U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

66–171 PDF 2011

S. HRG. 109–1132 

THE COAST GUARD’S FISCAL YEAR 2007 

BUDGET REQUEST 

HEARING 

BEFORE THE

SUBCOMMITTEE ON FISHERIES 

AND THE COAST GUARD 

OF THE

COMMITTEE ON COMMERCE, 

SCIENCE, AND TRANSPORTATION 

UNITED STATES SENATE 

ONE HUNDRED NINTH CONGRESS 

SECOND SESSION 

JUNE 15, 2006 

Printed for the use of the Committee on Commerce, Science, and Transportation 

( 

(II) 

SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION 

ONE HUNDRED NINTH CONGRESS 

SECOND SESSION 

TED STEVENS, Alaska, Chairman 

JOHN MCCAIN, Arizona 

CONRAD BURNS, Montana 

TRENT LOTT, Mississippi 

KAY BAILEY HUTCHISON, Texas 

OLYMPIA J. SNOWE, Maine 

GORDON H. SMITH, Oregon 

JOHN ENSIGN, Nevada 

GEORGE ALLEN, Virginia 

JOHN E. SUNUNU, New Hampshire 

JIM DEMINT, South Carolina 

DAVID VITTER, Louisiana 

DANIEL K. INOUYE, Hawaii, Co-Chairman 

JOHN D. ROCKEFELLER IV, West Virginia 

JOHN F. KERRY, Massachusetts 

BYRON L. DORGAN, North Dakota 

BARBARA BOXER, California 

BILL NELSON, Florida 

MARIA CANTWELL, Washington 

FRANK R. LAUTENBERG, New Jersey 

E. BENJAMIN NELSON, Nebraska 

MARK PRYOR, Arkansas 

LISA J. SUTHERLAND, Republican Staff Director 

CHRISTINE DRAGER KURTH, Republican Deputy Staff Director 

KENNETH R. NAHIGIAN, Republican Chief Counsel 

MARGARET L. CUMMISKY, Democratic Staff Director and Chief Counsel 

SAMUEL E. WHITEHORN, Democratic Deputy Staff Director and General Counsel 

LILA HARPER HELMS, Democratic Policy Director 

SUBCOMMITTEE ON FISHERIES AND THE COAST GUARD 

OLYMPIA J. SNOWE, Maine, Chairman 

TED STEVENS, Alaska 

TRENT LOTT, Mississippi 

GORDON H. SMITH, Oregon 

JOHN E. SUNUNU, New Hampshire 

DAVID VITTER, Louisiana 

MARIA CANTWELL, Washington, Ranking 

DANIEL K. INOUYE, Hawaii 

JOHN F. KERRY, Massachusetts 

FRANK R. LAUTENBERG, New Jersey 

(III) 

C O N T E N T S 

Page 

Hearing held on June 15, 2006 ............................................................................... 1 

Statement of Senator Cantwell .............................................................................. 3 

Statement of Senator Inouye .................................................................................. 5 

Prepared statement .......................................................................................... 6 

Statement of Senator Lott ...................................................................................... 44 

Statement of Senator Snowe ................................................................................... 1 

WITNESSES

Allen, Admiral Thad W., Commandant, U.S. Coast Guard ................................. 6 

Prepared statement .......................................................................................... 7 

Caldwell, Stephen L., Acting Director, Homeland Security and Justice Issues, 

U.S. Government Accountability Office .............................................................. 12 

Prepared statement .......................................................................................... 15 

APPENDIX

Response to written questions submitted to Admiral Thad W. Allen by: 

Hon. Maria Cantwell ........................................................................................ 72 

Hon. Daniel K. Inouye ...................................................................................... 64 

Hon. Frank R. Lautenberg ............................................................................... 82 

Response to written questions submitted to Stephen L. Caldwell by: 

Hon. Maria Cantwell ........................................................................................ 62 

Hon. Daniel K. Inouye ...................................................................................... 61 

(1) 

THE COAST GUARD’S FISCAL YEAR 2007 

BUDGET REQUEST 

THURSDAY, JUNE 15, 2006 

U.S. SENATE, SUBCOMMITTEE ON FISHERIES AND THE COAST GUARD, COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION, Washington, DC. 

The Subcommittee met, pursuant to notice, at 10:30 a.m. in room 

SD–562, Dirksen Senate Office Building, Hon. Olympia J. Snowe, 

Chairman of the Subcommittee, presiding. 

OPENING STATEMENT OF HON. OLYMPIA J. SNOWE, 

U.S. SENATOR FROM MAINE 

Senator SNOWE. The hearing will come to order. 

I’m pleased to be able to call this hearing today in order to focus 

the Committee’s attention, as well as the Senate, on one of the 

most critical issues facing our Nation’s homeland security, and that 

is to ensure the viability and ongoing success of the United States 

Coast Guard. 

As Chair of the Fisheries and Coast Guard Subcommittee, I am 

convening today’s hearing to review the ongoing challenges confronting the military service, such as readiness concerns due to 

overall degradation of legacy assets, as well as to examine the 

Coast Guard’s budget request for Fiscal Year 2007, in light of its 

multiple increasing responsibilities. 

Before we turn to these issues in-depth, I’d first like to thank Admiral Allen for being here today, as well as Mr. Caldwell for testifying, as well, on behalf of the GAO. 

Admiral Allen, I extend to you my sincerest congratulations on 

assuming the position of Coast Guard Commandant last month. 

You will face many challenges in the next 4 years, yet I’m confident 

in your ability to maintain and protect our homeland security. I 

would be remiss if I did not also mention the debt of gratitude this 

Nation owes you for your service in the Gulf shore region in the 

aftermath of Hurricane Katrina. You single-handedly righted a 

ship that was sinking fast and plotted a course to save thousands 

and thousands of lives. So, we’re deeply indebted to you, Admiral 

Allen. 

I also want to thank you, and congratulate you, Mr. Caldwell, on 

recently assuming the position of Director for Homeland Security 

with the Government Accountability Office. Your assistance to Congress and the Coast Guard will be crucial to our collective success. 

As we all know, the Coast Guard serves as a cornerstone of our 

Department of Homeland Security and is uniquely positioned to 

2 

perform a wide variety of missions critical to protecting American 

lives and property. 

Last year alone, the brave men and women of the Coast Guard 

responded to more than 32,000 calls for assistance, and saved nearly 38,000 lives, most of which occurred in the wake of Hurricane 

Katrina. Few will be able to forget the Coast Guard’s outstanding 

displays of courage and heroism in the aftermath of such devastation. 

We also cannot forget that search-and-rescue is but one of the 

many vital missions of the Coast Guard, and that it performed admirably in other areas as well. In 2005, the Coast Guard prevented 

348,000 pounds of marijuana and cocaine from crossing our borders. It also prevented more than 9,500 illegal immigrants from 

reaching our shores, conducted over 6,000 boardings to protect our 

vital fishery stock, and responded to more than 23,000 pollution incidents. The Coast Guard also aggressively defended our homeland 

by conducting more than 286,000 port security patrols, conducted 

26,000 security boardings, escorted over 10,000 vessels, and maintained more than 50,000 Federal aids-to-navigation along 25,000 

miles of marine transportation routes. 

While I applaud the Coast Guard for this record of success, I’m 

greatly concerned about its ability to sustain this level of performance. The President’s request that we’re considering today recommends approximately $8.4 billion in funding for the Coast 

Guard, which is only 4 percent more than last year’s enacted level. 

While any funding increases may appear to be good news, I’m concerned that this is not enough to meet our Nation’s critical and 

ever increasing homeland security maritime protection imperatives. 

For example, I regret that I must once again address the issue of 

how the Coast Guard’s high operational tempo combines with legacy asset degradation to hamper the service’s overall readiness, an 

issue that plagues the Coast Guard and its personnel year in and 

year out. The Coast Guard hopes to remedy this problem through 

its Deepwater Fleet Modernization Program, but the budget request does not significantly increase funding for this. More critically, the Administration’s request of $934 million would maintain 

this program on a 20-year-plus timeline, which does not allow the 

Coast Guard to fulfill the obligations the Nation has bestowed on 

it. We simply cannot expect the Coast Guard to do its job with unreliable or broken resources. 

I will continue to fight for Deepwater acceleration, because it is 

the best and most cost-effective way to remedy the Coast Guard’s 

readiness problems and provide the Coast Guard with the tools it 

requires to carry out all of its missions. 

The FY07 budget request contains other items that raise considerable concern, as well. For example, it recommends inheriting an 

additional mission known as the National Capital Region Air Defense, in which the Coast Guard now would be responsible for 

intercepting wayward or hostile air incursions over Washington, 

D.C. Undoubtedly, this will put a severe strain on already limited 

personnel, assets, and financial resources. In addition, projects 

aimed at sustaining our aging legacy assets continue to absorb millions of dollars, such as the mission-effectiveness projects for both 

the 210- and 270-foot cutters. 

3 

Moreover, authorizing $50 million for construction of a new 

Coast Guard headquarters facility at the site of historic St. Elizabeth’s Hospital campus does not appear to pass the test of cost effectiveness, accessibility, infrastructure capability, or even worker 

quality of life. I remain strongly opposed to this proposal, and I 

have incorporated language in this year’s Coast Guard authorization bill that would require an additional extensive review of the 

proposal, as well as an analysis of more viable alternatives. 

Our Committee’s responsibility here today is to ensure that the 

Coast Guard is well positioned and prepared to meet our future 

maritime challenges and threats head on and to successfully fulfill 

its diverse, yet vital, missions. While the Coast Guard desperately 

requires additional resources, our new realities also require it to efficiently and effectively maintain a proper mission balance. 

In today’s hearing, I expect to learn how Congress can best facilitate achievement of that goal. As I’m sure Mr. Caldwell will discuss, we have to balance the available resources with our expectations for mission performance. The time to act on these issues is 

now, before we are further in crisis. 

Admiral Allen, I look forward to discussing your agency’s budget 

request today, as well as the other issues that I have raised, and 

any others that you want to put before this Subcommittee. Obviously, our country relies on you more than ever before, and the 

types of missions that you do. And, frankly, I don’t think that we 

give you enough of the resources that are essential to carry out all 

of your missions. We’re asking you to do more with less continuously, and I know that is a very difficult responsibility. But you 

perform it well, as do all the men and women who are part of the 

Coast Guard. 

I also, Mr. Caldwell, want to welcome you to the Senate. And I 

know that the Coast Guard and the Committee welcomes your recommendations and your constructive advice and guidance. So, we 

thank you, as well. 

And before we turn to our witnesses, I will turn to the Ranking 

Member of this Subcommittee, Senator Cantwell, for any comments 

that she might care to make. 

STATEMENT OF HON. MARIA CANTWELL, 

U.S. SENATOR FROM WASHINGTON 

Senator CANTWELL. Thank you Chairwoman Snowe. And thank 

you for holding this important hearing. 

I would also like to thank Admiral Allen for his presence here 

today, and Mr. Caldwell, for joining us to discuss the President’s 

Fiscal Year 2007 budget request and the critical role that the U.S. 

Coast Guard plays in keeping the waters and coast of the United 

States safe, secure, and free from environmental harm. 

Admiral Allen, as you know, America expects a lot out of the 

Coast Guard, as my colleague just said, and we are always asking 

you to do more with less. In the post-9/11 era, the Coast Guard has 

elevated its homeland security mission in response to the very real 

threat of terrorist attacks on our ports and harbors. This is a big 

issue in my State, where the Ports of Seattle and Tacoma—combined—represent the third largest regional cargo load center in the 

Nation. The Coast Guard’s nonsecurity missions are also chalVerDate Nov 24 2008 12:39 May 06, 2011 Jkt 066171 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 S:\GPO\DOCS\66171.TXT SCOM1 PsN: JACKIE
4 

lenging in our region and throughout the country. Fisheries enforcement, search-and-rescue, and polar icebreaking are also very 

essential. And I want to assure you that I’m going to remain committed to making sure that the resources are there and available 

for those important missions. 

I was pleased to see that, given the Coast Guard’s growing homeland security responsibility, this year’s budget request contains a 

6.4 percent increase over 2006 enacted levels for that homeland security mission. However, I’m concerned that the nonsecurity missions take a 6.1 percent decrease from 2006, and I plan to ask you, 

Admiral Allen, for your opinion on the proper balance between the 

Coast Guard’s security mission and their nonsecurity missions. 

With the budgets as tight as they are, it is increasingly important that all Government agencies, including the Coast Guard, 

make efficient and effective use of taxpayer dollars allotted to 

them. And so, like Chairwoman Snowe, I am concerned that two 

of the Coast Guard’s biggest acquisition projects, the Deepwater 

Program and the Rescue 21 Program, are behind schedule and face 

massive cost overruns. As has already been said by the chairwoman, we know you’re up to a tough task. You performed admirably for our Nation in dealing with the aftermath of Katrina. But 

the Deepwater Program, I think, remains a very big challenge for 

the Coast Guard and for our country. According to a new GAO report that Senator Snowe and I requested, the Deepwater Program 

is having numerous problems moving forward with the construction 

of the Fast Response Cutter, the boat to replace the Coast Guard’s 

workhorse 110-foot cutter. I understand that, although Coast 

Guard has spent nearly $25 million developing the Fast Response 

Cutter, we have little to show for it, and the project is 3 years behind schedule. 

Similarly, a recent GAO report found that Rescue 21, the Coast 

Guard’s new system to track and respond to mayday calls, is 5 

years behind schedule, with total acquisition costs estimated at 

$872 million, $161 million more than the Coast Guard’s most recent estimate. 

The GAO also indicates that system testing has shown up to 10 

percent communication coverage gaps when the Coast Guard had 

originally promised 2 percent. And I also understand that Rescue 

21 has encountered setbacks in implementing vessel asset tracking 

and other components of the system. 

Obviously, the search-and-rescue missions are very important. I 

say that coming from a State which has more than 264,000 registered recreational boats, and a $3 billion commercial fishing industry, with a fleet of over 9,500 different vessels. On average, 27 

people die in Washington State each year in recreational boating 

accidents. So, I want to get your opinion on the best way to move 

forward on the Rescue 21 system, and what we should do to help 

implement better safety and security. 

I’m also concerned that the Deepwater and Rescue 21 Programs 

are indications of a fundamental problem with the Coast Guard’s 

acquisition management and contracting approach. I have several 

questions I’m going to be asking you about that. And I would appreciate your honesty in how you think we move forward on that 

5 

program and oversight, and if there are changes that we—should 

be made to how that contract responsibility functions today. 

Admiral Allen, I would like to commend you, again, for your 

service in Katrina and Rita, because part of, I think, our challenge, 

moving forward—while we’ve seen the devastation of coastlines in 

Louisiana and Mississippi, we saw the massive environmental 

damage that transpired there, and I think that one of the big challenges that we also face is the estimated 9 million gallons of oil 

that was spilled into the Gulf of Mexico. So, I’m concerned that the 

nearly $1 billion price tag for cleanup of spills may end up liquidating the Oil Spill Trust Fund, which certainly, I think, should be 

a national priority for us in moving forward on oil spill response 

and assuring essential safety in various regions of the country. In 

Washington State, over 750 oil tankers transited Washington State 

waters just in this last year. And just 2 years ago, money from the 

fund was used to mount a rapid response following the Dalco oil 

spill, which contaminated miles of shoreline across the southern 

parts of Puget Sound. 

Again, I would just reiterate to you how big I know the challenge 

is facing the Coast Guard, and how important it is, in your new 

leadership, to make these decisive decisions and to help us move 

forward on further reforms. 

I think, again, the State of Washington represents such a complex waterway system in which the Coast Guard is demanded to 

do so much. Besides the Ports of Seattle and Tacoma moving millions of cargo containers, we have cruise ship traffic, we have a 

ferry system that transports more people across Puget Sound than 

Amtrak, and you’re very involved in the safety and security measures on our ferry system, as well as those other issues that I mentioned, about drug interdiction, polar icebreaking, and a variety of 

other issues that you are charged with on a day-to-day basis that 

make for a very, very complex challenge in organization. 

But we look forward to your comments, and to Mr. Caldwell’s, on 

how we can improve the accounting and oversight of the contract 

of these very, very big expenditures in the Deepwater and Rescue 

21 Program. 

I thank the Chair. 

Senator SNOWE. I thank you, Senator Cantwell. 

I’m also pleased to welcome the Co-Chairman of this Commerce 

Committee, Senator Inouye, if there are any comments he cares to 

make. 

STATEMENT OF HON. DANIEL K. INOUYE, 

U.S. SENATOR FROM HAWAII 

Senator INOUYE. Thank you very much, Madam Chair. 

I just wanted to come by to demonstrate my support for the 

Coast Guard and to thank them for all the work they’ve done for 

the people of Hawaii. 

I would like to also state that the funding suggested is not quite 

adequate for the activities of the Coast Guard, and we’re going to 

do our very best to lift it. 

Madam Chair, may I have my full statement made part of the 

record? 

Senator SNOWE. Without objection, it’s so ordered. 

6 

[The prepared statement of Senator Inouye follows:] 

PREPARED STATEMENT OF HON. DANIEL K. INOUYE, U.S. SENATOR FROM HAWAII

I would like to welcome Admiral Allen back to our Committee. I also would like 

to welcome Mr. Caldwell, the new Director of the Homeland Security office within 

the Government Accountability Office (GAO). 

The Coast Guard’s importance to the Nation cannot be overstated. It ensures the 

safety of our coastal communities, protects our natural resources, aids our country’s 

national defense at home and abroad, and is widely recognized as the lead agency 

for port security. 

The Coast Guard has always served an essential role to ensure safety and security on the ocean and in our ports. Earlier this year, in my state, the Coast Guard 

played a particularly critical role in rescue efforts on Kauai during the heavy, destructive flooding. 

While the Administration has requested an increase in Coast Guard funding for 

Fiscal Year 2007, I am not convinced that it adequately addresses all of the Coast 

Guard’s security and nonsecurity missions. Five years after September 11, 2001, we 

are still struggling to find the right balance in funding and resource allocation to 

meet all of the Coast Guard’s critical duties. 

We all recognize that homeland security is among our highest priorities. Yet other 

key missions such as maritime safety and the protection of our living marine resources, also must be a high priority. 

Last year, just as in the four preceding years, the Coast Guard failed to detect 

any of the illegal fishing vessels spotted by other U.S. sources within the Western/ 

Central Pacific area of the U.S. Exclusive Economic Zone. I am concerned that the 

problem stems from the fact that District 14, the largest Coast Guard district in the 

U.S., commands fewer assets than any other district in terms of personnel, aircraft, 

and cutters. 

I also am frustrated by recent reports regarding the cost overruns and delays in 

two key modernization programs. Delays and cost overruns are particularly of concern, and the Coast Guard needs to address these issues. These programs must succeed, and I would like to know what is being done to rectify the current problems. 

Senator INOUYE. Thank you very much. 

Senator SNOWE. Thank you. Thank you very much, Senator 

Inouye. 

Admiral Allen, please proceed. And welcome to your first testimony before this Committee in your new capacity as Commandant. 

Welcome. 

STATEMENT OF ADMIRAL THAD W. ALLEN, COMMANDANT, 

U.S. COAST GUARD 

Admiral ALLEN. Thank you, Madam Chairman. 

I have a statement for the record, and, with your permission, I 

will submit it for the record and make a very brief opening statement. 

Senator SNOWE. Without objection, so ordered. 

Admiral ALLEN. On the 25th of May, Madam Chairman, I made 

a compact with the people of the Coast Guard, and I stated it publicly in my state-of-the-command speech, that our focus would be 

mission execution and mission excellence. 

We had an extraordinary year, this last year in the Coast Guard, 

with the operations associated with hurricane response, but, as you 

know, since 9/11, we’ve had an extraordinary amount of expectations created for the Coast Guard. We need to be able to deliver 

the kind of performance the country expects of us. And, in my focus 

as Commandant, in a very opening conversation with my people, 

I’ve told them I’m going to focus on mission execution, but, behind 

that are the platforms and the equipment we give our people, and 

the people we put out there, and the competencies that we provide 

7 

them, and, behind that, the command-and-control system and the 

mission-support systems. 

The issues that you’ve talked about here this morning already, 

whether the acquisition issues or the mission-balance issues, all relate to balancing that portfolio of missions the Coast Guard is assigned, and how we do that on a day-to-day basis, taking the pulse 

of the areas of responsibilities that our field commanders are given, 

and then allocating resources, based on risk, to the highest area 

possible. 

I have committed to doing some immediate reviews that will impact some of the areas that were raised in your statements, and 

I can talk about these in greater detail. We are going to look at 

the entire command-and-control structure in the Coast Guard, how 

we deliver support services. We are going to look at the acquisition 

organization of the Coast Guard and see how that might be better 

aligned. And, in general, we are going to focus on—in terms of acquisition, both Rescue 21 and Deepwater. The term I’ve given my 

folks is ‘‘ruthless execution’’—cost, schedule, and performance controls, lockdown requirements, get these pieces of equipment, these 

platforms, into production and put them in the hands of our people. 

They’re very capable platforms, whether you’re talking about Rescue 21 or Deepwater. The tools we’re going to give our people are 

going to be very, very significantly better than the ones they have 

right now. We need to get these things into production, solve the 

problems, and move on. We need to cut steel and float boats, 

Madam Chairman. 

I’d be glad to take any questions. 

[The prepared statement of Admiral Allen follows:] 

PREPARED STATEMENT OF ADMIRAL THAD W. ALLEN, COMMANDANT, U.S. COAST GUARD

Introduction 

Good morning Madam Chair and distinguished members of the Committee. I am 

humbled by the confidence President Bush has placed in me with my recent appointment as the 23rd Commandant of the United States Coast Guard, and honored 

to be before you today. In my new capacity, I would like to discuss the Coast 

Guard’s FY 2007 budget request, and how it will support our commitment to mission execution; a commitment my predecessor Admiral Collins established during 

his tenure as Commandant. Admiral Collins’ commitment is my commitment. 

The Coast Guard’s ‘‘World of Work’’ 

The Coast Guard operates on and around our oceans, seas, lakes, rivers, bays, 

sounds, harbors and waterways—this is the maritime domain and it is unique. Distinct from land borders characterized by clear legal boundaries, our oceans represent the last global commons. As the Committee knows well, we live in an interconnected world. Nowhere is this fact more clearly demonstrated than in the maritime domain. Safe and unfettered access to this domain is fundamental to our own 

and the international community’s economic prosperity. As a result, maritime safety 

and security are not just issues of U.S. national interest and security, but of global 

stability. The maritime domain is also enormously complex, with an unparalleled 

variety of users. From the world’s largest cruise ships and tankers to professional 

fishermen and weekend boaters, the profiles of maritime users are as varied as the 

jagged coastlines surrounding our country. 

Thankfully, the Nation has a Coast Guard able to successfully operate in this 

complex and unique environment. Single-purpose agencies such as the Revenue Cutter Service, the Lifesaving Service, and the Lighthouse Service have been integrated 

over the last century into the uniquely effective and efficient Service we are today. 

The Coast Guard you oversee, the Coast Guard that we have collectively built has 

a relatively straightforward purpose—exercise authorities and deploy capability to 

guarantee the safety, security and stewardship of the U.S. maritime domain. That 

8 

is who we are, what we are charged to do, and represents the core character of the 

service. 

While the character and nature of our Service are clear, our missions are not static. New threats emerge as others are mitigated; Coast Guard capabilities, competencies, organizational structure and processes must change accordingly. 

The work of this Committee helped ensure that the Coast Guard was transferred 

intact to the Department of Homeland Security. We now must adapt to the reality 

of an ever-changing maritime domain. Our mandate and responsibility, indeed our 

passion, is serving the Nation with the best leadership, authorities and capability 

we can muster. 

Priorities . . . Right Tasks . . . Right People and Tools . . . Effective, 

Integrated Support 

Secretary Chertoff has set forth a six-point agenda to guide near term Department of Homeland Security priorities and initiatives. 

• Increase overall preparedness, particularly for catastrophic events; 

• Create better transportation security systems; 

• Strengthen border security, interior enforcement, and reform immigration processes; 

• Enhance information sharing with our partners; 

• Realign the Department of Homeland Security (DHS) organization to maximize 

mission performance; and 

• Improve DHS financial management, human resource development, procurement, and information technology. 

