the Coast Guard to 

track vessels and communicate with them. Current regulations require 

certain vessels (such as commercial vessels over 65 feet in length) 

traveling on international voyages or within VTS areas to install and 

operate the transmission equipment.14 Vessels that are not subject to 

current regulations generally include noncommercial and fishing vessels 

and commercial vessels less than 65 feet long. This means that many 

domestic vessels are not required to transmit the vessel and voyage

information and therefore will be invisible to the NAIS. The Coast Guard 

has indicated in the Federal Register that it is considering expanding the 

requirements to additional vessels.15

 14Vessel traffic services areas are locations where the Coast Guard monitors and 

communicates with vessels using AIS, radar, and other technologies to prevent collisions 

and other accidents. 

15In our previous report we recommended that the Coast Guard should pursue

opportunities to cost-share with private entities that were interested in receiving vessel and 

voyage information transmissions. According to Coast Guard officials, subsequent to the

publication of the report they have partnered with private entities in Tampa, Florida, and

Alaska. 

Page 27 GAO-07-489T 
Another non-Deepwater project covered in the budget request is Rescue 

21, the Coast Guard’s command, control, and communication 

infrastructure used primarily for search and rescue. The fiscal year 2008 

AC&I budget includes $81 million for continued development of Rescue 

21. In May 2006 we reported that shortcomings in Coast Guard’s contract 

management and oversight efforts contributed to program cost increases

from $250 million in 1999 to $710.5 million in 2005 and delays in reaching 

full operating capability from 2006 to 2011.16 Our recommendations 

included better oversight of the project, completion of an integrated 

baseline review of existing contracts, and development of revised cost and 

schedule estimates. According to the Coast Guard, it has taken a series of

actions in response, including program management reviews and oversight 

meetings, conducting integrated baseline reviews on existing contracts, 

and meeting regularly to assess project risks. 

Coast Guard Has Taken 

Actions to Improve 

Oversight of Rescue 21 

Contracts, but System 

Coverage Has Been 

Reduced 

According to the Coast Guard officials we met with, the contractor is 

currently on time and on budget for installing the full system in 11 Rescue 

21 regions, including such regions as New Orleans, Long Island/New York, 

and Miami. The last of the 11 regions covered by current contracts is 

scheduled to be completed by October 2008. Contracts for the 25 regions 

that remain have not been signed. To keep to current project cost and 

schedule baselines, however, the Coast Guard has reduced the required 

performance of the system. Originally, Rescue 21 was supposed to limit 

coverage gaps to 2 percent, meaning that the system had to be able to 

capture distress calls in 98 percent of the area within 20 nautical miles of 

the coast and within navigable rivers and other waterways. The current 

contract calls for coverage gaps of less than 10 percent. Rescue 21 was 

also intended to have the capability to track Coast Guard vessels and 

aircraft and provide data communication with those assets. Neither the 

capability to track the Coast Guard’s own assets nor data communications 

is included in the current technology being installed. 

 16GAO, United States Coast Guard: Improvements Needed in Management and Oversight 

of Rescue System Acquisition, GAO-06-623 (Washington, D.C.: May 2006). 

Page 28 GAO-07-489T 
While the fiscal year 2008 budget request contains funding for specifically

addressing the projects discussed above, certain other projects were 

judged by Coast Guard officials to be lower in priority and were not 

included. We have examined two of these areas in recent work—vessels 

for aids to navigation and domestic icebreaking activity, and vessels for 

icebreaking in polar areas. 

Coast Guard Faces 

Additional Challenges 

Addressing 

Traditional Missions 

Decline in Condition of 

Some ATON and Domestic 

Icebreaking Assets May 

Require More Attention for 

Recapitalization or

Outsourcing Options 

Last September, we completed work for this committee on the condition 

of Coast Guard aids-to-navigation (ATON) and icebreaking assets.17 More 

than half of these assets have reached or will be approaching the end of

their designed service lives. In 2002, the Coast Guard proposed options for 

systematically rehabilitating or replacing 164 cutters and boats in these 

fleets after determining that the age, condition, and cost of operating these 

assets would diminish the capability of the Coast Guard to carry out ATON 

and domestic icebreaking missions. We noted that no funds had been

allocated to pursue these options, apparently due to competing needs for

replacing or rehabilitating other Coast Guard assets. These competing 

needs, reflected largely in the Coast Guard’s expensive and lengthy 

Deepwater asset replacement program, will continue for some time, as will 

other pressures on the federal budget. The Coast Guard is requesting no 

additional spending for ATON assets or infrastructure in fiscal year 2008. 

