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34–776 PDF 2007

THE COAST GUARD’S INTEGRATED

DEEPWATER SYSTEM

(110–4)

HEARING

BEFORE THE

SUBCOMMITTEE ON 

COAST GUARD AND MARITIME TRANSPORTATION

OF THE

COMMITTEE ON 

TRANSPORTATION AND 

INFRASTRUCTURE 

HOUSE OF REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

JANUARY 30, 2007

Printed for the use of the 

Committee on Transportation and Infrastructure

(

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE 

JAMES L. OBERSTAR, Minnesota, Chairman 

NICK J. RAHALL, II, West Virginia 

PETER A. DEFAZIO, Oregon 

JERRY F. COSTELLO, Illinois 

ELEANOR HOLMES NORTON, District of 

Columbia 

JERROLD NADLER, New York 

CORRINE BROWN, Florida 

BOB FILNER, California 

EDDIE BERNICE JOHNSON, Texas 

GENE TAYLOR, Mississippi 

JUANITA MILLENDER-MCDONALD, 

California 

ELIJAH E. CUMMINGS, Maryland 

ELLEN O. TAUSCHER, California 

LEONARD L. BOSWELL, Iowa 

TIM HOLDEN, Pennsylvania 

BRIAN BAIRD, Washington 

RICK LARSEN, Washington 

MICHAEL E. CAPUANO, Massachusetts 

JULIA CARSON, Indiana 

TIMOTHY H. BISHOP, New York 

MICHAEL H. MICHAUD, Maine 

BRIAN HIGGINS, New York 

RUSS CARNAHAN, Missouri 

JOHN T. SALAZAR, Colorado 

GRACE F. NAPOLITANO, California 

DANIEL LIPINSKI, Illinois 

DORIS O. MATSUI, California 

NICK LAMPSON, Texas 

ZACHARY T. SPACE, Ohio 

MAZIE K. HIRONO, Hawaii 

BRUCE L. BRALEY, Iowa 

JASON ALTMIRE, Pennsylvania 

TIMOTHY J. WALZ, Minnesota 

HEATH SHULER, North Carolina 

MICHAEL A. ACURI, New York 

HARRY E. MITCHELL, Arizona 

CHRISTOPHER P. CARNEY, Pennsylvania 

JOHN J. HALL, New York 

STEVE KAGEN, Wisconsin 

STEVE COHEN, Tennessee 

JERRY MCNERNEY, California 

JOHN L. MICA, Florida 

DON YOUNG, Alaska 

THOMAS E. PETRI, Wisconsin 

HOWARD COBLE, North Carolina 

JOHN J. DUNCAN, JR., Tennessee 

WAYNE T. GILCHREST, Maryland 

VERNON J. EHLERS, Michigan 

STEVEN C. LATOURETTE, Ohio 

RICHARD H. BAKER, Louisiana 

FRANK A. LOBIONDO, New Jersey 

JERRY MORAN, Kansas 

GARY G. MILLER, California 

ROBIN HAYES, North Carolina 

HENRY E. BROWN, JR., South Carolina 

TIMOTHY V. JOHNSON, Illinois 

TODD RUSSELL PLATTS, Pennsylvania 

SAM GRAVES, Missouri 

BILL SHUSTER, Pennsylvania 

JOHN BOOZMAN, Arkansas 

SHELLEY MOORE CAPITO, West Virginia 

JIM GERLACH, Pennsylvania 

MARIO DIAZ-BALART, Florida 

CHARLES W. DENT, Pennsylvania 

TED POE, Texas 

DAVID G. REICHERT, Washington 

CONNIE MACK, Florida 

JOHN R. ‘RANDY’ KUHL, JR., New York 

LYNN A WESTMORELAND, Georgia 

CHARLES W. BOUSTANY, JR., Louisiana 

JEAN SCHMIDT, Ohio 

CANDICE S. MILLER, Michigan 

THELMA D. DRAKE, Virginia 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida 

(II)

SUBCOMMITTEE ON COAST GUARD AND MARITIME TRANSPORTATION 

ELIJAH E. CUMMINGS, Maryland, Chairman 

GENE TAYLOR, Mississippi 

RICK LARSEN, Washington 

CORRINE BROWN, Florida 

JUANITA MILLENDER-MCDONALD, 

California 

BRIAN HIGGINS, New York 

BRIAN BAIRD, Washington 

TIMOTHY H. BISHOP, New York 

JAMES L. OBERSTAR, Minnesota 

(Ex Officio) 

STEVEN C. LATOURETTE, Ohio 

DON YOUNG, Alaska 

HOWARD COBLE, North Carolina 

WAYNE T. GILCHREST, Maryland 

FRANK A. LOBIONDO, New Jersey 

TED POE, Texas 

JOHN L. MICA, Florida 

(Ex Officio) 

(III)

(V)

CONTENTS Page

Summary of Subject Matter .................................................................................... vi 

TESTIMONY 

Allen, Admiral Thad W., Commandant, U.S. Coast Guard ................................. 12

Mackay, Leo S., Jr., President, Integrated Coast Guard Systems ...................... 44

Teel, Phillip, President, Northrop Grumman Ship Systems ................................ 44

PREPARED STATEMENT SUBMITTED BY A MEMBER OF CONGRESS 

Oberstar, Hon. James L., of Minnesota ................................................................. 62

PREPARED STATEMENTS SUBMITTED BY WITNESSES 

Allen, Admiral Thad W ........................................................................................... 65

Mackay, Leo S., Jr. .................................................................................................. 151

Teel, Phillip .............................................................................................................. 155

SUBMISSIONS FOR THE RECORD 

Allen, Admiral Thad W., Commandant, U.S. Coast Guard:

Response to question from the Subcommittee ................................................... 25

Response to question from the Subcommittee ................................................... 32

Response to question from the Subcommittee ................................................... 35

Response to question from the Subcommittee ................................................... 39

Response to question from the Subcommittee ................................................... 41

‘‘Blueprint for Acquisition Reform in the U.S. Coast Guard,’’ report .............. 79

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(1)

COAST GUARD’S INTEGRATED DEEPWATER 

SYSTEM 

Tuesday, January 30, 2007, 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON COAST

GUARD AND MARITIME TRANSPORTATION, COMMITTEE

ON TRANSPORTATION AND INFRASTRUCTURE, WASHINGTON, DC. 

The subcommittee met, pursuant to call, at 11:00 a.m., in room 

2167, Rayburn House Office Building, the Honorable Elijah E. 

Cummings [Chairman of the subcommittee] presiding. 

Mr. CUMMINGS. This hearing will come to order. 

First, I want to thank all of you for being here. I want to take 

this opportunity to welcome all the members of the Subcommittee 

on Coast Guard and Maritime Transportation to our first meeting. 

I am deeply honored to have been selected by Chairman Jim 

Oberstar and my colleagues on the Transportation and Infrastructure Committee to chair this very distinguished Subcommittee. I 

know that most of our Subcommittee members have a long tenure 

with the Subcommittee and with the maritime industry, and I truly 

look forward to working with Ranking Member LaTourette and 

with each member of the Subcommittee to accomplish our ambitious agenda for the 110th Congress. 

Before we begin today’s hearing, let me speak briefly about that 

agenda. 

Our Subcommittee will balance oversight of the Coast Guard 

with our effort to support and strengthen our national maritime industry, and to ensure that maritime transportation is more closely 

integrated into what must be a truly multimodal transportation 

network in this Country. 

The Coast Guard is a critical part of our homeland security system and, as was demonstrated by the terrible aftermath of Hurricane Katrina, a critical part of our Nation’s emergency response capability. I intend to be an advocate for the service and for all of 

the men and women who are putting their lives on the line everyday in defense of our great Nation. 

Our Subcommittee will ensure that the Coast Guard is an effective steward of taxpayers’ resources. And we begin that effort with 

today’s hearing on the troubled deepwater procurement. 

Importantly, however, we will also closely examine whether the 

Coast Guard has adequate resources to enable it to implement its 

significant homeland security responsibilities while also fulfilling 

its other critical missions, including drug interdiction, search and 

rescue, and maritime safety oversight. 

2

I appreciate the leadership of Commandant Allen and his dedication to the effectiveness and excellence, and I look forward to working closely with him. 

Since assuming the chairmanship of this Subcommittee, I have 

had many invaluable opportunities to meet with many different 

members of the maritime community to begin discussions with 

them about the issues they face, including security concerns, the 

maritime security program, short sea shipping, and the Jones Act. 

I appreciate the welcome I have received from the maritime community and our Subcommittee looks forward to working closely 

with labor, management, and all actors in the community to craft 

practical solutions to our shared challenges. 

To that end, we will also work to foster pragmatic dialog between 

the members of the commercial maritime community and the 

United States Coast Guard to ensure that each group understands 

what the other needs to succeed in what should be their complementary pursuits. 

The security of U.S. ports and the cargo transported through 

them will be a major priority for this Subcommittee. The House of 

Representatives has already passed H.R. 1, which not only implemented the recommendations of the 9/11 Commission, but exceeded 

these recommendations by phasing in requirements that will lead 

to the scanning of all cargo bound for United States ports. The 

Subcommittee on Coast Guard and Maritime Transportation will 

work closely with the Committee on Homeland Security, ably led 

by Chairman Bennie Thompson, to examine the gaps that remain 

in port security and to fill these gaps in ways that will protect our 

Nation from emerging threats while not unduly slowing the flow of 

commerce through our ports. 

Obviously, this is an ambitious agenda, and we begin today with 

a hearing on the Coast Guards Deepwater procurement program. Deepwater is a program of procurements projected to cost $24 

billion dollars and currently expected to take 25 years to complete. 

The procurements encompass the rehabilitation or new construction of 91 cutters, 124 small craft, surface craft, and 244 new or 

converted aircraft, including both helicopters and fixed-wing airplanes. 

This is the most complex procurement the Coast Guard has ever 

undertaken, and it is made even more complex by the Coast 

Guard’s decision to employ a private sector systems integrated 

team comprised of Lockheed Martin and Northrop Grumman, rather than fulfilling that function with its own personnel. 

Obviously, the Deepwater procurement process has had significant and highly publicized problems, including a failed effort to rehabilitate and modernize eight 110-foot legacy cutters and problems with the initial design of the fast response cutter that required the design process to be halted. 

The seriousness of the concerns about Deepwater have, however, 

now been raised to a whole new level. The Department of Homeland Security’s Office of Inspector General has issued a report criticizing almost every aspect of the procurement of the National Security Cutter, the most expensive asset to be acquired under the 

Deepwater program. The IG found that the NSC will likely not 

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tract because its construction was guided by a flawed design. The 

IG indicates that the senior leadership of the Coast Guard and of 

the Integrated Coast Guard Systems team was warned about the 

design flaws by numerous studies, including studies by the Coast 

Guard and the United States Navy, yet refused to make design corrections or to slow the development of the cutter to respond to 

these concerns. 

In other words, DHS’s IG’s report would suggest that the Coast 

Guard and its contractors have knowingly and willfully spent close 

to $1 billion, a figure that is likely to rise, to build a flawed ship, 

and that as a result of this decision the United States taxpayer is 

likely to now have to pay for repairs on brand new vessels which 

may nonetheless still not serve their full anticipated service life. 

The IG is unequivocal in stating that the design failures plaguing the NSC occurred specifically because the Coast Guard yielded 

too much authority for the NSC program to the integrated team. 

Further, the IG claims that the Coast Guard was resistant to its 

investigation and that it has failed to properly document the decisions taken during the development of the NSC. 

This is one of the most troubling Inspector General reports I 

have read during my 11 year tenure as a member of the Congress 

of the United States. 

The purpose of our hearing today is to understand the nature 

and the causes of the problems that have been encountered in the 

Deepwater procurement program, and to hear from the Coast 

Guard and from the two firms serving as systems integrated—Northrop Grumman and Lockheed Martin—the specific steps that each 

party will be taking to correct this procurement process. 

The DHS’s IG’s report, coupled with the previous failure of the 

120-foot patrol boat, calls into serious question whether we can 

trust the Coast Guard and its contractors to take the steps necessary to produce reliable assets that meet all quality standards. 

Be sure that our Subcommittee will require accountability of the 

Coast Guard and of Northrop Grumman and Lockheed Martin. Our 

Subcommittee will not allow taxpayer money to continue to be 

wasted on failing projects. 

I have read the testimony that our witnesses have provided. I appreciate the detail of some of the testimony and hope that our witnesses will use this opportunity to begin to respond to the findings 

of the Homeland Security Department Inspector General’s report. 

If the IG’s findings are accurate, they demand that fundamental 

changes be implemented in the Deepwater procurement. In particular, they suggest that the Coast Guard must quickly move to 

hold the contractors implementing Deepwater to a higher technical 

standard. 

I look forward to hearing from each of today’s witnesses the specific corrective actions that will be taken going forward to establish 

systems capable of producing effective designs and managing reliable production processes for every asset to be rehabilitated or constructed through Deepwater. 

As I previously said to Admiral Allen, it is also particularly important that the Coast Guard demonstrate it is capable of exercising effective control over Deepwater. Ultimate responsibility of 

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tation, rests with the Coast Guard, and I look forward to hearing 

how the Coast Guard will meet this awesome responsibility. 

And to the members of the Committee, I have also talked to the 

Commandant and made it clear to him, and we have agreed, that 

he will come before us again in 120 days so that we can review the 

progress that he will testify to today. 

And with that I yield to my distinguished good friend, the Ranking Member, Congressman LaTourette, for his opening statement. 

Mr. LATOURETTE. Mr. Chairman, thank you very much and, first 

of all, I want to congratulate you on being named as the chairman 

of this important Subcommittee, and we look very much forward to 

working with you and the majority members in the 110th Congress. 

From our side, I would say that on the Republican side of the 

ball on this Subcommittee, although this is a new posting for me, 

we have a wealth of talent in that former chairman of the full committee, Mr. Young, is a member; the former past chairman of this 

Subcommittee for six years, Mr. LoBiondo, is a member; in a previous Congress, the chairman of the Coast Guard Maritime Committee, before it merged with the Transportation and Infrastructure Committee, Mr. Coble, is a member; and we also want to welcome Mr. Poe, as well. 

As I indicated, Chairman Cummings, we look forward to working 

with you to assist the Coast Guard to maintain the resources and 

authorities necessary to support all of the service’s traditional and 

maritime security missions. One of the most important responsibilities of this Subcommittee is to carry out meaningful oversight over 

all facets of the Coast Guard and the maritime transportation system. 

There is no more important issue facing the Coast Guard now 

than the delays and setbacks that are jeopardizing the success of 

the Integrated Deepwater System program. Deepwater was originally designed to provide the Coast Guard with a system of systems that would be composed of an optimal mix of assets designed 

to accomplish all of the Coast Guard’s offshore missions. The plan 

called for the near complete replacement of the Coast Guard’s legacy fleet with an integrated fleet of new cutters, small boats, and 

aircraft that would be equipped with enhanced capabilities. 

We are now five years in to the original Deepwater contract, and 

we continue to hear about a stream of new and serious problems 

with several of the assets that were designed and are being constructed throughout the program. The Coast Guard, under the direction of this Subcommittee, has already halted the project to 

lengthen the 110-foot patrol boat class due to serious structural deficiencies in the new 123-foot patrol boat’s design. As a result, the 

Coast Guard has suspended operations on the eight vessels that 

were converted. 

The loss of these eight vessels, combined with the ongoing deterioration of the legacy 110-foot class, is reducing the Coast Guard’s 

readiness levels and could potentially prevent the Coast Guard 

from achieving mission success. 

Additionally, the Coast Guard has found problems with the design of the fast response cutter which will eventually replace the 

110-foot patrol boat fleet. The Coast Guard is now in the process 

5

of searching for another design that can be quickly constructed to 

supplement the existing 110s while the FRC design is modified. 

The 110s are the workhorses of the Coast Guard. We must replace 

these vessels as quickly as possible, while making sure that the 

legacy vessels remain safe and fully capable until the replacement 

vessels are available. 

Just yesterday, as Chairman Cummings indicated, the Inspector 

General of the Department of Homeland Security released a troubling report on the development of the National Security Cutter 

under Deepwater. The report states that the NSC as currently designed will not meet the performance specifications that were proscribed by the Coast Guard in the original Deepwater contract. The 

report notes that the Coast Guard is not in agreement with several 

of the report’s findings, and I hope that at today’s hearing we will 

hear more about the problems that the Coast Guard has encountered with this asset and others, and what corrections and adjustments the Coast Guard intends to take. 

I am extremely concerned by the report’s conclusions that Deepwater assets do not meet the Coast Guard’s required standards; 

even more concerned that the Coast Guard seems to be lowering 

its standards to accept these assets, rather than demanding that 

the program’s integrator produce assets at the level that are called 

for in the original contract. 

At the same time, I understand that the Coast Guard needs to 

have some degree of flexibility regarding the replacement vessel for 

the 110-foot patrol boat, and I encourage the Coast Guard and the 

program integrator to design and acquire a cost-effective patrol 

boat as soon as possible. The loss of more than 50 mission days a 

year is clearly unacceptable. 

The Deepwater program and the assets that will be required 

under Deepwater are critical to the Coast Guard future mission 

success. The Coast Guard must take a more active supervisory role 

in the review of asset design and construction, and the award of 

contracts and subcontracts to prevent the occurrence of even more 

delays and problems in the future. 

We are at a critical junction if the Deepwater program is to succeed. I hope that this and successive hearings will help all parties 

get this program back on track. The men and women of the Coast 

Guard carry out brave and selfless service to our Nation each and 

every day. In my home State of Ohio, the Coast Guard safeguards 

the lives of merchant mariners and recreational boaters, maintains 

safe and efficient maritime commerce on our lakes and rivers, and 

secures our ports and shore side facilities from maritime attack. 