I will work collaboratively throughout the Administration and with the Congress 

to translate this agenda into action. I will focus on: 

• Mission execution . . . performing the right tasks with the right doctrine to reduce risk, mitigate threats, improve response, increase preparedness, and enhance our ability to recover from events that occur; 

• Capabilities and competencies . . . we are nothing without our people, and our 

people cannot be effective without the right tools; and 

• Coast Guard organizational structure that optimizes mission execution . . . aimed at field support, leveraging partnerships at all levels of government, and internally aligned with DHS systems. 

Embracing the Department’s agenda, we will strengthen the Nation’s layered 

maritime security regime. Our shore-based operations, maritime patrol and presence 

and deployable, specialized forces create a strategic trident for integrating with our 

partners and responding to all threats... all hazards . . . at all times. We have 

taken bold steps forward already by creating Sectors for shore-based operations, and 

we have taken equally bold steps by advancing the Deepwater acquisition for maritime presence, patrol, and response. We must now organize our agile, deployable 

forces and support them with proper doctrine, equipment, logistics, training and exercises. Across all of our forces, we will partner with other services and agencies 

to integrate and coordinate our efforts. To improve mission execution of this strategic trident, we will analyze our command and control structure. We will also reevaluate and realign our mission support system, including organizational structures, human resources, maintenance, logistics, financial management and information systems to fully support the Secretary’s and the Coast Guard’s priorities. 

The Coast Guard continues to adapt to growing mission demands to enhance maritime security, while appropriately meeting other mission requirements. For example, in 2005, the Coast Guard: 

Secured the maritime border: 

• Completed verification of security plans, required by the Maritime Transportation Security Act (MTSA), for U.S. port and facilities and vessels operating 

in U.S. waters; 

• Completed 31 foreign port security assessments in order to improve our awareness of foreign port compliance with international requirements; 

• Prevented more than 338,000 pounds of cocaine (an all-time maritime record) 

and over 10,000 pounds marijuana from reaching the United States; and 

• Interdicted nearly 9,500 undocumented migrants attempting to enter the country illegally by sea, the second highest number of any average year in the past 

20 years. 

9 

Enhanced national maritime preparedness: 

• Began comprehensive security reviews of waterside nuclear power plants; 

• Created formal processes for addressing security concerns and requirements involving the citing of new shore-side Liquefied Natural Gas facilities; and 

• Established a new Area Maritime Security Exercise program requiring annual 

local exercises, and designed to assess the effectiveness of the Area Maritime 

Security Plans and the port community’s preparedness to respond to security 

threats and incidents. 

Strengthened partnerships: 

• Established a National Maritime Security Advisory Committee to provide a 

strategic public-private forum on critical maritime security topics; 

• Launched America’s Waterways Watch, a citizen involvement program that 

leverages the Coast Guard’s relationship with the maritime public; 

• Deployed the Homeport information sharing web portal, which allows for collaboration and communication in a controlled security environment (for sensitive but unclassified material) among Area Maritime Security Committee 

members and port stakeholders at large; 

• Conducted more than 268,000 port security patrols, 5,800 air patrols and 26,000 

security boardings; and 

• Provided security escorts to over 10,000 vessels. 

Saved lives and property: 

• Saved over 33,000 lives in the wake of Hurricanes Katrina and Rita, one of the 

largest search-and-rescue operations in United States history; 

• In addition to hurricane response, responded to more than 32,000 calls for maritime rescue assistance; and 

• Saved the lives of over 5,600 mariners in distress. 

Protected the environment: 

• Boarded more than 6,000 fishing vessels to enforce safety and fisheries management regulations, a 30 percent increase over 2004; 

• Conducted more than 3,000 inspections aboard mobile offshore drilling units, 

outer continental shelf facilities and offshore supply vessels; and 

• Responded to 23,904 reports of water pollution or hazardous material releases 

from the National Response Center, resulting in 4,015 response cases. 

Facilitated maritime commerce: 

• Kept shipping channels and harbors open to navigation during the Great Lakes 

and New England winter shipping season; 

• Ensured more than 1 million safe passages of commercial vessels through congested harbors, with Vessel Traffic Services; and 

• Maintained more than 50,000 Federal aids-to-navigation along 25,000 miles 

navigation channels. 

Supported national defense 

• Safely escorted more than 169 military sealift movements at 13 different major 

U.S. seaports, carrying more than 20 million square feet of cargo; and 

• Maintained an active patrol presence in the Arabian Gulf in support of the U.S. 

Navy and allied naval units. 

More than singular statistics or accomplishments, the above list, in total, demonstrates the winning formula of a military, multi-mission Service founded on core 

operational principles of flexibility, on-scene initiative and unity of effort. It is this 

time-tested and trusted operational model that allows the Coast Guard to meld its 

public safety and national security roles into a seamless set of maritime strategies 

that also protect and ensure the economic viability of the U.S. maritime domain. 

2007 Budget 

The above accomplishments are only possible with a Coast Guard that is Ready, 

Aware and Responsive. The President, Congress and public expect nothing less: 

Ready to prevent and respond to a broad range of maritime safety and security requirements; Aware of what is going on in our ports, along our coasts and on the 

high seas; and most of all, Responsive whenever and wherever there is a need for 

the Coast Guard to save lives, secure maritime borders, protect natural resources, 

10 

facilitate maritime commerce or contribute to national defense. The Fiscal Year 

2007 request delivers on these expectations through its focus on three key investment priorities: 

The Integrated Deepwater System (IDS) acquisition program remains the centerpiece of a more ready, aware and responsive 21st century Coast Guard. The 2007 

Budget provides a Deepwater investment plan that provides funding for: 

• Constructing the fourth National Security Cutter; 

• Acquiring the sixth Maritime Patrol Aircraft; 

• Bolstering the network of command, control, communications, computers, intelligence, surveillance and reconnaissance (C4ISR) technology; 

• Completing the HH–65 re-engining; and 

• Initiating several essential legacy conversion projects, including installation of 

airborne use of force equipment aboard 36 helicopters. 

While the Deepwater program necessarily invests in capabilities adequate to operate in the often unforgiving offshore environment, it is these same capabilities that 

are instrumental to effective response operations in port and coastal areas as well. 

As an example, assets scheduled for modernization under the Deepwater program 

include every Coast Guard aircraft type. These aircraft are critical parts of our port 

and coastal response infrastructure as well as extended offshore operations. The 

Deepwater program’s conversion and/or enhancement of legacy aircraft and cutters 

are making an impact now. The operational benefits were apparent during the 

Coast Guard’s response to Hurricane Katrina. Three more powerful re-engined HH– 

65C helicopters flew 85 sorties to save 305 lives. The converted aircraft can hoist 

280 more pounds and stay on-scene longer than their predecessors. Similarly, the 

C4ISR improvements to high and medium endurance cutters enabled more effective 

on-scene coordination of rescue operations in New Orleans, LA, and Gulfport, MS 

during Hurricanes Katrina and Rita, with local first responders and other Federal 

agencies. 

Preserve Preparedness. Strengthening preparedness within the U.S. maritime domain is a core competency and responsibility of the Coast Guard. It depends directly 

on the readiness of Coast Guard cutters and aircraft, infrastructure and personnel, 

as well as the coordination of a robust response posture through partnerships with 

DHS, DOD and other Federal, state and local entities. The FY 2007 requests funding to preserve and strengthen Coast Guard readiness. Relevant budget initiatives 

include: 

• Depot level maintenance and energy account: $51.3 million to close inflationary 

cost growth gaps. These are bills that must be paid; without increased funding, 

Coast Guard readiness will be eroded. 

• Medium endurance cutter mission effectiveness project: $37.8 million to support 

the Mission Effectiveness Project (MEP) for 270-foot and 210-foot Medium Endurance Cutters (WMEC). Our 210-foot and 270-foot cutters are currently operating with obsolete equipment and subsystems that must be replaced. The 

project includes replacing major subsystems such as small boat davits, oily 

water separators, air conditioning and refrigeration plants, and drinking water 

evaporators. The main propulsion control and monitoring systems will also be 

upgraded. This effort is vital to sustain our legacy fleet of medium endurance 

cutters until they are recapitalized. 

• Operations and Maintenance for new assets: $30.5 million to fund operations 

and personnel for the airborne use of force program, the first national security 

cutter, new maritime patrol aircraft and secure communications systems; $42.3 

million for Deepwater logistics support. 

• Personnel protective equipment: $7.2 million to replace obsolete oxygen breathing apparatus aboard ships and training centers with safer self-contained 

breathing apparatus (SCBA). Over the past 30 years, all shore-based Federal 


al.eps
11 

and DOD fire fighters, the Military Sealift Command, all western navies, all 

merchant ships, the U.S. Air Force and all U.S. Navy flight deck personnel have 

adopted and use exclusively the open circuit SCBA. The Navy is currently replacing all their OBAs with SCBAs. This leaves the Coast Guard as the only 

fire fighting organization without SCBAs for its personnel. In order to ensure 

the personal protection of Coast Guard personnel while serving aboard Coast 

Guard cutters, the transition from using the obsolete OBA to the SCBA is essential. 

• Shore infrastructure and aids-to-navigation: $25.9 million to recapitalize aidsto-navigation nationwide and rebuild or improve aged shore facilities in Cordova, Alaska (housing); Integrated Support Command Seattle, Washington; and 

Base Galveston, Texas. These funds are necessary to improve critical shore infrastructure essential to supporting Coast Guard personnel as they execute missions and operational requirements. 

Maximize Awareness. Securing our vast maritime borders depends upon our ability to enhance maritime domain awareness (MDA). Effectively addressing maritime 

vulnerabilities requires maritime strategies, through partnerships with the Navy 

and other maritime entities that not only ‘‘harden’’ targets but detect and defeat 

threats as far from U.S. shores as possible. Identifying threats as far from U.S. 

shores as possible requires improved awareness of the people, vessels and cargo approaching and moving throughout U.S. ports, coasts and inland waterways. Relevant budget initiatives include: 

• Nationwide Automatic Identification System: $11.2 million to continue procurement plans and analysis for deployment of a nationwide system to identify, 

track and exchange information with vessels in the maritime domain. 

• Maritime Domain Awareness: $17 million to support follow-on and new initiatives, including a new Coast Guard counterintelligence program, prototype Sector and Joint Harbor Operation Center support, and expanded secure communications system infrastructure. 

• Deepwater C4ISR: $60.8 million to develop and install systems and subsystems 

that are part of the Deepwater Command, Control, Communications, Computer, 

Intelligence, Surveillance and Reconnaissance (C4ISR) system. This system is 

designed to support designated Coast Guard commanders in the exercise of authority while directing all assigned forces and first responders across the full 

range of Coast Guard operations. This system of ‘‘eyes and ears’’ allows us to 

see, hear and communicate activity occurring within the maritime domain, 

which is critical to deterring and defeating threats before reaching our shores. 

Enhance Capability. Just as important to being ready and aware is equipping and 

training Coast Guard personnel with the capabilities and competencies to respond 

effectively. For example, the advance information required from vessels calling upon 

United States ports is critical to understanding who and what is arriving in order 

to identify potential threats. However, if Coast Guard cutters and aircraft do not 

have the capabilities necessary to deal with identified threats early and effectively, 

an opportunity to mitigate risk is lost. Relevant budget initiatives include: 

• Deepwater: $934.4 million (total). The FY 2007 request for the Deepwater program reflects the Administration’s continued commitment to the recapitalization 

of the Coast Guard’s aircraft and ships and the network that links them together into an integrated system. More capable and reliable cutters, boats, aircraft and associated systems will enhance safety and security in U.S. ports by 

improving the Coast Guard’s ability to perform all its missions. Specifically, the 

FY 2007 request provides funding for: the fourth National Security Cutter, the 

first Fast Response Cutter, HH–65 and HH–60J conversions, new maritime patrol aircraft, HC–130J operations, sustaining the HC–130H, arming two HH– 

60’s and 34 HH–65’s at seven Air Stations, and development of shipboard and 

land-based vertical unmanned aerial vehicle systems. 

• Rescue 21: $39.6 million to continue system design (two locations), preparation 

(four locations) and installation (seven locations). The Rescue 21 project represents a quantum leap in maritime communications technology, enhancing effectiveness across all coastal missions. 

• National Capital Region air defense: $62.4 million to establish infrastructure, 

acquire additional aircraft and fund operations for this newly assigned homeland security mission in the Nation’s capital. The Air Defense mission in the 

National Capital Region rests with the Department of Defense (DOD) under the 

construct of OPERATION NOBLE EAGLE. Through a Memorandum of Agreement, DOD and the Department of Homeland Security (DHS) have agreed that 

12 

DHS will continue to conduct essential helicopter operations assisting with air 

security in the NCR. The Coast Guard has been directed to execute this requirement on behalf of DHS. Requested funding is critical to stand-up this new capability and avoid negative impacts to other Coast Guard mission-programs. 

• Response Boat—Medium: $24.8 million to begin low-rate initial production to 

replace 41-foot utility boats and non-standard boats. 

• Maritime Security Response Team (MSRT): $4.7 million to provide additional 

personnel and transform the prototype Enhanced Maritime Safety and Security 

Team in Chesapeake, VA. into an MSRT, providing on-call maritime counterterrorism response capacity. This request will also enhance maritime counterterrorism training facilities at the Coast Guard Special Missions Training Center at Camp Lejeune, N.C. 

Table 1: Summary of the FY 2007 President’s Request 

Preserve Readiness (Ready) * Maximize Awareness (Aware) ** Enhance Capability (Responsive) *** 

DW Legacy Sustainment MDA—Sector Command Center DW Modernization 

SCBA Implementation NAIS R21 

HF Recapitalization DW C4ISR RB–M 

Financial Management MAGNET NCR Air Defense 

DW Logistics SIPRNET MSRT 

Shore Infrastructure Counter-Intel C–130J 

Maintenance Inflation Airborne Use of Force operations 

Energy Gap MPA follow-on 

* Readiness is the foundation of the Coast Guards ability to prevent and respond to incidents. Katrina 

makes this point clearly. Readiness is the key to daily mission performance as well as the capacity to respond 

to national incidents. 

** Awareness is the core enabler of effective decisionmaking and response. Expanded partnerships and new 

technology must be employed to ensure an integrated and coordinated response to the threats we face today. 

*** Building on recent investments we must continue to strengthen the foundation of CG readiness across 

each of our core missions while we fill remaining capacity and capability gaps in our layered security posture. 

Conclusion 

I am committed to continuously improving mission execution. To do so, we must 

better integrate with our partners, organize our deployable forces, assess our command and control structure and realign our mission support systems. I would like 

to take this opportunity to lead the Coast Guard toward these changes, and I request your support as I introduce steps that will improve mission execution. One 

step will organize all specialized, deployable forces under a single command structure. A second will be to transform the entire logistics systems by capturing efficiencies between the Deepwater logistics plan and our internal, Coast Guard-wide 

logistics process. Last, we plan on merging our Deepwater and Acquisitions Directorates into one Directorate expanding our major acquisition flexibility, coordination 

and effectiveness across all projects. These are all aggressive initial steps that will 

improve mission execution and ensure the Coast Guard is ready to respond to all 

threats... all hazards . . . at all times. 

The Coast Guard is a tested and trusted Service ready to answer the Nation’s call, 

but future successes are a function of the effective, integrated employment of our 

collective capabilities and competencies to reduce risks and mitigate threats to our 

Homeland. Our challenge is to attack each day and each task with a purpose 

grounded in who we are, what we have been and what we must become. 

Thank you for the opportunity to testify before you today. I will be happy to answer any questions you may have. 

Senator SNOWE. Mr. Caldwell? 

STATEMENT OF STEPHEN L. CALDWELL, ACTING DIRECTOR, 

HOMELAND SECURITY AND JUSTICE ISSUES, 

U.S. GOVERNMENT ACCOUNTABILITY OFFICE 

Mr. CALDWELL. I thank you very much. I’m pleased to be here 

today, Madam Chair and Senators Cantwell and Inouye, to discuss 

Coast Guard issues. 

Like my predecessors in GAO before this Subcommittee, we view 

this annual hearing as one of the most important ones for us to adVerDate Nov 24 2008 12:39 May 06, 2011 Jkt 066171 PO 00000 Frm 00016 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\66171.TXT SCOM1 PsN: JACKIE
13 

dress the wide-ranging Coast Guard issues that we review during 

the course of the year. 

And I’m also honored to testify alongside the new Commandant 

of the Coast Guard. And, again, Admiral Allen, I offer my congratulations on your new leadership role. 

While my complete statement is added for the record, I’d like to 

emphasize three things in my oral comments. And these have already been addressed, to some large extent, by you, Madam Chair, 

as well as Senator Cantwell. 

The first issue is the Coast Guard’s overall budget and performance. The second issue is acquisition management, to include Deepwater. And the third issue is the mission balancing. 

As appropriate, I may refer to specific pages in my statement, 

when there are some tables or other graphics that might be helpful 

to the Committee. 

Let me start with comments on the overall budget and performance. 

As you know, the fiscal realities for the Coast Guard must be 

dealt with in the broader context of our Nation’s growing long-term 

fiscal crisis. But getting to the specifics, page 18, as well as 30 of 

my statement, have details on the budget, trends, and makeup. 

And I think we’re already aware of these, but these are there for 

your interest. 

Coast Guard’s 2007 budget request indicates more moderate 

growth than in previous years. Given the pace of increase over the 

past several years and competing demands for the Federal dollar, 

this more moderate growth is probably to be expected. 

On the flip side, in terms of performance, page 31 of my statement has details on the Coast Guard’s performance measures from 

2002 to 2005. Notwithstanding aging assets, destructive hurricanes, and expanding homeland security missions, Coast Guard’s 

2005 performance was the highest it has been since 2005. When 

the final data are in, the agency will most likely, exceed 8 of its 

11 mission performance targets. 

As both of you have indicated, Hurricane Katrina is one of the 

most notable aspects of performance of the Coast Guard this year. 

Unlike much of the rest of the Federal Government, the Coast 

Guard was leaning forward, had anticipated many of these problems, and acted proactively. Some of the factors contributing to the 

Coast Guard’s success here were its organizational flexibility and 

structure, several operational principles that emphasize focus, but 

flexibility, at the same time, as well as a general emphasis on planning and preparedness. In my statement, we give some more specific details on that. 

In terms of acquisition management, I’d like to discuss the Deepwater Program and one other program. Both of these have been 

mentioned by you, Madam Chair and Senator Cantwell. 

First, let me just start by saying the Coast Guard is not unique 

in having the kinds of acquisition programs it has for major management issues. GAO’s high-risk report, issued last year, noted 

DHS-wide challenges, in terms of managing major systems procurements. 

My written statement discusses a number of positive steps the 

Coast Guard has taken with respect to managing Deepwater. Page 

14 

23 of my statement actually has a chart that summarizes the recommendations we’ve made, as far as overall performance, as well 

as the status of implementation by the Coast Guard. Of our 11 recommendations, 5 have been implemented, and the other 5 are 

being implemented by the Coast Guard. 

Despite the overall progress as noted, not all is well with the 

Deepwater Program. Regarding the Fast Response Cutter, the interim solution of extending the 110-foot patrol boats to 123 boats— 

I’m sorry—123-feet—has run into structural problems, as exhibited, in one case, with the hull buckling on the MATAGORDA. And, 

more recently, design work has been halted on the composite hull, 

as proposed by the contractor. 

Acquisition problems are occurring outside Deepwater as well as 

with the Rescue 21 communications system. Senator Cantwell, you 

went into some of the details there, but the bottom line is, the program has grown from $250 million to $710 million or more, and the 

implementation schedule has slipped by 5 years. 

Government Executive magazine recently quoted Admiral Allen 

as saying, ‘‘The Coast Guard will pursue Deepwater with ruthless 

execution.’’ The Commandant has said that again here today. And, 

at GAO, we believe Coast Guard must also apply ruthless oversight 

as part of this ruthless execution. Obviously, Admiral Allen is already planning ways to do that, based on his statement here today. 

In terms of balancing diverse missions, as is well known by this 

Committee in its oversight role for maritime security, Coast Guard 

has a very large portfolio of homeland security missions. And this— 

again, this situation is faced by many organizations other than the 

Coast Guard. As noted in GAO’s report on 21st century challenges, 

many Federal agencies—many, many—must make the hard choices 

about homeland security priorities, given uncertain risks and limited resources. 

In the Coast Guard’s case, it must balance homeland security 

with its more traditional missions—provide safety through navigational aids, search-and-rescue, as mentioned, responding to maritime pollution incidents, as well as to protect important fishing 

grounds. After 9/11, GAO had noted a very large decline in some 

of these other missions’ resource hours; however, recent Coast 

Guard data for performance actually shows that the performance 

in all these other missions is improving. 

But the pressure to assume greater homeland security responsibilities is still very strong. In addition to the new Maritime Security Response Team the Coast Guard is setting up and making very 

robust, in terms of even adding chemical and biological capabilities 

to it, the Coast Guard has also taken on the new mission of air defense, as mentioned, which is outside its traditional domain. 

Though not without precedent, this is a new mission for the Coast 

Guard in some ways. 

And, meanwhile, the replacement of some assets outside homeland security, such as buoy tenders and aids-to-navigation—and, 

sorry, icebreakers—are not funded at all, at least the replacement 

of ships is not funded at all in the 2007 budget. 

In conclusion, several of the developments I’ve mentioned are 

good news here today. Despite many demands, Coast Guard continues to make progress across the board in terms of all of its misVerDate Nov 24 2008 12:39 May 06, 2011 Jkt 066171 PO 00000 Frm 00018 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\66171.TXT SCOM1 PsN: JACKIE
15 

sions, and its response to Hurricane Katrina is one bright aspect 

in what is otherwise a tale of tragedy and failure. Certainly, if one 

measure of organizational excellence is performance under crisis, 

the Coast Guard has demonstrated itself to be a very high-performing organization. But excellence must also be demonstrated in 

the more mundane aspects, such as the management of its acquisitions. Here, the record, as we’ve mentioned, is not unblemished. 

But, overall, we work with the Coast Guard on a daily basis, we 

are impressed by their general approach to managing their resources flexibly, and their can-do attitude, and our day-to-day work 

reveals an agency that is open to constructive feedback, wants to 

learn from its mistakes, and looks for opportunities to leverage its 

resources. 

Madam Chair and Senator Cantwell, I would be happy to respond to any questions at this time. 

Thank you. 

[The prepared statement of Mr. Caldwell follows:] 

PREPARED STATEMENT OF STEPHEN L. CALDWELL, ACTING DIRECTOR, HOMELAND

SECURITY AND JUSTICE ISSUES, U.S. GOVERNMENT ACCOUNTABILITY OFFICE

Madame Chair and members of the Subcommittee: 

I am pleased to be here today to discuss the President’s Fiscal Year 2007 budget 

request for the Coast Guard—funding that the Coast Guard believes is critical to 

improving its performance and reducing vulnerabilities within the U.S. maritime domain. As you know, the Coast Guard has faced many extraordinary challenges and 

new responsibilities in recent years, including heightened responsibility for protecting America’s ports, waterways, and waterside facilities from terrorist attacks, 

while maintaining responsibility for many other programs important to the Nation’s 

interests, such as helping stem the flow of illegal drugs and illegal immigration, protecting important fishing grounds, and responding to marine pollution. Overall, the 

Coast Guard has met these heightened responsibilities despite added challenges 

posed by the declining condition of its aging assets and special surge operations it 

has periodically experienced—such as responding to Hurricane Katrina. 

My testimony today provides; (1) an overview of the Coast Guard’s Fiscal Year 

2007 budget request and key performance information, (2) a discussion of the 

changes and initiatives the Coast Guard has implemented to meet growing responsibilities, (3) a status update on some current acquisition efforts, and (4) a look at 

some future Coast Guard challenges as it attempts to balance its various missions. 

My testimony is drawn from a number of reports we have issued on Coast Guard 

operations, as well as from work done specifically for this hearing. In some cases 

our work is still ongoing and fuller results will be reported once the engagements 

are completed. The scope of our work did not include evaluating whether the proposed funding levels are commensurate with the Coast Guard’s stated needs. All of 

our work has been conducted in accordance with generally accepted government auditing standards. (See app. I for additional information regarding our scope and 

methodology and see related GAO reports for a listing of recent reports.) 

Summary 

Although the Coast Guard’s budget continues to grow, the Agency’s Fiscal Year 

2007 budget request indicates a more moderate growth than that of previous years. 