Without specific funding to move forward, the Coast Guard has attempted 

to break the project into smaller components and pursue potential funding 

from within the Coast Guard’s budget, focusing on the assets most in need 

of maintenance or replacement. In February 2006, the Coast Guard began 

a project to replace its fleet of 80 trailerable aids-to-navigation boats with 

new boats that have enhanced capabilities to do ATON work as well as 

other missions.18 According to a Coast Guard official, this acquisition 

would cost approximately $14.4 million if all 80 boats are purchased and 

would bring on new boats over a 5-year period as funds allow. The Coast 

Guard official responsible for the project said the Coast Guard intends to 

make the purchases using a funding stream appropriated for the 

maintenance of nonstandard boats that can be allocated to the boats with 

the most pressing maintenance or recapitalization needs. Availability of 

 17GAO, Coast Guard: Condition of Some Aids-to-Navigation and Domestic Icebreaking 

Vessels Has Declined; Effect on Mission Performance Appears Mixed, GAO-06-979 

(Washington, D.C.: Sept. 22, 2006). 

18These boats can be placed on trailers and transported on land by truck. 

Page 29 GAO-07-489T 
these funds, however, depends on the condition and maintenance needs of 

other nonstandard boats; if this funding has to be applied to meet other 

needs, such as unanticipated problems, it may not be available for 

purchasing these boats. 

In addition to carrying out their primary missions of ATON and domestic 

icebreaking, these assets have also been used in recent years for other 

missions such as homeland security. The Coast Guard’s ATON and 

domestic icebreakers saw a sharp increase in use for homeland security 

missions after the attacks of September 11, and while this trend has 

moderated somewhat, the use of some assets in these missions continues 

well above pre-September 11 levels. This increase is most prominent for 

domestic icebreakers, which are being operated more extensively for 

other purposes at times of year when no icebreaking needs to be done. 

Newer ATON vessels, which have greater multimission capabilities than 

older vessels, tend to be the ATON assets used the most for other 

missions. 

In addition to considering options for replacing or rehabilitating its ATON 

assets, the Coast Guard also has examined possibilities for outsourcing 

missions. In 2004 and 2006, the Coast Guard completed analyses of what 

ATON functions could be feasibly outsourced. Although possibilities for 

outsourcing were identified for further study, Coast Guard officials noted 

that outsourcing also carries potential disadvantages. For example, they 

said it could lead to a loss of “surge” capacity–that is the capacity to 

respond to emergencies or unusual situations. Coast Guard officials noted

that outsourcing or finding a contractor to do work after an event such as

Katrina is difficult due to the increased demand for their services as well

as the fact that the labor pool may have been displaced. When a contractor 

is found, it usually takes a long time to get the work completed due to the 

backlog of work and tends to be very expensive. In addition, this surge 

capability may be needed for other missions, such as those that occur 

when ATON assets can be used to support search and rescue efforts. In 

the aftermath of Hurricane Katrina, for example, some ATON assets 

provided logistical support for first responders or transported stranded 

individuals. Coast Guard officials stated that after Hurricane Katrina, its 

own crews were able to begin work immediately to repair damaged aids 

and get the waterways open to maritime traffic again. Coast Guard 

officials also indicated that outsourcing may adversely affect the Coast 

Guard’s personnel structure by reducing opportunities to provide 

important experience for personnel to advance in their careers. 

Page 30 GAO-07-489T 
The Coast Guard confronts ongoing maintenance challenges that have left 

its polar icebreaking capability diminished. The Coast Guard has two 

Polar-class icebreakers for breaking channels in the Antarctic.