We need to make sure that the Deepwater program is carried out 

in a way that the best, most capable equipment are acquired to 

allow these Coast Guardsmen to carry out their important missions. 

I want to thank the witnesses for appearing this morning. I look 

forward to their testimony. 

And I thank you, Mr. Chairman, for yielding. 

Mr. CUMMINGS. I want to thank you, Mr. LaTourette. 

I yield now to the gentleman from Mississippi, Mr. Taylor. 

Mr. TAYLOR. Thank you, Mr. Chairman. 

6

Commandant, thank you for being here. Commandant, let me 

begin by again thanking you and all the men and women of the 

Coast Guard for the great job you did during and after Hurricane 

Katrina. Obviously, a number of us have some serious problems 

with this program, with the 110-foot program, on the other side 

with the LCS program, and it does seem to be a problem that has 

spread throughout the industry that we need to get a handle on. 

I am often hearing that people, off-the-cuff, say, well, this is a 

first of a fleet problem and, therefore, you can expect it. Maybe if 

you are going to build 50 ships of one kind, like we did with the 

DDG–51s. But when you all are building eight and your first two 

have serious flaws, something is wrong. And all of the formulas 

that I am looking at, and all the formulas that Congress has presented, both from the Coast Guard and from the Navy, the only 

way we get to the number of ships that we need is for that ship 

to be functional and fully capable for 30 years for the life of that 

ship. 

So I guess I am troubled more than most when I see reports that 

within, the Coast Guard organization, they were telling us early on 

that these ships were not going to last for 30 years, that possibly 

within 3 years we would have serious structural problems and that 

the Coast Guard, in effect, moved the goal post from 230 days of 

patrolling a year down to 180. 

Now, I would hope that you would come to this Committee with 

some solutions. And I would hope that one of the things we will 

look at is some form of unified shipbuilding command utilizing the 

expertise of the Navy, so that we are not duplicating it within the 

Department of Homeland Security and the Department of Defense, 

and, above all, I am seeing the same thing with LCS. There is a 

quote in here where someone says that self-certification is in effect 

no certification. I believe that to be true. The programs we are 

counting on the contractors to self-certify have let us down now on 

the 110, on this program, on the LCS, and we have got to fix that. 

So I want to hear what you have to say on this. 

But, again, thank you for what you did in Hurricane Katrina, 

what all the Coast Guardsmen did. But like everyone else on this 

panel, we hate to see money wasted. We hate to see resources that 

ought to be in the inventory tied up at the dock, as in the case of 

the 110s. And we want to work with you to find some solutions on 

that. 

Thank you very much, Mr. Chairman. 

Mr. CUMMINGS. Thank you very much, Mr. Taylor. 

I am very pleased that the Ranking Member of the Transportation Committee is with us. I now yield to Mr. Mica. And thank 

you very much for being with us. 

Mr. MICA. Well, thank you. I am pleased to join you today. And 

congratulations to you Mr. Cummings. You and I have worked as 

chair and ranking member before and had great cooperation. He 

has done some incredible things to represent his area, Baltimore, 

and I have been up there with him; put tremendous personal effort 

into the well being of the citizens of that community, and I look 

forward to working with you now as I take over the Republican 

side of the Committee. 

7

And congratulations to Mr. LaTourette. I don’t think he could 

have a better colleague take the helm of a very critical assignment, 

and some of that we are going to hear about today. But Steve 

LaTourette is undoubtedly one of the most qualified members of 

our side of the aisle and I asked him to take on this responsibility. 

I didn’t realize some of the trouble that we have had with some 

of these programs dealing with the Coast Guard. The first thing I 

learned, the Deepwater program, the Coast Guard’s program to recapitalize its aging fleet of vessels, aircraft and support systems, 

was actually in deep trouble, and there has been a number of hearings, I understand eight over the past three years, and I am sure 

Mr. LaTourette and the Chairman of the Subcommittee will continue their work to make certain that we get these programs back 

on track. 

First, I also want to join others in expressing my support for the 

men and women of the Coast Guard. They do an incredible job; 

first line of defense and guardian of the seas. I think everybody 

was so proud of the work they did—again I have to repeat it—with 

Katrina, just an incredible record of success and effort. We thank 

you for that. 

I am concerned about some of the things I have heard just in the 

past few weeks, taking over, again, the Republican side of the 

Transportation Committee. We had the deaths of two divers aboard 

the polar icebreaker HEALY. The Admiral has reported to me on 

that. Of course, I was unfortunate to have the family of one of 

those lost, a young lady in service to the Coast Guard, from my district. We need to make certain that we have in place measures to 

ensure that that will never happen again, and I have been assured 

that, and I know that Admiral Allen will take care to make certain 

that, again, those errors are not repeated. 

New Coast Guard assets, however, must be equipped with systems and capabilities to carry out all of the Coast Guard’s important missions. The success of Deepwater is absolutely critical, and 

I am supportive of the program, but I am concerned about the failure that I too learned of the 110-foot patrol boat conversion project 

and the strain that it is putting on asset capabilities in my own 

home State of Florida. I was briefed there are some eight vessels 

I guess sidelined. These are workhorses of our fleet and it has decreased our capability to deal with critical missions. The loss of 

these vessels diminishes the force projection capabilities in Florida 

and also jeopardizes the Coast Guard missions to interdict both illegal narcotics and undocumented illegals before they reach the 

United States. 

I am also especially concerned about how a forced reduction 

would impact the Coast Guard’s capability to handle mass migration or disruption. We anticipate the death of the Cuban dictator 

and other events that may proceed. I have discussed this with Admiral Allen. Tomorrow I will do a closed door briefing with the Admiral, a closed door briefing with members of the Florida delegation, invite members of this Subcommittee to participate so that we 

can hear your plans in case we do get slammed or hit by, again, 

the disruption from the impending death of the Cuban dictator. 

So for the reasons I have stated, I continue to be supportive of 

this Subcommittee’s work, will do anything I can to work with the 

8

Chair, the Ranking Member, and all members of the Subcommittee 

and Committee to make certain that we have the best Coast 

Guard, they have the best equipment, and we are able to complete 

any mission or challenge. And with that, I thank you and yield 

back. 

Mr. CUMMINGS. Mr. Mica, thank you. 

Mr. Larsen. 

Mr. LARSEN. Thank you, Mr. Chairman. 

As part of the Deepwater program, three Coast Guard H–65 helicopters located in the Pacific Northwest have undergone successful 

engine overhauls. Five more in the Pacific Northwest will undergo 

the same overhaul. One of these overhauled helicopters participated in the successful rescue on the Olympic peninsula that would 

not have been possible without that Deepwater investment. 

Unfortunately, these kinds of success stories in the Deepwater 

program seem to be too few and too far between, subsumed by the 

tidal wave of bad news coming out of the program itself. Problems 

with procurement, contract management and oversight lead to cost 

overruns, lead to structural deficiencies in maritime assets and, 

therefore, warranted attention. To many, the Deepwater program 

seems to be, well, in deep water. For the sake of taxpayers, we 

must get to the bottom of these troubles. The Deepwater program 

is our Country’s first line of defense to securing our shores. 

I hope to get out of this hearing today an understanding of how 

the Coast Guard intends to fix the problems with Deepwater. Our 

intent is to ask tough questions and get candid answers. I have serious concerns over the ballooning price tag of implementing Deepwater and expect answers as to how the Coast Guard plans to control these costs. I also expect an answer as to why the first two of 

eight National Security Cutters were built after the Coast Guard’s 

chief engineer found the structural design to have significant flaws. 

I look forward to taking a closer look at Deepwater and how to 

fix its problems. We in Congress owe it to those who elected us to 

ensure their money is being spent wisely and that this important 

program is implemented effectively, and the Coast Guard can expect our help in ensuring that that does happen. 

So I look forward to today’s testimony Mr. Chairman. Thank you 

for my time, and I yield back. 

Mr. CUMMINGS. Thank you very much. 

Mr. Coble. 

Mr. COBLE. Thank you, Mr. Chairman. Mr. Chairman, I too want 

to congratulate you and the distinguished gentleman from Ohio as 

you all lead this very important Subcommittee. 

Admiral Allen, good to have you back on the Hill. 

Some of my congressional colleagues, Mr. Chairman, call me one 

of the vocal cheerleaders of the Coast Guard. I may not be a head 

cheerleader, but I remain on the cheerleading squad. 

I am very high on the Coast Guard and I am very high on you, 

Admiral, personally. I think the Coast Guard is in good hands with 

you and your able staff at the helm. There are two sides to every 

story, and the issue before us is no exception. I look forward to 

hearing from you Admiral. 

9

And, Mr. Chairman, you may have mentioned this in your opening statement, but I assume that we will hear from the IG at some 

appropriate time? 

Mr. CUMMINGS. Yes. We wanted to have the IG here today, but 

there were some conflicts. So, yes, we will have the IG here hopefully within the next few weeks. 

Mr. COBLE. I thank you. 

In closing, I will reiterate what has been said by others. Naturally, we are concerned if there has been recklessness, for want of 

a better word, regarding the expenditure. I am sure we will get to 

the bottom of that. But I repeat, Admiral, I appreciate very much 

what you and the men and women of the Coast Guard do, and I 

will continue to be a cheerleader. 

And with that, Mr. Chairman, I yield back. 

Mr. CUMMINGS. Thank you very much. 

Mr. Baird. 

Mr. BAIRD. I have a number of questions. In case I don’t get to 

them, let me just put the marker down that I am interested in 

what the Coast Guard plans to do, in the interim, to fill the gap 

that is going to be created by the problems with the 123s, and, 

also, I have sort of a core question of are the same people who presided over the errors that we are going to be learning about today 

those who are going to be making the decisions about how to fill 

the replacements? Because I have grave concerns about their competence and reasoning to do so. And I am sorry to say that, but I 

think the evidence may suggest that if the same people are going 

to fix the problem that created the problem, we ought to look at 

an alternative. 

I yield back. 

Mr. CUMMINGS. I am very pleased to yield to the former chairman of this Subcommittee, Mr. LoBiondo. 

Mr. LOBIONDO. Thank you, Mr. Chairman. Congratulations to 

you. I am looking forward to the hearing. 

I want to echo Mr. Taylor’s comments. I don’t know how to begin 

to express how troubled and disappointed I am with all the news 

that is coming out, where we have repeatedly been assured that 

the worst is behind us, and it seems like it just doesn’t end. So, 

Admiral Allen, you have a big challenge, and I look forward to 

hearing your testimony. 

Mr. CUMMINGS. Thank you very much. 

Mr. Higgins? I am sorry, Mr. Bishop. 

Mr. BISHOP. Thank you, Mr. Chairman. 

I too will probably not be here to ask questions, but I, like I am 

sure all of my colleagues on this panel, are deeply, deeply concerned about how Deepwater has evolved thus far, and I guess I 

would ask that we be assured or that you provide us with some degree of confidence that the process that led us to this point is a 

process that will not be carried forward from this point on. I mean, 

when I look and recognize that we have spent over $100 million 

and all we really have to show for it, if I understand it correctly, 

are eight boats that we can no longer use and a design for a patrol 

boat that is unworkable, and then when I think about what that 

$100 million could be used for elsewhere in this Country—how 

many kids we can help get a college degree, how many units of 

10

housing we could build, how many seniors we could assist—it is 

just simply unacceptable. 

So I very much hope—and I live in a coastal region and the 

Coast Guard in our region is magnificent. I have nothing but the 

highest regard for the service that the Coast Guard provides to 

boaters in our region. But I very much hope that the excellence 

that they demonstrate in how they perform their daily responsibilities will also manifest itself in how we move forward with this 

Deepwater project. 

Thank you, Mr. Chairman. I yield back. 

Mr. CUMMINGS. I want to thank you very much, Mr. Bishop. 

Now, Mr. Poe. 

Mr. POE. Mr. Chairman, thank you very much, and congratulations again. 

I represent Southeast Texas, and the Sabine Neches Riverway is 

the primary source of commerce. As you know, the Port of Beaumont ships about one-third of the military cargo that goes to Iraq 

and Afghanistan out of that little bitty port, number one port of deployment in the United States for that military cargo. Of course, 

we had a hurricane that most Americans have forgotten about, 

Hurricane Rita. Came right up to Sabine Neches Riverway, wiped 

out one town; Sabine Pass doesn’t exist anymore. And certainly 

concerned about the widening and deepening of that channel. Patrolled by the Coast Guard; they do an excellent job. 

One concern on a different note that we will talk about eventually is the numbers of people in the Coast Guard, because half the 

Coast Guard that is assigned to that area are reservists on active 

duty, have been on active duty for a long time, and they are from 

all over the Country; they are even from Minnesota. So when we 

get through the communication problem with those folks, they do 

an excellent job 

But I am concerned about all the things that have been mentioned by all the other Committee members and look forward to the 

testimony. But I do want to publicly thank the Coast Guard for the 

excellent work they do under all the hardship circumstances that 

they have down there in Southeast Texas. 

And thank you, Mr. Chairman. 

Mr. CUMMINGS. I want to thank you, Mr. Poe. 

Now we will turn to Admiral Allen. 

And, Admiral Allen, I just want to make it very clear that I said 

to our Committee yesterday in an organizational meeting that we 

want to act in a bipartisan manner. I think that you have heard 

basically a common theme, and that is, one, we want to trust and 

we want to make sure that the Coast Guard, and anybody or any 

organization doing anything for the Government of the United 

States of America, that those dollars are spent effectively and efficiently. 

I will tell you, in my little brief introduction of you, that I have 

the utmost confidence in you and the Coast Guard. I saw you—the 

first time I met you was down in Katrina, and I admire you for 

what you have done. As to the men and the women of the Coast 

Guard, you know, this Committee thanks every one of them, because I know, I have seen what they do with regard to drug interVerDate 0ct 09 2002 12:03 Nov 06, 2007 Jkt 000000 PO 00000 Frm 00022 Fmt 6633 Sfmt 6633 P:\DOCS\34776 HTRANS1 PsN: JASON
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diction, putting their lives on the line everyday. I have seen many 

of the wonderful things they have accomplished. 

And basically what we are getting to here, and the reason why 

I am saying this is because I am trying to make sure you tell us 

what we are trying to get to. We want to make sure that when they 

go out to sea and do the jobs that we expect them to do, particularly in this post–9/11 era, that they have the very best equipment 

that we can find. And that is what is important to us. And I know 

that in my conversations with you—and thank you very much for 

our several conversations, and you have made it clear that you are 

a no nonsense person. I know that you are. So now we want to hear 

solutions; where we go, how were the mistakes made before and 

how do we correct those so that they don’t happen again. 

But I say this last but not least, that the Coast Guard can’t wait 

for the best equipment and the American people can’t wait. So we 

want to see if we can get solutions, move this process along, and 

demand accountability and trust. 

Before I go to you, I am so pleased to have the Chairman of our 

Committee to come by, Jim Oberstar. Many of us call him the guru 

of transportation, and I have given him another name, the guru of 

the Coast Guard. And he has just been just a tremendous chairman. I am so glad that you had a moment to stop by. Thank you, 

Mr. Chairman. I now yield to you. 

Mr. OBERSTAR. Thank you very much. I will take only a moment. 

Congratulations, Mr. Cummings, on assuming the chairmanship 

of the Coast Guard Subcommittee. You have had a long relationship with the Coast Guard through the Port of Baltimore and your 

vigilance over the Chesapeake Bay is a long appreciation by your 

constituents, as I have seen from our visits there. 

I want to welcome Mr. LaTourette, who previously chaired the 

Railroad Subcommittee and did a splendid job there on behalf of 

rail passengers and freight rail interests and rail safety. I welcome 

you to a new assignment, that of the Coast Guard. 

Admiral Allen, welcome. You have, as you proved during 

Katrina, been a stand-up Admiral, a stand-up public servant. You 

were sent into an extraordinarily difficult situation and handled it 

with great skill and reflected great credit on the Coast Guard, on 

yourself, and on the Executive Branch of Government at a time 

when people were despairing that any help would be forthcoming. 

And you took personal charge of the live fire issue on the Great 

Lakes; sent Admiral Crawley out to undertake hearings which he 

conducted himself in each of the locations where the live fire exercise was scheduled, and he suspended those activities. 

Time and again, my appreciation of the Coast Guard, as Chairman Cummings said, is unbounded. But the Deepwater program is 

a black moment for the Coast Guard. It is a dark chapter in an 

otherwise brilliant service to the public. But it is not unprecedented. The FAA was in the same situation in the 1980’s, as the 

Federal Aviation Administration was moving to vast modernization 

of the air traffic control system and engaged in contracts with private sector and design, engineering, and deployment of air traffic 

control technologies that were way beyond the state of the art. 

And what we found was that the FAA did not understand how 

to manage multibillion dollar contracts. We couldn’t tell where the 

12

FAA left off and the contractor began, and vice versa. The FAA was 

self-certifying. That is not acceptable. The Coast Guard was allowing the industry to self-certify. That is not acceptable. And I think 

you understand that. 

And I appreciate this very thick document, which I read over the 

weekend. It is the work of the Inspector General of the Department 

of Homeland Security. I think, as Chairman Cummings said, we 

want to hear where the Coast Guard is headed now. And I think 

I understand the problems, how it got out of hand, but I want to 

hear from you how you plan to address it. 

As in the case of the FAA, when Mr. Hinson became administrator of FAA and brought in the GSA to review their contractual 

situation, brought in Navy contractors, that is, Navy contract supervisors for the Department of the Navy, who were overseeing 

multibillion dollar contractors, what they found was that if FAA 

had simply followed the rules of procurement of GSA, not the new 

rules that they were looking for, they would have saved money, 

they would have produced a better product, they would have done 

it close to time. And I think we will find that is the same situation 

with the Coast Guard. 

So let us proceed Mr. Chairman. 

Welcome, again, Admiral Allen. I thank all of our members for 

being here. 