Even with the need to sustain new homeland security duties, respond to particularly 

destructive hurricanes, and cope with aging assets, the Coast Guard reported that 

its Fiscal Year 2005 performance, as self-measured by its ability to meet performance targets, was the highest since the terrorist attacks in September 2001. The 

Coast Guard reported that it met or exceeded performance targets for 7 of 11 programs, and anticipates meeting the target for 1 additional program once final results for the year are available. Coast Guard officials attributed the missed targets 

to, among other factors, the increased flow of migrants and staffing shortages for 

certain security units within the defense readiness program. In particular, our ongoing work found that the Coast Guard’s response to Hurricane Katrina highlighted 

three key elements that enabled the Coast Guard to provide an unprecedented 

search-and-rescue response during Hurricane Katrina: a priority on training and 

16 

contingency planning, a flexible organizational structure, and the agency’s operational principles. 

The Coast Guard has undertaken three organizational changes designed to assist 

it in adjusting to its added responsibilities. First, it is completing a realignment of 

its field structure, an effort that, according to the Coast Guard, will allow a field 

level commanding officer to manage operational resources more efficiently. Second, 

Coast Guard officials expect that the development and implementation of a new 

Maritime Security Response Team, modeled after Department of Defense (DOD) 

counter-terrorism teams, will provide increased counterterrorism capability to respond to threats in waters under Coast Guard jurisdiction. Finally, new and expanded partnerships that cut across both government and industry to address maritime security concerns also have the potential to improve operational effectiveness 

and efficiency. For instance, under requirements of the Maritime Transportation Security Act of 2002 (MTSA), each Coast Guard Captain of the Port is required to 

work in conjunction with a range of local partners to develop a security plan for its 

port area to address security vulnerabilities and respond to any incidents.1 Another 

partnership that leverages governmental resources is the Coast Guard’s relationship 

with the National Oceanic and Atmospheric Administration (NOAA). This partnership allows vessel tracking information obtained with NOAA technology to be 

shared with the Coast Guard, thereby assisting the Coast Guard with its enforcement of domestic fisheries regulations. 

Our recent reviews indicate that while the Coast Guard has made progress in 

managing Deepwater acquisitions, further actions are needed and the lessons 

learned from this effort have not been applied to other ongoing acquisitions. In specific, the Coast Guard has successfully implemented most of GAO’s recommendations to improve the Integrated Deepwater System, the largest, and most significant 

ongoing Coast Guard acquisition initiative. However, further attention and action 

are needed before all of our past recommendations for improving accountability and 

program management can be considered fully implemented. Despite these improvements in program management, the Deepwater program has continued to encounter 

difficulties, most recently in the acquisition of the Fast Response Cutters which are 

scheduled to replace the Coast Guard’s aging patrol boat fleet. Meanwhile, the Rescue 21 program—an effort to replace antiquated command, control, and communication infrastructure used to monitor mariner distress calls and coordinate searchand-rescue operations—continues to be of concern as the program has been plagued 

by delays, technical problems, and cost escalation. Currently estimated implementation costs have escalated from $250 million to more than $710.5 million, and GAO’s 

analysis, based on prior trends, indicates that Rescue 21 costs could be as high as 

$872 million. In addition, the program’s originally proposed schedule for full implementation has slipped by 5 years resulting in continuing performance challenges for 

field units, and the potential for additional costs to keep the current system functioning until it is replaced. These problems and the causes underlying them have 

much in common with the issues we identified with the Deepwater program which 

has also experienced management and contractor oversight problems, schedule 

delays, and cost escalation. A third acquisition effort, designed to provide the Coast 

Guard with the capability to transmit and receive information to and from vessels 

entering and leaving U.S. waters, is still early in its development, limiting the Coast 

Guard’s ability to identify and leverage potential partners to share costs, according 

to Coast Guard officials. The Coast Guard is taking steps to better manage these 

programs, but it cannot lose sight of the need to address and resolve these ongoing 

acquisition management concerns. 

The Coast Guard also faces two additional challenges in managing its assets and 

balancing its various missions. Our ongoing work for this Committee found that 

some of the Coast Guard’s buoy tenders and icebreakers are deteriorating and may 

need additional resources to sustain or replace them. Like the Deepwater assets, 

many of these types of assets are approaching or have exceeded their initial design 

service lives, and our preliminary observations indicate that the Coast Guard’s key 

measure of their condition shows a decline for some assets of both types. Although 

the Coast Guard has identified the need to sustain or replace these assets, no funds 

have been budgeted to carry out this project. A second challenge the Coast Guard 

faces is the addition of a new mission, defending the air space surrounding the Nation’s capital, which falls outside its traditional focus on the maritime environment 

and therefore represents further growth in its responsibilities. While groundwork 

has been laid through the request of Fiscal Year 2007 funds to purchase the equipment necessary to carry out this new responsibility, it is likely to require additional 

personnel and training. 

17 

Budget Request Reflects Moderate Growth, While Overall Program 

Performance Improved 

The Coast Guard’s Fiscal Year 2007 budget request shows continued growth but 

at a more moderate pace than that of the past 2 years. The current budget request 

reflects a proposed increase of about $328 million, compared to increases for each 

of the past 2 budget years that exceeded $500 million for each year.2 (See Fig. 1.) 

About $5.5 billion, or more than 65 percent of the total funding request of $8.4 billion, is for operating expenditures.3 The acquisition, construction, and improvements 

(AC&I) account amounts to another $1.2 billion, or about 14 percent, and the remainder is primarily for retiree pay and healthcare fund contributions. (See app. II 

for more detail on the Coast Guard’s Fiscal Years 2002–2007 budget accounts.) 

If the Coast Guard’s total budget request is granted, overall funding will have increased by more than 50 percent since Fiscal Year 2002, an increase of $2.82 billion. 

According to Coast Guard officials, much of the additional $328 million in this Fiscal 

Year’s budget request, which is about 4 percent over and above the Fiscal Year 2006 

budget of $8.1 billion, covers such things as salary and benefit increases and maintenance. In addition, more than $57 million of this increase is to establish a permanent National Capital Region Air Defense program to enforce the National Capital 

Region no-fly zone, a program previously conducted by U.S. Customs and Border 

Protection (CBP).4 By comparison, the increases for the AC&I account for this time 

period have been even greater than the overall funding increase, growing by 66 percent since Fiscal Year 2002. However, the Fiscal Year 2007 AC&I budget request 

of almost $1.2 billion represents little change in funding from the Coast Guard’s Fiscal Year 2006 enacted AC&I budget. 


615g1.eps
18 

Coast Guard Reported Progress Made in Meeting Program Performance Targets 

Even with sustained homeland security responsibilities, aging assets, and a particularly destructive hurricane season stretching resources across the agency, in Fiscal Year 2005 the Coast Guard reported that 7 of its 11 programs met or exceeded 

program performance targets.5 In addition, the agency reported that it anticipates 

meeting the target for 1 additional program when final results become available in 

July 2006, potentially bringing the total met targets to 8 out of 11 programs.6 According to Coast Guard documents, the agency missed targets for three programs— 

undocumented migrant interdiction, defense readiness, and living marine resources—in Fiscal Year 2005, as it had in some previous years. Coast Guard officials 

attributed these missed targets to, among other factors, the increased flow of migrants and staffing shortages for certain security units within the defense readiness 

program. (See app. III for more detailed information on each program.) If the Coast 

Guard meets 8 performance targets as it predicts, the results would represent the 

greatest number of performance targets met in the last 4 years. (See Fig. 2.) The 

preliminary results of our ongoing work reviewing the Coast Guard’s six non-homeland security performance measures suggests that, for the most part, the data used 

for the measures are reliable and the measures themselves are sound. That is, they 

are objective, measurable, and quantifiable as well as cover key program activities. 

However, given the DHS policy of reporting only one main performance measure per 

program and the limits on how comprehensive a single measure is likely to be, there 

may be opportunities to provide additional context and information to decisionmakers about Coast Guard performance results. We will provide final results on this 

work in a report to be published later this summer. 


615g2.eps
19 

Overall Progress Came Despite Additional Demands Posed by Hurricane Katrina 

This overall progress came in a year when the Coast Guard faced significant additional demands brought on by Hurricane Katrina. As it had to do when it implemented MTSA and when it conducted heightened port security patrols immediately 

after the September 2001 terrorist attacks, the Coast Guard found itself operating 

at an increased operational tempo for part of Fiscal Year 2005. Although the Hurricane Katrina response period was relatively brief for some missions, such as searchand-rescue, Coast Guard officials told us that the sheer magnitude of the response 

made it unique, and responding to it tested the agency’s preparedness and ability 

to mobilize large numbers of personnel and assets within a short time. In this effort, 

the Coast Guard had several responsibilities during and immediately following the 

hurricane: to conduct search-and-rescue; to direct the closing and re-opening of ports 

in cooperation with stakeholders, (such as shipping companies, harbor police, DHS, 

CBP, and local fire and police departments), to ensure safety and facilitate commerce, thereby lessening the economic impact of the storm on the Nation; and to 

monitor pollution clean up of the many oil spills that occurred in the wake of the 

flooding. For the purposes of this testimony, I would like to focus on the Coast 

Guard’s search-and-rescue response. We are conducting a more complete review of 

the Coast Guard’s role and response to Hurricane Katrina across several mission 

areas under the authority of the Comptroller General, and expect to provide additional information later this summer. So far, however, this work is showing that 

three factors appear to have been key to the Coast Guard’s response to Hurricane 

Katrina: 

• The Coast Guard was prepared to respond to search-and-rescue needs. Although 

the magnitude of Hurricane Katrina required substantial response and relief efforts, the Coast Guard was well prepared to act since it places a priority on 

training and contingency planning. First and foremost, the missions the Coast 

Guard performed during Hurricane Katrina were the same missions that the 

Coast Guard trains for and typically performs on a day-to-day basis. The Coast 

Guard’s mission areas include, among others, search-and-rescue, law enforcement, regulatory functions, and, most recently, homeland security responsibilities, allowing the Coast Guard to respond and act in a myriad of situations. 

However, with regard to Hurricane Katrina, the magnitude of the Coast 

Guard’s mission activity appears noteworthy. For example, for all of 2004, according to the Coast Guard’s Fiscal Year 2005 Report, the Coast Guard responded to more than 32,000 calls for rescue assistance and saved nearly 5,500 

lives. By comparison, in 17 days of Hurricane Katrina response, Coast Guard 

officials reported conducting over 33,500 rescues, including rescuing 24,135 people by boat and helicopter and evacuating 9,409 people from hospitals. Coast 

Guard officials we spoke to underscored the importance of the planning, preparation, and training that they regularly conduct that allowed them to complete 

the many challenging missions presented by Katrina. 

• The Coast Guard’s organizational structure and practices facilitated the agency’s 

response. In terms of the Coast Guard’s organizational structure, the Coast 

Guard has personnel and assets throughout the United States, which allows for 

more flexible response to threats. In terms of Coast Guard practices, according 

to the hurricane and severe weather plans we reviewed for Coast Guard Districts 7 (Florida region) and 8 (Gulf region), and discussions we had in Washington, D.C., Virginia, Florida, Alabama, and Louisiana with Coast Guard officials responsible for implementing those plans, the Coast Guard tracks the likely path of an approaching storm, anticipates the necessary assets to address the 

storm’s impact, and repositions personnel and aircraft out of harm’s way, with 

a focus on reconstituting assets to respond to local needs once it is safe to do 

so. Given the magnitude of Hurricane Katrina, the Coast Guard took a more 

centralized approach to prioritize personnel and assets to respond, but the operational command decisions remained at the local level. That is, the Coast 

Guard’s Atlantic Area Command played a key role in identifying additional 

Coast Guard resources, and worked with District Commands to quickly move 

those resources to the affected Gulf region, while local operational commanders 

directed personnel and assets to priority missions based on their on-scene 

knowledge. 

• The Coast Guard’s operational principles facilitated the agency’s actions. 

Throughout our field work, Coast Guard officials referred to the principles of 

Coast Guard operations that guide the agency’s actions. Coast Guard officials 

identified these principles, which ranged from the importance of having clear 

objectives and flexibility to managing risks and exercising restraint, as instrumental in their preparation for Hurricane Katrina.7 The Coast Guard prides 

20 

itself on these operational principles that collectively form the foundation of 

Coast Guard culture and actions during operations. These principles set an expectation for individual leadership in crisis, and personnel are trained to take 

responsibility and action as needed based on relevant authorities and guidance. 

For example, during the initial response to Hurricane Katrina, a junior-level 

pilot, who first arrived on-scene in New Orleans with the planned mission of 

conducting an environmental inspection flight, recognized that search-and-rescue helicopters in the area could not communicate with officials on the ground, 

including those located at hospitals and at safe landing areas. This pilot took 

the initiative while on-scene—an operational principle—to redirect her planned 

mission, changing it from an environmental flight to creating the first airborne 

communication platform in the area. Doing so helped ensure that critical information was relayed to and from helicopter pilots conducting search-and-rescue 

so that they could more safely and efficiently continue their vital mission. When 

we consulted her commanding officer about these actions, he supported her decision and actions and noted that Coast Guard personnel generally have the flexibility to divert from their intended mission to accomplish a more important mission, without obtaining advance supervisory approval. He indicated that this 

was not only common practice, but it was supported by a written directive at 

his unit. 

While acknowledging the importance of these operational principles, it is equally important to note that the response to Hurricane Katrina also hinged on discipline and adherence to critical plans. For example, multiple aircraft were operating in a confined space with little separation, thus adhering to critical 

search-and-rescue plans, as well as using experience and judgment, resulted in 

numerous rescues despite these difficult circumstances. While the Hurricane 

Katrina search-and-rescue effort was unprecedented, sustaining this effort 

might have been much more difficult if it had gone on for a much longer period. 

Combining a longer-term catastrophic response with the continuing needs of the 

agency’s day-to-day missions would be more challenging for a small service such 

as the Coast Guard. Relative to other military services, the Coast Guard is 

small, and when resources are shifted to any one specific mission area, other 

mission areas may suffer.8 For example, Coast Guard units in Florida sent 

many air and surface assets to the Gulf region to respond to Hurricane Katrina. 

While the assets were deployed to the Gulf region, the Coast Guard noticed a 

spike in the level of illegal migration activity off of the Florida coast. However, 

once Coast Guard assets returned to the Florida region, the Coast Guard initiated a more intensive air and sea patrol schedule to markedly announce their 

return to the area, and focus on interdicting illegal migrants. 

The Coast Guard Continues with Organizational Changes and Expanded 

Partnerships to Meet Growing Responsibilities 

Coast Guard organizational changes and expanded partnerships have helped to 

alleviate some resource pressures posed by added responsibilities or further deterioration of assets, as well as help accomplish its mission responsibilities. I would like 

to highlight three of these efforts: a revised field structure that consolidates decisionmaking processes at the operational level into a single command, a new resource for confronting and neutralizing terrorist activity, and new and stronger 

partnerships both within and outside DHS. 

New Field Command Structure Aimed at Improving Operational Efficiency 

In conducting our work for this hearing, we followed up with the Coast Guard to 

obtain an update on the implementation of a new field command structure that unifies previously disparate Coast Guard units, such as air stations, groups, and marine safety offices into integrated commands.9 As we reported to you last year, the 

Coast Guard began making this change to improve mission performance through 

better coordination of Coast Guard command authority with operational resources 

such as boats and aircraft.10 Under the previous field structure, for example, a marine safety officer who had the authority to inspect a vessel at sea or needed an 

aerial view of an oil spill as part of an investigation would often have to coordinate 

a request for a boat or an aircraft through a district office, which would obtain the 

resource from a group or air station. Under the realignment, these operational resources are to be available under the same commanding officer—allowing for more 

efficient operations. This revised structure involves dividing operations into 35 geographic ‘‘sectors.’’ Coast Guard officials stated that all 35 sectors have been established as of May 2006. According to Coast Guard personnel, the realignment is particularly important for coordinating with other Federal, State, and local agencies, 

21 

as well as meeting new homeland security responsibilities and preparing for the 

challenge of protecting the United States against terrorist attacks. 

New Maritime Security Response Team to Provide Additional Security Capability 

Another initiative to protect the United States against terrorist attacks is the 

Coast Guard’s development and implementation of a Maritime Security Response 

Team (MSRT)—a prototype team similar to DOD’s counter-terrorism teams. The 

Coast Guard, in cooperation with DOD and other Federal law enforcement agencies, 

plans to outfit the MSRT with specialized tactical equipment and train the team to 

conduct high-risk boardings of vessels and perform other offensive counter-terrorism 

activities within the maritime environment. The Coast Guard’s $4.7 million request 

for Fiscal Year 2007 would provide the team with chemical, biological, radiological, 

nuclear, and explosive detection equipment; improve the Coast Guard’s Special Missions Training Center facility; and provide additional personnel and operating capacity for a third 60-member unit, building the team toward 24/7 response capabilities. Coast Guard officials said that once the MSRT is fully developed, it will provide 

active counter-terrorism and advanced interdiction operations and address capacity 

and capability gaps in national maritime counter-terrorism response. 

New and Evolving Coast Guard Partnerships Designed to Improve Operational 

Effectiveness and Efficiency 

In addition to partnering efforts associated with the development of the first 

MSRT, the Coast Guard is developing other partnerships, both internal and external 

to DHS, designed in part to improve operational effectiveness and efficiency. For example, the Coast Guard is currently developing a pilot program to increase operational efficiencies between the Coast Guard and CBP aimed at pushing potential 

threats away from U.S. ports. This offshore operation, currently in a pilot stage, includes the integration of each agency’s vessel targeting efforts, unifies their boarding operations, and includes professional exchange opportunities. Although this effort is only being tested within the Pacific Area Command of the Coast Guard, according to a senior Coast Guard official, the Pacific Command intends to send its 

results to Coast Guard headquarters so the agency can determine how to best implement the program across the Coast Guard at a later date. 

In addition to partnering with other Federal agencies, the Coast Guard has also 

initiated partnerships with both government and industry. Under regulations implementing MTSA, a Coast Guard Captain of the Port must develop an Area Maritime 

Security Plan in consultation with an Area Maritime Security Committee. These 

committees are typically composed of members from Federal, local, and state governments; law enforcement agencies; maritime industry and labor organizations; 

and other port stakeholders that may be affected by security policies. The security 

plan they develop is intended to provide a communication and coordination framework for the port stakeholders and law enforcement officials to follow in addressing 

security vulnerabilities and responding to any incidents. Stakeholders in two ports 

we visited identified their Area Maritime Security Committees as an invaluable 

forum for port partners. For example, they said meetings of these committees serve 

as an opportunity for members of the port community to network with one another, 

build relationships, address various maritime-related issues, and coordinate security 

planning efforts. 

The Coast Guard has expanded its partnership with NOAA to enforce domestic 

fisheries regulations. NOAA operates a technology-based system, called the vessel 

monitoring system, to track and monitor fishing vessels. This system offers realtime data on a ship’s course and position, where the ship has requested to fish, the 

type of fishing requested, and the number of days the ship has been out of port. 

The Coast Guard uses this information to assist with its enforcement of domestic 

fisheries regulations by identifying vessels that may not be in compliance with domestic fisheries regulations. For example, the monitoring information will show if 

fishing vessels are operating within a restricted area. According to Coast Guard officials, the information shared from this partnership has allowed Coast Guard assets 

to be used more efficiently in checking on potentially noncompliant vessels and enforcing fishing laws. 

Progress Made with Ongoing Acquisition Efforts, but Continued Attention 

Is Warranted 

Our recent reviews indicate that while the Coast Guard has made progress in 

managing the Deepwater program, further actions are needed and the lessons 

learned from this effort have not been applied to other ongoing acquisitions. For example, even with the Coast Guard’s improved management and oversight of its 

Deepwater program, further steps are needed before all of our past recommendations for improving accountability and program management can be considered fully 

22 

implemented. In addition, the acquisition of Fast Response Cutters has recently experienced setbacks. Meanwhile, the Rescue 21 program continues to be of concern 

as the program has been plagued by delays, technical problems, and cost escalation—issues that parallel the problems encountered in the early years of the Deepwater program. Another program, the Nationwide Automatic Identification System, 

is still in early development stages and specific technical system requirements remain undefined. As a result, according to Coast Guard officials, this has affected the 

Coast Guard’s efforts to respond to our recommendation that the agency cultivate 

potential partnerships in order to leverage resources toward implementing the system. Because all of these programs are important for the Coast Guard in meeting 

growing operational demands, they bear close monitoring to help ensure they are 

delivered in an efficient and effective manner. 

Progress Continues in Making Recommended Improvements to Deepwater Program 

Management, but Some Recommendations Are Not Yet Fully Implemented 

One of the largest and most significant acquisitions that the Coast Guard has undertaken is the upgrade and replacement of its Deepwater assets, an acquisition approach that has raised a number of management and accountability concerns over 

the past 8 years.11 The Coast Guard has devoted considerable attention to concerns 

that we and others raised, in particular to implementing recommendations for improvement. Our past concerns about the Deepwater program have been in three 

main areas—ensuring better program management and oversight, ensuring greater 

accountability on the part of the system integrator, and creating sufficient competition to help act as a control on costs—and to address these concerns, we made a 

total of 11 recommendations.12 Table 1 provides an overview of the 11 recommendations, including their current status. In short, five recommendations have been fully 

implemented, five have been partially implemented, and one has not been implemented.13 Three of the five partially implemented recommendations appear close to 

being fully implemented, in that the actions taken appear to be sufficient but results 

are not yet known or final procedural steps (such as issuing a policy currently in 

draft form) are not complete. The remaining two partially implemented recommendations, both of which deal with effective program management and contractor oversight, remain somewhat more problematic, and these are discussed further below. In both cases, however, the steps needed to fully implement these recommendations are relatively straightforward. 


615g3.eps
23 

Strengthening Integrated Product Teams 

In 2004, we reported that the integrated product teams (IPTs), the Coast Guard’s 

primary tool for managing the Deepwater program and overseeing contractor activities, were struggling to carry out their missions because of four major issues: (1) 

lack of timely charters to provide authority needed for decisionmaking, (2) inadequate communication among team members, (3) high staff turnover, and (4) insufficient training. Despite progress in addressing these four issues, we do not consider 

this recommendation to be fully implemented. There are indications that the IPTs 

are still not succeeding in developing sufficient collaboration among subcontractors. 

Coast Guard officials recently reported that collaboration among the subcontractors 

continues to be problematic and that the system integrator wields little influence 

to compel decisions among them. For example, when dealing with proposed design 

changes for assets under construction, the system integrator has submitted the 

changes as two separate proposals from both first-tier subcontractors rather than 

coordinating the separate proposals into one coherent plan. According to Coast 

Guard performance monitors, because the two proposals often carry a number of 

overlapping work items, this approach complicates the Coast Guard’s review of the 

needed design change. Several improvements designed to address these problems 

are under way, but it is too early to determine if these will effectively eliminate the 

problems. 

Providing Field Personnel with Guidance and Training on Transitioning to New 

Deepwater Assets 

In 2004, we reported the Coast Guard had not effectively communicated decisions 

on how new Deepwater and existing assets are to be integrated during the transition and whether Coast Guard or contractor personnel (or a combination of the two) 

will be responsible for maintenance of the Deepwater assets. For example, Coast 

Guard field personnel, including senior-level operators and naval engineering support command officials, said they had not received information about how they 

would be able to continue meeting their missions using existing assets while also 

being trained on the new assets. Since that time the Coast Guard has placed more 

emphasis on outreach to field personnel, including surveys, face-to-face meetings, 

and membership in IPTs. Despite these efforts, there are indications that the actions are not yet sufficient to consider the recommendation to be fully implemented. 

In particular, our review of relevant documents and discussions with key personnel 

make clear that field operators and maintenance personnel are still concerned that 

their views are not adequately acknowledged and addressed, and have little information about maintenance and logistics plans for the new Deepwater assets. For example, though the first National Security Cutter is to be delivered in August 2007, 

field and maintenance officials have yet to receive information on plans for crew 

training, necessary shore facility modifications, or how maintenance and logistics responsibilities will be divided between the Coast Guard and the system integrator. 

According to Coast Guard officials, many of these decisions need to be made and 

communicated very soon in order to allow for proper planning and preparation in 

advance of the National Security Cutter’s delivery. 