19 Both are 

reaching the end of their design service lives, and given the funding 

challenges associated with maintaining them, the Coast Guard decided to

deactivate one of the two, the Polar Star, in 2006. This reduced 

icebreaking capability since only one Polar-class icebreaker, the Polar 

Sea, was available, and for the Polar Sea it increased maintenance needs 

while reducing time available to conduct maintenance.20

Coast Guard Faces 

Decision on Future of 

Polar Icebreakers 

 19In addition to the Polar-class icebreakers, the Coast Guard acquired a third icebreaker, 

the Healy, in 2000. Unlike the Polar-class icebreakers, the Healy was designed to be an 

Arctic scientific platform and does not have the capabilities to break ice in the Antarctic 

under most conditions. According to Coast Guard officials, although the Healy also has 

maintenance issues, the condition and extent of maintenance needed for the Polar-class

icebreakers is more severe. 

20Coast Guard officials estimated it would require $40 million to $50 million and 2 to 3 years

of service to refurbish the deactivated Polar-class icebreaker—the Polar Star—to a 

capability level commensurate with its other Polar-class icebreaker. Coast Guard officials 

noted that this funding would cover upgrades to systems and to replace vessel 

infrastructure and parts that Coast Guard had cannibalized over the past years to replace 

parts on the Polar Sea. 

Page 31 GAO-07-489T 
Figure: 7: Coast Guard Polar-class Icebreaker 

Source: Coast Guard.

Coast Guard officials and others have reported that failure to address 

these challenges could leave the nation without heavy icebreaking 

capability and could jeopardize the investment made in the nation’s 

Antarctic Program.21 According to Coast Guard officials, the remaining 

Polar-class icebreaker’s age and increased operational tempo have left it 

unable to continue the mission in the long term without a substantial 

investment in maintenance and equipment renewal. One option, 

refurbishing the two existing Polar-class icebreakers for an additional 25

years of service, is estimated to cost between $552 million and $859 

 21In the Antarctic, the United States maintains three year-round scientific stations. Coast 

Guard Polar-class icebreakers provide heavy icebreaking support necessary to open a

shipping channel and allow maritime resupply of fuel, food, and cargo to these scientific 

stations. Polar icebreakers deploy to support primary missions such as the U.S. Antarctic 

Program, but while present in the polar region, they often support secondary missions such 

as search and rescue or respond to maritime environmental response situations as

situations arise. 

Page 32 GAO-07-489T 
million. Another option, building new assets, would cost an estimated $600 

million per vessel, according to Coast Guard officials.22

Coast Guard officials have begun planning a transition strategy to help 

keep the sole operating Polar-class icebreaker mission-capable until new 

or refurbished assets enter service, which would take an estimated 8 to 10 

years.23 According to officials, this 10-year recapitalization plan will 

identify current and projected maintenance service needs and equipment

renewal projects and associated costs, alternatives to address these needs, 

and timelines for completing these projects. 

Madam Chair and members of the subcommittee, this completes my 

statement for the record.

 22According to the Coast Guard, this estimate this is based on Healy construction costs,

making adjustments for increased structural and power requirements. 

23In 2007, the National Research Council of the National Academies issued a final report on 

the condition of the U.S. polar icebreaking fleet (Polar Icebreakers in a Changing World:

An Assessment of U.S. Needs). This report corroborated Coast Guard’s assessment of the 

increased risks faced by the deteriorating condition of these vessels and recommended that 

Congress immediately take action to design, plan, and build two replacement polar

icebreaking vessels to replace the aging Polar-class vessels. Moreover, because these new 

vessels would not be available for another 8 to 10 years, the report recommends that

Congress provide the Coast Guard with a sufficient operations and maintenance budget to 

address maintenance backlogs on the two operating polar icebreakers to ensure a

minimum level of icebreaking capability during this period. The report also recommends 

leaving the Polar Star in caretaker status until the new vessels enter service. 

Page 33 GAO-07-489T 
For information about this statement, please Contact Stephen L. Caldwell, 

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

or caldwells@gao.gov. Contact points for our Office of Congressional 

Relations and Public Affairs may be found on the last page of this 

statement. Individuals making key contributions to this testimony include 

Penny Augustine, Jonathan Bachman, Jason Berman, Steven Calvo, 

Jonathan Carver, Christopher Conrad, Adam Couvillion, Geoffrey 

Hamilton, John Hutton, Christopher Hatscher, Tonia Johnson, and 

Stan Stenersen. 