Mr. CUMMINGS. Thank you very much, Mr. Chairman. 

Admiral Allen. 

TESTIMONY OF ADMIRAL THAD W. ALLEN, COMMANDANT, 

UNITED STATES COAST GUARD 

Admiral ALLEN. Thank you, sir. It is a pleasure to be here today 

Mr. Chairman, Mr. LaTourette, Ranking Member. Chairman Oberstar, it is always a pleasure. And the members of the Committee. 

I thank you for your past leadership, our collaboration, and your 

support here today, and your very valid questions regarding what 

is going on in Deepwater with the Coast Guard. 

I think, quite clearly, we have all demonstrated, in the comments 

made previously and in mine here, that Deepwater is critically important to the Coast Guard in sustaining future readiness to put 

the right tools in the hands of our people, as has been stated. I 

have no higher purpose, as the Commandant, than to put those 

tools into the hands of our people and to do it efficiently, effectively, and mindful of the stewardship responsibilities we have. 

Deepwater is essential to the Coast Guard’s future. In many 

ways it is the Coast Guard’s future. We have to get it right. And 

getting it right means several things, and what I would like to talk 

about is three major topics. Then I would like to go to the specific 

platforms and answer any questions you may have about that. 

Mr. Chairman, I have a statement for the record. I would like 

to submit that and then open with an oral statement. Thank you. 

Mr. CUMMINGS. With no objection, it will be submitted. Thanks. 

Admiral ALLEN. First, internally, the Coast Guard must create 

the right organizational structure. And beyond organizational 

structure, we must create the right culture to reconcile competing 

interests that are in the best interests of the Coast Guard and the 

13

Nation. We are doing that. We have been doing that since last 

year. 

Formerly as Chief of Staff, and now as the Commandant, I directed a series of top-to-bottom studies. One of those studies will 

create a single acquisition organization to improve the management of human capital, professionalize program management, and 

align us with the new service-wide mission service organization. 

What this will do, it will take the technical authority that is providing oversight regarding standards, the program management of 

the acquisition, and put them to work for the same Admiral so adjudication of conflict will be less of a problem or will be no problem 

at all. 

I have also clarified and strengthened the role of the Assistant 

Commandant for Engineering and Logistics, and you will commonly see that person referred to in the report as the technical authority. I clearly designated the Assistant Commandant for Engineering and Logistics as the technical authority several months ago 

and, after consultant with the IG, I have just issued a directive 

which states the technical authority is—and this is a quote from 

the directive—‘‘the authority responsibility and accountability to 

establish, monitor, and approve technical standards, tools, and 

processes related to acquisition.’’ There is no ambiguity about the 

technical authority in the Coast Guard, who it is, where the accountability resides, and what his tasking is. 

Second, we must collaborate effectively with our industry partners and, where appropriate, provide direction that preserves the 

Government’s interests and the performance required of our cutters 

and planes. We are doing that as well. 

Since assuming my duties as Commandant, I have met or talked 

with both Mr. Stevens of Lockheed Martin and Mr. Sugar of Northrop Grumman on several occasions. We held a meeting on the 

19th of January which was frank, open, and in many ways very insightful. We have put together a joint team that will provide recommendations to assure how we can best align and optimize the 

relationship in the next award time, and define those responsibilities of the Government and the contractor and where responsibility lies. 

Mr. Chairman, we understand the Coast Guard’s role. I understand my responsibility and the terms of acquisition for the Coast 

Guard and where the Government’s interest needs to be protected, 

and that resides with me, sir. 

Third, we must maintain cordial, productive relationships with 

oversight bodies. They have legitimate roles in this endeavor. We 

are doing that. And to the extent that we can provide, or improve 

on, guidance to our people, we will do that as well. 

This morning, the testimony that I submitted for the record, Mr. 

Chairman, was sent to every member of the Coast Guard, along 

with an email from me, and I will quote one paragraph from my 

all-hands message this morning. ‘‘External scrutiny from the Inspector General and other overseers will raise questions on the 

Deepwater acquisition throughout its life. As public servants, we 

are not only subject to their oversight, but it is a central feature 

of the appropriations and authorization process. I welcome external 

review, as it enables us to improve our processes, become more efVerDate 0ct 09 2002 12:03 Nov 06, 2007 Jkt 000000 PO 00000 Frm 00025 Fmt 6633 Sfmt 6633 P:\DOCS\34776 HTRANS1 PsN: JASON
14

fective stewards of taxpayer dollars, and better serve the American 

public.’’

I have made it unequivocal where we stand in regards to our 

dealings with the IG to my people in the Coast Guard. I have met 

with the Inspector General and the Deputy Secretary to talk about 

the issues contained in the report. And let me be clear here, because there are technical issues we will have to resolve. To the extent there is any ambiguity regarding our position on the NSC IG 

audit, let me clearly state here we concur and have implemented 

five of the six recommendations made. Regarding the sixth recommendation, we have deferred to the Department of Homeland 

Security to establish a policy regarding how the IG interacts with 

the various components. 

Now, having said that, there are technical issues related to how 

contracts are interpreted that we have to work out with the IG. I 

have committed to the Inspector General to issue a report within 

90 days that lays out our plan to move ahead. We are both in 

agreement that the National Security Cutter must have a 30 year 

service life to best serve the men and women of the Coast Guard 

and carry out the missions to which we are assigned. 

As was noted by one of the members, Deepwater has provided 

new valuable capability of the Coast Guard in the form of new 

fixed wing aircraft, re-engined helicopters, and significant upgrades 

for our legacy cutters, one of which I rode over the holidays in 

Winward Pass. Our people are happy with the products. However, 

we acknowledge the issue with the NSC, the 123 conversions and 

FRC. 

I am prepared to talk about each one of these, but I will wait 

for your questions to answer on the specific platforms. Thank you, 

sir. 

Mr. CUMMINGS. Thank you very much. Let me start off where 

you left off when you were talking about the FRC, the Fast Response Cutter. Admiral, as you probably know, last year this Committee directed the Coast Guard to competitively compete the construction of that Fast Response Cutter among all United States 

shipyards. Are you willing to do that? 

Admiral ALLEN. Yes, sir. The acquisition is actually divided into 

two parts, a solicitation for a design and a construction of what we 

would call a parent craft, and then a communications integration 

piece that will allow it to be interoperable with the other assets 

that are out there. Those solicitations have been made through 

ICGS. There is complete open competition. It will be built in the 

United States and, when that contract is awarded, it will be openly 

competed. 

Mr. CUMMINGS. Now, you know, I am sure you read the IG report, have you not? 

Admiral ALLEN. Yes, sir. 

Mr. CUMMINGS. And you told us the things that you want to do 

to—and, by the way, we appreciate the fact that you have looked 

at that report and, of the six recommendations, you are going to, 

I think you said, carry through with five of them; Homeland Security will deal with the other one. But, you know, so that we don’t 

go through this again, and as I have told you many times, one of 

the things we are most concerned about is trust and accountability. 

15

How do you explain the repeated failures in the procurement of 

ships under this program, the Deepwater program? 

Admiral ALLEN. I think you almost have to look at each individual platform, between the National Security Cutter, the 123 

conversion, and then the FRC. They happened at different stages 

of the life cycle of this procurement and some of these decisions 

that we are talking about were actually made two to three years 

ago. And while we in the Coast Guard had visibility of them and 

knew about such things as there was a fatigue life issue with the 

National Security Cutter, and while we briefed staff, I think very 

clearly there should have been a more specific focused communication to our overseers in Congress to make sure that you were absolutely aware of it, because it wasn’t our intent to withhold the information. 

That said, I think, regarding the National Security Cutter, early 

issues within our technical community that normally would have 

been vetted at integrated product team meetings failed to resolve 

conflicting views and competing positions on the structural life of 

the ship. I think what bothered us at the time was we didn’t have 

a way inside the Coast Guard to get that thing raised to the highest level and get a decision made and get on with it. Because of 

that there was a lot of study, discussion, let’s check it one more 

time, and, quite frankly, there was some computer modeling that 

was not available when we built ships before that was done to help 

us in that decision making. 

By the time all that was in front of the decision makers in the 

Coast Guard, we were at a point in the National Security Cutter 

production where to stop production and redesign the ship at that 

point would have caused an irrecoverable loss in schedule and costs 

associated with that. And while it is not documented maybe as well 

as it should be on paper that is auditable by the IG, the decision 

of the Coast Guard leadership at that time was to deal with the 

structural problems moving forward and retrofit the first and second NSCs rather than to stop production, given the schedule and 

costs associated with that, sir. 

Mr. CUMMINGS. Now, looking back at that decision, I mean, I 

know this is kind of Monday morning quarterbacking, but would 

you agree with that decision? That is, what you just said. Would 

you have agreed with the decision that they made with regard to 

the NSC? 

Admiral ALLEN. I think, quite clearly, it is arguable either way. 

Sitting where we were at, with a program of record, funding, and 

a workforce ready to start assembling the modules down at 

Pascagoula, with the long lead time materials already acquired and 

the detailed design done, that is a lot of work headed towards a 

ship that would have to be stopped and started again. I think, arguably, that is not a bad business decision to make. 

I will tell you this, though, and the IG would tell you too, that 

the business case is not apparent, is not analyzed, nor is it in writing where it is traceable or auditable, so there doesn’t appear to 

be a basis on which the decision was made. Absent that, one could 

infer that the responsibility was abdicated to accept what the contractor provided. I think there was informed decision-making; I 

don’t think it was well documented. 

16

Mr. CUMMINGS. Now, with regard to the cutter, and you go back 

to the point—you made three points in your opening statement of 

things that you wanted to address a little differently. I am just 

wondering how do—if we reach an impasse like that again, how 

does—I guess it would have to come within your first two points. 

How does what you are trying to do now, how would that resolve 

that issue? Because, again, you are talking about time, you are 

talking about apparently opinions that differ, and you are talking 

about vessels that don’t do what we expect them to do. 

Admiral ALLEN. Yes, sir. 

Mr. CUMMINGS. That is a big problem. 

Admiral ALLEN. In our attempt to put management focus on the 

preparation of proposals for the Deepwater Project, we created a 

new organizational entity in the Coast Guard, the actual Deepwater Program Office itself, and put a flag officer in charge of it 

with an SES as the deputy. When we did that, we did that separate from our engineering technical staff, and then our operational 

people that owned the requirements for what we were trying to 

buy. Automatically, you have a triangle there, and when you have 

three different positions trying to adjudicate that, unless you have 

procedures and an organizational culture of collaboration to make 

that happen, it is not going to be easy to find a central point of 

consensus if there is a disagreement. We had some of those early 

on. One of them was about the fatigue life of the NSC. 

The organizational structure that I am putting in place in the 

Coast Guard, that will be in place in the next few months, will take 

the technical authority, the contracting organization and the program manager and put them in the same organization, working for 

the same Admiral who I can hold accountable for that performance. 

And, in fact, the guy who is going to do that is sitting right behind 

me, Rear Admiral Ron Rabago, who is a former Coast Guard CO 

at the yard and a former cutterman himself, naval engineer and 

sailor, sir. 

Mr. CUMMINGS. Thank you very much. 

Mr. LaTourette. 

Mr. LATOURETTE. Thank you very much, Mr. Chairman. 

Admiral, the IG report has received wide circulation; it was delivered to the Hill on Friday and I was saddened to read about it 

in the newspaper over the weekend, before you had the opportunity 

to come here and address us. But I took from at least the published 

accounts and other things that perhaps the Coast Guard is not in 

agreement with some of the findings of the Inspector General, and 

I would like to focus first on the National Security Cutter and ask 

you a few questions that were referenced, again, in printed accounts and in the IG’s report. 

Can you share with us what the original performance requirement regarding days of sea and days underway was for the National Security Cutter? 

Admiral ALLEN. Yes, sir. I think this is the pivotal issue between 

the Inspector General and the Coast Guard right now, because I 

think almost everything else is resolvable. And this is something 

we are just going to have to make sure we have an agreement on 

and come back to you all and tell you this. This is the nub of the 

issue. 

17

Our current policy for deploying cutters limits them to 185 days 

away from home port. We don’t do that because the ship can’t do 

it, we do that because it is not fair to our people or the perstempo, 

if you will, for the same reasons there are deployment limits on 

forces overseas in Iraq. 

Under the Deepwater concept, we intend to use four crews for 

three vessels and multicrew the vessels. That will allow us to 

achieve 230 days away from home port. 

Now, there is a difference between days away from home port 

and usable days at sea, if you will, and let me explain that, if I 

could. Even under 185 day limit that we have right now, if you consider a boat leaving Alameda or Seattle and we have to transit to 

the Bering Sea or the middle of the Pacific, you may end up using 

considerable days in transit. So when you actually get out to the 

operating environment, you may yield only 130 or 140 days a year, 

including port calls and where you might have to go for maintenance. 

So our intent was, in establishing 230 days away from home port 

as a standard, that we would yield between 170 or 180 days. Now, 

what we are dealing with the IG about currently is whether or not 

the standard is should the ship be designed to be in the operating 

environment for 230 days, subjected to wave stress, and so forth, 

or should it be designed to operate between 170 and 180 days in 

those operating environments, which is where we think it will be 

in terms of how much you strengthen the vessel. 

And, as you know, there are no shock absorbers on ships; they 

have natural flex and you have to build in the resistance to flexing 

and bending in the service life of the ship to be able to withstand 

it, and you are actually building in shock absorbers for the cutter. 

We are basing that on 170 to 180 day standard. The IG would assert the contract says 230 days. It is an issue of contract interpretation. We believe the contract clearly states 230 days away from 

home port, 170 to 180 mission days. 

We get into semantical loops around underway, days away from 

home port. This needs to be clarified completely and reported back 

to everybody, sir. 

Mr. LATOURETTE. Well, Admiral, then, are you representing to 

the Subcommittee that the NSC is currently designed, or with the 

modifications that the Coast Guard has proposed, meets the specifications in the Deepwater contract? 

Admiral ALLEN. Our position is to meet the specification of the 

Deepwater contract for the 30 year service life, the ships could presume to be operating between 170 and 180 days in the mission 

area, and that is defined as whether you are out in the Pacific or 

the Atlantic. That produces a certain amount of historical wave action and stresses on the ship that can be modeled by a computer. 

The difference is do you model 30 years at 170 or 180 days, or 30 

years at 230 days, and that takes a much strengthened and a much 

stiffer ship to be able to handle that, and a much more heavy and 

expensive ship. You are almost buying more performance than you 

need to accommodate transits and days away from home port. 

Mr. LATOURETTE. Another portion of the Inspector General’s report that dealt with the National Security Cutter represents that 

as early as December 2002 there were technical experts within the 

18

Coast Guard that were raising concerns about the design of the 

NSC, and there was also a memo in March of 2004 from the Assistant Commandant for Systems that urges the Coast Guard’s Deepwater Program management delay the start of construction until 

some of those concerns could be resolved. 

As Chairman Cummings has sort of echoed in his opening remarks, I think we should look at how we are going to go forward, 

but in order to go forward, I think we do have to examine what 

has transpired. Can you share with us how the Coast Guard handled the concerns of the Assistant Commandant and, secondly, why 

the Coast Guard authorized construction on the NSC to begin before those technical concerns had been resolved? 

Admiral ALLEN. Let me preface my remarks by just stating that 

this was a decision that was made—some of these decisions were 

made two, three, and four years ago, and I am characterizing leadership at the time. I was there and heard some things, was privy 

to it, it may not be exact, but basically, as I stated to Chairman 

Cummings, the potential irrevocable loss of schedule days and costs 

associated with that at a certain point start to reach the cost of retrofitting when you are building the first hull in the class of a ship. 

The decision taken by Coast Guard management, whether you 

agree with it or not, the decision that was taken was that they 

would continue to take a look at the structural issues that were 

raised in the memo, and to the extent that retrofitting was needed, 

that would be done on the first and second hulls after delivery so 

as not to break production and incur costs and schedule delays 

there. 

I think the IG would tell you there should have been a business 

case analysis that traded those off so you knew what you were 

doing against the other. One of the problems w e have in dealing 

with the IG is that is not documented anywhere on paper that is 

traceable or auditable, and one of the things we have talked to the 

IG about going forward is creating better documentations of decisions, rationale for senior leaders, taking action, and then making 

that visible and transparent. 

Mr. LATOURETTE. And, Admiral, the last question that I would 

have for you on this subject is one of the selling points of having 

this integrated system and then having the integrators go out and 

look for the best product was that if the product didn’t meet the 

specifications, didn’t comply with the contracts, there was the ability to go back on the integrator. We now have two examples, one 

the conversion of the 123-foot boats, and they are sitting, they are 

not usable based upon some structural deficiencies; and there is a 

$302 million request for equitable adjustment on the NSC. 

Can you tell us—again, I think almost every member of the Subcommittee talked about the need to watch the public purse. Can 

you tell us what action the Coast Guard is taking to recoup those 

wastes costs from the system integrator? 

Admiral ALLEN. I will do that. Let me again preface it with just 

a comment that this puts me in somewhat of a conflicted position, 

as I talked to the Chairman about. We are trying to produce vessels and put them in the hands of our people. That takes a certain 

amount of collaboration and getting on with business, if you will, 

and how you are going to solve problems. That becomes difficult to 

19

do if you think everything you lay on the table in a meeting may 

be subject to discovery in a potential lawsuit. And these are serious 

discussions that I need to have with the COs of both corporations 

going forward, and these are the kinds of discussions we are having. 

What I am choosing to do is making sure that we lock down requirements, we understand where we are going, especially with the 

NSC, the future of the 123s and the Fast Response Cutter; there 

will be a bridging hull for that. There will probably come a day 

when we need to adjudicate where responsibility lies for the value 

received by the Government. I am not sure there is enough information right now that would lead us to do that, but I can’t let that 

stand in the way of making the decisions and building the cutters. 