Design Risks Have Delayed Delivery of the Fast Response Cutter 

Despite improvements in Deepwater program management, the Coast Guard has 

encountered difficulties in the conversion and acquisition of one Deepwater asset— 

its Fast Response Cutter (FRC). Under the original 2002 Deepwater Implementation 

Plan, all 49 of the Coast Guard’s 110-foot patrol boats were to be converted into 123- 

foot patrol boats, with increased capabilities, as a bridging strategy until a replacement vessel, the 140-foot FRC, came on line beginning in 2018. The Coast Guard 

converted 8 of the 110-foot patrol boats to 123-foot boats, but discontinued further 

conversions because the patrol boats were experiencing technical difficulties, such 

as hull buckling, and were not able to meet post-September 11, 2001 mission requirements. This prompted the Coast Guard to revise this part of the Deepwater 

program. The 2005 Revised Deepwater Implementation Plan reflected the Coast 

Guard’s cancellation of further patrol boat conversions and acceleration of the design and delivery of the FRC, which was being designed to use composite materials 

in the hull, decks and bulkheads.14 Under the 2005 revised plan, the first FRC was 

scheduled to come on line in 2007—11 years earlier than originally planned. 

In late February 2006, the Coast Guard suspended design work on the FRC because of risks with the emerging design. In particular, an independent design review by third-party consultants preliminarily demonstrated, among other things, 

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

similar length. As a result, the Coast Guard is now pursuing three strategies for 

moving forward with the FRC acquisition. The first strategy involves Integrated 

24 

Coast Guard Systems, the prime contractor, purchasing design plans for and building an ‘‘off-the-shelf’’ patrol boat that could be adapted for Coast Guard use as a 

way to increase patrol hours until the FRC design could be finalized. The Coast 

Guard issued a request for information in April 2006 to assess the off-the-shelf options. The second strategy is to revise the requirements of the FRC in order to allow 

for modifications to the current FRC design. Concurrent with the first two strategies, the Coast Guard’s third strategy is to have a third party reassess the analyses 

used in the decision to use composite materials for the FRC to determine if the use 

of composite materials will, in fact, reduce total ownership costs. The result of the 

Coast Guard pursuing these strategies is that the Coast Guard would end up with 

two classes of FRCs. The first class of FRCs would be based on an adapted design 

from a patrol boat already on the market, to expedite delivery, and a follow-on class 

that would be based on revisions made to address the problems identified in the 

original FRC design plans. Pursuant to these three strategies, Coast Guard officials 

now estimate that the first FRC will likely not be delivered until late Fiscal Year 

2009, at the earliest. GAO plans to release a report in late June 2006 providing updated information on the status of FRC design efforts. 

Rescue 21 Continues to Be of Concern as It Enters Implementation Phase 

The Rescue 21 acquisition program—the Coast Guard’s effort to replace its antiquated command, control and communication infrastructure used primarily to monitor mariner distress calls, and coordinate search-and-rescue operations—continues 

to be of concern as the program has been plagued by numerous delays, technical 

problems, and cost overruns. GAO’s recently released report shows that the program 

is about 5 years behind its originally proposed schedule for full implementation in 

2006, as a result primarily of delays in development and testing of the system.15

In addition, these delays have raised the Coast Guard’s estimated costs for bringing 

Rescue 21 up to full operating capability from $250 million to $710.5 million.16

Moreover, our analysis of contractor performance trends, including a significant 

number of contract items not completed as planned and requiring renegotiation, indicates that total acquisition cost overruns will continue, and implementation costs 

could reach as high as $872 million.17

These delays, technical problems, and cost overruns are the result of deficiencies 

in Coast Guard acquisition management and contractor oversight—deficiencies similar to those that we identified earlier in the Deepwater program. Such a pattern 

is of concern because it suggests that the Coast Guard has not translated the lessons learned from Deepwater to its overall acquisition management.18 In particular, 

deficiencies in the Rescue 21 program include common problems of acquisition management and oversight including ineffective project monitoring and risk management, poorly defined user requirements, unrealistic schedule and cost estimates developed by the contractor, and limited executive-level oversight. And although the 

Coast Guard has developed the high-level requirements for Rescue 21, it has relied 

solely on the contractor to manage these requirements. 

As discussed, we found similar problems in the Deepwater program with comparable adverse impacts on cost, schedule and results. For example, at the start of 

the program we identified a number of risks that would need to be addressed for 

the program to be successful—including ensuring that procedures and personnel are 

in place for managing and overseeing the contractor, and taking steps to minimize 

potential problems in developing new technology. Since that time, we have made numerous specific recommendations to the Coast Guard based on the deficiencies uncovered by our audits.19

The delays in implementing Rescue 21 mean that field units will continue to face 

limitations in their ability to hear boaters in distress and the agency will be subject 

to cost and performance challenges to maintain the legacy equipment. For example, 

as a result of Rescue 21’s delay, some field units will likely continue to experience 

coverage gaps, limiting their ability to monitor mariners in distress and some will 

continue to be at risk of performing larger and potentially more costly searches due 

to the legacy system’s more limited capabilities. In addition, because the legacy 

equipment is over 30 years old, it is at high risk for failure, a factor which could 

result in costly repairs. Moreover, although the Coast Guard previously issued a 

moratorium on upgrades to the legacy system, delays in the Coast Guard’s implementation of Rescue 21 may require units to upgrade or install new equipment for 

the legacy system. This would result in further costs, and in fact, this has already 

occurred at some units.20

The importance of resolving acquisition management problems is underscored by 

the operational benefits that are expected to be realized from system implementation, and some of these benefits have already been achieved in a few locations where 

the Rescue 21 system has been used. For example, following Hurricane Katrina, the 

25 

Coast Guard took advantage of Rescue 21’s capabilities to address communications 

challenges through an early deployment of a portable antenna to Louisiana in September 2005 to provide communications capabilities that had been lost due to the 

storm. In another case, the direction-finding capability of the Rescue 21 system 

helped the Coast Guard to rescue some stranded boaters who had inaccurately identified their location to the Coast Guard. 

Coast Guard in Early Phase of Developing the Nationwide Automatic Identification 

System 

The Coast Guard is at an early phase in developing the Nationwide Automatic 

Identification System (NAIS)—an important step in the overall effort to increase 

port safety and security by collecting, integrating, and analyzing information on vessels operating within or bound for U.S. waters—and is pursuing partnership opportunities that could potentially accomplish NAIS installation goals more quickly and 

reduce installation costs to the Federal Government. According to the Coast Guard, 

NAIS will allow the Coast Guard to both receive and transmit information to vessels 

entering and leaving U.S. waters, supporting both MTSA and the National Plan to 

Achieve Maritime Domain Awareness.21 In July 2004, we recommended that the 

Coast Guard seek and take advantage of opportunities to partner with organizations 

willing to develop systems at their own expense as part of the acquisition process.22

In response, according to Coast Guard officials, the agency has begun to develop 

partnerships. However, officials noted that because the project and technology are 

still in the early stages of development, these partnerships remain limited. For example, Coast Guard officials said that because the Coast Guard still does not know 

all of the specific technical system requirements, they do not yet know of all the 

potential partners that could enable the Coast Guard to leverage resources. In addition, system requirements may change as the technology is further developed, and 

as a result, some current partnerships may be short-term. 

The Coast Guard intends to use the Fiscal Year 2007 budget request of $11.2 million, along with past unobligated project funding, to award a NAIS contract in Fiscal Year 2007 for initial design, logistics, and deployment in strategic ports and critical coastal areas of the country. According to the Coast Guard, officials are performing market research as part of the development phase of the Coast Guard and 

DHS major acquisition processes, and the project office is analyzing this information 

to determine capabilities within the market to satisfy NAIS requirements and to establish an optimal acquisition strategy. Coast Guard officials we spoke with noted 

that NAIS is currently in the initial stage of a major acquisition project. As such, 

the acquisition project plans for costs, schedule, and performance have not yet been 

established. The Coast Guard expects these project plans to be determined later this 

year and stated that both the baseline costs and current completion schedule are 

early estimates and subject to revision as final requirements mature. 

Coast Guard Faces Future Challenges as It Balances Missions 

The Coast Guard also faces two additional challenges in managing its assets and 

balancing its various missions. The first challenge is to find the resources to replace 

some additional assets, not included in the Deepwater program, for its non-homeland security missions. Our ongoing work found that some of the Coast Guard’s existing buoy tenders and icebreakers are approaching or have exceeded their initial 

design service lives. The second challenge the Coast Guard faces is the addition of 

a new mission, defending the air space surrounding the Nation’s capital, which falls 

outside its traditional focus on the maritime environment. While groundwork has 

been laid through the request of Fiscal Year 2007 funds to purchase the equipment 

necessary to carry out this new responsibility, it is likely to require additional personnel and training. 

Some ATON and Icebreaking Assets Show Decline and May Need Additional 

Resources to Sustain Capabilities 

To facilitate maritime mobility through its aids-to-navigation (ATON) and 

icebreaking missions, the Coast Guard uses a variety of assets, such as buoy tenders 

and icebreakers. Like the Deepwater legacy assets, many of these types of assets 

are approaching or have exceeded their initial design service lives. We are currently 

conducting work for this Committee to look at the condition and the Coast Guard’s 

actions to upgrade or better manage these assets. While this work is still ongoing, 

our preliminary observations indicate that some of these assets are experiencing 

maintenance issues that may require additional resources in order to sustain or replace their capabilities. 

26 

Coast Guard’s Condition Measures Show Decline in Some ATON and Icebreaking 

Assets 

From 2000 to 2004, the Coast Guard’s key condition measures show a decline for 

some ATON and icebreaking assets.23 For ATON and icebreaking cutter assets,24

the key summary measure of condition—percent of time free of major casualties 25— 

fluctuated but generally remained below target levels 26 for some asset types. According to Coast Guard officials, even though it did not have a centralized tracking 

system for the condition of its ATON small boat assets during this time period, the 

Coast Guard’s overall assessments of these smaller assets indicated that most of the 

asset types were in fair to poor condition. According to Coast Guard officials and 

documents, the reasons for their condition include the fact that many of the asset 

types are beyond their expected service lives and the general workload of the assets 

has increased to carry out other missions, such as maritime security after September 11, 2001, or providing disaster response after events such as the recent hurricanes on the Gulf Coast. 

Increasing Amount of Maintenance on ATON and Domestic Icebreaking Assets Is 

Being Performed 

Coast Guard personnel reported to us that crew members have had to spend increasingly more time and resources to troubleshoot and resolve maintenance issues 

on the older ATON and domestic icebreaking assets. The Coast Guard personnel we 

met with indicated that because the systems and parts are outdated compared with 

the technology and equipment available today, it can be challenging and time consuming to diagnose a maintenance issue and find parts or determine what corrective 

action to take. For example, the propulsion control system on the 140-foot 

icebreaking tugs uses circuit cards that were state-of-the-art when the tugs were 

commissioned in the late 1970s to 1980s but are no longer manufactured today and 

have been superseded by computer control systems. According to the Coast Guard 

personnel we met with, the lack of a readily available supply of these parts has 

forced maintenance personnel to order custom made parts or refurbish the faulty 

ones, increasing the time and money it takes to address maintenance problems. The 

personnel also told us that because such equipment is outdated, finding knowledgeable individuals to identify problems with the equipment is difficult, which further 

complicates the maintenance of the assets. Crews of other assets we visited also confirmed the difficulty of diagnosing problems and obtaining replacement parts for 

other critical subsystems such as the main diesel engines. 

Aware of such issues, the Coast Guard completed a mission needs analysis for 

ATON and domestic icebreaking assets, and developed an approach to renovate or 

recapitalize these assets. This analysis, which was completed in 2002, looked at the 

condition of the existing assets and their ability to support mission needs. The analysis concluded that all of the assets suffered in varying degrees with respect to safety, supportability, environmental compliance, and habitability, and would need replacement or rehabilitation to address these issues. In response to this analysis, the 

Coast Guard developed a plan to systematically replace or renovate the assets. Program officials at the Coast Guard indicated that current estimates place the total 

cost to carry out this plan at about $550 million. According to a Coast Guard official, 

although resource proposals to carry out this project had been made during the 

budget planning processes for Fiscal Years 2004, 2005, 2006, and 2007, those proposals were either deferred or terminated by DHS or the Office of Management and 

Budget from inclusion in the final budget requests. 

Polar Class Icebreaking Assets Are in Need of Significant Maintenance 

Preliminary observations from our review of the Coast Guard’s polar icebreaking 

assets revealed similar challenges for the Coast Guard to perform the maintenance 

needed to sustain the capabilities of these assets. As with the other older ATON and 

domestic icebreaking assets, the two Polar Class icebreakers that are used for 

breaking the channel into the Antarctic research station are reaching the end of 

their design service lives of 30 years.27 According to Coast Guard officials, the icebreakers’ age combined with recent harsh ice conditions and increased operational 

tempo have left the Polar Class icebreakers unable to continue the mission in the 

long term without a substantial investment in maintenance and equipment renewal. 

These officials also told us that while the hull structures are sound, critical systems 

such as the main gas turbine controls and the controllable pitch propeller systems 

have become unreliable. Corroborating this account of the icebreakers’ condition, an 

interim report issued in December 2005 by the National Research Council of the National Academies also found that the icebreakers have become inefficient to operate 

because substantial and increasing maintenance is required to keep them operating 

27 

and that significant long-term maintenance had been deferred over the past several 

years.28

Given the age and obsolescence of the Polar Class icebreakers, funding for maintenance and repair has been and will likely continue to be a challenge. Coast Guard 

officials indicated that the cost of maintenance activity for the icebreakers required 

that additional funding be transferred from other Coast Guard asset maintenance 

accounts in previous years in order to carry out this maintenance. For Fiscal Years 

2005 and 2006, the Coast Guard also obtained additional funds for maintenance 

from the National Science Foundation (NSF).29 The Coast Guard has considered undertaking a project to extend the service lives of the existing assets by refurbishing 

or replacing those systems that have reached the end of their service lives. The 

Coast Guard estimates that this extension project could provide an additional 25 

years of service for the existing assets. The cost to carry out this project for both 

Polar Class icebreakers is estimated between $552 and $859 million. Coast Guard 

capital planning documentation indicates that failure to fund this project could 

leave the Nation without heavy icebreaking capability and could jeopardize the investment made in the Nation’s Antarctic Program. According to Coast Guard officials, the agency has identified these needs but has not yet requested funds in part, 

because other agencies have taken financial responsibility for funding polar 

icebreaking assets.30

The Coast Guard Is Undertaking New Responsibility Beyond Typical Maritime 

Missions 

While the Coast Guard continues to face the challenge of performing the diverse 

array of responsibilities associated with its many missions, the Fiscal Year 2007 

budget request includes initial funding for a new Coast Guard responsibility of enforcing a no-fly zone in the national capital region. The scope of the mission—intercepting slow and low flying aircraft—falls outside of the Coast Guard’s typical mission of protecting and preserving the Nation’s ports and waterways. According to 

Coast Guard officials, DHS agreed to this mission through a memorandum of understanding with DOD and subsequently determined that the Coast Guard was the 

best suited agency within DHS to perform the mission.31 Coast Guard officials also 

said, the agency will officially take over these responsibilities from CBP in late Fiscal Year 2006. However, despite previous experience performing air intercept activities, according to Coast Guard officials, the new homeland security mission has required additional training and assets.32 The Coast Guard’s $57.4 million Fiscal Year 

2007 budget request, the first year of a planned 2-year project, would provide funding to acquire five of the seven HH–65C helicopters needed for the mission, and, 

according to Coast Guard officials, update infrastructure at Air Station Atlantic 

City, as well as upgrade equipment at Reagan National Airport. Officials added that 

efforts to train Coast Guard pilots have already been underway. While groundwork 

has been laid through the request of Fiscal Year 2007 funds to purchase the equipment necessary to carry out this new responsibility, it is likely to require additional 

personnel and training. 

Concluding Observations 

Several of the developments we are reporting on today are good news. Despite 

many demands, the Coast Guard continues to make progress in meeting its performance targets, and its successful search-and-rescue work in responding to Hurricane 

Katrina is one positive aspect of what largely otherwise appears to be an ongoing 

tragedy. Certainly, if one measure of organizational excellence is performance in crisis, Hurricane Katrina shows that the Coast Guard is well along on that scale. Excellence must also be demonstrated in more mundane ways, however, such as how 

an organization manages its acquisitions. In this case, the Coast Guard needs to 

consistently, and from the beginning, employ widely known best practices for its acquisition management processes particularly with respect to developing requirements, project and risk management, and ensuring proper executive level oversight. 

Although the Coast Guard is to be complimented for its willingness to make improvements after our audits have identified problems, such as with the Deepwater 

program, its acquisition management would be better if the agency employed the 

lessons once learned and translated them into generally-improved practices. Better 

overall practices would help to ensure that future projects will not repeat past problems and will be completed on time and at cost. 

The Coast Guard has clearly been at the vortex of many of the most sweeping 

changes in the Federal Government’s priorities over the past several years. ‘‘Homeland security’’ carries a much different tone, as well as budgetary significance, in 

the national consciousness after September 11, 2001. However, dramatic infusions 

of money are no guarantee of success; rather they bring added responsibility to enVerDate Nov 24 2008 12:39 May 06, 2011 Jkt 066171 PO 00000 Frm 00031 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\66171.TXT SCOM1 PsN: JACKIE
28 

sure that large investments of taxpayer dollars are wisely spent. Our work has 

shown that the Coast Guard continues to face some challenges in balancing all of 

its missions and in keeping a sustained focus on managing its significant capital acquisition programs. Continued efforts are needed to sustain the progress that has 

been made thus far. 

Madame Chair and members of the Subcommittee, this completes my prepared 

statement. I would be happy to respond to any questions that you or other Members 

of the Subcommittee may have at this time. 

APPENDIX I: OBJECTIVES, SCOPE, AND METHODOLOGY

To provide a strategic overview of the President’s Fiscal Year 2007 budget request 

for the Coast Guard, we analyzed the Coast Guard’s budget justification and other 

financial documents provided by the Coast Guard, focusing on several areas of particular Congressional interest. We also interviewed Coast Guard headquarters officials familiar with the Coast Guard’s budget and acquisition processes. 

To report on the Coast Guard’s progress in meeting its performance targets, we 

reviewed Coast Guard data and documentation addressing the status of performance targets between Fiscal Years 2002 and 2005. In reporting the performance results, we did not assess the reliability of the data or the credibility of the performance measures used by the Coast Guard. Previous GAO work indicates that the 

Coast Guard data are sufficiently reliable for the purposes of reporting on general 

performance, but we have not examined the external sources of data used for these 

measures. In addition, we are currently involved in ongoing work looking at the reliability of the data and credibility of performance measures for the Coast Guard’s 

six non-homeland security programs. 

To determine the status of key outstanding Coast Guard recommendations, we 

interviewed Coast Guard headquarters officials regarding the status of the recommendations—including any progress made to implement them. We also obtained 

and reviewed relevant documents from the Coast Guard. 

To discuss the Coast Guard’s response to Hurricane Katrina, we relied on our ongoing work regarding Hurricane Katrina, with particular focus on the Coast Guard’s 

preparation, response, and recovery to Katrina with respect to search-and-rescue, 

pollution response, and facilitation of maritime missions. To obtain a more detailed 

understanding of the Coast Guard’s response to Hurricane Katrina, we interviewed 

officials, reviewed documents, and conducted site visits at two Coast Guard Districts, the Atlantic Command, and Coast Guard headquarters. We also interviewed 

city and state officials in areas impacted by Hurricane Katrina and assisted by the 

Coast Guard. 

To determine the Coast Guard’s progress in implementing our prior recommendations related to its Deepwater program, we drew from ongoing work, which included 

extensive reviews and analyses of documentation provided by the Coast Guard. We 

supplemented our document reviews and analyses with extensive discussions with 

officials at the Deepwater Program Executive Office, as well as with interviews with 

key Coast Guard operations and maintenance officials, contract monitors, and representatives of the system integrator. 

To report on the status and cost of Coast Guard’s Rescue 21 program, we drew 

from our work examining (1) the reasons for significant implementation delays and 

cost overruns against Rescue 21’s original 2002 proposal; (2) the viability of the 

Coast Guard’s revised cost and implementation schedule that is projected to reach 

full operational capability in 2011; and (3) the impact of Rescue 21’s implementation 

delay upon the Coast Guard’s field units which are awaiting modernization of antiquated communications equipment. This work has involved reviewing acquisition 

plans, implementation schedules and cost estimates for Rescue 21, as well as documentation regarding problems associated with the antiquated communications 

equipment. We also interviewed Coast Guard field personnel at units using the antiquated equipment and at the two sites where Rescue 21 has been deployed. 

We also drew from our ongoing work to report on Coast Guard’s ATON and 

icebreaking assets. Specifically, this work is examining: (1) the recent trends in the 

amount of time ATON and domestic icebreaking assets have spent performing various missions and the impact of these trends on their primary missions; (2) the condition of the ATON and domestic icebreaking assets and the impact of their condition on performing their primary missions; and (3) the actions the Coast Guard has 

taken to upgrade or better manage its ATON and domestic icebreaking assets or use 

alternatives to carry out their missions. While conducting this work, we have interviewed Coast Guard program and maintenance officials at headquarters, area commands, and selected districts to obtain information on the missions these assets 

carry out, the condition of the assets, and the past and estimated future costs to 

29 

maintain and deploy them. We also interviewed these officials and reviewed documents about the Coast Guard’s plans to maintain or replace these assets. We also 

analyzed Coast Guard data from 2000 to 2004 on condition tracking measures, resources spent to operate the assets, and the number of hours the assets spent on 

Coast Guard missions. Finally, we interviewed crew members of various assets, selected by nonprobability sample—to provide diversity among asset types and locations—to obtain their views on the condition and maintenance of their assets and 

any impact the assets’ condition may have had on their ability to carry out their 

missions.33

This testimony is based on published GAO reports and briefings, as well as additional audit work that was conducted in accordance with generally accepted government auditing standards. We conducted our work for this testimony from July 2005 

through May 2006. 

APPENDIX II: BREAKDOWN OF THE COAST GUARD’S FISCAL YEAR 2007 REQUEST

Appendix II provides a breakdown of the Coast Guard’s Fiscal Year 2007 budget 

request. In addition to operating expenses and acquisition, construction, and improvements, the remaining Coast Guard budget accounts include areas such as environmental compliance and restoration, reserve training, and oil spill recovery. (See 

Table 2.) 


615g4.eps
30 

APPENDIX III: ADDITIONAL INFORMATION ON SPECIFIC COAST GUARD PROGRAM

RESULTS

Appendix III provides a detailed list of Coast Guard performance results for the 

Coast Guard’s 11 programs from Fiscal Year 2002 through 2005. Shaded entries in 

Table 3 indicate those years that the Coast Guard reported meeting its target 

unshaded entries indicate those years that the Coast Guard reported not meeting 

its target. Each program is discussed in more detail below. 

Note: TBD, to be determined; NA, not available. 

aThe target for ice operations noted here is for domestic icebreaking only, and the 

target level varies according to the index of severity for an entire winter. Thus, for 

those winters designated as severe, the target is 8 or fewer closure days. For winters designated as average, the target is 2 or fewer closure days. Because 2002 and 

2004 were designated as average winters, the 7 and 4 days of closures did not meet 

the target. bThe ports, waterways, and coastal securities program did not have a numeric 

target for the program’s performance measure because this was the first year this 

performance measure was used and a numeric baseline had not been established. 

However, according to the Coast Guard, in the absence of a numeric target, the program used, and met, a target of fully implementing all planned activities geared toward lowering the risk due to terrorism in the maritime domain. c Complete data are not yet available for the illegal drug interdiction program, 

however, the Coast Guard anticipates meeting the performance target for this program based on past performance. dThe performance measure for the illegal drug interdiction program, the percent 

of cocaine removed, was revised in Fiscal Year 2004 from the percent of cocaine 

seized in order to more accurately report the impact Coast Guard counter-drug activities have on the illicit drug trade. As a result, the cocaine removal rates for Fiscal Years 2002–2003 are not available. eThe Coast Guard did not have a performance target for the marine safety performance measure in Fiscal Year 2002. Therefore, we were unable to determine 

whether marine safety program results met a performance target for Fiscal Year 

2002. 


615g5.eps
31 

Programs Meeting Fiscal Year 2005 Performance Targets 

U.S. Exclusive Economic Zone Enforcement.34 The Coast Guard reported that in 

Fiscal Year 2005, it met the performance target for U.S. Exclusive Economic Zone 

enforcement—defined as the number of foreign vessel incursions into the U.S. Exclusive Economic Zone, by detecting 174 foreign vessel incursions, within the performance target of 200 or less incursions. This represents a more than 30 percent 

decrease in foreign vessel incursions since Fiscal Year 2004, when the Coast Guard 

detected 247 incursions. Coast Guard officials attributed this decrease in incursions 

to many factors, including the agency’s efforts in combating incursions, such as an 

increased number of air and water patrols, and the likelihood that some Mexican 

fleets known to cross into U.S. waters were damaged during the 2005 hurricane season. 