GAO Contacts and 

Staff 

Acknowledgments 

Page 34 GAO-07-489T 
Page 35 GAO-07-489T 

Appendix I: Performance Results by Program 

from Fiscal Year 2002 through Fiscal Year 

2006 

Appendix I provides a detailed list of Coast Guard performance results for 

the Coast Guard’s 11 programs from fiscal year 2002 through 2006. 

Program Program performance measure 2002 2003 2004 2005 2006

Performance 

target for 2006 

Programs meeting 2006 targets: 

U.S. Exclusive 

Economic Zone

Enforcement 

Number of detected Exclusive 

Economic Zone (EEZ) incursions 

by foreign fishing vessels 

250 152 247 174 164 ≤199 

Ice Operations 

(domestic 

icebreaking) 

Number of waterway closure 

days 

7 7 4 0 0 ≤2a

Marine 

Environmental

Protection 

Average of oil and chemical spills 

greater than 100 gallons per 100 

million tons shipped 

35.1 29.4 22.1 18.5 16.3 ≤19 

Ports, Waterways, 

and Coastal Security 

Percent reduction in maritime

terrorism risk over which the 

Coast Guard has influence 

n/a n/a n/a 14% 17% ≥14% 

Undocumented

migrant interdiction 

Percentage of interdicted illegal 

migrants entering the United 

States through illegal means 

88.3% 85.3% 87.1% 85.5 89.1 ≥89% 

Program expected to meet 2006 target: 

Illegal Drug 

Interdiction 

Percentage of cocaine removed 

out of total estimated cocaine 

entering the United States 

through maritime meansb

Not 

reported 

Not 

reported 

30.7% 27.3% TBDc

≥22% 

Programs that did not meet their 2005 targets: 

Aids to Navigation Number of collisions, allisions,

and grounding

2,098 2,000 1,876 1,825 1,765 ≤1748 

Defense Readiness Percentage of time that units 

meet combat readiness level

70% 78% 76% 67% 62% 100%

Living Marine

Resources 

Percentage of fisherman found in 

compliance with federal

regulations 

97.3% 97.1% 96.3% 96.4% 96.6% ≥97% 

Marine Safety 5-year average annual mariner, 

passenger, and boating deaths 

and injuries 

5,766 5,561 5,387 5,169 5,036 ≤4721 

Search and Rescue Percentage of distressed 

mariners’ lives saved 

84.4% 87.7% 86.8% 86.1% 85.3% ≥86% 

Source: GAO analysis of Coast Guard data. 

Note: TBD, to be determined; n/a, not available. Bold numbers indicate that performance targets were 

met previously. 

a

The target for ice operations noted here is for domestic icebreaking only, and the target level varies

according to the index for an entire winter. Thus, for those winters designated as severe, the target is 

8 or fewer closure days. For winters designated as average, the target is 2 or fewer closure days. 

Because 2002 and 2004 were designated as average winters, the 7 and 4 days did not meet the 

target. 
b

The performance measure for the illegal drug interdiction program, the percentage of cocaine 

removed, was revised in fiscal year 2004 from the percentage of cocaine seized in order to more 

accurately report the impact Coast Guard counterdrug activities have on the illicit drug trade. As a 

result, the cocaine removal rates for fiscal year 2002-2003 are not available. 

c

Complete data are not yet available for the illegal drug interdiction program. However, the Coast 

Guard anticipates meeting the performance target for this program based on past performance. 

Page 36 GAO-07-489T 
Page 37 GAO-07-489T 

Related GAO Products 

Coast Guard: Status of Efforts to Improve Deepwater Program 

Management and Address Operational Challenges. GAO-07-575T. 

Washington, D.C.: March 8, 2007. 

Coast Guard: Preliminary Observations on Deepwater Program Assets 

and Management Challenges. GAO-07-446T. Washington, D.C.: Feb. 15, 

2007. 

Coast Guard: Coast Guard Efforts to Improve Management and Address 

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

Washington, D.C.: Feb. 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.: Feb. 8, 2007. 