I will tell you this, as I have told you before, I am accountable 

to make sure if there is value due to the Government that was not 

received, to act in the manner that preserves the Government’s interest, and I will do that working with the other stakeholders. 

Mr. LATOURETTE. I appreciate that very much. As you know, the 

integrator recently received a 43 month contract extension for the 

work that they have done, and it is my understanding, on the 

scores that were assessed to determine how good a job they were 

doing, they ranged between 60 and 76 percent, which, from my perspective, is not so good. And I would just opine, unsolicited, that 

the integrator owes it to the American taxpayer to fulfill the contracts according to the specification. And as it was sold to the Congress that there was recourse, I would hope that that recourse 

would be taken swiftly in accordance with the other concerns that 

you have. 

Thank you, Chairman. 

Mr. CUMMINGS. Thank you very much. 

Mr. Taylor. 

Mr. TAYLOR. Thank you, Mr. Chairman. 

Commandant, again, thank you for the great work the Coast 

Guard did after Katrina. And I have to say that because it leads 

into my disappointment in this program, in the 110 program, and, 

conversely but not unrelated, to the LCS program, which is built 

by a lot of the same people. And I am seeing a pattern here. 

In the 110 program you have eight vessels that were fully capable before they went to the shipyard; now you have got eight pieces 

of junk sitting at the dock maybe good for a river patrol boat if we 

give it to Columbia or somebody, but that you can’t take out to sea. 

Is that fairly accurate? 

Admiral ALLEN. We are under———

Mr. TAYLOR. And no one is at fault. The shipyard says they 

didn’t do it. Everyone says it is somebody else’s problems. Well, the 

taxpayers are stuck with the bill and the Coast Guard got what 

were eight capable ships sitting at the dock that are useless. 

Then we have this. We have the Assistant Commandant saying, 

in 2002, that he had—a man who has got all sorts of masters degrees, a naval architect, naval engineer saying something is wrong 

here, we need to fix it before we build the ship, and apparently nobody is listening. 

In the case of the LCS we have got a ship that is 70 percent complete but now at twice the original cost. 

20

So, again, the timing is not good for the Coast Guard, but twothirds of those problems are in your shop. And in one case you 

have an insider, a highly capable insider of your organization saying we have got a problem, let’s fix it now. 

Now, let’s take it a step further. We are saying, well, we will fix 

it a little bit later. Well, my recollection is that you were going to 

retire 378s as each one of these comes online. So as we give that 

378 away to a third world country or we scrap it, that capability 

is gone. You have now got to bring the first two cutters back in to 

get fixed. Well, you have just lost one-eighth of your capability 

every time you tap one of those ships. 

So why wasn’t the decision made early on to listen to the Assistant Commandant and, secondly, to fix those things when we had 

the opportunity? Again, I thought I heard you say—and I am going 

to give you an opportunity to correct me, but I thought I heard you 

say, well, we really can live with the 180 days a year. With all due 

respect, if Hurricane Katrina taught us anything, it is we have got 

to prepare for the worst. 

And we really can’t count on having all eight cutters. We could 

have a Cole-like incident where someone blows up one of the eight 

and you are counting on seven to do the work of eight. If you are 

tying up two, you are now counting on five to do the work of eight. 

I just don’t buy that, Commandant. Good gosh, the one thing you 

beat into my head, or your predecessors beat into my head a long 

time ago, was prepare for the worst, and you are not doing that; 

you are sugar-coating it, and it troubles me. And I think we need 

to get this fixed right now. 

The second thing is we have some programmatic problems, both 

here and in the Navy, where apparently all sorts of money can get 

wasted, ships can get delayed, things can get screwed up and no 

one is responsible. So I am asking for your guidance. As the senior 

officer in the United States Coast Guard, what are your recommendations to fix that this doesn’t continue? 

Admiral ALLEN. Yes, sir. As I indicated earlier, there is a structural and a cultural issue to this. The memo that was written and 

the information was passed in 2003 and 2004 went out of one Assistant Commandant’s office into another. Under the new acquisition structure that is being provided right now, that technical authority, the contracting officer, and the program manager for the 

acquisition work for the same Admiral, accountable to me, and we 

will not have that happen again. 

I am explaining what happened two or three years ago and the 

implications of those decisions. Right or wrong, the decisions were 

taken and the window was closed. I control what I control now in 

the organization that I run, and I have made it pretty clear to the 

Committee how I am going to stand my watch, and the watch will 

be that we will resolve those issues at the lowest level possible. If 

they cannot be resolved, I expect them to walk in my door and tell 

me about it. That is part of the ethics and the ethos of the Coast 

Guard that people expect, and that is how I am going to run my 

outfit. 

Mr. TAYLOR. Commandant, the Assistant Commandant who 

waved the flags that something was wrong, where is he now, is he 

still on active duty? 

21

Admiral ALLEN. He is retired. He is Rear Admiral Errol Brown. 

In fact—I am sorry, he is recalled to active duty. He is leading the 

top-to-bottom review of the Coast Guard Academy that I convened. 

Mr. TAYLOR. If I may, he ought to be leading this program, with 

all due respect. Apparently he is the one who caught it; no one listened to him, and I, quite frankly, think you placed him in the 

wrong place over at the Academy. 

Admiral ALLEN. He retired. I brought him back for a special job. 

He is not in the Coast Guard any longer. He agreed to come back 

from retirement to do this special task force for me, to take a look 

at the Coast Guard Academy and issues up there. 

The engineers that are sitting behind me have been tasked to do 

the same type of thing that he did and that speak truth to power 

and walk in my door and tell me that, sir. 

Mr. TAYLOR. Who on active duty now would have gotten these 

memos and either ignored them or rejected them? 

Admiral ALLEN. The Chief of Engineering, the Program Executive Office, the Commandant and the Vice Commandant are all retired. 

Mr. TAYLOR. Thank you, Mr. Chairman. 

Mr. CUMMINGS. Just before we go to Mr. Coble. 

Let me just ask you this, just following up on something Mr. 

Taylor said. Is it better to have greater strength than less strength 

as far as the ships are concerned? 

Admiral ALLEN. I would like to address that. 

Mr. CUMMINGS. I know it is more expensive, but I think Mr. Taylor makes a very good point. I mean, we are post–9/11. We have 

got all kinds of problems. I am just wondering, when we see where 

we are now, would it have been better to have—would it be better 

to have greater strength and err on the side of strength, as opposed 

to not having the strength. 

Admiral ALLEN. I can’t state strongly enough that this is not an 

issue of suboptimizing performance of this hull. It is understanding 

that we are going to increase the days away from home port to 

yield greater mission effectiveness in the operating areas where we 

operate. We do not get 180 days a year out of the cutters we have 

now; it is more down like around 130 or 140. So there is a significant increase in capability. That is the reason we are only purchasing 8 rather than 12. But it is premised on the fact that we 

will multiple crew them and we will get 230 days away from home 

port out of every cutter. So the yield remains the same; we get better mission performance because they are more effective. 

Now, the loss—I think where Mr. Taylor was going, if they are 

laid up for retrofit afterwards, you are going to lose days there. The 

fact of the matter is the plan, as developed, when the decisions 

were made, were due to the retrofits as part of normally scheduled 

yard periods so there would not be a loss of days associated with 

the retrofits. 

Mr. CUMMINGS. Mr. Coble. 

Mr. COBLE. Thank you, Mr. Chairman. 

Admiral, as I said previously, good to have you back on the Hill. 

The gentleman from Ohio put his oars in waters that I was going 

to pursue, and that is the 110-foot cutters which were deemed not 

seaworthy, and then the composite patrol boat which failed tank 

22

and model tests. My question, Admiral, was going to be—and I 

think Mr. LaTourette addressed it—the possibility—and this may 

be a premature question—the possibility of recouping some of those 

costs. If you think that is a viable course to pursue, I hope you will 

do it. You probably can’t address that with certainty now, but I 

think it is a fair question, albeit a premature question. 

Admiral ALLEN. Well, I think it is premature for the National Security Cutter and the FRC. I think it is on point for the 123s, 

should we not return them to service, sir. 

Mr. COBLE. Admiral, there is a gap between the number of patrol 

boat and marine patrol aircraft hours the Coast Guard needs to 

complete its mission and the number that will be actually available 

due to problems with integration. What will Deepwater do to address the patrol boat symbol for Nash aircraft hour gap, A, and 

what is being done in the interim to address these concerns? 

Admiral ALLEN. Well, let me give you a quick answer to the aircraft side, because I really would like to focus on the surface side, 

if I could, sir. 

We recently took delivery of our first new surveillance aircraft, 

CASA 235; arrived over the holidays, it is down in Elizabeth City. 

We have that production line up and running, and it is our goal 

to accelerate the delivery of those aircraft, because they are the replacements for our Falcons, as you know, and that will provide us 

the initial bridging into the maritime patrol aircraft hours gap. 

The more problematic gap was the one that existed for patrol 

boats, before we had the problem of laying up the eight 123s. So 

we have a problem of trying to achieve the patrol boat gap, but we 

also have the problem of trying to mitigate the loss of the 123s. If 

I could, I would like to give you a couple of things that we are 

doing there. 

Mr. COBLE. That would be fine. 

Admiral ALLEN. Tactically, in the near term, we are going to take 

the eight crews from the 123s that were laid up and we are going 

to double crew 110-foot cutters. That is a new operating concept of 

the future; we have done it with 179-foot patrol craft and we are 

doing it with other cutters. So we will recoup probably about 

11,000 hours by double-crewing the existing 110s with the crews off 

the 123s and use their operating money to operate those ships 

longer. 

Near term, if there is an issue tactically with a mission surge or 

something like that, we have the capability to redirect our medium 

endurance cutters; we have coastal patrol boats. We actually have, 

from time to time, in special operations have used our large buoy 

tenders, and that is what we would intend to do. 

There is some good news here, though. The good news is that 

after discussions with my counterpart, Mike Mullen, Chief of Naval 

Operations, he has agreed to extend the loan of the WPC–179s to 

the Coast Guard for five more years. They were scheduled to go out 

of the inventory in 2008, which would have exacerbated the capability shortfall. Based on our close relationship and his desire to 

help us in what is obviously a pretty tough time for us, we are 

going to enter into negotiations and redraft a memo of understanding to all us to keep those vessels, which I am eternally grateful to Mike Mullen for. 

23

In the meantime, we need to move at best speed to get a replacement FRC out there as soon as we can. As I said earlier, we are 

going to openly compete that hull, and we hope to have that thing 

on contract very shortly. 

Mr. COBLE. Thank you, Admiral. I think I have time for one 

more question. You and I previously discussed Rescue 21 some 

months ago, Admiral, and you told me at that time you were working with General Dynamics to deploy the program, and I understand that it has been implemented in the east region of the Gulf 

Coast and around Seattle, and moving toward full rate production. 

How effective is the program? 

Admiral ALLEN. I would call the program stabilized, moving at 

a full rate production. We got passed on the technical issues related to software integrated; we have worked out most of the technical bugs, if you will. We are ready to roll. We need to get these 

systems out there because they bring great value to the Country. 

Right after we installed them in St. Pete, we had two spectacular 

saves there. They are up and operating in the Port Angeles and 

Puget Sound region now. 

The biggest concern I have—and I meet with the CEO of General 

Dynamics two or three times a year also, just as I am with the 

Deepwater CEOs—is the unpredictability of when you go in to put 

a tower up, environmental issues associated and just the physical 

difficulties of getting a tower in. The technology is there, we just 

need to produce it. We are moving as fast as we can. I believe this 

program is stabilized. 

Mr. COBLE. Thank you, Admiral. 

I yield back, Mr. Chairman. 

Mr. CUMMINGS. Thank you very much. 

As we go on to Mr. Oberstar, let me just ask you this. What is 

the—you know, I guess the NSCs cost what, about $450 million? 

Admiral ALLEN. That is a very good question Mr. Chairman. Depending on the changes that are agreed upon for the structural 

issues, the full implementation of post–9/11 changes. We still need 

to come to closure on and definitize some of the aspects of those 

changes. The original contract price was a little over—we started 

with a little over $200 million. That has crept up because of 9/11 

requirements, damage caused by Katrina. One of the things we owe 

you as soon as we get the final answer to the fatigue issue is to 

come back and finalize that estimate and give it to you, sir. 

Mr. CUMMINGS. Well, what I was trying to get to, I was just 

thinking if we are spending $450 million or less on a vessel, do we 

have any kind of warranty? I mean, I am just curious. In other 

words, a warranty against cracks for, say, 30 years, is that something unreasonable? And I know you have said to Mr. LaTourette 

and to other members—because I am just trying to make sure we 

get to the bottom line here—that you have got your legal team 

looking at some things and you are concerned about litigation, and 

I understand all of that. But I guess I am trying to get to, I mean, 

if we buy a car, you usually get a warranty. Well, it seems to me 

that—I mean, is there anything that says, with regard to the integrated system, the team, do they say we guarantee that you are 

going to have 30 years without cracks? 

24

Admiral ALLEN. It is a layered system, sir, and what I would like 

to do, if I can answer for the record and give you a detailed explanation, because there are issues regarding system performance, in 

other words, what the entire system, once it is networked together, 

is supposed to be capable of. But as you produce each platform, 

there are specifications that that platform is supposed to achieve 

as part of the system. There are warranty issues at some level; 

when you get to the higher level it is actually performance against 

the specification that is in the contract. I would be happy to lay it 

out in a tiered level, but it is a multitier system.[Information follows:]

25


34776.008
26


34776.009
27

Mr. CUMMINGS. I would like for you to get that to us, and I was 

just wondering if there is something that can be done, as you all 

continue to work out your differences, whether we can have something that sort of—I mean, if it is now sufficient now, I mean, that 

might be part of your discussions, that is all. 

Admiral ALLEN. Yes, sir. Lessons learned. I understand. 

Mr. CUMMINGS. Mr. Oberstar. 

Mr. OBERSTAR. Thank you, Mr. Chairman. 

Admiral, this contract is a performance requirements contract, 

correct? In light of what you know now, and the experience that 

you have had with this, would you do it the same way again? You 

didn’t do this, you didn’t order this contract, but it was done. 

Would the Coast Guard do this again? 

Admiral ALLEN. I will give you a two part answer to that, sir. 

I think we should do it this way. I think we need to learn how to 

do it better in the future. I think performance-based contracting 

and a systems approach is the way to go, but if you are going to 

do that you need to understand how you ought to be organized in 

terms of competency, capacity, and capability to be able to manage 

a contract like that with a systems integrator. I think we were not 

as integrated on the Coast Guard side. I think the concept is 

sound. 

But to go to the second answer, I think, moving forward—and I 

am going to turn my hat around as a former chairman of the Joint 

Requirements Council of the Department for three years—the 

Coast Guard and the Department of Homeland Security have to become competent in managing complex system integrator contracts. 

We do not have a Naval Sea Systems Command and we do not 

have a Wright-Pat Air Force Base. We do not have those huge system integration type capacities inside the Department, nor will we 

ever get it. I think it is incumbent on the Coast Guard to learn 

from Deepwater. I think it is incumbent on the Coast Guard to 

learn from SBI. It is incumbent on the Department to learn from 

both acquisitions how to do this, because it has to be a basic competency of the Coast Guard and the Department going forward, sir. 

Mr. OBERSTAR. The latter is correct. The Coast Guard needs to 

know better how to handle major contracts, just as the FAA stumbled badly in the late 1980’s and early 1990’s and then got turned 

around when David Ansen, Administrator of FAA, brought in outside counsel, if you will, from the Navy, from GSA, to help FAA 

produce better good documents, do better oversight, better contract 

management, and be more specific in their specifications. 

Admiral ALLEN. Yes, sir. 

Mr. OBERSTAR. Now, performance contract, the European—

French, German, Dutch, Belgian, Italian—transportation ministries 

build highways and bridges the same way, with a performance; 

want the road to be of so many lanes, want it to carry so much 

traffic, want it to have a 50-year life span. You build it to meet 

those specifications and you warrant it. So the contractor is obligated. 

We do highway design and bridge design, engineering construction, bidding very differently in the United States. AASHTO, the 

American Association of State Highway Transportation Officials, 

has a manual that has very clear specifications for what the 

28

subbase should look like, what the base should be, what the content of the concrete and the concrete bed and the content of the asphalt in an asphalt bed should be, and the contractor is held to a 

bid document that meets those specifications. It has worked well. 

We should have better standards for highway construction. 

I wonder whether this performance-based contracting really is, 

as you said, the best way to go, especially if you have language in 

the bid document that allows the contract, as the IG report says, 

to self-certify compliance with standards. Would you do that again? 

Admiral ALLEN. Probably not, sir. And I will give you this example. 

Mr. OBERSTAR. I hope you say will not. 

Admiral ALLEN. Yes, sir. We are about ready to complete the 

FRC, as I said. That will be ABS class, sir. 

Mr. OBERSTAR. All right. Because we had this little sort of difference of views with the Coast Guard a few years ago about selfcertification of vessels subject to Coast Guard certification. If the 

Coast Guard certified a vessel, and then it had a problem and the 

Coast Guard then went out and inspected the failure, it is inspecting its own certification; you need an independent party like the 

NTSB to come in and review. We had quite a discussion with your 

predecessor over several months about that matter, and finally resolved that the NTSB should have a role in inspection of vessel 

failures where a Coast Guard had been certification agent. 

So in this situation, to allow a contractor to cut square holes and 

the Coast Guard knows from experience that those openings are 

subject to stress at the corners and subject to failure, and then 

allow the contractor to say, well, but that is OK. And then if you 

come in and say, well, it is not all right and we want this change, 

they are subject to a change order and you are paying for that 

change order. 