Ice operations. To meet this performance target, the Coast Guard’s ice operations 

program must keep winter waterway closures to 8 days or fewer for severe winters 

and less than 2 days per year for average winters. According to Coast Guard documents, the agency met its target for an average winter with 0 days of waterway 

closures during the 2005 ice season. 

Search and rescue. The Coast Guard reported that performance in this area, as 

measured by the percentage of mariners’ lives saved from imminent danger, was 

86.1 percent, just above the target of 86 percent for Fiscal Year 2005. This result 

is similar to the Fiscal Year 2004 result of saving 86.8 percent of lives in imminent 

danger. The Coast Guard identified continuing improvements in response resources 

and improvements made in commercial vessel and recreational boating safety as the 

main reasons for continuing to meet the target. 

Aids to navigation. According to Coast Guard reports, the aids-to-navigation program performance measure—that is, the 5-year average number of collisions, 

allisions, and groundings—improved in Fiscal Year 2005 by dropping to 1,825 incidents from 1,876 incidents in Fiscal Year 2004. The Fiscal Year 2005 total was also 

below the target of 1,831. The Coast Guard attributes this continued decrease to a 

multifaceted system of prevention activities, including radio aids-to-navigation, communications, vessel traffic services, dredging, charting, regulations, and licensing. 

Ports, waterways, and coastal security. In Fiscal Year 2005, the Coast Guard 

began using a new measure of program performance—the percent reduction of terrorism-related risk in the maritime environment. According to Coast Guard officials, 

this measure is based on an assessment of the total amount of maritime risk under 

the Coast Guard’s authority. At the end of each fiscal year the Coast Guard calculates the amount of this total risk that has been reduced by the program’s activities throughout the fiscal year. Officials added that because of the dynamic and 

changing nature of risk, the total amount of maritime risk under the Coast Guard’s 

authority—the baseline level of risk—is recalculated annually. Because this was the 

first year the agency used the measure, there was no previous performance baseline 

to establish a numeric annual target. However, according to the Coast Guard, in the 

absence of a numeric target, the program used, and met a target of fully implementing all planned activities geared toward lowering the risk due to terrorism in 

the maritime domain. 

Marine environmental protection. The marine environmental protection measure 

of performance is the 5-year average annual number of oil and chemical spills greater than 100 gallons per 100 million tons shipped. According to Coast Guard reports, 

since Fiscal Year 2002, the reported average number of oil and chemical spills has 

dropped from 35.1 to 18.5 in Fiscal Year 2005. The Coast Guard identified its prevention, preparedness, and response programs—including industry partnerships and 

incentive programs—as reasons for the drop. 

Marine safety. The marine safety measure—a 5-year average of passenger and 

maritime deaths and injuries—achieved its Fiscal Year 2005 performance target of 

1,317. During Fiscal Year 2005 there were 1,311 incidents, a slight increase from 

1,299 incidents in Fiscal Year 2004. Beginning in Fiscal Year 2006, the Coast Guard 

will use a revised version of this measure that includes injuries of recreational boaters as well, representing a broader and more complete view of marine safety. 

Program Expected to Meet Fiscal Year 2005 Target 

Illegal drug interdiction. While complete results for the illegal drug interdiction 

performance measure—the rate at which the Coast Guard removes cocaine bound 

for the U.S. via noncommercial maritime transport—are not yet available, the Coast 

Guard anticipates exceeding the Fiscal Year 2005 target of removing 19 percent or 

more of cocaine bound for the U.S. According to Coast Guard officials, in Fiscal Year 

2005 the Coast Guard removed a record 137.5 metric tons of cocaine bound for the 

U.S. Coast Guard officials believe that this record amount of cocaine removed will 

32 

result in exceeding the Fiscal Year 2005 performance target. Final program results 

are due to be published in July 2006. 

Programs Not Meeting Targets in Fiscal Year 2005 

Defense Readiness. Defense readiness is measured by the percentage of time that 

units meet combat readiness status at a C–2 level.35 The Coast Guard reported that 

the overall level of performance for the defense readiness program decreased for the 

second consecutive year from a high of 78 percent in Fiscal Year 2003, to 76 percent 

in Fiscal Year 2004, and 67 percent in Fiscal Year 2005. According to Coast Guard 

officials, this decline in recent years was because of staffing shortages for certain 

security units within the defense readiness mission. According to Coast Guard officials, the agency intends to solve these staffing problems by offering incentives for 

participation as well as making participation mandatory instead of voluntary, as it 

was previously. 

Living marine resources. The Coast Guard reported that the performance measure 

for living marine resources—defined as the percentage of fishermen complying with 

Federal regulations—was 96.4 percent, just below the target of 97 percent for Fiscal 

Year 2005. This result is similar to the Fiscal Year 2004 result of 96.3 percent. According to Coast Guard officials, the agency missed the Fiscal Year 2005 target because of a variety of economic conditions and variables beyond Coast Guard control, 

such as hurricane damage, high fuel costs, fewer days-at-sea allocations, and lucrative seafood prices in some fisheries—which created greater incentives for fishermen 

to violate fishery regulations. The Coast Guard conducted 6,076 fisheries boardings 

in Fiscal Year 2005, an increase of more than 30 percent since Fiscal Year 2004. 

However, it is important to note that the compliance rate is a conservative estimate 

of agency performance because the Coast Guard targets vessels for boarding, thereby making it more likely that they will find vessels that are not in compliance with 

fishery regulations. According to Coast Guard officials, a key contributor to targeting vessels is the vessel monitoring system, which has enhanced the agency’s 

ability to target vessels by providing more timely information. 

Undocumented migrant interdiction. According to Coast Guard reports, in Fiscal 

Year 2005 the Coast Guard did not meet its performance target of interdicting or 

deterring at least 88 percent of undocumented aliens from Cuba, Haiti, the Dominican Republic, and China attempting to enter the U.S. through maritime routes. The 

Coast Guard identified 5,830 successful arrivals out of an estimated threat of 40,500 

migrants yielding an interdiction and deterrence rate of 85.5 percent, a decrease 

from the Fiscal Year 2004 result of 87.1 percent. According to the Coast Guard, program performance decreased because the flow of migrants was higher than in previous years, increasing from almost 22,000 in Fiscal Year 2002, to more than 40,000 

in Fiscal Year 2005. Coast Guard officials said that the agency is developing a new 

measure to better account for both the Coast Guard’s efforts and the migrant flow 

to more accurately report program performance. This new measure will include migrants of all nationalities that successfully arrive in the U.S. through maritime 

routes. 

Related GAO Products 

United States Coast Guard: Improvements Needed in Management and Oversight of 

Rescue System Acquisition. GAO–06–623. Washington, D.C.: May 31, 2006. 

Coast Guard: Changes in Deepwater Acquisition Plan Appear Sound, and Program 

Management Has Improved, but Continued Monitoring Is Warranted. GAO– 

06–546. Washington, D.C.: April 28, 2006. 

Coast Guard: Progress Being Made on Addressing Deepwater Legacy Asset Condition 

Issues and Program Management, but Acquisition Challenges Remain. GAO– 

05–757. Washington, D.C.: July 22, 2005. 

Coast Guard: Preliminary Observations on the Condition of Deepwater Legacy Assets 

and Acquisition Management Challenges. GAO–05–651T. Washington, D.C.: 

June 21, 2005. 

Maritime Security: Enhancements Made, but Implementation and Sustainability Remain Key Challenges. GAO–05–448T. Washington, D.C.: May 17, 2005. 

Coast Guard: Preliminary Observations on the Condition of Deepwater Legacy Assets 

and Acquisition Management Challenges. GAO–05–307T. Washington, D.C.: 

April 20, 2005. 

Coast Guard: Observations on Agency Priorities in Fiscal Year 2006 Budget Request. 

GAO–05–364T. Washington, D.C.: March 17, 2005. 

Coast Guard: Station Readiness Improving, but Resource Challenges and Management Concerns Remain. GAO–05–161. Washington, D.C.: January 31, 2005. 

Maritime Security: Better Planning Needed to Help Ensure an Effective Port Security 

Assessment Program. GAO–04–1062. Washington, D.C.: September 30, 2004. 

33 

Maritime Security: Partnering Could Reduce Federal Costs and Facilitate Implementation of Automatic Vessel Identification System. GAO–04–868. Washington, 

D.C.: July 23, 2004. 

Maritime Security: Substantial Work Remains to Translate New Planning Requirements into Effective Port Security. GAO–04–838. Washington, D.C.: June 30, 

2004. 

Coast Guard: Deepwater Program Acquisition Schedule Update Needed. GAO–04– 

695. Washington, D.C.: June 14, 2004. 

Coast Guard: Station Spending Requirements Met, but Better Processes Needed to 

Track Designated Funds. GAO–04–704. Washington, D.C.: May 28, 2004. 

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

Coast Guard: Relationship between Resources Used and Results Achieved Needs to 

Be Clearer. GAO–04–432. Washington, D.C.: March 22, 2004. 

Contract Management: Coast Guard’s Deepwater Program Needs Increased Attention 

to Management and Contractor Oversight. GAO–04–380. Washington, D.C.: 

March 9, 2004. 

Coast Guard: New Communication System to Support Search and Rescue Faces 

Challenges. GAO–03–1111. Washington, D.C.: September 30, 2003. 

Maritime Security: Progress Made in Implementing Maritime Transportation Security Act, but Concerns Remain. GAO–03–1155T. Washington, D.C.: September 

9, 2003. 

Coast Guard: Actions Needed to Mitigate Deepwater Project Risks. GAO–01–659T. 

Washington, D.C.: May 3, 2001. 

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

01–564. Washington, D.C.: May 2, 2001. 

Coast Guard: Strategies for Procuring New Ships, Aircraft, and Other Assets. GAO/ 

T–HEHS–99–116. Washington, D.C.: March 16, 1999. 

Coast Guard’s Acquisition Management: Deepwater Project’s Justification and Affordability Need to Be Addressed More Thoroughly. GAO/RCED–99–6. Washington, D.C.: October 26, 1998. 

ENDNOTES 1Pub. L. 107–295, 116 Stat. 2064 (2002). 

2GAO’s analysis of the Coast Guard’s budget is presented in nominal terms 

throughout this testimony. 3The $8.4 billion request for the Coast Guard represents about 20 percent of the 

Department of Homeland Security’s (DHS) budget request for Fiscal Year 2007. 4 In addition to the $57.4 million request, the Coast Guard’s Fiscal Year 2007 

budget request includes a $5 million transfer from CBP to support the National 

Capital Regional Air Defense program. 5These seven programs are ice operations, search-and-rescue, marine environmental protection, marine safety, aids-to-navigation, U.S. Exclusive Economic Zone 

enforcement, and ports, waterways, and coastal security. 6The one additional program the Coast Guard anticipates meeting the target for 

is the illegal drug interdiction program. 7The Coast Guard’s seven operational principles include the Principle of: (1) Clear 

Objective, (2) Effective Presence, (3) Unity of Effort, (4) On-Scene Initiative, (5) 

Flexibility, (6) Managed Risk, and (7) Restraint. U.S. Department of Transportation, 

Coast Guard Publication 1, U.S. Coast Guard: America’s Maritime Guardian, 

(Washington, D.C., 2002). 8 Consisting of approximately 39,000 active duty personnel, the Coast Guard is a 

multi-mission agency with a longstanding Federal leadership role in protecting life 

and property at sea, such as directing search-and-rescue operations. Furthermore, 

the Coast Guard is a military service responsible for protecting U.S. ports and waterways. Other U.S. military branches include: U.S. Army with approximately 

488,900 active duty personnel; U.S. Navy with approximately 358,700 active duty 

personnel; U.S. Air Force with approximately 351,700 active duty personnel; and 

U.S. Marines with approximately 178,700 active duty personnel. 9 A Coast Guard group is an operational unit that oversees station operations and 

provides guidance on policy and administrative matters. 10GAO, Coast Guard: Observations on Agency Priorities in Fiscal Year 2006 Budget Request, GAO–05–364T (Washington, D.C.: Mar. 17, 2005). 11GAO, Contract Management: Coast Guard’s Deepwater Program Needs Increased Attention to Management and Contractor Oversight, GAO–04–380 (Washington, D.C.: Mar. 9, 2004). 12 In June 2002, the Coast Guard contracted with Integrated Coast Guard Systems to identify and deliver the assets needed to meet a set of mission requirements 

34 

specified by the Coast Guard. Integrated Coast Guard Systems is a business entity 

jointly owned by Lockheed Martin Corporation and Northrop Grumman Ship Systems, which act as first-tier subcontractors and either provide Deepwater assets or 

award second-tier subcontracts for providing the assets. 13The Coast Guard disagreed with and declined to implement a recommendation 

that pertained to updating its cost baseline to determine whether the Deepwater acquisition approach is costing more than a conventional acquisition approach. While 

we stand behind our original recommendation, we decided not to pursue it further 

because the Coast Guard has decided not to take action on this issue. 14 Composite materials, as used in shipbuilding, are typically fiber-reinforced plastic laminates consisting of plies of various reinforcing fabrics laminated together. Integrated Coast Guard Systems decided to use composite materials for the FRC’s hull 

after an analysis of alternatives found that the use of such materials instead of steel 

generally offers several advantages, such as lower maintenance and life-cycle costs, 

a longer service life, and reduced weight. 15GAO, United States Coast Guard: Improvements Needed in Management and 

Oversight of Rescue System Acquisition, GAO–06–623 (Washington, D.C.: May 31, 

2006). 16 In April 2006, the Department of Homeland Security approved a new acquisi- tion program baseline for Rescue 21 with a total acquisition cost of $730.2 million 

after decreasing certain functionality. 17The Coast Guard’s Fiscal Year 2007 budget request for Rescue 21 is $40 mil- lion, a slight decrease from the $41 million Congress approved for Fiscal Year 2006. 18Our concerns from past audits of the Deepwater acquisition focus on the Coast 

Guard’s overall ability to effectively and efficiently manage its major acquisitions, 

oversee contractors, and translate lessons learned from one program to another. 19GAO–05–757; Coast Guard: Preliminary Observations on the Condition of Deepwater Legacy Assets and Acquisition Management Challenges, GAO–05–651T (Washington, D.C.: June 21, 2005); Coast Guard: Preliminary Observations on the Condition of Deepwater Legacy Assets and Acquisition Management Challenges, GAO–05– 

307T (Washington, D.C.: Apr. 20, 2005); GAO–05–364T; Coast Guard: Deepwater 

Program Acquisition Schedule Update Needed, GAO–04–695 (Washington, D.C.: 

June 14, 2004); GAO–04–380; Coast Guard: Actions Needed to Mitigate Deepwater 

Project Risks, GAO–01–659T (Washington, D.C.: May 3, 2001); Coast Guard: 

Progress Being Made on Deepwater Project, but Risks Remain, GAO–01–564 (Washington, D.C.: May 2, 2001); and Coast Guard: Strategies for Procuring New Ships, 

Aircraft, and Other Assets, GAO/T–RCED–99–116 (Washington, D.C.: Mar. 16, 

1999). 20 Coast Guard officials reported that the agency upgraded a console at one unit 

to mitigate operational challenges and installed a new antenna at a second unit to 

address coverage gaps. 21The National Plan to Achieve Maritime Domain Awareness was developed in 

October 2005 in support of the National Strategy for Maritime Security, as directed 

by National Security Presidential Directive—41/Homeland Security Presidential Directive—13. The plan outlines national priorities for achieving maritime domain 

awareness, including near-term and long-term objectives, required program and resource implications, and recommendations for organizational or policy changes. 22GAO, Maritime Security: Partnering Could Reduce Federal Costs and Facilitate 

Implementation of Automatic Vessel Identification System, GAO–04–868 (Washington, D.C.: July 23, 2004). 23The assets discussed here vary greatly in terms of their size, age, and operating 

environment. In terms of size they range from a 420-foot polar icebreaker to a 21- 

foot trailerable boat to service aids-to-navigation. In terms of age, the range is 2 

years for recently commissioned seagoing buoy tenders to more than 60 years for 

inland construction and buoy tenders. ATON assets are located on both East and 

West Coasts, as well as the Gulf Coast and major Inland Rivers such as the Mississippi while domestic icebreakers are located on the East Coast and Great Lakes. 

The polar icebreakers operate in both Arctic and Antarctic regions. 24The Coast Guard defines a cutter as any Coast Guard vessel 65 feet in length 

or greater, having adequate accommodations for crew to live on board. Boats are defined as those vessels under 65 feet in length that usually operate near shore and 

on inland waterways. 25 A casualty is a deficiency in mission essential equipment; a major casualty 

causes the major degradation or loss of at least one primary mission. 26The standard target level for the ‘‘percent of time free of major casualties’’ is 

72 percent, which is a Navy standard that has been adopted by the Coast Guard. 27 In addition to the two Polar Class icebreakers, the Coast Guard acquired a 

third icebreaker, the HEALY, in 2000. Unlike the Polar Class icebreakers, the 

35 

HEALY was designed to be an Arctic scientific platform and does not have the capabilities to break ice in the Antarctic under most conditions. According to Coast 

Guard officials, although the HEALY also has maintenance issues, the condition 

and extent of maintenance needed for the Polar Class icebreakers is more severe. 28 National Research Council of the National Academies, Polar Icebreaker Roles 

and U.S. Future Needs: A Preliminary Assessment, 2005. The Council has been 

tasked to conduct an assessment of the current and future roles of the Coast 

Guard’s polar icebreakers. A final report is expected to be released this summer in 

which it will provide a more detailed analysis and evaluation of the assets and capabilities needed to carry out the mission over the longer term. 29 NSF is the lead agency responsible for supporting U.S. polar research. As such, 

it is the primary user of the polar icebreakers to provide logistical support and serve 

as research platforms in the polar regions. Coast Guard officials told us that under 

the terms of a memorandum of agreement, entered into in 1986 and updated in 

1999, NSF and other users of the icebreakers reimbursed the Coast Guard for some 

of the operational costs. 30For Fiscal Year 2006, responsibility for funding the polar icebreaking assets 

was transferred to NSF, with the Coast Guard retaining custody of the assets to 

operate and maintain them. The President’s budget request for Fiscal Year 2007 

proposes to continue this arrangement. With this transfer of budget authority to 

NSF, Coast Guard officials indicated that while the Coast Guard plays an advisory 

role to NSF on the maintenance needs of the icebreakers, NSF is now responsible 

for making funding requests for maintenance projects such as the service life extension project. 31The Coast Guard’s primary mission for the National Capital Region Air Defense 

program will be to determine intent of, and compel, low and slower moving aircraft 

to clear National Capital Region protected airspace. 32The Coast Guard’s previous experience with air intercept activities includes responsibility for air intercept during planned national security special events, such 

as the Democratic and Republican national conventions and the Super Bowl, as well 

as performing some air intercept activities as part of its illegal drug interdiction 

program. 33 Nonprobability sampling is a method of sampling where observations are selected in a manner that is not completely random, usually using specific characteristics of the population as criteria. Results from nonprobability samples cannot be 

used to make inferences about a population because in a nonprobability sample 

some elements of the population being studied have no chance or an unknown 

chance of being selected as part of the sample. 34The Exclusive Economic Zone is defined as an area within 200 miles of U.S. 

shores in which U.S. citizens have primary harvesting rights to fish stocks. The 

Coast Guard also refers to the U.S. Exclusive Economic Zone enforcement program 

as either the foreign fish enforcement program or as other law enforcement. 35 According to the Coast Guard, the C–2 combat readiness level is defined as the 

level at which a unit possesses the resources and is trained to undertake most of 

the wartime missions for which it is organized or designed. 

Senator SNOWE. Thank you, Mr. Caldwell. I appreciate your testimony, as well, and the recommendations and in-depth evaluation 

of the overall performance of the Coast Guard and all of its programs. And we’re at a critical moment for the Coast Guard. 

Let me start with you, Admiral Allen, with the Deepwater Program, because it’s an ongoing concern of mine, and I know it is of 

yours and the Coast Guard’s. And, obviously, the GAO has done extensive review and analysis. In one of the last hearings that we 

held on this question, we were informed that we can decrease the 

number of assets, the number of cutters and planes, and increase 

the capabilities. One, I have a concern about that, because there’s 

no substitute for having a presence with either of our cutters or our 

planes. The second ongoing problem is whether or not we’re going 

to be able to accomplish this goal while making the investments in 

the recapitalization of our assets over a 20- to 25-year period. This 

timeline has already been extended by 5 years, and we’re trying to 

accomplish this goal at a time in which you’re facing some very 

36 

aging equipment. So, is that the right solution? Because the longer 

it goes, I think you’re going to have extensive problems. Obviously 

there are cost overruns that are associated with the program. 

We’ve already identified, an increase from $17 to $24 billion. And 

then, of course, we had the experience with the Fast Response Cutter, that you now have to go back to the drawing board because of 

the conceptual designs of that program. And I gather there were 

problems with the trials of the original design. 

So what’s the future for Deepwater, as you see it, given the urgency to get some of these assets online sooner rather than later? 

A 20- to 25-year timetable is about a quarter of a century. With 

the first National Security Cutter scheduled to come online in August 2007, how do you see this timeline working? Is this realistic? 

I proposed, as you know, an accelerated timeframe for Deepwater 

that would have actually saved money for the taxpayers, but we 

couldn’t get the Administration’s support for that program. I think 

it puts men and women in jeopardy, given where we are today and 

what’s at stake. And the fact is that it is an open invitation for further delays, when you’re talking about 20 to 25 years. 

Admiral ALLEN. Thank you for the question, Madam Chairman. 

And, in fact, for the last 2 to 3 months, as I’ve gone through the 

confirmation process, I’ve spent a lot of time thinking about it. If 

I could just give you a couple of general thoughts. 

First of all, the overall system. I think we’ve got that right. In 

other words, this interlocking, integrated system of cutters, aircraft, and sensors that can talk to each other and pass information. 

I think the basic rationale is sound, and remains sound. I, like you, 

look at the prospect of, at the end of this acquisition, out 25 years, 

something which I may never see, and wonder what the 

executability is. 

But when I look at the problems that we have before us today 

related to the operational mix we’re involved in, how these assets 

need to be employed for the mission set that we’ve got, I think, in 

the near term, I have to take a more immediate context of the gaps 

that we have in maritime patrol aircraft hours and patrol boat 

hours, as far as meeting the requirements the country has levied 

on us today, and then generalize that to a larger context. If you 

could accelerate or you could move something forward, how should 

you do that? 

And I think there are a couple of basic elements related to that. 

One is filling immediate gaps. And the gaps that we’ve established 

are maritime patrol, patrol boat hour gaps. The second one is, get 

these articles to where they can be produced, and produce them as 

rapidly as you can. The National Security Cutter is poised to be 

put in the water and be delivered next year. I went to Pascagoula 

last week, on one of my first trips, and I actually walked through 

the entire ship, looked at it, looked at the progress. I think we’re 

making real progress there. I think the ship is going to be an extensive improvement over the current fleet and our capability out 

there, and we look forward to getting that there. 

The patrol boat fleet, we’ve been bookended by performance on 

both ends. The interim solution, to extend the 110-foot fleet to 123 

feet, has produced structural problems with the extension. We terminated that at eight, and then decided to accelerate the developVerDate Nov 24 2008 12:39 May 06, 2011 Jkt 066171 PO 00000 Frm 00040 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\66171.TXT SCOM1 PsN: JACKIE
37 

ment of the Fast Response Cutter. There are design issues associated with that composite hull that needed to be worked out. But, 

in between those two performance bookends is a patrol boat gap 

that I have to fill. For that reason, we’re going to focus on some 

type of an off-the-shelf what we call a paracraft, or replacement patrol boat design. It gives us an immediate filler for those hours that 

we need. We’re not walking away from the composite structure, because we think there are definite advantages over the life cycle regarding maintenance costs, but until that’s proven to be effective 

and producible, we need to fill those patrol boat-gap hours. 

So, when I look at the overall acquisition, I look at, what do I 

need, today, to be most effective for the country? How does that fit 

into the overall 25-year timeline? And if there is an opportunity to 

move that up, or funds are made available, I would focus on those 

near-term gaps first, ma’am. 

Senator SNOWE. How bad is the gap, in terms of the hours, for 

the patrol boats? 