Coast Guard: Condition of Some Aids-to-Navigation and Domestic 

Icebreaking Vessels Has Declined; Effect on Mission Performance 

Appears Mixed. GAO-06-979. Washington, D.C.: Sept. 22, 2006. 

Coast Guard: Non-Homeland Security Performance Measures Are 

Generally Sound, but Opportunities for Improvement Exist. GAO-06-816. 

Washington, D.C.: Aug. 16, 2006. 

Coast Guard: Observations on the Preparation, Response, and Recovery

Missions Related to Hurricane Katrina. GAO-06-903. Washington, D.C.: 

July 31, 2006.

Maritime Security: Information-Sharing Efforts Are Improving. 

GAO-06-933T. Washington, D.C.: July 10, 2006. 

Coast Guard: Status of Deepwater Fast Response Cutter Design Efforts.

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

United States Coast Guard: Improvements Needed in Management and 

Oversight of Rescue System Acquisition. GAO-06-623. Washington, D.C.: 

May 31, 2006. 

Coast Guard: Changes in Deepwater Acquisition Plan Appear Sound, 

and Program Management Has Improved, but Continued Monitoring Is 

Warranted. GAO-06-546. Washington, D.C.: April 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.: July 22, 2005. 

Coast Guard: Preliminary Observations on the Condition of Deepwater

Legacy Assets and Acquisition Management Challenges. GAO-05-651T. 

Washington, D.C.: June 21, 2005. 

Maritime Security: Enhancements Made, but Implementation and 

Sustainability Remain Key Challenges. GAO-05-448T. Washington, D.C.: 

May 17, 2005. 

Coast Guard: Preliminary Observations on the Condition of Deepwater

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

Washington, D.C.: April 20, 2005. 

Coast Guard: Observations on Agency Priorities in Fiscal Year 2006 

Budget Request. GAO-05-364T. Washington, D.C.: March 17, 2005. 

Coast Guard: Station Readiness Improving, but Resource Challenges and 

Management Concerns Remain. GAO-05-161. Washington, D.C.: January 

31, 2005. 

Maritime Security: Better Planning Needed to Help Ensure an Effective

Port Security Assessment Program. GAO-04-1062. Washington, D.C.: 

September 30, 2004. 

Maritime Security: Partnering Could Reduce Federal Costs and 

Facilitate Implementation of Automatic Vessel Identification System.

GAO-04-868. Washington, D.C.: July 23, 2004. 

Maritime Security: Substantial Work Remains to Translate New 

Planning Requirements into Effective Port Security. GAO-04-838. 

Washington, D.C.: June 30, 2004. 

Coast Guard: Deepwater Program Acquisition Schedule Update Needed. 

GAO-04-695. Washington, D.C.: June 14, 2004. 

Coast Guard: Station Spending Requirements Met, but Better Processes

Needed to Track Designated Funds. GAO-04-704. Washington, D.C.: May 

28, 2004. 

Page 38 GAO-07-489T 
Coast Guard: Key Management and Budget Challenges for Fiscal Year

2005 and Beyond. GAO-04-636T. Washington, D.C.: April 7, 2004. 

Coast Guard: Relationship between Resources Used and Results Achieved 

Needs to Be Clearer. GAO-04-432. Washington, D.C.: March 22, 2004. 

Contract Management: Coast Guard’s Deepwater Program Needs 

Increased Attention to Management and Contractor Oversight. 

GAO-04-380. Washington, D.C.: March 9, 2004. 

Coast Guard: New Communication System to Support Search and 

Rescue Faces Challenges. GAO-03-1111. Washington, D.C.: September 30, 

2003. 

Maritime Security: Progress Made in Implementing Maritime 

Transportation Security Act, but Concerns Remain. GAO-03-1155T. 

Washington, D.C.: September 9, 2003. 

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. 

Coast Guard: Strategies for Procuring New Ships, Aircraft, and Other 

Assets. GAO/T-HEHS-99-116. Washington, D.C.: Mar. 16, 1999. 

Coast Guard’s Acquisition Management: Deepwater Project’s 

Justification and Affordability Need to Be Addressed More Thoroughly. 

GAO/RCED-99-6. Washington, D.C.: October 26, 1998. 

(440593) Page 39 GAO-07-489T 
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