Admiral ALLEN. Yes, sir. Roger, loud and clear. One of the things 

we have to adjudicate going forward in the Deepwater contract, especially the NSC contract—and we have had conversations about 

this—is standards. There are several different types of engineering 

standards out there which you can build to. There are traditional 

standards which naval combatants are built to, but we are now informed by new ways to model construction through something 

called finite element analysis, where you can actually load ships 

over their life cycle and kind of be able to predict where those 

stresses are at. 

We have never had those tools available when we built large cutters before, for instance, when the 378s were being built. And some 

of the interaction between the contractor and the Coast Guard 

right now is the intersection of existing shipbuilding standards and 

specifications that are used for naval combatants and some of these 

new tools that are coming in to check the risk and what the 

stresses will do over the life of a cutter. These have to be brought 

into the process, sir. 

Mr. OBERSTAR. Under the changes that you specified at the outset, you said that the Coast Guard will have authority over—I forget exactly your words—and accountability and approval of authority to do work. But the contract remains in effect, doesn’t it? So 

even with your proposal, will your proposed adaptations to the IG 

29

report include authority for the Coast Guard to override the integrated contractor and not have to pay for change orders? 

Admiral ALLEN. On the first part, the technical authority and 

who makes that decision is now clear, and the Coast Guard is the 

Chief Engineer of the Coast Guard reporting to me to be able to 

make the determination of whether or not it is in conformance with 

the standards. After that it becomes an issue of contract law, how 

the contract is written and whether performance is required. 

So as you stated earlier, as we move forward we are going to 

have to understand how these contracts need to be structured to 

make sure that, when there is ambiguity about performance, we 

can assign responsibility and accountability. As we move into the 

next award term, the award term criteria are going to be very important, and we won’t finalize those until the work group that has 

been established by the two COs and myself is reported back to us. 

Mr. OBERSTAR. So you will change that language and retain authority for the Coast Guard to make approvals, and not allow contractor to self-certify? 

Admiral ALLEN. Where we need to implement the procedures 

that allow the technical authority to do his job, we will do that, sir. 

It is going to be—the contract is really a series of contracts, as you 

know; different contract line items and DTOs. As we move forward, 

we will move business practices into place that will ensure that we 

can guarantee performance, sir. 

Mr. OBERSTAR. But for the existing contract, your order does not 

change the language of the contract. 

Admiral ALLEN. Well, as I said earlier, I think there are issues 

with the NSC and the 123s that we are going to have to figure out. 

After conversations with the Chief Executive Officers, we need to 

put everything on the table, see where we are at, and then we will 

move from there, sir. I roger your concern. 

Mr. OBERSTAR. I think it would be beneficial for us to invite the 

Coast Guard back, Mr. Chairman and Mr. Ranking Member, when 

you have a new approach, a new contracting document to share 

that with us in open session. 

Admiral ALLEN. Yes, sir. I have offered to come back in 120 days. 

Mr. OBERSTAR. Welcome external review, and that is very much 

in keeping with Admiral Allen, and I think we will want to see 

what changes you propose in future contracting authority for the 

Coast Guard so that there is not repetition of this major stumble. 

Mr. CUMMINGS. Would the Chairman yield? Mr. Chairman, before you got here, I had said that in my conversations with the Admiral, he has agreed to come back in 120 days to address some of 

these issues then, because I felt that we really needed to stay on 

top of this. 

Mr. OBERSTAR. Thank you. 

Mr. CUMMINGS. And he has agreed, I mean graciously agreed, 

with no hesitation, and we do appreciate that. 

Mr. OBERSTAR. Thank you. Thank you, Mr. Chairman, for initiating that. I regret that I have to step out of these hearings; a lot 

of other things. 

Mr. CUMMINGS. Thank you very much, Mr. Chairman. 

Mr. LoBiondo? 

Mr. LOBIONDO. Thank you, Mr. Chairman. 

30

Admiral, the IG has raised some serious concerns about the ability of the service to resolve disputes, such as those with the National Security Cutter through the integrated product teams. Do 

you feel that the integrated product teams are working? And what 

assurances can you give us that the Coast Guard’s concerns are 

being heard and properly addressed? 

Admiral ALLEN. They clearly didn’t work as they should have 

early on; otherwise, these issues, when they were failed to be properly addressed, at least by our representatives from the technical 

community, created a lot of cultural divide, I would say, inside the 

Coast Guard. I made it very clear to everybody working for me 

right now that that is not going to happen again. To the extent 

that the IPT process is the way we are going to manage these 

issues at the deck plate level, there has to be open collaboration, 

and if for some reason there is a disagreement, it must be immediately raised for adjudication, and it has got to be raised high 

enough where flag officers with responsibility are held accountable 

for that. I have had that conversation with my staff and they all 

know that, sir. 

Mr. LOBIONDO. And can you give the Committee any assurances, 

where red flags are waved to you that impact our ability to decide, 

that that information will be shared with the Committee? 

Admiral ALLEN. Absolutely sir. I think especially you are well 

aware of when tough things happen, they don’t get better with age, 

and most all of you get a direct call from me when something 

doesn’t happen, sir, and I will continue to do that. 

Mr. LOBIONDO. Both the IG and the GAO have raised serious 

concerns about the service’s ability to manage and properly oversee 

the program due to lack of personnel and lack of personnel competency, I believe, as they put it. What do you intend to do to deal 

with this issue and how will it affect the Deepwater procurement 

schedule? 

Admiral ALLEN. A couple of things, sir. By creating the new acquisition organization that I mentioned earlier, we will take all of 

the, for instance, all the 1102 series contracting officers will all be 

managed within the same organizational framework. Rather than 

having stovepipe competing contracting shops, if you will, there 

will be a contracting shop where everybody is managed from a 

human resource standpoint by the same flag officer. It is part of 

a much larger blueprint for acquisition reform that I am carrying 

out inside the Coast Guard that I started actually back before the 

change of command, when I was Chief of Staff. This will align us 

with the Department of Homeland Security and align us with best 

practices. We have been consulting with the Defense Acquisition 

University on how we should be properly structured, given the 

feedback we got from oversight groups from Deepwater, and I am 

prepared to submit for the record that blueprint for acquisition reform to the Committee that will provide in detail the steps that I 

have been talking about here today. 

Mr. LOBIONDO. Thank you. 

Mr. CUMMINGS. Thank you very much. 

Mr. Larsen. 

Mr. LARSEN. Thank you, Mr. Chairman. 

31

There was a question earlier about the cost of the cutters, and 

I just want to clarify something as far as that, Admiral Allen. The 

IG’s report indicates that the original cost for the first two were 

about $517 million, and then with post–9/11 changes and other 

items, inflation, the cost of the first two would be about $775 million. And then, according to the IG, the request for equitable adjustment was about $302 million. Assuming that number is right, 

we are looking at, for the first two cutters, a cost of around $500 

million or so each. Is that accurate, is that what you think? 

Admiral ALLEN. I would say that is an estimate on the high side, 

subject to definitization of task orders that are out there and where 

we are going with the request for equitable adjustment. A lot of 

that leads back to the work groups that are established right now 

to resolve how we are going to deal with the fatigue standards on 

the ships, how much retrofitting will be done; and there are tradeoffs in there. So I would say the potential is that figure. Where it 

actually will end up, what the request for equitable adjustment will 

be and exact cost of retrofitting to achieve the fatigue life of the 

ship, we are still in the process of determining that, and I would 

be happy to provide you a more detailed answer for the record and 

at 120 days come back and give you an update. 

Mr. LARSEN. OK. 

I have further questions. My yellow light has come on. I haven’t 

been at this for five minutes. So if someone wants to keep my accurate time, I would appreciate it. 

Mr. CUMMINGS. No problem. We have got you. 

Mr. LARSEN. With regards to the FRC, you are moving possibly 

towards a replacement patrol boat, the FRC-B class, as you call it 

in your testimony, expecting RFPs for design no later than March 

1st. Who will assess those RFPs? 

Admiral ALLEN. The solicitation will be made through Integrated 

Coast Guard Systems. They will receive two types of proposals, one 

is for a technical proposal on the hull itself, the other one will be 

a comms integration package. Northrop Grumman is dealing with 

the hull part of it; the systems integration package will be dealt 

with by Lockheed Martin. But, again, we will have visibility on 

that. 

Mr. LARSEN. Who will make the decision, then, on the RFPs? 

Admiral ALLEN. They will make a proposal to us and it will be 

up to us whether to accept or reject it, and as I stated earlier, we 

will make sure there is competition and that———

Mr. LARSEN. Are either of the integrators involved with putting 

together an RFP? 

Admiral ALLEN. They are our instrumentality of doing that. Northrop Grumman is working on the hull side of it and Lockheed 

Martin is working on the comms side. 

Mr. LARSEN. I’m sorry, are they putting together their own proposal? 

Admiral ALLEN. It is being openly competed. I don’t have the 

exact entities who are competing . I can get back and get you an 

answer to that. 

[The information received follows:]

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34776.010
33

Mr. LARSEN. Thanks. With regards to Chairman Oberstar’s questions about self-certification, it seemed from your answer that you 

left open the possibility that self-certification would still be possible 

in the future in contract changes for the next term. 

Admiral ALLEN. I believe I corrected my answer, sir. I understand the issue there. For instance, moving forward on ship construction and design, we will have ABS involvement, for example, 

for the construction of the FRC. We understand certification is required, and we will do that moving forward. 

Mr. LARSEN. With regards to your reorganization on the acquisition with—is it Admiral Blore? 

Admiral ALLEN. Yes. 

Mr. LARSEN. Will that acquisition organization be responsible, 

then, for the decisions made on procurement? You said at one point 

that you wanted to push decisions down to the lowest level. Is that 

the lowest level within the Coast Guard or is that the lowest level 

within the organization, which would include the system integrators? 

Admiral ALLEN. Under the new organizational structure that is 

in the acquisition reform blueprint that I will submit to the Committee, Admiral Blore will become the Chief Acquisition Officer of 

the Coast Guard; all acquisitions, not just Deepwater. Work for 

him will be Admiral Rabago, who is sitting behind me, who will 

focus just on the Deepwater portion. We are bringing him in because of his expertise in naval engineering and architecture, the 

fact that he is former CO of the Coast Guard Yard. 

Mr. LARSEN. Right. So in terms of pushing decisions for Deepwater, in answer to an earlier question you mentioned pushing 

some decisions about Deepwater acquisition down to the lowest 

level. Are those decisions at the lowest level within the Coast 

Guard or at the lowest level within the organization for Deepwater, 

which would include the integrators? I am assuming the integrators on your organizational chart are nearer the bottom and then 

there is a connection up into the Coast Guard organization. 

What I am getting at is part of the problems I am reading in the 

IG report have to do with the issues of technical authority, who is 

making these decisions; and some of those decisions were not made 

by—the Coast Guard was not as involved as the IG believed it 

should have been in some of these decisions. 

Admiral ALLEN. Right. And what the technical authority will do, 

it will establish standards, and if those standards aren’t met, he 

will make the decision whether or not they are being met, and he 

will play a much more aggressive role. I am not sure that that role 

was as well defined or adhered to back when those decisions were 

made in 2003, 2004. In addition, we are contemplating changes inside Coast Guard Headquarters with a technical authority and the 

Chief Acquisition Officer, Admiral Blore will work for the same 

three star Admiral. That is where I mentioned earlier the single 

point accountability for reconciling technical authority and acquisition and program management. 

Mr. LARSEN. OK. 

Mr. Chairman, I probably have used my legal five minutes. 

Mr. CUMMINGS. You did. 

Mr. LARSEN. Thank you. 

34

Mr. CUMMINGS. Mr. Baird. 

Mr. BAIRD. Admiral, thank you for your testimony today and for 

your service. It is a difficult position you are in today, and we appreciate. You are as committed as we are, I know, to making sure 

your crews have the equipment they need and that the taxpayers’ 

money is well served. 

I am particularly interested in the issue of filling the gap here. 

You talk about aggressively examining the purchase of four 87-foot 

patrol boats. Have you made decisions on that, what would be purchased and how? 

Admiral ALLEN. Well, there are a number of options. One of the 

reasons we were looking at 87-foot coastal patrol boats is they are 

in production, there are contract vehicles out there. The biggest 

issue we have right now is a source of funds and how that might 

move, given the appropriation structure and all that kind of stuff. 

The answer is to throw everything we have got at the problem. So 

you need that, you need the extension of the loan of the WPC–179s 

from the Navy, which we have been successful in negotiating. So 

it is kind of an all-hands-on-deck evolution. 

Mr. BAIRD. Right, and I respect that is what you have got to do. 

What is the time frame for delivery of the 87-footers, do you know? 

Admiral ALLEN. Well, they are already in production. If you will, 

I will answer you for the record, but I think it is fairly quickly, I 

think we are talking like 12 to 18 months. 

[The information received follows:]

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Mr. BAIRD. OK, I would like to chat with you about that. 

Admiral ALLEN. But if I could adjust that for the record, I would 

appreciate it. 

Mr. BAIRD. Separately, if I might, I would like to chat with you 

and your staff about the capacity of those 87-footers and their longevity and performance vis-a-vis other alternatives that are available in the marketplace. 

Admiral ALLEN. Happy to do that. I would also say that, in conjunction with the Navy and funded by the Navy, we are procuring 

87-foot coastal patrol boats for force protection duties that we are 

doing with the Navy. 

Mr. BAIRD. I would like to chat with you about that broad issue, 

if I might. Maybe we can find a time to do that. 

Admiral ALLEN. Happy to do that, sir. 

Mr. BAIRD. Who will decide—one of the questions I have, I think 

we talked about your staff. We recognize that you weren’t in your 

current position when some of these contracts were made, but you 

are dealing with contractors, and the contractors must have people 

who made what I think are decisions that have dramatically, if not 

defrauded, certainly cost the taxpayers money. Are you going to 

make sure that the contractors you are dealing with are not employing the same people in the same capacity as future decisions 

are made? 

Admiral ALLEN. Well, as you might well imagine, it is not my 

purview to meddle in the internal affairs of private sector organizations, who they hire and fire. 

Mr. BAIRD. I am not sure it is not, Admiral. I tell you what, if 

I was hiring a contractor who came over to my house and he was 

going to fix my bathroom, and he had a plumber tear the bathroom 

apart and not put it back together and he said don’t sweat it, Mr. 

Baird, I will send the same guy over to fix it, I would say the heck 

you will. 

Admiral ALLEN. Well, having said that, I have a responsibility to 

work with the CEOs and put enough discipline into the system 

where we what we want out of it. How that plays out inside the 

contractor’s shop is for their senior management to work on. I am 

trying to start at the highest level with the leadership that I have 

with the two CEOs and create a new paradigm on how we are 

going to work on accountability on both sides of the organization, 

sir. 

Mr. BAIRD. I appreciate that, sir. 

Mr. Chairman, I don’t know that I will be here when the respective businesses testify, but I certainly hope this Committee will ask 

them to speak to this Committee about how they plan to correct 

this. 

Let me go back to my example. Are there any consequences? I 

mean, how much do we guestimate the taxpayer is out? How much 

money has been wasted here? 

Admiral ALLEN. I would hazard a guess on the 123s only because 

if we don’t return them to service, the amount of money that was 

obligated under Deepwater contract is little less than $100 million; 

there are probably some other costs there. The NSC has yet to be 

adjudicated and, quite frankly, the NSC hasn’t been operated yet 

and we don’t know how the fatigue life is going to work on that. 

37

We have every reason to believe the ship is going to operate as intended. 

So the only smoking gun, if you will, right now is if there is no 

value accrued for the investment made in the 123s and we don’t 

return them to service, we would have to look at that. 

Mr. BAIRD. And what amount might that be? 

Admiral ALLEN. The acquisition value right now is a little under $100 million. 

Mr. BAIRD. Is there any consequence to the folks who are responsible for this? 

Admiral ALLEN. Well, I think you have to establish the details, 

what decisions were made, what information was known, and I 

have set up basically the equivalent of an internal audit to take a 

look at how the decision was made on the acceptance of the 123 

extension at the time that we accepted the proposal from Deepwater. That information will be developed and anything that comes 

out, I will be completely transparent and will be made available to 

the Committee. 

Mr. BAIRD. My question would be is there a way that the public 

can get their money back. 

Admiral ALLEN. Well, I think you have to figure out how the decisions were made and where accountability lies, and then things 

will have to take their course, sir. 

Mr. BAIRD. OK. The IG’s report has basically a statement 

about—I will just read it out loud: ‘‘The impediments we experienced in obtaining access to personnel information and documentation associated with the NSC acquisition are unacceptable in light 

of the statutory mandates of our office,’’ etc., etc. Basically it 

sounds like the IG was trying to investigate this to get at the bottom of it and they just ran into roadblock after roadblock after 

roadblock. What is being done to prevent that? These folks have a 

statutory mandate to look out for the well being of the taxpayers. 

What is being done to make sure they can do their job? 

Admiral ALLEN. Yes, sir. That is the one item that I referred to 

early on that was referred to the Department for a Departmentwide policy. I meet weekly in a group called The Gang of 7, it is 

all the component commanders in the Coast Guard, if you will, 

meeting with the Deputy. We have recommended to the Deputy 

and the Secretary that they standardize guidance from the Department on how each one of the components should interact with the 

IG so we don’t have different rules. And, quite frankly, you have 

commanding officers of units out there and IG auditors will arrive. 

We need to make sure everybody understands what is the responsibility of the unit, what is the responsibility of the auditors, 

notification of how we want to do that. In some cases we are trying 

to facilitate the gathering of information for them. In some cases 

they interpret that to be controls being placed on their access. And 

what I want is absolute clarity so we don’t have a problem again 

in the future, sir. 

Mr. BAIRD. I appreciate that. If I just close with when we get 

back to this 87-foot. When I chat with you, I hope that, one of my 

problems is that people who have focused on the current design of 

the 87-footers may have been also involved with the decision-making that has led to the failures we have seen thus far. 