Admiral ALLEN. I can give you a statement for the record, and 

I can expand on it for the record, but I believe we’re talking about 

20,000 hours in patrol boats. And I’d have to get back to you on 

the aircraft hours, but we can submit that for the record. 

Senator SNOWE. And so, how soon could you get off-the-shelf patrol boats online? 

Admiral ALLEN. We’ve got a request for information out to industry right now. We’re planning on reviewing that. And I would think 

to awarding a contract in the next 6 to 12 months is doable. 

Senator SNOWE. I guess that sort of illustrates my concerns, 

when I look at the magnitude of this recapitalization project and 

the age of many of the cutters and the aircraft. It’s troubling, because it just seems to me that the program is going to be much 

more vulnerable to deferrals, postponements, or cost overruns, over 

such a long period of time, particularly when there’s such a necessity, right now, to get new equipment. 

Admiral ALLEN. I agree—— 

Senator SNOWE. Do you—— 

Admiral ALLEN. I agree—— 

Senator SNOWE.—think it’s realistic to have a 20- to 25-year 

timeframe? 

Admiral ALLEN. Well, what I would rather propose is, I provide 

you information on how we close those gaps, and how we do it as 

quickly as possible, because I think that’s the better measure of 

what we need to have right now. And it may be less than 25, but 

what we really need is those capability gaps closed. 

Senator SNOWE. Were you surprised by the setback on the Fast 

Response Cutter? 

Admiral ALLEN. Well, it was—it had to do with the feasibility of 

the design, vis-a`-vis the requirements we provided to them. I think 

there was a little bit of surprise, but we also know there’s value 

to this composite hull, if it can be done, and we’re not trying to 

jeopardize that, at this point. But the real issue right now is getting patrol boats out there in the Straits of Florida and wherever 

else we need them. 

Senator SNOWE. What do you see the implications being, Mr. 

Caldwell, of this question, on the Deepwater Program? 

38 

Mr. CALDWELL. Senator Snowe, I know that last year you raised 

the issue about whether we should accelerate this program, and 

there are two points I’d like to make. The first is, on some of these 

programs, we’re at a very critical stage, still in the design and the 

early part of the production. So, because of some of the problems 

that have arisen, in terms of both cost and schedule and other 

problems, as we have talked about, we would not be supporting acceleration, at this time. Once you have a proven design, and proven 

beyond just the design, but building and actually field them, then 

acceleration is a much more reasonable approach, as opposed to 20 

years. 

Senator SNOWE. In other words, you’re suggesting that because 

this is still all in the design stage, and because the new capabilities 

are going to be incorporated into these cutters, that it’s not feasible 

to accelerate the program until they get the first one online? 

Mr. CALDWELL. Well, until you have a proven design, we would 

not be in favor of acceleration of the program. 

Senator SNOWE. I understand what you’re saying, obviously, 

given the experience with the Fast Response Cutter, but it just 

suggests to me that it’s going to lead to a perpetual series of delays 

and deferrals. The Deepwater Program’s already been extended by 

almost 5 years, and an additional $7 billion, in terms of cost. I 

hesitate to think about what that means for the long term. Will it 

be extended for another 5 years, and another? That’s the concern. 

I don’t know what can be done about it, but I think that when you 

have this extensive timetable of 25 years there are just an infinite 

number of possibilities for things to go wrong, and it prevents us 

from focusing on getting things done. Obviously we want to get it 

done right, but the question is whether or not you can accelerate 

that timetable in a way that gets everybody focused on the ultimate goal. I just don’t see the 25-year timetable. It seems unrealistic, given the need that is abundantly apparent with the current 

assets being as old as they are. 

Admiral Allen? 

Admiral ALLEN. I think Mr. Caldwell said something that was 

fairly germane. I think, in lieu of looking at an acceleration of a 

25-year program—and maybe I wasn’t clear in my previous comments, and I’d like to add onto his—if you take what your urgent 

gaps are, and you address those, and you take what units are designed and producible, where you can accelerate them, because you 

have a proven design, and you can do something with it, certain 

elements of the acquisition might be accelerated or brought forward. But to take the entire system and say you’re going to move 

it to the left is a little more difficult. That’s the reason I’m focusing 

on near-term requirements, what we have that can be produced 

and be brought in quickly, because that’s a meeting of the most effective, efficient way to do the acquisition against the requirements 

that I have now. 

Senator SNOWE. What about the current status of your fleet? Can 

it be sustained for the long term, given this prolonged schedule, 

over 20 to 25 years? 

Admiral ALLEN. Well, specifically looking at the 110-foot patrol 

boat fleet, the 210-foot medium endurance cutter fleet, and the 270- 

foot medium endurance cutter fleet, the mission effectiveness proVerDate Nov 24 2008 12:39 May 06, 2011 Jkt 066171 PO 00000 Frm 00042 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\66171.TXT SCOM1 PsN: JACKIE
39 

grams we have right now, we believe, are viable bridging strategies 

that will give us those cutter hours, pending the construction of the 

National Security Cutter in the fall on OPC. We think that is stabilized. The problem right now is that patrol boat filler for that— 

the gap in those hours. 

Senator SNOWE. Thank you. 

Senator Cantwell? 

Senator CANTWELL. Thank you, Madam Chair. 

Admiral Allen, I have a—we don’t know each other too well. 

We’ve had a chance to talk in my office. But I get a sense you are 

a man of few words, but great action. And I, again, appreciate your 

work in response to Katrina and Rita. And, certainly, if there was 

a test run for the complexity and challenges of the Deepwater Program, you just had them in dealing with that situation. 

I’d like to delve a little further into this issue and get your honest response to where you think we should go in looking at the program from a comprehensive level of contract and contract negotiations. Obviously, my colleague talked about some of the challenges 

from just purely being behind. And Mr. Caldwell has documented 

this in more detail in his report. I wonder if you believe, since GAO 

has long advised us about the contract risks and the challenges 

with lack of oversight by the Coast Guard, and particularly this 

lack of competition by subcontractors, whether you would consider 

renegotiating the contract to ensure that the contractor really does 

adhere to the challenges of having competition. And what, specifically—if you were willing to do that, what would you put into that 

kind of change to the contract that would assure that we’re getting 

true competition? 

Admiral ALLEN. That’s an excellent question. If I might couch it 

in terms of the award term decision that was just made, that might 

be the best way to explain it. 

The evaluation of the base award term that was just completed 

focused on operational effectiveness, total ownership cost, and customer satisfaction as criteria by which we were going to judge the 

performance of integrated Coast Guard systems. It was clear to us, 

as we moved through the first award period, that issues like competition—and we also had concerns in logistics and management 

and execution of the program, as have been raised here—as part 

of the award term decision process to move forward, we were allowed to award up to 60 months in the first award term. We only 

awarded 43, based on the evaluation factors that I just stated. But, 

as we move forward, to ensure that we’re going to address the 

issues that you’ve raised, we have changed the criteria set by 

which we are going to evaluate integrated Coast Guard systems. 

It’s going to consist of cost control, operational effectiveness, program management and execution, logistics, and the fifth one is 

competition, ma’am. 

Senator CANTWELL. Does that mean you’re going to renegotiate 

that contract, or does that mean you’re—— 

Admiral ALLEN. Well, we’re going to—— 

Senator CANTWELL.—just holding them—— 

Admiral ALLEN.—evaluate their performance against whether or 

not they are using competition. 

40 

Senator CANTWELL. And what’s the time period by which you’ll 

judge whether they meet the criteria that you’re laying out for 

them? 

Admiral ALLEN. It could be up to—it could be the 43-month 

award term that was just announced. In other words, this is the 

criterion by which to judge there will be any—how we will proceed 

after the 43-month period, ma’am. 

Senator CANTWELL. And now that you’ve gone through that exercise, if you were starting fresh on this, what kind of changes would 

you make to the way that these contracts are awarded? 

Admiral ALLEN. Well, I think the five areas that we’ve noted are 

the ways we would change them, because that’s what we have 

changed. It includes a focus on logistics and a focus on competition. 

And we agree on that. 

Senator CANTWELL. Mr. Caldwell, your recommendation is to develop a comprehensive plan for holding the system integrator accountable? 

Mr. CALDWELL. Yes, Senator Cantwell, that was one of our recommendations, and we’ve looked at it in detail. It is partially implemented, and some of the things that Admiral Allen has just 

gone over discuss that. 

To get at your larger question, you seem to be asking whether 

the systems acquisition was approached the right way? And that’s 

an area where we did have a recommendation to capture comprehensive data on what the traditional approach would have cost, 

versus the approach they’ve taken now. And that’s one recommendation the Coast Guard has decided not to implement. And 

this is one where, without certain data being collected, I’m not sure 

we’ll ever know that. 

Senator CANTWELL. We’ll ever know what? I mean, just to be—— 

Mr. CALDWELL. Well, I think, from a larger perspective, of government acquisition of major systems, it’s a very innovative approach that they’ve taken. We’ve found that some of the risks that 

we’ve talked about in our earlier reports, going back several years, 

have come to realize, in terms of schedule or skippage and things 

like that—— 

Senator CANTWELL. Could you elaborate on what you mean by 

‘‘innovative’’? 

Mr. CALDWELL. Well, they’ve contracted out the contract management, basically, in terms of having very open—instead of coming 

up with very detailed requirements of individual assets and systems, the Coast Guard has said—and I think this is consistent with 

some of the guidance Coast Guard got from OMB and some other 

larger trends in government acquisition—to focus on capabilities. 

We don’t need a ship that does this, or we don’t need a helicopter 

that does this other thing. What we need is the capability to do 

this type of mission. And then, let the contractor come up with 

what the details of that will be. And the contractor, then, has a 

larger role than the traditional role, in terms of actually developing 

the requirements, which, in traditional acquisitions, is done within 

the government side. 

Senator CANTWELL. I’m not sure I understand what you’re saying 

about the feature set that you get from basically hiring a contractor 

to do the subcontracting work, versus a normal procurement procVerDate Nov 24 2008 12:39 May 06, 2011 Jkt 066171 PO 00000 Frm 00044 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\66171.TXT SCOM1 PsN: JACKIE
41 

ess. I really want to understand this point, because you’re saying 

innovation has brought us a better product, but certainly it has 

brought us big delays, cost overruns, and a lack of competition. 

And, obviously, juxtaposed to other procurement programs that we 

have for the Federal Government, it is a very different program. 

So, I want to understand exactly—with these cost overruns and 

challenges and delays, exactly what innovation is getting us. 

Mr. CALDWELL. I did not say that innovation brought us a better 

product. What I had said was that the approach the Coast Guard 

took was innovative. And the difference there is, I think, partly because of limitations in the acquisition capacity that the Coast 

Guard had when they came up with Deepwater, as well as a new 

approach to define capabilities, but not the specific requirements of 

individual assets, the Coast Guard took the approach that they did 

with the systems-of-systems integration approach. 

Senator CANTWELL. Yes, Admiral Allen, did you want to address 

that? 

Admiral ALLEN. If I could just add on to what Mr. Caldwell said, 

our thought, at the start of the acquisition, was to take an area of 

operation, in the ocean, the missions that had to be performed 

there, and not assume that we would do a one-for-one replacement 

on either an aircraft or a cutter, and that both the cutters and the 

aircraft that we procured would be connected by a network to make 

them interoperable. And we asked industry to propose a solution 

to us that this would be the type of portfolio of assets, and the network that would combine them would produce your mission results. 

That’s what they provided to us in their offer, and that’s what we 

awarded the contract based on in 2002. The assets, as they’re being 

delivered, are capable, and they are an improvement over the existing assets. The timing, the cost, and the schedule are issues that 

we’re dealing with right now. But the innovative approach to buy 

this as a system, we believe, remains sound. I walked through the 

National Security Cutter in Pascagoula last week, and it is an extraordinary vessel compared to the 378-foot cutters that are patrolling in the Bering Sea right now. So, it’s a matter of delivering the 

system. 

Senator CANTWELL. And you don’t think that you would have 

gotten that under a different procurement process? 

Admiral ALLEN. Well, there would have been a couple of challenges. And this is after the fact, but I think these are the challenges we would have faced. We would have faced the challenge of 

taking new cutters bought at different periods of time, and new aircraft, and integrating them, in terms of communications. One of 

the first things we had to do after we bought the H–60 aircraft that 

we have right now, we found out that there was a problem with 

high-frequency communications due to locations of antennas and 

emitter problems, and we had to go back and retrofit. We were trying to do away with those types of configuration problems by actually buying a network. 

The other issue with using the systems integrator was that the 

Coast Guard has no equivalent of the Naval Sea Systems Command, SPAWARS, or NAVAIR. In other words, we don’t have a 

body that just does that full time, because we don’t buy these types 

42 

of articles that often, so there is no capacity or competency in that 

area inside the Coast Guard to do that integration. 

Senator CANTWELL. What if you did have that capacity? 

Admiral ALLEN. Well, moving forward, that is something we need 

to think about developing inside the Coast Guard. 

And the third area is just the personnel strength to be able to 

execute some of this stuff with the staffing limitations that we 

have. 

I was going to get to it later on, but we are—I am going to take 

a baseline look at our acquisition structure inside the Coast Guard 

within the next 90 days, and make recommendations to the Department to align with the new Chief Procurement Officer organization 

and look for some better—organizational structure that will 

produce better performance for the Coast Guard. 

Senator CANTWELL. I’d be very interested in seeing your recommendations on that. I, like Chairwoman Snowe, remain very 

committed to the Deepwater Program. They’re resources that we 

surely need and have delayed for a long time. But we also are paying a high price for this innovation that you are discussing here, 

and I think my sense of the situation is, we need to go beyond what 

you have implemented for the next 43 months, and be aggressive 

at looking at the structure and the alternatives that would help 

some of that core competency be retained in the Coast Guard, because I think not only will we get the product that you’re actually 

looking for, we’ll actually get it cheaper, and probably on schedule, 

because those outlines of core issues in capabilities will be done by 

the customer, as opposed to a contractor—not that there isn’t great 

contract experience out there; I’m simply saying I think cutting the 

cost of the Deepwater Program is going to be a big challenge for 

us to move forward on getting the end product that we really want 

and having the faith of our colleagues to actually make the appropriation commitment there. And we would hate for that appropriation commitment to drag because of concerns about cost overruns 

or delays. 

I know we’ve been joined by another colleague, Madam Chair, 

but if I could just ask the Admiral about the Oil Spill Liability 

Trust Fund and where he thinks we need to go with that trust 

fund, whether we’re going to run out of resources, given what we 

just saw in the Gulf and what we had to do for cleanup after 

Katrina and Rita. What are your thoughts about addressing the 

possibility of that fund’s depletion in the future? 

Admiral ALLEN. Well, first of all, let me thank the Committee 

and the Members of Congress, in advance of Katrina, for recognizing that we had a problem with the depletion of the Oil Spill 

Liability Trust Fund, when the tax on crude oil had lapsed and the 

ability to replenish that had stopped, and we took care of that 

problem, just to find ourselves in the midst of the significant response associated with Katrina. 

And what we found in Katrina, which was quite unprecedented 

in Coast Guard history, was an interaction with the Oil Spill Liability Trust Fund as it relates to oil spill and cleanup, and the 

role of the Disaster Relief Fund and mission assignment to the 

Coast Guard under ESF–10, which is the oil and HAZMAT response, and how those two interact. And what we have found out 

43 

is, these are two funding mechanisms that have never interacted 

at this level before in the history of those two statutory programs, 

if you will. We are working, right now, on ways to make sure that 

as we work through the mission assignment process with FEMA, 

we haven’t done indelible harm to the Oil Spill Liability Trust 

Fund and depleted it where it would not allow us to be able to respond to a threat of a spill in the future. I think you’re going to 

see us come up with some fairly constructive recommendations on 

how we need to move forward, not only with the Oil Spill Liability 

Trust Fund, but how the Coast Guard interacts with FEMA during 

a Stafford Act response, in terms of mission assignment. 

Senator CANTWELL. You’re going to look at alternative approaches to addressing claims and how to make sure that we don’t 

have the depletion of the fund, though? 

Admiral ALLEN. That’s correct. There are a lot of competing interests here, too. I mean, if there’s—one of the basic tenets of our 

oil spill response structure is that there is a responsible party. 

You’re not precluded from proceeding to cleanup—this happened in 

the wake of the Exxon Valdez, with the Oil Pollution Act of 1990— 

but there is the notion of a responsible party, which you go back 

and recoup the cost of cleanup from, if there is a responsible party 

to do that. The interaction of that role of the responsible party is, 

you move into a Stafford Act response after an emergency. And our 

mission assignment, I think, needs to be clarified. And we’d be 

happy to provide more information to the Committee. 

Senator CANTWELL. Thank you, Admiral. 

Thank you, Madam Chair. 

Senator SNOWE. Thank you, Senator Cantwell. You make an excellent point, as well. I think it is critical that the Coast Guard develop an in-house expertise with respect to the oversight of Deepwater. 

I think if you’re talking about ‘‘ruthless execution,’’ and ‘‘ruthless 

oversight,’’ we should position that accountability within the Coast 

Guard, to ensure that they have the expertise to manage and to 

oversee this program. I just see it being unrealistic—sustaining 

this timeframe of 20 to 25 years. We’re just beginning the program, 

and we already have cost overruns, extension of the schedule, and 

design problems. I question whether or not the Coast Guard is 

going to be in the best position to meet all these responsibilities. 

Not even anticipating what occurred last fall, think about the demands that were placed on the men and women of the Coast 

Guard, and their assets. How do you continue to meet those responsibilities, in addition to homeland security, and maritime response? It makes a compelling case for figuring out how to do this 

differently while sustaining the appropriations for this program. 

Deepwater is very sensitive to appropriations, year to year, and can 

ill afford any decrease because that could affect our ability to maintain the timetable of this program on an annual basis. 

Senator Lott? 

44 

STATEMENT OF HON. TRENT LOTT, 

U.S. SENATOR FROM MISSISSIPPI 

Senator LOTT. Thank you. Thank you, Madam Chairman, for 

having this hearing and for the leadership you provide in these 

critical areas. And, I must say, I think you’re looking especially resplendent in your Seersucker outfit today. 

[Laughter.] 

Senator SNOWE. See, I called up Trent this morning to see what 

he was wearing. 

[Laughter.] 

Senator LOTT. It’s a growing trend in Maine, I understand. 

Senator SNOWE. Oh, yes. 

[Laughter.] 

Senator LOTT. But we’re together when it comes to ships, so—— 

First, Admiral Allen, thank you, again, for your service—thank 

you for your service to our country, and particularly to the Coast 

Guard, and your effort to help us to try to bring some order out 

of the chaos that we all had to deal with after Hurricane Katrina. 

We were hit with a devastating blow, more than any of us realized 

in the immediate aftermath. And, as we look back on it, I think we 

still sometimes underestimate, you know, the catastrophe that we 

had there, both the hurricane in Mississippi, the flood in Louisiana, 

and the difficulty in dealing with it afterward. I have been particularly critical of some Federal response, particularly at FEMA and, 

to my great disappointment, even the U.S. Army Corps of Engineers. But one part of the Government that really did a fantastic 

job, in my opinion, was the Coast Guard. I’ve said it publicly before, and I’m going to say it every chance I get, the Coast Guard’s 

response before the hurricane, and their rescue efforts in the immediate aftermath, the leadership you provided, the fact that you 

were responsive and you did help bring some modicum of order out 

of all that, is greatly appreciated. So, I was delighted to see that 

you were going got be the Commandant. And you’ve got some work 

to do here, but thank goodness it’s a good, strong agency, good people, and we appreciate the service you provide to our country and 

to the men and women in this country—particularly those of us 

that live along the coastline. 

Now, having said that, I was there when we were talking about, 

you know, creating the Department of Homeland Security, this 

mammoth new department, where we brought in, whatever, 120- 

something agencies and bureaus, you know, parts of other departments, and brought it in under this new umbrella. I remember 

Senator Ted Stevens was particularly antsy about putting Coast 

Guard in Homeland Security and enveloping it in another department. I’ve always wondered why Coast Guard has been bumped 

around the way you have. You were—you know, I guess, at some 

point, maybe you were affiliated with the Pentagon, but then you 

were at Transportation, and now you’re at Homeland Security. 

Where else have you been? Don’t answer the question, but—— 

[Laughter.] 

Senator LOTT.—Senator Stevens was right in saying—questioning that move, but he also insisted that we kind of wall you off 

in your role, in your ability to act as the Coast Guard, from, you 

know, total, you know, control by the Department of Homeland SeVerDate Nov 24 2008 12:39 May 06, 2011 Jkt 066171 PO 00000 Frm 00048 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\66171.TXT SCOM1 PsN: JACKIE
45 

curity. Has that been achieved? Has it worked? Is it working? Is 

there a problem with the sort of unique role and position you have 

in the Department of Homeland Security? 

Admiral ALLEN. Senator, I think it has worked. As you know, 

based on the efforts of this Committee and others in the Congress 

when the Coast Guard was shifted over, Sections 888 and 889 of 

the Homeland Security Act identified the mission set and that 

would be untouched as we moved over. That allowed us a certain 

amount of stability and maturity, I think, as sustained Coast 

Guard operations, but also allowed us to be a really contributing 

member of the Department as we’ve gone in. 

And I think we are a better organization for being in the Department of Homeland Security, for the following reasons. Number 

one—and I’m pleased to announce—ever since we went into the Department of Homeland Security, we’ve gotten our appropriations by 

1 October. 

Senator LOTT. You did what? 

Admiral ALLEN. We got our appropriations by 1 October. 

Senator LOTT. That’s a novel thing. 

[Laughter.] 

Admiral ALLEN. Second—I’ll take the case of FEMA, because 

you’re well aware of the response down in the—— 

Senator LOTT. Sure. 

Admiral ALLEN.—Gulf. Our interaction with FEMA has increased dramatically since we went into the Department, not just 

associated with the Katrina response. We are a better organization 

for having FEMA in the Department working with us, and we 

think FEMA is a much better organization for being in the Department with the Coast Guard and working together. We have 

predesignated Federal officials for this hurricane season from the 

Coast Guard, working with FEMA Federal coordinating officials in 

advance, looking at evacuation plans, trying to address problems, 

so we won’t have to revisit what happened last year. 

Senator LOTT. You sort of came to the defense of FEMA. And I 

think that’s unfortunate. But I’m glad to hear you’re working together. They have not functioned well. They have not—the chain 

of command is convoluted and chaotic. You know, when you try to 

get money from here to there, I mean, it goes from—what? It has 

to be approved by OMB. Treasury has to release the money, I 

guess. It goes to FEMA. It goes to MEMA. It goes to the Army 

Corps of Engineers. It goes to some contractor. It’s endless. 

One of the reasons why I think you were effective in rescue and 

in the aftermath of the hurricane, including, you know, clearing out 

obstacles out of navigable channels that we needed cleared quickly, 

was because you weren’t dealing with a tremendous chain of command. You didn’t have to check with the Secretary of Homeland 

Security to do your job. I think that’s part of FEMA’s problem. 

Now, I do like the idea of coordination, cooperation, planning in advance, but they have a huge problem with chain of command. 

Now, why were you able to do such a better job in your role at 

Coast Guard than anybody else at Homeland Security? 

Admiral ALLEN. Well, under Homeland Security Presidential Directive 5 in the Homeland Security Act, the Secretary is the National Incident Manager for non-Title X operations. And I felt comVerDate Nov 24 2008 12:39 May 06, 2011 Jkt 066171 PO 00000 Frm 00049 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\66171.TXT SCOM1 PsN: JACKIE
46 

pletely empowered, as a principal Federal official, to do what needed to be done down there. And I was acting at one level above the 

FEMA Federal coordinating official. And, at one point, I was designated as the FEMA Federal coordinating official, which was 

somewhat unprecedented. 

Senator LOTT. And things got better almost immediately. 

Admiral ALLEN. Well, I felt I was empowered to act, sir. 

Senator LOTT. Well, that’s the key. But—well, I appreciate your 

time and your comments on that, and what you do. I know my time 

is out. But if you would bear with me just a minute more. 

On the Deepwater Program, this is critical for the future of the 

Coast Guard. I mean, I’m very familiar with the Coast Guard, particularly in the Gulf and the—you know, the tin cans you’re still, 

you know, having to use down there, and doing the best you can 

with that, but you need a different kind—you need modern crafts, 

you need a—you know, a fleet that’s different from what you’ve had 

in the past. I know there have been questions—and I don’t want 

to ask you to repeat it—but, you know, overall, how do you feel? 