38

So I hope we can take an open-ended approach and look more at 

alternatives that are out there, specifications in terms of performance, not just saying let’s just go with the existing vessels. We may 

be able to find a better vessel for less money, more available and 

more tested in the real world already. And I hope to chat with you 

and yield back my time. Thank you, Admiral. 

Mr. CUMMINGS. Mr. Baird, it is my understanding that the IG is 

currently working on a report with regard to the 123s, and I expect 

that we will have that before the Admiral returns to us in 120 

days. 

What we are going to do now, to the members of the Committee, 

we are going to go to a limited round. Not everyone has questions. 

We will got Mr. LaTourette, then we will go to Mr. Taylor, and 

then I will close it out, unless somebody else has something. 

Mr. LATOURETTE. Thank you very much, Mr. Chairman. 

Admiral, briefly, when you are done, we are going to talk to the 

representatives from the integrators, and I just want to get your 

response to this before we begin. We have been talking about 

whether or not items meet the specifications in the contract and 

whether there are engineering difficulties. I want to talk about the 

issue of competition. Do you know the percentage of contracts that 

are let by the integrator to either Northrop Grumman, Lockheed 

Martin, or their subsidiaries, what percentage of the Deepwater 

contracts are being performed by those folks? 

And then the second part of that question, so I don’t overburden 

the Chairman, is just an issue that you and I talked about earlier 

on the subject of competition. You mentioned, in response to a 

question or in your remarks, the delivery of the first CASA 235. 

And on the issue of competition I think I advised you that a vendor 

came into my office and claims that you are paying $44 million for 

this CASA 235 and that they can deliver it for $21 million at the 

platform. And all the upgrades to make it compatible, I mean, certainly don’t cost another $21 million. 

So, one, if you know, what percentage of contracts go to Northrop 

Grumman, Lockheed Martin, and/or their subsidiaries; and, secondly, just on the CASA 235, could you put my mind to rest why 

that person’s observation is not an accurate one? 

Admiral ALLEN. Yes, sir. We have data. It is extensive data, so 

I wouldn’t try to answer for the record, if that is OK, but there is 

extensive competition. Integrated Coast Guard Systems is required 

to provide that data to us. They deal with hundreds of vendors 

around the Country and we would be glad to make that available 

for the record, sir, including what work was directed to either Lockheed or Northrop Grumman. That is all transparent, sir. 

[The information received follows:]

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Mr. LATOURETTE. I would appreciate that. 

Admiral ALLEN. Regarding the CASA, when we are buying airframes, we have a lot of different competitors that come in and 

want to do business with us. The problem is we are not always 

comparing apples to apples and not every airframe is the same airframe, even though they appear to be the same model. Based on 

avionics package and what you are buying with that base model, 

and what we intend to do with it in terms of missionization, they 

may or may not be the same. What I would like to do is give you 

a side-by-side comparison and we can send that over to you, sir 

[The information received follows:]

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Mr. LATOURETTE. I appreciate that. 

Thank you, Mr. Chairman. 

Mr. CUMMINGS. Thank you very much, Mr. LaTourette. 

Mr. Taylor. 

Mr. TAYLOR. Thank you, Mr. Chairman. 

Commandant, I would like to bring your attention to page 79 of 

the audit and the diagram up on the wall. 

Admiral ALLEN. Yes, sir. 

Mr. TAYLOR. They are identifying in that things that they presume will fail in less than the 30-year design life of the ship, and 

in some instances less than 15 years. Now, the ones that are circled, at least two of them, appear to be on deck, so, given my limited experience, probably not that hard to fix. What troubles me, 

though, is the shaded areas down in the bilges of the ship, which 

by everyone’s account is the hardest place to work, whether you 

have got to go back and add some stiffeners. You know, once you 

finish a ship, you have got paint, piping, electrical wires, you may 

have fuel down there that you have to remove before you can do 

any welding, degassing. 

And it goes back to the question when it was brought to your attention, in March of 2002, that we had problems, it would have 

been so much more efficient to have corrected these things before 

all of those sequential elements took place after that, the paint, the 

piping, the plumbing, the electrical wires, the insulation, the antifouling paint. Getting to those spaces had to get more difficult 

every day as more things are added to the ship. Again, I scratch 

my head and wonder as to why, given the opportunity, the Coast 

Guard didn’t correct it in a timely manner. 

Admiral ALLEN. Sir, I can only restate at the time irrevocable 

loss of schedule and the cost risk associated with that, whether it 

was quantified and auditable or not, was the rationale for moving 

forward. 

Mr. TAYLOR. But doesn’t the cost go———

Admiral ALLEN. All I can tell you is that was the decision. 

Mr. TAYLOR. But doesn’t the cost go up when the difficulty goes 

up? And the difficulty goes up as each compartment above it is 

sealed. 

Admiral ALLEN. Well, what I would like to do is come back to 

you, if I can, because what we are doing right now, we are having 

the active discussion between our technical representatives and 

ICGS about exactly how those reinforcements would be worked. I 

don’t know as far as whether or not there are interferences or anything else, and we could give you a more technical answer for that, 

and we would really like to do that, sir. 

Mr. TAYLOR. Well, Commandant, again to the point, I want to see 

you build these cutters. I want to see the Navy build the LCS. I 

want the 110s converted and put back to sea. But all of these 

things occurring at the same time tells me that we have serious 

problems both within the Navy, within the Coast Guard, and somewhere in the industrial base, and no one ever says I screwed up. 

And that mind-set has got to change, because we are wasting hundreds of millions of the taxpayers’ dollars, we are delaying ships, 

and if you take the attitude of, well, we will just use them for 15 

years, it is a disposable ship, as the parent of somebody who may 

43

be manning one of those ships, I have got to say does that mean 

you have the same attitude that we have disposable crews? Disposable crews are not an option. 

Admiral ALLEN. Sir, I am not going to sit here and tell you that 

we shouldn’t have identified that earlier and taken action to resolve it before we got to the issuance of the DTO for production. 

That would have been the best way to do that. That is not the right 

way to run an acquisition in the future. That is not the way we 

will do it in the future, sir. 

Mr. TAYLOR. Thank you, Mr. Chairman. 

Mr. CUMMINGS. Thank you. 

Admiral, I want to thank you too, and I want to ask you about 

a question unrelated to what we have talked about here today, on 

another matter. You recently released a report regarding the 

deaths in August of 2006 of two Coast Guard divers assigned to the 

Cutter HEALY. In essence, the report found that the deaths were 

preventable and resulted from failures at all levels of the service. 

The report further found that the dive program on the HEALY was 

not adequately managed and, further, that the overall management 

structure and policies of the Coast Guard’s dive program are inadequate to properly guide and manage the program. 

As I understand it, the Coast Guard assumed responsibility for 

dive safety inspections and other aspects of the dive program in the 

1990’s from the Navy, which had previously performed those duties. The findings of the accident report suggested that this program, the dive program, grew faster than the Coast Guard’s ability 

or willingness to manage it properly. This is particularly troubling 

given that the dive program is so central to the Coast Guard’s missions. 

Are there any other programs that you feel have grown faster 

than the Coast Guard’s ability to adequately and safely manage 

them, particularly in the post–9/11 environment? 

Admiral ALLEN. Mr. Chairman, that is a very wise question. It 

mirrors a conversation that we had just two weeks ago, after the 

HEALY notifications were made. My senior management team and 

I were sitting around Headquarters and we said where is the next 

corner where, for some reason, grew too fast, somewhere lost it in 

the tyranny of the present that we need to be looking at around 

the Coast Guard. And, actually, I have asked all my Assistant 

Commandants to go around and do an assessment of where we 

may have issues out there where we could predict ahead of time 

if we were cognizant of the fact that we were starting to have a 

juniority problem because we were trying to grow too fast or we 

had maybe taken our eye off the ball, sir. 

I think you are absolutely right. I can’t give you a specific program right now. There are some areas regarding human capital 

that I am concerned about competencies and capabilities, but I 

have got a team looking at how we are going to do HR to support 

the new organization. I would be happy to give you some thoughts 

in the future on that, sir. 

Mr. CUMMINGS. And just on one other note, Admiral. As I sat 

here and I listened to you answering these questions, I must tell 

you that there is a book that I am reading, it is entitled ‘‘The Speed 

of Trust,’’ and it talks about how when you trust a person, how easVerDate 0ct 09 2002 12:03 Nov 06, 2007 Jkt 000000 PO 00000 Frm 00055 Fmt 6633 Sfmt 6633 P:\DOCS\34776 HTRANS1 PsN: JASON
44

ily things move along. And I must tell you that I think because this 

Committee has a tremendous trust in you, that we are able to 

move forward and believe strongly that you are going to do the 

right thing at the helm. And I just want you to know that we appreciate that. That is very, very significant. 

And so that we will be very clear, when you come back in 120 

days, what can we expect to hear from you? Now, I know that you 

have said a number of things already and we will get those to you, 

but the things off the top of your head, what can we expect in that 

120 days? 

Admiral ALLEN. Well, sir, the first thing you can expect is I have 

committed to the IG to give him a report in 90 days on how we 

are going to respond to the recommendations. So at 120 days there 

should be a check on the metric there; what does the IG say, what 

does the Coast Guard do about it, and what does the IG say about 

that. And we intend to be transparent and accountable regarding 

that. 

The second thing is we will have much more clarity on a few 

things going on: one, regarding where we are going with the Fast 

Response Cutter; what has happened with the technical evaluation 

of the 123-foot conversion; the IG report will be issued on the C4SR 

for the 123 programs. There are a number of things where we can 

come back and say since then this has happened and it is a good 

barometer of where we are going with this program. And we will 

continue to implement the reorganization that I talked about and, 

again, we will submit for the record the acquisition reform blueprint to you, sir. 

Mr. CUMMINGS. If there are no other questions, then thank you 

very much. 

We will move to the second panel. 

We are very pleased to have Dr. Leo Mackay, President of Integrated Coast Guard Systems, and Mr. Phillip Teel, President of 

Northrop Grumman Ship Systems. 

Gentlemen, welcome and thank you for being with us. 

Mr. Mackay. 

TESTIMONY OF PHILLIP TEEL, PRESIDENT, NORTHROP GRUMMAN SHIP SYSTEMS; LEO S. MACKAY, JR., PRESIDENT, INTEGRATED COAST GUARD SYSTEMS 

Mr. MACKAY. Thank you, Mr. Chairman and Mr. Ranking Member. Congratulations on your ascensions to your new positions. I 

look forward to working with you and the members of this Committee. 

Thank you for the opportunity to explain the progress that we 

are achieving on the Coast Guard’s Integrated Deepwater System 

program. Speaking for the men and women of Lockheed Martin, we 

are very proud to be associated with this critical program. 

The Deepwater program is modernizing the Coast Guard by recapitalizing aging assets, providing new assets, and expanding capabilities. Lockheed Martin is responsible for four Deepwater 

areas: first, aviation, which includes refurbishment of existing assets like the HH65C helicopters and the HC–130H aircraft; production of new assets such as the missionized C130J aircraft, the 

HC144 maritime patrol aircraft—the CASA, as the Commandant 

45

mentioned it—and the vertical takeoff and landing unmanned aerial vehicles; as well as management of service contracts such as the 

A109 HITRON helicopters stationed in Florida. 

Second, we are responsible for the command and control network 

and, third, for logistics, by which I mean the processes and systems 

to support fielded assets. Fourthly, we are responsible for systems 

integration and engineering to make sure all the assets can best 

work together as a team. 

We work within the Integrated Coast Guard Systems LLC, our 

joint venture with Northrop Grumman, our industry partner, to ensure that communication systems and logistic systems are properly 

coordinated with the programs, ships, and ship systems. 

The purpose of the ICGS joint venture is to provide for rapid allocation of work between the two companies, while at the same 

time achieving collaboration and cooperation. Today, when I refer 

to ICGS or separately to Lockheed Martin, this should be construed 

to mean the role of Lockheed Martin as part of ICGS. It is important to note that ICGS, in and of itself, is not a systems integrator, 

it depends on Lockheed Martin and Northrop Grumman to fulfill 

their specified taskings. 

Nor is it a replacement for Coast Guard decision-making. All designs and improvements are based on system engineering trade 

studies, analyses, and technical considerations. All major acquisition decisions are reviewed and approved by Coast Guard senior 

leadership. Together, Lockheed Martin and Northrop Grumman 

are utilizing more than 600 suppliers in 42 States, plus the District 

of Columbia, and we maintain an active database of more than 

3,000 potential suppliers. 

Deepwater is delivering both new and upgraded fixed wing and 

rotary wing aircraft, new communications systems that are making 

a significant contribution to improve mission performance, and the 

logistics systems necessary to support fielded assets. We understand the Deepwater system will continue to evolve, as it has since 

its beginning. It is important to maintain emphasis on the implementation of the Deepwater systemwide command and control network. 

C4ISR, an acronym that stands for Command and Control, Computers, Communications, Intelligence, Surveillance and Reconnaissance, is the network ‘‘glue’’ that permits various assets, including 

ships, aircraft, and shore stations, to work together to achieve a 

common purpose. The C4ISR domain is of particular importance as 

modern civil and commercial and military systems are dependent 

on the value delivered by the integrating power of the network. 

This is the core responsibility of Lockheed Martin in the Deepwater 

program, and has already made measurable progress with the rescue, enforcement, and interdiction activities of the Coast Guard on 

the high seas. 

Lockheed Martin is accomplishing high rates of software reuse, 

as well as system commonality and interoperability by the rigorous 

application of proven system engineering processes and capabilities. The National Security Cutter, for example, uses 75 percent of 

the U.S. Navy’s Open Architecture Command and Decision System. 

The Command and Control System for both Maritime Patrol Aircraft employs more than 50 percent of the functionality of the 

46

Navy’s P–3 Anti-Surface Warfare Improvement Program. The Operations Center consoles on the National Security Cutter utilize 

more than 70 percent of the design of the Navy’s UYQ–70 display 

systems and, overall, 65 percent of Deepwater software is reused 

from government and commercial sources. 

This reuse of available software and systems is the key to commonality. Every one of the Coast Guard’s 12 high-endurance and 

27 medium-endurance cutters have received two separate command 

and control system upgrades, giving the fleet markedly improved 

capability to seize drugs, interdict migrants, and save lives. 

As for the shore sites, there are 12 total under contract to receive 

upgrades. This will facilitate Coast Guard interoperability with 

civil agencies—this application of off-the-shelf software permits 

Deepwater to take advantage of the rapid changes in commercial 

marketplace and investments which commercial firms make, to leverage those for the Coast Guard. 

As the Commandant mentioned, the first medium-range surveillance patrol aircraft, the HC–144, was transferred to the Coast 

Guard on December 20th, 2006 and is now undergoing 

missionization, which will be completed in April. The second aircraft was accepted by the Government on January 25th, just a few 

days ago. 

At the same time, we are working to complete the re-engining 

and upgrading of HH65 helicopters. We have completed 65 of 95 

helicopters to date, and this project was part of the original Deepwater program plan. At the direction of the Coast Guard, it was accelerated due to safety flight issues. 

Lockheed Martin and American Eurocopter are working with the 

Coast Guard aircraft and supply center, and are now producing upgraded helicopters, the HH65 Charlies, that can fly faster, twice as 

far, and with twice the payload. 

A service contract for the HITRON helicopters based in Jacksonville, Florida has been renewed for a fourth year. The eight helicopters are equipped with airborne use of force and have had a significant impact on the list of drug interdictions. The squadron, in 

fact, celebrated its hundredth successful interdiction last May. 

Our performance in industry has been closely supervised by the 

Coast Guard, with additional oversight from the Department of 

Homeland Security, this Congress, the GAO, and the Inspector 

General’s Office. Each of the multiple reviews has provided constructive recommendations as requirements continue to evolve. The 

results so far indicate that Deepwater has made a difference in the 

effectiveness of the Coast Guard with regard to the numbers of 

drug seizures, migrant interdictions, and lives saved. Our overarching goal is to produce more capability for the operating forces 

of the Coast Guard and to produce those sooner. 

Thank you again for the opportunity to present and to explain 

the progress we are achieving in the Deepwater program. I look 

forward to answering your questions. 

Mr. CUMMINGS. Thank you very much, Mr. Mackay. 

Mr. Teel? 

Mr. TEEL. Good afternoon Chairman. 

Mr. CUMMINGS. Good afternoon. 

47

Mr. TEEL. Ranking Member LaTourette and the other Subcommittee members, I want to thank you for the opportunity to be 

here. On behalf of Northrop Grumman and all the men and women 

there who have built ships for over 70 years, I want to thank you 

for your support of the Deepwater program and of your long-term 

support of the Coast Guard. 

My written testimony and my summary remarks that I am about 

to make are intended to provide you with updated information regarding the 123, the Fast Response Cutter, and the design and surface life of the National Security Cutter. 

First I want to address the patrol boats. The 110 patrol boats 

have seen extensive duty, as we have talked about today, through 

their service lives over the last 20 years. The 123 conversion was 

intended as an interim measure to extend the life and enhance the 

capabilities of that aging patrol fleet until the new vessels, the 

FRCs, were available to replace it. The conversion work was performed under subcontract of Northrop Grumman by Bollinger Shipyards, the original builder of the 110s. The conversion project underwent an extensive design and review process with the contractor 

and Coast Guard and American Bureau of Shipbuilding. The due 

diligence was done. 

Six months after delivery of the first converted vessel, the 

Matagorda crew discovered buckling in her hull and on her deck. 

This discovery occurred immediately following a high speed transit 

in rough seas to avoid Hurricane Ivan. Coast Guard and Northrop 

Grumman analyzed the situation. We concluded that a workmanship condition arising from the original 110 construction, not the 

conversion, was the primary cause of buckling, and repairs were 

made. 

In March 2005, six months later, another converted 123 experienced hull deformation. The deformation was different from the 

first. Like the first, all previous structural analysis had not predicted this failure. At this time, six converted vessels had been converted and two were in process. The Coast Guard and the contractors each performed additional, more detailed structural analysis. 