I mean, there have been some kinks, there have been some problems. You—you’re having to deal with that. It was a new thing for 

Coast Guard, and it was going to have to naturally be evolutionary, 

in a way. But, how do you see it right now? Just a generic answer, 

if you would. 

Admiral ALLEN. Well, as I stated earlier, I think the systems approach, where we’re looking at how the cutter, aircraft, and sensors 

all interact is a very sound decision. Different pieces of that have 

evolved differently. I think we have to lock down requirements. We 

have to get producible designs. And we have to get to ruthless execution and produce these things. We have some—certain platforms 

that are problematic right now. One is the patrol boat. But I can 

tell you, a week ago today I was in Pascagoula. I took the Master 

Chief of the Coast Guard, and we walked from the stem to the 

stern, and down to the lower decks of the new National Security 

Cutter. That’s going to be an outstanding operating platform for 

the Coast Guard. So, we need to get by the design issues, get these 

things into production, and then I’ll be in a position to advise you 

all on acceleration and what the art of the possible is in getting 

these tools to our people as fast as we can. 

Senator LOTT. Yes. Well, I think it’s critical for the future of the 

Coast Guard. We want it done right. We don’t want to waste 

money. So, I know you’re going to give it your utmost attention, 

and I hope you will. And we’ll do our part. And, Pascagoula, you 

said the magic word. 

[Laughter.] 

Senator LOTT. Thank you, Madam Chairman. 

And thank you, Admiral Allen. 

Admiral ALLEN. Thank you. 

Senator SNOWE. Thank you. Thank you, Senator Lott. 

Admiral Allen, obviously you’re the head of America’s lead agency for maritime security. One topic you and I discussed on the 

phone was that of port security, which obviously is a vital issue. 

One aspect of that emerged recently and publicly. I sent a letter 

to your predecessor about it, and I received a response last night. 

I appreciate that, and I’d like to have you discuss it this morning. 

47 

I think it is crucial for us to understand exactly how the Coast 

Guard approaches the boarding of commercial ships entering the 

United States. In your letter, you said that you use a risk-based 

approach. Now, there are public reports indicating that the Coast 

Guard was giving advance notification about potential boardings to 

commercial ships before they enter the United States. I’d like to 

have you clarify for this Committee what exactly is the policy of 

the Coast Guard, regarding the boarding of ships. What is a riskbased approach? Can we feel confident in that approach to identify 

any security threats? Do you give advance notification? 

Finally, I want to point out the fact that only 2 percent of the 

containers are inspected that enter the United States. As you 

know, Dr. Stephen Flynn, from Council of Foreign Relations, who 

has testified on numerous occasions, has indicated that we should 

have 100 percent inspection of the containers entering the United 

States. And yet, we only have 2 percent, at this point. So, can you 

give us your perspective on this question? This is one of the foremost concerns in the Congress about our ability to address the vulnerability within our port security system. I don’t think there’s any 

question that this is truly a major vulnerability. 

And so, I’d like to have you address the question of advance notification of boardings, and then the issue of container inspection. 

Admiral ALLEN. Yes, Madam Chairman, I’d be happy to. 

First of all, if I could take you back to the several days following 

9/11. The Coast Guard instituted an emergency rule that required 

a 96-hour advance notice of arrival for commercial shipping approaching the United States. That was done to allow us to vet crew 

lists, cargo, and the background of the vessel, and see whether or 

not it posed a risk to the United States. If it did, the vessel was 

denied entry until we could do an offshore boarding, most of the 

time with an armed boarding party. If we thought there were controls that needed to put be on the ship to bring it safely into port, 

we instituted them, at that point. 

Since 9/11, with the passage of the Maritime Transportation Security Act that has laid out other requirements for vessel security 

plans and facility security plans, we have a tiered approach to dealing with vessels as they come in. And let me start with the most 

high-risk to the lowest risk. And we do use a risk-based method in 

conducting our boardings. 

The first level is, if there was specific intelligence that would cue 

us to understand there’s a problem onboard that needed to be dealt 

with. If we believe there is a dangerous situation on a vessel, we 

don’t want to deal with it in a port. If you deal with a weapon of 

mass destruction on a vessel at the sea buoy, you’re dealing with 

consequence management, at that point. We have protocols in place 

within the interagency to do coordination with either DOD, the 

FBI, and other folks, that allow us to do boardings far out at sea. 

And those are no-notice boardings. The cutter comes over the horizon with a boarding team. Sometime they can be vertically inserted 

with a helicopter. And we would board those ships to address the 

threat as far offshore as we can. 

The second area would be as part of a normal screening process. 

And this would be the same as if you were arriving on a commercial airline and you had to clear Customs, and somebody ran your 

48 

name, and there was a hit. When you arrived in port, you would 

be sent to secondary, and there would be a screening done. The second level of inspection would be if we have reason to believe that 

a ship needs to be inspected before it enters port. We would then 

direct it to an anchorage, or we would meet it offshore with a 

boarding party and make sure that the paperwork was checked, at 

which point we could ascertain that the information provided with 

the advance notice of arrival was correct. 

The third category would be a normal port call of a ship that has 

been inspected before. It’s been ascertained that it did not pose a 

threat. They would come into the dock, do their normal Customs 

clearance, Immigration clearance, and be allowed to go ahead and 

proceed with their cargo operations. We may do spotchecks at that 

point to make sure they’re in compliance with the International 

Ship and Port Security Code. 

But generally it’s those three areas that we operate in, and our 

Captains of the Ports use risk-based decisionmaking models, and 

we have a matrix that assigns points on the flag of the ship, past 

performance, that would lead us to believe whether or not there’s 

a problem on the vessel. 

Senator SNOWE. But isn’t it still a problem that we only inspect 

2 percent of the containers? That really does pose a significant vulnerability, frankly. When you think about the fact that we have 6 

million containers coming into the country every year and 7,500 

commercial vessels, they present infinite possibilities for disaster 

because we don’t inspect enough containers. 

Admiral ALLEN. Yes, ma’am, it’s a good point. What I tend to 

look at when I think of port security and the maritime security regime for this Nation, I think of the totality of the threats and the 

vulnerabilities we may have to deal with. And, you’re right, containers do present a vulnerability. Since the events of 9/11, we 

have conducted both threat and vulnerability assessments for the 

top 55 ports in the United States to let us know what is vulnerable 

and what kind of threat would be effective against those facilities 

or those vessels. In some cases, containers constitute a vulnerability. In other cases, as in Miami, it might be cruise ships. And 

then you have the threat that might be successful against it. 

I believe—and this is my opinion—that over the next couple of 

years, we will solve the container problem with technology. There 

are nonintrusive technologies that are being developed that will 

allow us to, in a useful amount of time, be able to check what is 

in those containers, especially high density materials, based on 

things like advanced spectroscopic portals and things like that. It 

needs to be done. I think the bar has been set on where the Department needs to go. Customs and Border Protection and the Domestic Nuclear Detection Office are working on the technical fix for 

that, and I think we need to be moving ahead rapidly, because 

there’s an issue of public perception on the safety of containers. 

I would tell you, from the Coast Guard side, we also need to be 

concerned about the threat from vessel-borne improvised explosive 

devices, just from a vulnerability standpoint. In my view, that is 

a serious issue that probably needs to be addressed more than it 

has been in the past. 

49 

Senator SNOWE. And you only have 20 inspectors, as I understand it, with worldwide compliance. Is that true? 

Admiral ALLEN. Yes, ma’am. There are two pieces of frameworks 

that were established after 9/11. One is the Maritime Transportation Security Act, that lays out the procedures and rulemaking 

inside the United States for security plans for facilities and vessels. 

The International Ship and Port Security Code, which was negotiated in IMO at the same time with the MTSA passage, calls for 

international inspections of ports. That’s where we have the 20 people—it is the foreign ports—and certifying that they are in compliance. 

Senator SNOWE. Do you think that’s sufficient? 

Admiral ALLEN. We could use more. 

Senator SNOWE. How many would you—— 

Admiral ALLEN. We anticipate, if we could increase the number 

of personnel assigned to that by 20 or 30, we could drop a cycle, 

which is currently between 4 and 5 years, down to 2, which we 

think is more acceptable. 

Senator SNOWE. OK. And you’ve requested $2 billion for ports, 

waterways, and coastal security. That’s 24 percent of the entire 

budget. Is that sufficient? 

Admiral ALLEN. Madam Chairman, we’re kind of talking apples 

and oranges here. We have almost shifted to the mission-mix issue. 

Could I answer that question, if that’s all right? 

Senator SNOWE. Yes. OK. 

As part of our budget submission in the Coast Guard, we take 

the mission employment hours, and we load those with costs due 

to an—what we call a mission cost model. It’s an algorithm. And 

we’re able to say, based on the number of hours that we operated 

last year, in taking the entire budget of the Coast Guard, we can 

establish a pie chart on how much each program costs. 

If you move forward, and you try to use that for predictive purposes and budgeting, you run a real risk that it won’t match the 

reality of that particular year. And I think the—especially in nonhomeland security mission areas, in search-and-rescue and others, 

that may not be an accurate prediction of what we’re actually going 

to do. 

The fact of the matter is, SAR comes first. You can say you’re 

going to do so much SAR, but the fact of the matter is, you’re going 

to do what SAR you have to do. It’s a demand function, and we will 

do that. 

I would submit to you that the pie charts we provide you are a 

construct to better understand how we allocate cost to employment 

hours, but don’t necessarily predict how we’re actually going to execute the mission out there. We will do what needs to be done, 

based on risk assessment in the areas of responsibility we’ve given 

to our commanders, and SAR will always come first. 

Senator SNOWE. No, I understand exactly what you’re saying. 

And you’re absolutely right. 

And on the question of inspectors, I think we ought to work further on that issue alone, because that obviously is an area that we 

obviously have to improve. 

Admiral ALLEN. Happy to do that, ma’am. 

Senator SNOWE. OK. 

50 

Senator Cantwell? 

Senator CANTWELL. Thank you, Madam Chair. 

I’m going to continue with questions about port security, because 

I think it is one of the important issues. And I don’t know if people 

understand that the Coast Guard has been given responsibility to 

actually look at the security system of foreign ports. I’m a very big 

supporter of any program that is point-of-origin, whether it’s people 

or cargo. If we think we’re going to wait until they get to the Port 

of Seattle or Port of Tacoma, it’s a little late, when it comes to 

these weapons of mass destruction. What we want to do is make 

sure—as you said, use technology, but make sure that the security 

starts at the point of origin. 

That is the Coast Guard’s responsibility, I believe. And I don’t 

know what you believe about the budget request and operational 

ability for you to carry out that mission, if you think that you have 

the resources there. And what do we need to do to get the International Maritime Organization to adopt protocols on security 

standards that would have us operating on a similar basis on an 

international scale, instead of just having the United States try to 

implement regimes here in the United States, at a point of time 

when it’s probably a little late, once that cargo or personnel actually reach the shores of our country? 

Admiral ALLEN. I’m in complete agreement with you, Senator. 

First of all, there’s a combination programmatic responsibility here 

between the Coast Guard and Customs and Border Protection Container Security Initiative and their C–TPAT program. Our piece of 

this relates to the international ship and port security protocols 

that were negotiated in IMO regarding the certification of the foreign ports. We have that piece. The issue related to advanced 

screening of containers is the Container Security Initiative, and we 

work very closely with Customs on that. So, they’re handling, actually, the throughput of the containers and how they are screened 

in the ports; we’re actually handling how the port is complying 

with the physical security standards for facilities and vessels that 

were negotiated in IMO. It is a shared responsibility, and we work 

closely with Customs and Border Protection. 

Following the passage of the Maritime Transportation Security 

Act we established, with the resources available, a certain inspections cycle that would allow us to complete the inspection of those 

ports on a 5-year cycle. As we move forward, if policy dictates it, 

that cycle will be shortened. It’s going to require more people. And 

we would support that. 

Senator CANTWELL. So, has funding been a primary issue on limiting the Coast Guard? 

Admiral ALLEN. I don’t think it’s been an issue. We just assumed 

a certain level of service. And if that certain level of service is not 

what we want, we need to change it, we need to add some more 

people to it. I don’t think the decision was made with prejudice on 

what the level of funding will be. We just established the 5 years 

as a standard. And if that’s not the standard we want, then we just 

need to source to the new standard. 

Senator CANTWELL. But you’re saying we haven’t inspected all 

the ports yet, correct? 

51 

Admiral ALLEN. We haven’t finished the 5-year cycle, that’s correct. 

Senator CANTWELL. It’s not as if we have the initial plan, correct? It’s not as if we have these international protocols agreed to, 

and then you’re going to investigate to see if they’re being carried 

out. 

Admiral ALLEN. The protocols have been ratified by the signatories of the Safety of Life at Sea Treaty via IMO. 

Senator CANTWELL. TWIC? 

Admiral ALLEN. Excuse me? 

Senator CANTWELL. TWIC? You know, personnel security measures and a standard by which all port employees will be—— 

Admiral ALLEN. Well, the Transportation Worker Identification 

Card is a domestic requirement related to the Maritime Transportation Security Act. There has not been an equivalent protocol—— 

Senator CANTWELL. Do you think we need one? 

Admiral ALLEN. Well, there is one working right now to—at least 

in the maritime area. It’s a seafarers’ identification card. We’re 

working with the International Labor Organization. 

Senator CANTWELL. Do you think that we need—— 

Admiral ALLEN. I think the notion of enrollment, with biometric 

data, an ability to verify, through a card, who holds the card and 

whether or not the person holding that card matches the biometrics 

on that card, is suitable for anything worldwide transportation. 

There ought to be international standard. And I don’t think anybody that I know would disagree with that. That ought to be the 

goal for all transportation systems in the world. 

Senator CANTWELL. But we don’t have that yet in place. 

Admiral ALLEN. Well, we can control, domestically, what we do 

through legislation and how we regulate the United States as a 

coastal state. And then we can negotiate, through IMO, international protocols, which, again, requires international consensus. 

It’s a question of unilateral versus multilateral solutions. 

Senator CANTWELL. I understand, but I’m saying, if you’re going 

to investigate ports, and we’re on a 5-year time—at least this Senator believes that a 5-year horizon without implementing those 

international protocols leaves us still with a great deal of vulnerability. And we’ve tried to put more resources into the budget—in 

fact, the Senate passed that, and then it was stripped out in conference—the resources that would have helped us pay for more of 

these international operations. 

Again, with so many cargo containers coming through 5 or 6 different ports in the State of Washington, this is a very big issue for 

our State, and for many parts of the East and West Coast in making sure that we’re getting international cooperation. So, I guess— 

just as when the Dubai issue came up, I think the Coast Guard responded within the framework of the questions being asked, but, 

at some point in time, I would like an assessment from the Coast 

Guard, from the bottom up—not, ‘‘Here’s what we did with the resources and the decisions that you all have made,’’ but, ‘‘Starting 

from the bottom up, here’s what the Coast Guard believes would 

be the international security regime that would help us.’’ 

Yes, I get that State and various other people then have to carry 

that out, but I think that we’re in this Catch 22 every year, Madam 

52 

Chairman, where, you know, the Coast Guard is dealing with the 

resources that it’s been given, and saying, ‘‘This is what we can get 

done.’’ And yet, we still believe that there are aspects of that mission that should be expedited or prioritized. And yet, then it comes 

to giving the Coast Guard the resources to do that, and we think 

that we do, at least from the Senate side, only to find out, then, 

that the resources are stripped out in conference. So, it’s a continuing cycle, and I think the public wants to know that we take 

this port security issue seriously, particularly from the international regime perspective. Again, with situations in the Northwest, with the Ressam case coming through Port Angeles with explosives, and the amount of cargo container traffic, and the targeting of various transportation vessels off the coast of any of our 

States; these represent threats that we’d like to see a better regime 

on. 

Yes, Admiral, go ahead. 

Admiral ALLEN. If I could make one comment. Senator, I think 

you’re right on target here. I think trying to look at what I would 

call the maritime security regime for a coastal nation-state in current global environment, you need to look at that as an entire system. And we tend to incrementally make changes since 9/11, and 

some of them were necessary right away, like the 96-hour advance 

notice of arrival, the extraordinary work done by this Committee 

on the Maritime Transportation Security Act. But, as I’ve been 

thinking about my transition into this job, I’ve also been thinking 

about, what is the end state? Where is it we want to be as a coastal 

nation-state managing the last global commons? What is the acceptable mix of both controls, freedom of navigation, freedom of access to the waters? And where does this end-state need to be, not 

only in terms of containers, but, ultimately, how we do manage 

shipping? What does this portend for recreational boating and the 

entire population that operates on the water out there? 

One of my goals is to come up with a Coast Guard strategy that 

can support my 4-year tenure that kind of lays out not only a legislative, but a regulatory and a budgetary, agenda about how you put 

this thing together in a meaningful system. And I would love to 

continue this discussion. 

Senator CANTWELL. Well, I’d love to see those recommendations, 

because I think the United States has a lot of leverage here. But 

we need to give you the resources and hear those recommendations 

so that we use that leverage and get this implemented on an international basis. I think for us to continue this debate and think 

that, you know, just issuing TWIC cards, you know, for longshoremen here in the United States, is, you know, going to be the solution, or inspecting cargo right when it gets to our ports, I think, 

is missing the point. We have to make sure, as you said, using 

technology from the point of origin, that that cargo and product is 

secure before it even leaves those foreign ports. And if we can get 

that international cooperation, then we’re certainly going to give 

U.S. citizens more security in this very, very busy area of traffic 

and movement of product. 

So, I will look forward to your thinking about this, and your legislative proposals. 

53 

Admiral ALLEN. I would just make a quick note. Just 2 and a 

half weeks ago, we successfully culminated an agreement at IMO 

on long-range vessel tracking, which is a significant step forward. 

If you’re going to be approaching a coastal State, and you’ve declared advance notice of arrival, it will be a requirement to be able 

to track that vessel out to 2,000 miles. If you’re transiting near a 

coastal State, it’ll be 1,000 miles. I think this—in my view, this is 

a significant breakthrough. But that is where we need to go. 

Senator CANTWELL. I agree. Thank you. 

Senator SNOWE. Admiral Allen, to follow up on this whole port 

security question—I was mentioning Dr. Flynn. He testified recently before a House Committee, and he indicated that both Customs and Coast Guard are grossly underfunded, given the major 

new missions for both of your agencies that have been added since 

9/11. Would you agree? 

Admiral ALLEN. Well, I think it becomes an issue of, how often 

do you want us to check what’s going on in the ports? There are 

standards that have been established for both facility and vessel 

security plans, which is our piece of the port. The container screening is largely a Customs issue, with radiation portal monitors, and 

so forth. Again, it gets back to the response I gave to Senator Cantwell. The original implementation of the Maritime Transportation 

Security Act presupposed a certain level of service, if you will, to 

support that Act. If, from a policy standpoint, we want more frequent inspections of facilities or vessels, or random spotchecks, that 

will require more people to do that. And the question is, what is 

the threshold, in terms of risk, that we’re willing to tolerate in the 

management of those facilities and vessels that are coming into the 

country? 

Senator SNOWE. Yes. But, as Dr. Flynn indicated it’s also a question not only of who’s moving containers, but what is being moved 

in those containers. And I think that’s what becomes a significant 

risk. So the question is, how are we going to tackle these problems? 

It’s been 5 years since 9/11, and we’re still grappling with this 

issue. And I guess it is a matter of technology. It is a matter of 

more resources. But is there something that you could recommend 

to this Committee in terms of where you think we could go to make 

some progress on this question? 

Admiral ALLEN. I think there is. And I’m probably moving away 

from my Coast Guard hat, and I’m probably speaking as a former 

Chairman of the Joint Requirements Council for the Department, 

having done the reviews of the Domestic Nuclear Detection Office 

and their work out at the Nevada test facility on the advanced 

spectroscopic portal that will allow us to do nonintrusive inspections, look for dense materials in containers, and allow us to 

proactively find out if there are any weapons of mass destruction 

in these containers. So, if you’re asking my opinion from that 

standpoint, I support what Vayl Oxford and the folks over there 

are doing. And I think the quicker we can put that technology out 

there in the ports, we will do better, more efficient, and quicker 

cargo screening. 

Senator SNOWE. OK. Well, I appreciate that. And I would appreciate any input that you could provide the Committee on that, because it’s obviously a constant source of concern. I think that we 

54 

have to make the commitment. We have held numerous hearings 

on this subject, and we’re making very little progress, in finding 

something that we can do now to make these investments and certainly show and demonstrate our ability to get the job done. Inspecting 2 percent of the containers is not sufficient. The other 

issue, is making sure foreign countries are helping with compliance. There are two sides to every shipment. We must also account 

for those countries who are willing to cooperate with us in that regard, before these containers ever leave their shores to come to the 

United States. How many countries would you think are cooperating, in that respect? 

Admiral ALLEN. If you don’t mind, I would answer for the record. 

It depends on what country, where they’re at. There are countries we are concerned about. There are two issues. One of them 

is compliance with the International Ship and Port Security Code. 

Are they managing the port in compliance with international 

standards? The other one is, what kind of technology are they 

using to screen containers? How robust is that? What is the level 

of detection, the level of—and you kind of need to put the two together, ma’am. 

Senator SNOWE. Yes. And I think that’s another dimension to the 

whole Dubai controversy. I think that, frankly we, in Congress, and 

we as Americans, don’t feel comfortable where we are today on the 

question of port security. We really have not appropriately addressed this issue that really does reflect a priority. So, I think, 

from that standpoint, we really have to do far more than we’ve 

done today. Obviously, that’s on our end, as well. I think we have 

to make great strides on this question. 

One other issue, since you don’t already have enough to do, 

you’ve now been given the additional responsibility of managing 

the airspace around the Nation’s capital. I gather you’re taking on 

this responsibility from the Customs and Border Protection agency. 

I also understand that Customs only transferred $5 million; whereas, you’re requesting an additional $57 million to assume this new 

responsibility. Can you tell us how you plan to go about it? 

Admiral ALLEN. Yes, ma’am. We intend, somewhere around the 

September–October timeframe—we’re working against that right 

now—to add five additional aircraft at Air Station Atlantic City, 

just to the north of us, as an operating base. We will deploy aircraft from there, down to the local area, at National Airport. There 

will be two aircraft that will be on strip alert to ensure that we 

can get one airborne. The difference in our response package and 

what we’re doing, versus what Customs and Border Protection did, 

was, Customs and Border Protection was brought in to support the 

inauguration, following 9/11, and basically temporarily deployed 

people to provide air intercept support to take a look at general 

aviation aircraft that might come into the Capital airspace. They’ve 

been supporting that in a temporary basis now for many years. We 

are going to permanently put capability in to support that. And the 

FY07 request is for the five aircrafts, the personnel to support 

them, the operating expenses, and the facility cost. And the amount 

that was reprogrammed within the Department to support that 

was not $5 million, it was $4 million. 

55 

Senator SNOWE. Well what was the problem with Customs and 

Border Protection? Why weren’t they able to perform this mission? 

Admiral ALLEN. They were operating in a domestic law enforcement capacity in response to incursions into the flight-restricted 

zone around the Capital. The Coast Guard operational model will 

be different than that. Because of our ability to operate with the 

Department of Defense under Title X, when these Coast Guard aircraft lift off, they’ll be under the tactical control of NORAD, and 

it will be part of the air defense mission, as opposed to a law enforcement mission that Customs and Border Protection was carrying out. 

Senator SNOWE. Mr. Caldwell, how do you view this new mission, 

in terms of the impact on the Coast Guard’s overall budget, as well 

as additional responsibilities outside the traditional areas? 

Mr. CALDWELL. In producing this testimony, we actually did 

some preliminary data-gathering from the Coast Guard, so we 

know a little bit about the impetus as to why the program was set 

up, but we haven’t done a detailed review of it. 

You know, the Coast Guard already has a fleet of helicopters. 

They’re using helicopters that are consistent with the rest of their 

fleet, so there will certainly be some impact, but it’s—you know, 

the Coast Guard does have that unique role of being both a military service and a law enforcement organization. We understand, 

also, the Coast Guard has had this mission before, at least on a 

temporary basis, for certain national security special events, like, 

I think, the Super Bowl down in Jacksonville and for a couple of 

other activities. 

Senator SNOWE. Will you be doing any further evaluation on this 

issue? 

Mr. CALDWELL. We have no plans to at this point. 

Senator SNOWE. All right. 

Any other questions? 

Senator CANTWELL. Thank you, Madam Chair. 