Despite extensive effort, these analyses have not replicated the experiences with these vessels. 

Additional problems have arisen with these ships and the Coast 

Guard has removed them from service. We are working with the 

Coast Guard to re-review all data and analysis to isolate the cause 

or causes of the problem on these vessels. And once isolated and 

design solutions defined, the final path ahead will be laid out and 

we will work with the Coast Guard to deal with those issues. 

At the outset, the 110s and 123s would eventually be replaced 

with Fast Response Cutters. That was the original plan for Deepwater. In 2005, because of the problems with the 123s, the Coast 

Guard accelerated the design and construction of the FRC by 10 

years. A worldwide market survey of existing patrol craft determined that no existing craft would fulfill all FRC requirements. 

To address the full set of requirements, Northrop Grumman proposed a new design. The design included a composite hull form 

with the potential to save $1 billion over the life of these vessels. 

The design is unique for patrol boats. This is driven by the need 

48

to stay within the Coast Guard’s funding limits, yet satisfy a neverbefore-seen requirements demand on a patrol boat. 

Contrary to some accounts, the FRC did not fail model testing. 

A preliminary test was conducted improperly. When conducted 

properly, the FRC passed the test. Moreover, an independent analysis confirmed that the FRC design will meet performance requirements. 

To meet the shortfall in patrol boat hours, the Coast Guard has 

pursued selecting an existing, proven patrol boat that, with limited 

modifications, can meet its highest priority requirements. This is 

an interim measure, as this craft will not satisfy all requirements 

originally required for FRC, thus the need for a dual path, explained by the Commandant. 

Now let me turn to the National Security Cutter. The NSC is a 

state-of-the-art frigate size naval ship. The first of this eight class 

ship, the Bertholf, was launched earlier last year, in September, 

and will be delivered in fall of 2007. The second is now under construction. With regard to the allegations of inadequate ship structure, the NSC is designed to achieve a 30-year service life. NSC 

was designed using the same structural design standards used successfully on Navy and Coast Guard vessels since World War II. 

Northrop Grumman has full confidence in the ability of the NSC 

to perform all of its intended missions. 

The issue under discussion with the Coast Guard deals with the 

long-term fatigue life related to various assumptions about operating conditions, as discussed earlier, it is not about whether the 

NSC, as designed, will be able to safely and effectively perform its 

mission over the range of operational environments. 

When predicting fatigue life, even the best of engineers may 

reach different conclusions. This is driven by the different assumptions about operating conditions. Coast Guard and Northrop Grumman technical experts are engaged in a meaningful dialog which 

will lead to final agreement on the fatigue structure and how the 

ship will be constructed in the future. 

With regard to NSC cost, the current NSC is not the ship that 

was proposed in 1998. NSC operational capabilities have substantially increased as a result of the post–9/11 Coast Guard requirement. The critical improvements, along with the impact of Hurricane Katrina, comprise the majority of the program’s cost growth. 

Northrop Grumman is committed, along with Lockheed Martin, 

our ICGS partners, and the Coast Guard, to making this Deepwater program successful. Thank you. I welcome your questions. 

Mr. CUMMINGS. Thank you very much. 

Let me go back to some of the things that I was asking the Admiral. The one thing that I am concerned about is I guess, Mr. Teel 

and Mr. Mackay, do you believe that the NSCs that you all have 

designed will not have fatigue cracks over 30 years? Do you believe 

that? 

Mr. TEEL. Sir? 

Mr. CUMMINGS. Mr. Teel? 

Mr. TEEL. Oh, I wasn’t sure I was on. 

Mr. CUMMINGS. No, go ahead. 

Mr. TEEL. Sir, fatigue analysis and fatigue projection is a fairly 

new science in shipbuilding. It has been something that has gone 

49

on in aircraft building for some years, and the techniques and tools 

that are used in aircraft building are beginning to be used more 

frequently in shipbuilding. And there are reasons for that: airplanes fall out of the sky; ships, while they can sink, usually you 

can deal with a crack and solve that problem and not have a catastrophic failure. 

Over the course of the last several years, we have been working 

with the Navy as it relates to LPD–17 fatigue forecasting, and 

DDG–1000 fatigue forecasting in trying to develop and refine tools 

and techniques to be able to predict from design, in the early 

phases of design, what fatigue cracking will occur and when on 

ships. 

The NSC, as I mentioned in my statement, is designed to the 

same set of standards that the DDGs, the LPDs, all prior Navy 

ships and, for that matter, prior Coast Guard ships, and those 

standards are to achieve 30 years. There have been no techniques 

to forecast that ability, and we are now collectively, as an industry, 

refining those. 

I apologize for going on, but———

Mr. CUMMINGS. No no no. No, that is fine. This is our problem. 

We have got people probably sitting, looking at this right now on 

C-SPAN, and they are trying to figure out, wait a minute, we are 

spending billions of dollars on a program and we are expecting that 

these vessels will last a certain period, and now do we hold you accountable and what standards do we use? And if there are no 

standards, then how do they know that they are getting everything 

out of their tax dollar? 

And as I listen to Mr. Taylor—and I know how frustrated he has 

been in this hearing—and others, I mean, it seems to us—we want 

to know—most of the times, if somebody produces a product, they 

are willing to give some type of warranty. 

Mr. TEEL. Yes, sir. 

Mr. CUMMINGS. Where does that fall within this realm? And you 

never did answer my question. The question is the ship, the NSCs, 

do you believe that they will withstand cracks within 30 years? In 

other words, they can get through 30 years without a crack. 

Mr. TEEL. Sir, I don’t know about whether they can. But I can 

comment on the fact that all naval vessels that are out there today 

are designed to the same set of standards. The occurrence of a 

crack and when that occurs is usually not something that we, as 

the designer and builder, know the exact day when it occurs. We 

do deliver the ships and they last for 30-plus years, as the ships 

have that we have designed and produced. 

The occurrence of the crack or a crack in structure is not always 

known by us because it is during the operational life of that vessel, 

and that is part of the reason that, today, the Navy and all of shipbuilding are looking to find ways to forecast the occurrence of a 

crack. The life of the vessel is 30 years. And, yes, I absolutely believe the NSC, as it is designed and built, will last 30 years. I cannot tell you when a crack might occur that would need repair, but 

the life of the vessel is 30 years. 

Mr. CUMMINGS. In both the current report on the National Security Cutter and in a report issued in August 2006 on the design of 

information technology systems under Deepwater, the DHS InspecVerDate 0ct 09 2002 12:03 Nov 06, 2007 Jkt 000000 PO 00000 Frm 00061 Fmt 6633 Sfmt 6633 P:\DOCS\34776 HTRANS1 PsN: JASON
50

tor General has asserted that you failed to meet technical standards on testing procedures established for procurements. How do 

you respond to that finding? 

Mr. TEEL. Well, I can’t comment on the IPTs. Maybe Dr. Mackay 

can. 

Mr. CUMMINGS. Dr. Mackay? 

Mr. MACKAY. With respect to the IPTs, we are certified by 

SPAWAR, which is a Navy organization with interim authority to 

operate and also with authorities to operate the systems on the 

ships, particularly the classified systems and SIPRNET. As a new 

procurement, we have worked through the issues with gaining and 

maintaining the authorities to operate, and worked through issues 

where we have worked with the Coast Guard, SPAWAR, and industry to set out procedures that streamline those activities. The 

123s did have both an interim authority to operate the classified 

systems before they were withdrawn from service. 

Mr. CUMMINGS. I think you heard me in what I said about the 

Admiral and this whole idea of trust and accountability, and, you 

know, I think one of the things that is happening here that, I 

mean, if you—I mean, you all heard, I think, what the Admiral 

said, that he is going to come back to us in 120 days. Are you all 

pretty much in agreement with the things he said? And if you are 

not, tell me what you are in disagreement with. Is there anything 

that jumps out at you that you disagree with with regard to what 

he said? Anything. 

Mr. TEEL. No, sir, I have no disagreement with what the Commandant said. We are working with the Coast Guard on the issues 

associated with 123s. We will understand those problems, and 

those problems that are our problems will be resolved and we will 

take care of them. In the case of the NSC, we are working with 

the Coast Guard on the changes that they feel are required and we 

will get those changes defined and incorporated as quickly as possible. 

Mr. CUMMINGS. Now, you heard him say that he was going to get 

back to us on the whole question—then I will turn this over to Mr. 

LaTourette—on the whole issue of the warranty. So is there any 

room for a warranty in this contract, this $24 billion contract? Any 

kind of warranty. 

Mr. TEEL. Well, in the case of the ships, there is a warranty. 

There is a warranty. I will get you, for the record, what that is, 

the length of time. But there is a warranty that that ship will perform in accordance with the requirements of the contract, and we 

stand behind that. I don’t recall the length of time of the warranty. 

Mr. CUMMINGS. Counsel tells me that for the 123-foot boat it is 

a year. 

Mr. TEEL. OK. 

Mr. CUMMINGS. That is not very long, is it? 

Mr. TEEL. Well, sir———

Mr. CUMMINGS. By the time you get in the water, the warranty 

is up. 

Mr. TEEL. Sir, the warranty is on the basis of when we turn the 

ship over. As with the case of an automobile or other things, the 

warranties are on the basis of the length of time operated. Once 

they are in the Coast Guard’s care, then we have to warrant workVerDate 0ct 09 2002 12:03 Nov 06, 2007 Jkt 000000 PO 00000 Frm 00062 Fmt 6633 Sfmt 6633 P:\DOCS\34776 HTRANS1 PsN: JASON
51

manship, and that workmanship continues long after the actual 

warranty of the full vessel operation. So workmanship is something 

that is always a guaranty. But I will get you a full explanation of 

the total and submit it to the record. 

Mr. CUMMINGS. What does a cutter cost? The 123-footer, what do 

they cost? 

Mr. TEEL. The conversion from 110 to 123 is about $8.5 million 

each. 

Mr. CUMMINGS. $8.5 million? 

Mr. TEEL. Yes, sir. 

Mr. CUMMINGS. So we get a year warranty for $8.5 million. Is 

that what you are saying? 

All right, Mr. LaTourette. 

Mr. LATOURETTE. Thank you, Mr. Chairman. 

Just for my edification, both of your testimonies indicate what 

you do, but could I just explore what your profession is by training? 

Mr. Teel, are you an engineer, for instance? 

Mr. TEEL. Yes, sir. 

Mr. LATOURETTE. And Dr. Mackay? 

Mr. MACKAY. I was from the Naval Academy. I was a naval officer first. There is a general engineering curriculum at the Naval 

Academy. 

Mr. LATOURETTE. Thank you very much. Just by sideline, the 

current Secretary of Transportation tells a story that you can tell 

the difference between an extrovert and introverted engineer because the extroverted engineer will stare at your shoes at a cocktail 

party, as opposed to their own. But that is another story. 

[Laughter.] 

Mr. LATOURETTE. I want to begin by a Watergate-like question, 

if I could, Mr. Teel, and ask you when, if ever, you were made 

aware of this? 

Mr. TEEL. Well, I don’t recall—first of all, I have been in this position for about, working with ships for about 18 months. During 

the early days of my turnover, there were fairly extensive briefings 

on all the programs. I don’t recall, until within the last six months 

or so, issues that were not headed toward resolution. And let me 

explain that. In the case of design of all systems, whether they are 

ships or aircraft or whatever, there are issues along the way about 

design this, how you design it, what the designs will be, and those 

get vetted and then the answers then become a part of the record 

of the review process. And that is the case with the National Security Cutter; the issues were reviewed. There were issues with 

structure. We have made structural changes, several structural 

changes as a result, over the course of the design of the National 

Security Cutter, as a result of the discussions and review with the 

Coast Guard on almost a continuous basis through the design process. 

So from that perspective there were issues. But from perspective 

that nothing was resolved, things were left to be resolved———

Mr. LATOURETTE. You are not aware of any? 

Mr. TEEL. Not aware, no, sir. 

Mr. LATOURETTE. And were you in the room when the Commandant was testifying? 

Mr. TEEL. Yes, sir. 

52

Mr. LATOURETTE. OK. And there was discussion, and in the IG’s 

report there is discussion about events occurring in 2002 and a 

memo in 2004. You were not aware of those? 

Mr. TEEL. Sir, I was aware of memos, but I was also aware of 

approval by the Coast Guard of the design that we were going forward with. So in my mind, and in our mind, that was a resolved 

issue to move forward with. 

Mr. LATOURETTE. OK. And as I understood your testimony, you 

believe that the first two National Security Cutters, the one that 

is almost done and the one that is in production, meet the requirements set out in the Coast Guard contract? 

Mr. TEEL. Yes, sir. 

Mr. LATOURETTE. OK. And the issue of cost overruns, how is that 

mediated between your companies and the Coast Guard, who decides and how is it decided who eats the overrun? When is it something that you eat and when is it something that the Coast Guard 

has to take responsibility for? 

Mr. TEEL. That is a discussion between the companies and the 

Coast Guard and the Coast Guard’s contracting authority. 

Mr. LATOURETTE. And relative to the 123 conversions, 123-foot 

conversions, are those discussions ongoing at the moment? 

Mr. TEEL. The discussions are ongoing to determine what the 

cause of the problems are, yes, sir. 

Mr. LATOURETTE. Right. And I understood your testimony that 

you think due diligence was done and we don’t know what happened at this moment in time. 

Mr. TEEL. Yes, sir. 

Mr. LATOURETTE. OK. Based upon your testimony—I assume you 

saw the media coverage over the weekend. 

Mr. TEEL. No, sir, I didn’t. 

Mr. LATOURETTE. OK. Have you heard about it? It was pretty big 

news around. 

Mr. TEEL. Yes, sir, I have. 

Mr. LATOURETTE. OK. The basic allegation that is made in the 

article, and I guess in the Inspector General’s report, is that you 

all are delivering a product that costs more and doesn’t perform, 

and I just want to give you the opportunity to say what you have 

to say about that. 

Mr. TEEL. Well, sir, the National Security Cutter is, by all standards within our shipyard—and our shipyard has been in operation 

for 72 years—the best first-of-class vehicle that we have built. Prior 

to the storm, it set every record for first-of-class ship built by that 

shipyard. The storm did impact that; delayed us some and added 

cost, but she still is ahead of most first-class ships, and certainly 

in the case of first-time workmanship and in terms of her ability 

to perform her intended mission she is an outstanding ship. 

Mr. LATOURETTE. The second issue that I talked to the Admiral 

about—and, Dr. Mackay, maybe you can chime in on this too—is 

there always some—when you have an integrated system and the 

integrators also are in the business of building the assets, the issue 

of competition. And if you could just briefly—I think I heard your 

testimony, Dr. Mackay, about how many vendors you deal with all 

across the Country, but could you talk about the robust competition 

that exists? And the question that I asked the Admiral,—if it is 

53

within your knowledge; if it is not, if you could supplement the 

record—what percentage of the contracts are let to Lockheed Martin, Northrop Grumman and/or your affiliates and subsidiaries. 

Mr. MACKAY. Well, we do have very robust competition. We have 

an open business model and in addition to the numbers of subcontractors that we work with across the Country and in the District of Columbia, we have a database of some 3,000 other suppliers 

that we have generated in six industry days. Both Lockheed Martin 

and Northrop Grumman have procurement systems that function 

in accordance with Federal acquisition regulations, and those acquisition regulations govern competition and they also point out 

some exemptions from competition for things like follow-on production, a highly specialized service or a unique supply where competition does not result in best value to the Government. 

But if you look at the—since the inception of the program, if you 

look at the subcontracts that have been let in the Deepwater program, almost $800 million worth that are $550,000 or greater—and 

that is a FAR stipulation—and you back out the FAR exceptions 

for best value for the Government, 85 percent of those dollars have 

been competed in an open manner. 

Mr. LATOURETTE. OK. And do you not have the information as 

to what percentage goes to your two companies? 

Mr. MACKAY. The percentage to the two companies I will have 

to get that for you. 

Mr. LATOURETTE. Could you get that for me? 

Mr. MACKAY. Yes, sir. 

Mr. LATOURETTE. And then just the last question, because Mr. 

Oberstar spent a good deal of time during his questioning of the 

Admiral, I see in your statement on page 7, Mr. Teel, you say that 

Northrop Grumman does not certify compliance. And I think I 

share Mr. Oberstar’s concern that self-certification is a tricky business. So could you just amplify on that for a minute? 

Mr. TEEL. Yes, sir. In the case of the 123s and in the case of the 

NSC, the oversight, we have ABS, the American Bureau of Shipbuilding, that are doing certifications on elements of the design and 

of the process. We don’t approve our own designs and move forward. We submit those either to ABS or to the Coast Guard for approval to proceed to the next phase. 

We don’t conduct a test and certify that it is acceptable. We either do that for the Coast Guard or their representative, and then 

that test is then reviewed on the basis of the data collected to the 

test procedure and provided to the Coast Guard to move forward. 

We are not in the business of self-certifying. We do not do that 

with any of our ships or vessels with the exception of some foreign 

customers that we actually do that. 

The issue in question is about how this is done and the mechanism and thoroughness and robustness of the outside review of 

what we do. We are doing what our requirement asks us, and we 

are not self-certifying. 

Mr. LATOURETTE. Thank you very much. 

Thank you, Chairman. 

Mr. CUMMINGS. Thank you, Mr. LaTourette. 

Mr. Taylor? 

Mr. TAYLOR. Thank you, Mr. Chairman. 

54

I want to thank these gentlemen for being here. 

A couple of things, Mr. Teel, and again my hearing is not perfect 

and my memory is even worse, but I thought I heard you say that 

this buckling that took place on the 123s was a part of the problem 

with the original 110 foot hull. For clarification, is there a history 

on that 110 foot hull that has not been modified of buckling in the 

same places as we saw on the six ships or the eight ships that were 

stretched? 

Mr. TEEL. Let me clarify. I think what my statement says was 

that on the Matagorda, the first ship that we found buckling, that 

is attributed to a legacy problem, a workmanship problem on the 

110, not a class program but a problem with a bulkhead not being 

welded on the legacy 110s. That is not considered to be what has 

caused the problems with the other ships. 

Mr. TAYLOR. What do you think has caused the problem with the 

other ships? 

Mr. TEEL. Sir, as my statement said, we haven’t determined 

what has caused the problem. There are several possibilities. Those 

are all being examined with the Coast Guard, comparing data with 

them to understand. Part of that could be a condition of the legacy 

ships. Part of that could be we always have to question did we do 

the design adequately. We believe we did, but until we are finished 

with this process, we don’t know. We are not sure. 

Were the ships operated in conditions that were above the conditions that were defined for these ships after the modification? 

Sometimes the Coast Guard is forced to operate in conditions that 

are beyond this mod’s requirements and potentially others, sir, but 

those are the ones that are in question and that we are reviewing 

with the Coast Guard. 

Mr. TAYLOR. Back to the original question, did the 110 have a 

history of hull buckling, crackling or deformities prior to the conversion to the 123? 

Mr. TEEL. There had been problems. I would like to submit that 

for the record because I don’t fully understand the details of that. 

There were certainly issues associated with the condition of the 

ship in terms of its age and stress corrosion. We believed we understood that, and in fact part of the process of conversion was to replace parts of the hull and decks where we found a problem with 

the condition of the ship. 

Mr. TAYLOR. OK, I would like to take you back to this part of 

the Investigator General’s report and again, bad ears, worse memory, but I thought I heard you say that there is no way to model 

stresses on a ship ahead of time which begs my question of where 

did the Inspector General come up with this and how did they predict that you would trouble in those areas in 15 years or less. 

Mr. TEEL. Sir, I didn’t say there was no way to model stresses 

on the ship. The modeling of stresses on the ship and then the resultant impact of those stresses on the ship over the course of the 

life of the ship in a fatigue-failure analysis mechanism is what is 

only recently, the last several years, becoming understood and a 

science. So I was not saying that it couldn’t be done. 

I also didn’t say that you could not model it, and in fact we have 

been modeling it through detailed fatigue analyses for years, but 

being able to predict its outcome in terms of when cracks occur 

55

over the operating life of the ship is the part that is currently being 

developed and refined. I will put it that way. 

Mr. TAYLOR. When the Assistant Commandant pointed out what 

he thought to be what needed structural changes, I am curious, did 

anyone from the Coast Guard contact your yard or your corporate 

office and say what would it cost to fix this now, even if it requires 

some after the fact work as opposed to what would it cost to do this 

later? 

Was any sort of cost comparison, even in any verbal sense, run 

by your organization to get a ballpark figure of what it would to 

fix these things before the cutter went to sea? 

Mr. TEEL. Sir, I am not certain that that was done. I will have 

to research our files and our data, and I will submit the answer 

for the record. 

Mr. TAYLOR. OK. 

Mr. TEEL. Not to my knowledge, but I will research that and give 

you a response to the record. 

Mr. TAYLOR. OK, but just for the record, you are an expert shipbuilder. Is it an accurate assessment to say that when you discover 

a problem, it is a heck of a lot easier to fix it the first time before 

the void is filled with diesel fuel or lube oil or whatever, before the 

additional piping is run, before the additional electrical wires are 

pulled, before it is painted, while it is in your shipyard the first 

time and the crews are already down there? Is it cheaper to fix it 

then or to bring the ship back after it has been to sea for a while? 

Mr. TEEL. Sir, once you have made the decision to make the 

change, it is clearly cheaper to fix it early, not later. 

Mr. TAYLOR. OK, thank you, Mr. Teel. 

Thank you, Mr. Chairman. 

Mr. CUMMINGS. Mr. Coble? 

Mr. COBLE. Thank you, Mr. Chairman. 

Gentlemen, good to have you with us. 

Not unlike my friend from Mississippi, my hearing is not perfect 

either, but I don’t think this question has been put to you, either 

of you. What methods did the Integrated Coast Guard Systems and 

the contractors use to review the proposed designs of each asset 

that will be acquired under Deepwater Program and what role, if 

any, did the subcontractors have at implementing these methods? 

Mr. MACKAY. Congressman, at the programmatic level, there are 

a series of programmatic reviews that I think are fairly typical in 

industry: a critical design review—let me see—a preliminary design review, a critical design review, production readiness review, 

test readiness review. 

At those reviews, both the team from industry which would be 

the appropriate domain head from ICGS, either Lockheed Martin 

or Northrop Grumman, and its principal subcontractors as well as 

technical authorities and programmatic authorities from the Coast 

Guard would review the data, and generally what is called a 

CDRL, a contract deliverable, is generated and sent to the Coast 

Guard. It is reviewed by the Coast Guard, and a decision to go forward, either without modifications or with other modifications and 

provisions, is made appropriate to the technical readiness at that 

particular gate. 

56

Mr. COBLE. So the Coast Guard would end the loop with ICGS, 

the contractor, and the subcontractors? 

Mr. MACKAY. Absolutely, sir. 

Mr. COBLE. Did you all use the expertise of independent outside 

groups to verify the results of the reviews that were being formulated? That can be for Mr. Teel or Dr. Mackay, either one. 

Mr. MACKAY. With respect to aircraft or C4ISR systems, the 

Coast Guard periodically avails itself. You will have to ask the 

Coast Guard which systems and programs precisely they have 

sought independent analysis on. 

On the industry side, again for aircraft, for C4ISR, we didn’t 

avail ourselves to independent analysis. 

Mr. COBLE. Mr. Teel? 

Mr. TEEL. In the case of ship design, we don’t routinely get outside assistance. It would depend on the complexity of the issue. In 

some cases, if our internal design people have, as you know and I 

didn’t point out earlier, not only do you tell engineers by staring 

at their shoes but also whether they argue with one another. If the 

level of controversy is high enough internally with the engineers 

about a solution, we will get outside activity involved. 

Over the course of this program, there has been significant independent review, albeit after issues have been raised. 

Mr. COBLE. I thank you. 

Finally, let me apply hindsight which inevitably is 20–20, always 

easy to say what you should have done. But, gentlemen, what steps 

should have been taken by the Coast Guard and industry engineers, if any, to identify design deficiencies in the 123 foot patrol 

boat, the Fast Response Cutter and/or the National Security Cutter? 

Mr. TEEL. Maybe I could take each of those separately, sir. 

Mr. COBLE. Sure. 

Mr. TEEL. In the case of the 110 to 123 modifications, it is really 

difficult for me to look at what might have been done differently. 

I believe after we are finished with this current analysis with the 

Coast Guard, we will understand that, but today I can’t tell you because I know that due diligence was done. 

Clearly, something differently needs to be done, and we will as 

a part of the response back to the Coast Guard, and when the 

Coast Guard comes back to you, we will make sure that we have 

contributed to the hindsight understanding of that and made recommendations about that. 

In the case of the FRC, sir, I believe that the FRC is a victim 

of an attempt to put more into a patrol boat vessel than it could 

take and our inability to be able to design that ship to accommodate those requirements because of cost caps. I am not sure there 

is anything to be changed. I think the lessons to be learned are 

that we probably should have moved faster as a team to get on 

with the next steps. 

In the case of the NSC, I do believe that the Commandant has 

defined those ways that we and the Coast Guard will be able to 

work more effectively together to vet all the issues more quickly 

than we did during the NSC design. I feel very strongly that the 

NSC is a very good ship. 

57

There are issues that have not been resolved about fatigue forecasting, and had we vetted those much earlier, we wouldn’t be talking about this today. 

Mr. COBLE. Thank you, gentlemen. 

Thank you, Mr. Chairman. 

Mr. CUMMINGS. Thank you very much, Mr. Coble. 

To follow up on what you just said, we will probably be calling 

you back in 120 days too because we want to take a look and see 

where we are then, considering this is major for the Coast Guard 

as you well know. 

Mr. TEEL. Yes, sir. 

Mr. CUMMINGS. We want to make sure that we are all still singing from the same hymn book and hopefully the same tune. 

Mr. Larsen? 

Mr. LARSEN. Thank you, Mr. Chairman. 

I am sure we are all familiar with the concept of the Rashomon 

Effect that law enforcement uses to explain how different people 

can see the same situation and give totally different stories. It is 

interesting that it is actually from a movie called Rashomon, and 

it follows the story of four people who saw the same incident. The 

movie ends with one individual just bawling his eyes because he 

understands that there is no truth in the world as a result of this. 

Through the process of this oversight hearing, I am trying to figure out what is not the truth but what is truth in this because I 

am hearing two different things being said on a variety of different 

issues. I think it is important that you do come back in 120 days 

because we are going to have a chance to chew on some of this stuff 

over the next four months and to try to put together some of the 

pieces that we have heard today. 

For instance, in your testimony, Mr. Teel, you say that Northrop 

Grumman does not self-certify compliance with structural requirements in the contract, but we heard from the Commandant that 

clearly there was a self-certification that I believe I heard he wants 

to fix as they move forward and as they do further awards. The 

IG’s report on page 15 says the Coast Guard allowed the contractor 

to self-certify compliance with standards. It sounds to me like two 

different diametrically opposed things are being said, and somewhere there is truth in there. 

I want to know how you would make your statement comport 

with what the IG says needs to be done and with what the Commandant, I think, clearly recognizes as a problem in the current 

setup. 

Mr. TEEL. Sir, I can only tell you what I understand about the 

situation. Now whether or not that is a result of multiple people 

seeing the same things differently, I cannot comment. 

What I can comment on is that self-certification is a definitional 

issue, and I am not trying to split hairs. I really am trying to say 

that when we go through any process of designing and building the 

ship, we are submitting data for approval and review to either ABS 

or the Coast Guard as it is defined in the contract. 

I honestly have not seen the latest version of the IG report. I 

have seen earlier versions. I also understand that there are issues 

with the level of review and the voracity of review that I believe 

58

the Commandant is addressing, and that may in fact be what the 

IG is addressing. 

The question about certifying our work would be one that said 

that we have no oversight and no review or approval of the steps 

or the tests that we go through, and we in fact do. 

Mr. LARSEN. Mr. Mackay, maybe you can try to illuminate this 

question a little bit for me on self-certification. Is Lockheed Martin, 

is the issue of self-certification with you? 

Mr. MACKAY. In the area of aviation and C4ISR, there isn’t that 

issue that I am aware of. As I said, with respect to the C4ISR system, the Coast Guard works with the SPAWAR out of the Navy, 

of course, and with aviation there are myriad regulatory and oversight authorities. 

With respect to the HC–144 we just delivered, it was certified by 

INTA, a European aviation authority, and then I believe the Coast 

Guard is going to work with NAVAIR in this Country to certify. 

There is a surfeit of certification authorities on the aviation side. 

Mr. LARSEN. Mr. Teel, with respect to the Fast Response Cutter 

replacement, the question I asked the Commandant, I would like 

to ask of you with regards to the RFP that is out and due, I think, 

March 31st if I recall. 

Will Northrop be doing the assessment of the RFPs? 

Mr. TAYLOR. In conjunction with the Coast Guard. 

Mr. LARSEN. Is Northrop planning to do their own RFP? 

Mr. TEEL. No, sir. 

Mr. LARSEN. You will be not involved in the design. 

Mr. TEEL. We will not be proposing a competitive approach, no. 

Mr. Carter. OK, so you will be out of that process to allow neutrality in that evaluation. 

Mr. TEEL. Yes, sir. 

Mr. Carter. Thank you. 

Thank you, Mr. Chairman. 

Mr. CUMMINGS. Thank you. 

Mr. LoBiondo? 

Mr. LOBIONDO. Thank you, Mr. Chairman. 

Gentlemen, thank you for being here today. 

The IG has raised some serious questions and concerns about the 

ability of the Coast Guard to resolve disputes such as those with 

the National Security Cutter through the integrated product teams. 

We have had a lot of discussion on this in trying to understand it. 

How do you feel they are working? I mean what is your assessment of this as we try to struggle to get to the bottom of this and 

what assurances can you give that the Coast Guard concerns are 

being heard and maybe more important properly addressed? 

Mr. MACKAY. Congressman, what I will say about the IPT process is it has certain strengths. It provides a great deal of transparency between industry and the Government as we work with 

these issues. 

I think the Commandant was very clear about some of the 

changes and improvements that he intends to make with respect 

to the overall management of the program, and he accurately characterized the spirit within which both Lockheed Martin and Northrop Grumman intend to work with him as he leads us in this 

transformation and to align industry with Government as they 

59

make changes to streamline and to very clearly compartmentalize 

several authorities and responsibilities with respect to this program and overall acquisition in the Coast Guard. 

Mr. TEEL. I really don’t have anything more to add other than 

that we welcome the changes and we will certainly respond in kind 

with the changes in our organizations that best reflect what the 

Coast Guard does and make sure that we match up well. We have 

been co-located with their teams from the beginning at the working 

level. We hope to continue that same level of activity, and getting 

a full participation of all of the Coast Guard functional specialists 

in that team environment is welcome. 

Mr. LOBIONDO. I really hope that is the case because as you are 

keenly aware, we have had challenges from the very beginning, 

getting the program up and running, and we never had much of 

a margin for error, but we just have none left at all. There are critics, and you read a lot of the articles, some in Congress who believe 

the program should be abandoned and then come back and figure 

out how to do it. The Coast Guard is in too much of a dire need 

of the assets, but we can’t sustain any more bad news. 

There are people out there that are decision-makers in this Congress who are not happy and are saying I told you so. Despite all 

the assurances we have had over the last couple of years, it turns 

out we find ourselves in hotter water than we have been before. I 

know that is not lost on you, but it is something that has got to 

be repeated over and over again. 

As we turn to the National Security Cutter, I am still having a 

hard time understanding why the cost was originally at around 

$500 million and now we are up to, I think, $960 million. How do 

we explain this when somebody asks this question? Is there an easily understandable explanation that doesn’t go into 50 pages of 

technical aspects? 

Mr. TEEL. Yes, sir, I will attempt to do that. I will apologize 

ahead of time for the engineer in me. 

I don’t identify with the numbers that you use, but there are significant changes to the National Security Cutter from the original 

ship that was proposed which is the baseline. Those changes came 

about as a result, as we have talked about, the Commandant and 

myself, of 9/11 requirements, and they are quite significant, and 

those changes resulted in a ship that is quite significantly different 

than that ship that was proposed. 

There are additional costs on the early ships as a result of 

Katrina. We have talked about that. The value of those ships, we 

believe is far greater than the cost will turn out to be. As the Commandant said, we are in the process of defining what those costs 

will be for the follow-on ships on the basis of the requirements for 

the fatigue structure if any is required, and it obviously appears 

that it is. 

What that ultimate cost will be, will be reported, as the Commandant said, as we get those refined and prior to the next report 

back to you. 

Mr. LOBIONDO. Thank you, Mr. Chairman. 

Mr. CUMMINGS. Thank you very much. 

Let me close this out. First of all, I want to thank you all for 

your testimony. 

60

Just following up on some of the things that Mr. Larsen said, 

certainly two or three people can look at one situation and see it 

differently, but the fact is that when the bottom line comes, when 

we get down to the bottom line, it does not appear that we are 

meeting our goals. I think the testimony from the Admiral and 

from you all has been very enlightening. 

I know that there are members of the Congress, and Mr. 

LoBiondo, I know is absolutely correct, there are members of Congress that are very concerned about this program, mentioning that 

they would like to see the funds cut off for it. I have heard that. 

We are determined to make this work, and we believe that when 

people sit down and reason and keep the goals of the American 

people’s safety at heart, we can do this. This is America, and we 

can do this. 

The thing that certainly I think we also want to keep in mind 

is that when we talk about the Coast Guard, again we are talking 

about our young men and women who are going out there every 

day, putting their lives on the line. The whole basis of what we are 

doing here is trying to make sure that they have the very best 

equipment that they can have. 

Just the other day in a town hall meeting, a lady said to me, one 

of my constituents. I sit on the Board of the Naval Academy, and 

her daughter is a fourth year student at the Naval Academy. She 

said, Congressman, I know my daughter is going out there, and she 

is probably going to end up in Iraq or Afghanistan. But, she said, 

I just want to make sure that you do everything in your power to 

make sure she has the equipment that she needs. 

Well, I feel the same way, and I promised her that I would. I 

know every single member of this panel feels the same way, that 

we want to make sure that our Coast Guard and men and women 

who are doing just a phenomenal job under sometimes very trying 

circumstances, we want to make sure they have what they need. 

I hope that when you all sit down with the Coast Guard—I think 

we have been blessed to have a great Admiral in charge, and when 

you all sit down and try to work out whatever differences there 

may be, that you keep that big picture in mind because this is not 

about Lockheed Martin. This is not about Northrop Grumman. 

This is not about the Admiral. This is about the security of our 

Country. 

As Mr. LoBiondo said, we have spent a lot of time going through, 

trying to figure out what to do. We have been losing time, and we 

don’t have time, any more time to lose. 

I ask you that when you go back to the table, consider everything 

that we have said, so that when we come back in 120 days, that 

you will be able to report to us that we are moving forward. 

One of the things that we must do, we must—we must—we must 

stop the bleeding. I am very serious about that. This Congress is 

tired of reading the stories in the paper that seems like we just 

cannot get it right. I know we are saying it is somebody else’s fault 

and all that. The bottom line is that we have got to have trust and 

we have got to have accountability. 

We look forward to working with you. I promise you this is going 

to be one of the number one issues that this Subcommittee deals 

61

with during this session, and we look forward to working with you 

and thanks a lot. 

That will end this hearing. 

[Whereupon, at 1:53 p.m., the subcommittee was adjourned.]

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