If I could, just on a couple of other budget priority issues that 

are of concern that are not reflected in the budget request. One is 

the icebreaker fleet and previous analysis of the need to replace 

and upgrade that, and if you could comment on that not being part 

of the priority request. And then, the Vessel Traffic System for collision prevention issues, also not being a priority as it relates to 

funding in this budget request. 

Admiral ALLEN. I’d be happy to do that. 

There is a report due this fall from the National Academy of 

Sciences that’s going to try and re-baseline what the Nation’s requirements are for polar icebreaking. There have been significant 

changes in both the Antarctic and the Arctic regions in recent 

years that I believe make this the right time to talk about that. 

The research that goes on in the South Pole Station is supported 

by McMurdo Base, which is where we break ice to allow that to be 

resupplied annually. It’s extremely important, for a variety of reasons, to the country, from environmental to national security and 

so forth. And I think on the other side, in the North Pole, we have 

a shrinking polar icecap that’s going to allow access to oilfields and 

economic exploitation, both in Russia, Greenland, United States, 

56 

and off the coast of Norway, that’s going to create more interests 

up there that need to be accounted for. 

Some of these things weren’t that visible a few years ago, when 

we established a baseline for the icebreaking fleet in 1990 by Presidential directive. It is my hope to establish a policy debate in the 

next 6 to 12 months that can lead us to a new established baseline 

on what kind of icebreaking capability this country needs to support what are now new evolved requirements in both the Antarctic 

and the Arctic. 

We have decisions to make on our two polar icebreakers regarding maintenance and replacement. We have one research vessel, as 

you know, the HEALY, which is being employed in the Arctic area. 

And we need to decide, as a Nation, is that the right amount of 

icebreaking capability? And if it is not, what do we need to do with 

the current fleet, and how are we to move forward? And that’s the 

reason I think that report this fall is going to be specifically important. 

One of the first things I did after assuming this job was reach 

out—— 

Senator CANTWELL. So, there’s not—— 

Admiral ALLEN. I’m sorry. 

Senator CANTWELL. If I could just interrupt. So, you’re not saying 

there’s less need. You’re saying you’re analyzing what the change 

in demand for icebreaking capabilities is. 

Admiral ALLEN. In the past, we’ve looked at the research requirements at the South Pole Station, the need to break out McMurdo. 

The requirements in Thule, Greenland, which we used to break 

out, were being handled by the Canadians. I think there has been 

a significant change in the potential requirements, both from an 

economic, science, and national security standpoint, that it probably is time to have that discussion again, that we had in 1999, the 

baselining requirements. 

Senator CANTWELL. And on the vessel—— 

Admiral ALLEN. If I could clarify, are you talking about automated identification systems, ma’am? 

Senator CANTWELL. The Vessel Traffic System, to make sure that 

you have a system to reduce the risk of vessel collisions—part of 

just having a better communication system to avoid vessel collision. 

Admiral ALLEN. Well, there are two systems right now that are 

interacting. One, we have current vessel traffic systems that have 

been established around the country at certain ports, not every 

port—originally established in the late 1980s and early 1990s—to 

prevent collisions, for the purpose of not having oil spills and degradation to the environment. What has happened since the passage 

of the Maritime Transportation Security Act are carriage requirements for automated identification systems that allow vessels that 

are within line of sight of each other to be aware of their presence, 

to reduce the risk of collision. That also enhances security, at the 

same time. 

It is a requirement where we have vessel traffic service systems 

in ports for vessels to carry those identification systems, so we can 

reduce the risk of a collision, but also improve security. 

Senator CANTWELL. I think what we’re interested in is the resources in the budget to make sure, in an area like Puget Sound, 

57 

where you have so much container traffic, so much tanker traffic, 

so much ferry transportation and recreational vehicle traffic, that 

those areas get the upgrades to that system. And I don’t think 

that’s reflected in the budget. 

Admiral ALLEN. If you’re talking about the specific infrastructure 

to support the VTS operations in Puget Sound, I’d be happy to answer that for the record and give you a breakdown of where we’re 

at right now and what the plans are for upgrades there. 

Senator CANTWELL. Thank you. 

Senator SNOWE. Thank you, Senator Cantwell. 

One final question, on Rescue 21 system. I know there have been 

cost overruns and problems in the development of that system, 

which is a replacement for the current system on national security 

in response to distress signals. What is the plan for that now? And 

I’d like to have you comment, as well, Mr. Caldwell. 

Admiral Allen? 

Admiral ALLEN. Mr. Caldwell and I talked about this yesterday, 

and I think probably the Coast Guard and GAO are in substantial 

agreement on the challenges that lie ahead in this project, and the 

way to move forward. 

This is an extremely important project, not only to the Coast 

Guard, but the United States. This is the replacement of our VHF– 

FM distress and calling system. This is the 911/mayday calling system for the Nation. It was first capitalized in the early 1970s. We 

don’t have the ability to direction-find when somebody calls in, and 

keep that information, and go back to be able to analyze it. And 

we had some significant cases in the 1990s that underscored the 

fact that this system was failing us, it was not supporting our mission or the national requirements. 

The Rescue 21 contract being executed by General Dynamics, in 

Scottsdale, Arizona, has provided a system that has significantly 

more capability, but we’ve encountered a couple of problems. One 

was the actual writing of the software code, and then the integration of the system to field it for initial operational test and evaluation. That caused schedule delays. And the cost of the contract rose 

dramatically. We have passed what we would call ‘‘operational test 

evaluation’’ now. We’re ready to field the system. But we have residual issues with the structure of the contract, the oversight associated with this, and cost controls that are embedded in it. 

We are in general agreement with GAO on what needs to be 

done, and it includes more executive involvement. We are standing 

up an executive oversight board. And I, myself, have personally 

called the CEO of General Dynamics, and we intend to personally 

work this as a leadership issue. 

But I would defer the details to Mr. Caldwell. 

Senator SNOWE. Thank you. 

Mr. Caldwell? 

Mr. CALDWELL. Senator Snowe, the Coast Guard has agreed to 

all of our recommendations, in terms of more executive-level oversight and more careful management at specific milestones. And I 

would mention that the problems with this contract, some of them 

were clearly the fault of the contractors, as opposed to the Coast 

Guard. The Coast Guard part was mainly lack of oversight—or, 

58 

when oversight was applied, it was just a little late in the cycle and 

could have been applied earlier when problems were known. 

The problem we’ll have at the operational level is that some of 

these locations that use these along the coast will have to wait 

longer, obviously, for the enhanced capabilities. And, in some cases, 

they’ve still got legacy equipment they’ve got to figure out how to 

maintain. Coast Guard had a moratorium on upgrades to the legacy systems, and—I guess I’m not quite sure what the status of the 

moratorium is. I know at least some locations we visited have 

taken some steps to spend some resources to keep these older systems running. 

Senator SNOWE. Well, it sounds like there are major deficiencies 

in this whole program. Frankly, it’s astounding, in terms of the 

cost overruns. I believe the program is from $250–$700-plus-million, and 5 years behind schedule? That’s a horrendous track 

record. What can we do? How do we make these contractors accountable? I, frankly, think it’s unacceptable to have those kind of 

cost overruns and be 5 years behind schedule. Talking about the 

Deepwater, and now looking at this experience as well, we may 

have to create some sort of standardized in-house expertise within 

the Coast Guard for management and oversight. Maybe there’s no 

other way to get that impetus and interest on the part of the contractors to remain accountable. I can’t understand it. But that really is an unacceptable track record, given where we are today, and 

the people and property these shortenings put at risk. 

Admiral ALLEN. I don’t disagree, Madam Chairman. I think there 

are a combination of issues. And you picked up the crosscutting 

team, and that’s the structure of the acquisition organization in the 

Coast Guard, and how we might optimize that, and also how we 

might manage these acquisitions in a standard process across the 

entire life cycle of the platform. 

In regards to this particular acquisition, one of the original challenges was, the contractor encountered significantly greater difficulty in writing the basic software code to deal with the digitized 

signals that were coming in and how they would be passed around 

and displayed, than they originally thought. And that drove cost up 

right at the beginning, and then there was a trickle-down effect 

that kind of just went through the contract. 

Another problem we encountered is the locating of the towers for 

these systems. We’re actually putting in new infrastructure around 

the country, and each site is different and has its own unique characteristics related to environmental issues and so forth. And so, 

those are some of the things that I don’t think were adequately understood at the outset. 

Senator SNOWE. Thank you. I’d like to work with you on this 

question, to determine what we need to do differently, because I 

think that this is something we would want to avoid in the future. 

I would also like to see what we can do to get this program back 

on track in any way feasible at this point. 

Admiral ALLEN. I would say, where the equipment has been installed, it’s performing really well. In Atlantic City and at Eastern 

Shore here, we’ve had a number of cases where it has exceeded, as 

far as distance offshore, our ability to locate a distress, and respond 

to it. And we are happy with it once it gets installed. 

59 

Senator SNOWE. Thank you very much. And I appreciate your 

testimony here today, and I appreciate your cooperation and your 

recommendations. And, Admiral Allen, I look forward to working 

with you in the future. You provide exemplary leadership to our 

country, and we thank you for taking the leadership of the Coast 

Guard. We truly appreciate it. 

So, thank you very much. This hearing is adjourned. 

[Whereupon, at 12:05 p.m., the hearing was adjourned.] 

(61) 

A P P E N D I X 

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. DANIEL K. INOUYE TO

STEPHEN L. CALDWELL

Question 1. I am extremely concerned by reports from the Coast Guard and the 

Government Accountability Office (GAO) that the Rescue 21 program is behind 

schedule, has significant cost overruns, and may not deliver the functionality originally promised. What are the GAO’s recommendations for this project? 

Answer. As we reported in May 2006, we found that a number of key factors contributed to Rescue 21 cost overruns and schedule delays. These factors include inadequacies in requirements management, project monitoring, risk management, contractor cost and schedule estimation and delivery, and executive-level oversight. For 

example, the contractor created a schedule that underestimated the time required 

to complete key tasks, and development took longer than planned, which led to 

delays in testing. Also, the Coast Guard stated that it had an executive-level oversight process that included semiannual and key decision point reviews. However, 

there is no evidence that these Rescue 21 reviews occurred prior to 2005. Consequently, according to the Coast Guard, the total acquisition cost for Rescue 21 has 

increased from $250 million in 1999 to $710.5 million in 2005, and the timeline for 

achieving full operating capability has been delayed from 2006 to 2011. 

However, our analysis of contractor performance trends indicated that the Coast 

Guard’s current acquisition cost estimate of $710.5 million is not viable. Our analysis showed that additional overruns will likely bring the total cost to $872 million 

unless critical changes are made. This includes a significant number of contract 

items that have not been completed as planned and must be renegotiated, which has 

caused uncertainty in the project’s schedule. Meanwhile, Coast Guard units operating without Rescue 21 face a high risk of failure with legacy equipment which 

could result in costly repairs. Also, until Rescue 21 is deployed, field units will likely 

continue to experience communication coverage gaps, which limit their ability to 

hear boaters in distress. To improve current cost and schedule estimates, the Coast 

Guard intends to conduct an integrated baseline review after contract items are renegotiated and expects to complete this review for 11 of the 46 Rescue 21 regions 

in the first quarter of Fiscal Year 2007. 

To more effectively manage the remaining development and deployment of Rescue 

21, we recommended that the Commandant of the Coast Guard ensure that Coast 

Guard executive-level upper management implement the following recommendations: 

• Oversee the project’s progress toward cost and schedule milestones and management of risks. 

• Establish a milestone to complete Rescue 21’s integrated baseline review, to include all renegotiated contract items. 

• Use the results of this baseline review to complete a revised cost and schedule 

estimate. 

Question 2. While maritime security is a top priority, we continue to rely on the 

Coast Guard for other missions, such as search-and-rescue, maritime safety, maintaining aids-to-navigation, and protecting our natural marine resources. In the 

aftermath of Hurricane Katrina, the entire Nation is now well aware of the life and 

death importance of these critical missions. Yet the Coast Guard’s Fiscal Year (FY) 

2007 budget would decrease funding for all six of its ‘‘non-security’’ missions. The 

Coast Guard has said that despite these cuts, they are meeting all of their performance goals for these missions. Is that true? 

Answer. Despite reductions in funding for non-homeland security missions, the 

Coast Guard met performance goals for 5 of its 6 non-homeland security programs 

for Fiscal Year 2005. According to Coast Guard documents, the agency missed targets for this program—living marine resources—in part, because of factors outside 

the agency’s control, such as hurricane damage, high fuel costs, and lucrative seaVerDate Nov 24 2008 12:39 May 06, 2011 Jkt 066171 PO 00000 Frm 00065 Fmt 6601 Sfmt 6621 S:\GPO\DOCS\66171.TXT SCOM1 PsN: JACKIE
62 

food prices—which created greater incentives for fishermen to violate fishing regulations. The number of non-homeland security performance goals met in Fiscal Year 

2005 is similar to the number of goals met over the last 3 years. For example, in 

Fiscal Year 2004, the Coast Guard met performance goals for 4 of the 6 programs, 

missing targets for the ice operations and living marine resources programs; in Fiscal Year 2003, the agency met performance goals for all 6 non-homeland security 

programs; and in Fiscal Year 2002, it met performance goals for 4 of the six programs, missing targets for the ice operations and search-and-rescue programs. 

In August 2006, we are reporting on the soundness of the performance measures 

used to track whether the agency meets its six non-homeland security performance 

goals, and the reliability of the data used in these measures. Specifically, we found 

that these performance measures are generally sound and the data used to calculate 

them are generally reliable, though some weaknesses exist. All six measures cover 

key program activities and are objective, measurable, and quantifiable, but three— 

those used to reflect performance for the ice operations, living marine resources, and 

search-and-rescue programs—are not completely clear, that is they do not consistently include clear and specific descriptions of the data, events, or geographic areas 

they include. While data used to calculate the measures are generally reliable, the 

Coast Guard does not have policies or procedures for reviewing or verifying external 

data used in the measures. As such, it is difficult to determine whether the marine 

environmental protection measure, is reliable as external data is used in its calculation and the Coast Guard’s review processes for this data are insufficient. 

Although the measures for the six non-homeland security are generally sound and 

the data used in their calculation are generally reliable, we discovered that two 

main challenges exist in using these measures to link resources to results. The first 

challenge relates to the scope of the measure—while each measure captures a major 

segment of program activity, no one measure reflects all program activities and 

thereby accounts for all program resources. The other challenge involves external 

factors, some of which are outside the Coast Guard’s control that can affect performance. For example, weather conditions can affect the amount of ice that must be 

broken, the number of navigational aids that need repair, and/or the number of 

mariners that require rescuing. As a result of these challenges, linking resources to 

results is difficult. The Coast Guard is aware of such challenges and has a range 

of ongoing initiatives to address them. However, it is still too early to determine 

how successful these initiatives will be at better linking resources to results. 

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. MARIA CANTWELL TO

STEPHEN L. CALDWELL

Question 1. I understand that Seattle and Port Angeles are among the next locations that Rescue 21 is to be implemented. While I’m happy to see upgrades to the 

existing legacy communications equipment in these two important cities in my 

State, I’m troubled by reports from GAO that Rescue 21 may not deliver on promised capabilities. Is it true that the system as delivered will not provide all of the 

capabilities originally planned? What will be compromised? 

Answer. It is true that under the current plans, Rescue 21 will not provide all 

of the capabilities that were envisioned earlier for the system. The Coast Guard 

originally developed Rescue 21 to include a component known as the Vessel SubSystem (VSS), which would allow the Coast Guard to track its vessels, specifically 

the 87-foot patrol boats, 47-foot motor life boats and 41-foot utility boats, via a visual display on computer monitors. However, VSS capabilities were deferred because 

the contractor could not meet the original contract requirements for simultaneous 

communications. While VSS has worked well on larger boats, the Coast Guard has 

experienced numerous problems with VSS on its 41-foot utility boats and 47-foot 

motor boats. According to Coast Guard officials, weather elements have caused problems with the computer screens onboard the boats, and there is not enough space 

onboard for personnel to man the equipment. As a result, in January 2006, the 

Coast Guard placed a stop work order on VSS. At the time of our briefing, in March 

2006, the Coast Guard and the Department of Homeland Security (DHS) were determining whether Rescue 21 should complete the development of VSS, or consider 

other sources for that functionality. In April 2006, the Coast Guard decided to descope VSS from Rescue 21, and is currently looking to secure VSS-like capabilities 

within the agency. In the interim, the Coast Guard relies on its vessels to periodically check-in with its communication centers regarding their location. 

Question 2. There have been reports that the area of geographical coverage will 

also be reduced—is that true? What geographical areas will not have access to this 

system? 

63 

1GAO, Contract Management: Coast Guard’s Deepwater Program Needs Increased Attention 

to Management and Contractor Oversight, GAO–04–380 (Washington, D.C.: Mar. 9, 2004). 2GAO, Coast Guard: Changes to Deepwater Plan Appear Sound, and Program Management 

Has Improved, but Continued Monitoring is Warranted, GAO–06–546 (Washington, D.C.: Apr. 

28, 2006). 3GAO anticipates that it will publish a report on its finding for this review in late April 2007. 

Answer. The existing National Distress Response System suffers from numerous 

gaps in communications coverage. For example, in some areas the Coast Guard cannot hear calls from mariners in distress or communicate with other Coast Guard 

vessels. Rescue 21 was intended to improve these coverage gaps. In a February 2006 

hearing before the House Appropriations Committee, the Coast Guard presented 

Rescue 21’s communication coverage capability as 90–98 percent out to 20 nautical 

miles from the shore, which would limit the communication coverage gaps to 10 percent or less in the United States. At the time of our briefing in March 2006, Rescue 

21 had been implemented at two Coast Guard Sectors, Atlantic City, NJ and Eastern Shore, MD. Since then the Coast Guard has begun system testing at two additional Sectors in the Gulf Coast Region—Mobile, AL and St. Petersburg, FL. The 

Coast Guard also reports that it has begun construction of Rescue 21 in Seattle and 

Port Angeles, WA. 

Since Rescue 21 has not yet been implemented in most Coast Guard Sectors, thus, 

it remains unknown at this time the full extent to which they will experience coverage gaps. 

Question 3. GAO has testified that only 5 of 11 specific recommendations to improve Coast Guard management of Deepwater—provided in March, 2004—have 

been implemented. Why has Coast Guard failed to fully implement these recommendations? 

Answer. GAO believes the Coast Guard is in the best position to answer why it 

has not fully implemented these recommendations. However, here is a summary of 

GAO’s areas of concern and the status of Coast Guard implementation. GAO’s past 

concerns about the Deepwater program have been in three main areas—ensuring 

better program management and contractor oversight, ensuring greater accountability on the part of the prime contractor (system integrator), and creating sufficient competition to help act as a control for costs—and GAO made a total of 11 

recommendations to address these concerns.1 In April 2006, GAO reported to you 

on the status of the Coast Guard’s management of its Deepwater program.2 This 

report was the basis for GAO’s comments during the testimony on the Coast Guard’s 

actions to implement the recommendations. At that time, GAO noted that the Coast 

Guard had fully implemented 5 of the 11 recommendations and had partially implemented an additional 5 recommendations. The Coast Guard disagreed with and declined to implement the remaining recommendation that pertained to updating its 

cost baseline to determine whether the Deepwater acquisition approach is costing 

more than a conventional acquisition approach. 

On October 4, 2006, GAO provided technical comments on a draft report by the 

Coast Guard addressing the status of the GAO recommendations, as required by 

Sec. 408(c) of the Coast Guard and Maritime Transportation Act of 2006 (H.R. 889). 

In commenting on this draft report, GAO noted that because it has ongoing work 

involving the status of the recommendations requested by the House Appropriations 

Subcommittee on Homeland Security,3 it is not specifically commenting on the sufficiency of the Coast Guard’s efforts to address the recommendations. As a result, the 

following is a synopsis of the status of the 5 partially implemented recommendations 

as of the date of GAO’s last report, April 2006. 

Recommendation 1: Improve integrated product teams (IPT) responsible for managing the program by providing better training, approved charters, and improving 

systems for sharing information between teams. 

Actions Taken: The Coast Guard has taken some actions, such as approving IPT 

charters, providing IPT training, establishing oversight and conflict resolution entities for the IPTs, and improving collaboration with the system integrator. 

Status as of April 2006 Report: While the Coast Guard has taken some actions, 

GAO does not consider the actions taken to be sufficient to consider the recommendation to be fully implemented because it is too soon to tell whether the actions taken are sufficient to effectively eliminate the problems. 

Recommendation 2: Provide field personnel with guidance and training on 

transitioning to new Deepwater assets. 

Actions Taken: The Coast Guard has taken some actions, such as placing more 

emphasis on outreach efforts to field personnel and including field personnel on 

IPTs. 

64 

Status as of April 2006 Report: While the Coast Guard has taken some actions, 

GAO does not consider the actions taken to be sufficient to consider the recommendation to be fully implemented. In particular, our discussions with key personnel make it clear that field staff have little information about maintenance and 

logistics plans for the new Deepwater assets. For example, while the first National 

Security Cutter is to be delivered in August 2007, field operators and maintenance 

staff have yet to receive any definitive plans on how responsibilities for maintenance 

and logistics responsibilities will be divided between the Coast Guard and the system integrator, Integrated Coast Guard System (ICGS). GAO will not be able to determine if this recommendation is fully implemented until more Deepwater assets 

are delivered. 

Recommendation 3: Establish a timeframe for putting steps into place to measure 

the contractor’s progress toward improving operational effectiveness. 

Actions Taken: The Coast Guard has taken some actions, such as developing modeling capabilities to simulate the new assets’ capabilities to meet Coast Guard missions and using mission performance data to measure the contribution of Deepwater 

assets and systems in key mission areas. 

Status as of April 2006 Report: While the Coast Guard has developed and is refining models to measure operational effectiveness, there are too few Deepwater assets 

currently in operation to effectively measure the system integrator’s actual performance in improving operational performance. As more Deepwater assets and systems 

come online, the amount of data will increase and the analytical tools will be more 

refined so that the Coast Guard should be in a better position to: (1) discern the 

Deepwater program’s contribution to operational effectiveness and (2) fully implement this recommendation. 

Recommendation 4: Establish criteria to determine when to adjust the project 

baseline and document the reasons for change. 

Actions Taken: The Coast Guard has taken some actions, such as using criteria 

from its Major Systems Acquisition Manual as the basis for adjusting the total ownership cost (TOC) baseline so that significant changes in mission requirements, 

schedule changes, or project funding can be reflected in the adjusted TOC baseline. 

In addition, DHS has increased its oversight of baseline changes. 

Status as of April 2006 Report: The Coast Guard’s steps, combined with DHS’s 

oversight requirements, should be sufficient to resolve this issue. DHS’s policy directive is only in draft form. GAO will consider this recommendation to be fully implemented when the management directive is finalized. 

Recommendation 5: Develop a comprehensive plan for holding the system integrator responsible for ensuring adequate competition among suppliers. 

Actions Taken: To address GAO’s concerns about ensuring out-year competition 

among second-tier suppliers, the Coast Guard contracted with Acquisitions Solutions, Inc. (ASI) to assess the amount of second-tier competition conducted by ICGS 

during 2004. ASI issued a report in May 2005 that made nine recommendations 

aimed at improving competition throughout the Deepwater program. According to 

Deepwater officials, ICGS developed a plan to adopt all nine recommendations by 

March 1, 2006. Coast Guard officials also stated that competition will be assessed 

as part of the award fee assessment criteria and that the Coast Guard will specifically examine the system integrator’s ability to control costs by assessing the degree 

to which competition is fostered at the major subcontractor level during the award 

term decision process. 

Status as of April 2006 Report: While the steps the Coast Guard has taken appear 

to be sufficient to resolve GAO’s concerns, GAO cannot consider this recommendation as being fully implemented until the Coast Guard addresses the ASI recommendations and GAO assesses the criteria used in the latest award term decision. 

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. DANIEL K. INOUYE TO

ADMIRAL THAD W. ALLEN

Question 1. Over the past 2 years, the Coast Guard, as the lead Federal agency 

on port security issues, has requested funds to establish additional Joint Harbor Operations Command Centers, yet it has been unsuccessful to date. Your predecessor, 

Admiral Collins, supported the development of additional Joint Operations Centers 

and he considered them a key element of the Coast Guard’s future development. Do 

you agree with his assessment? 

Answer. Coordination and collaboration among partner agencies and private interests is vital to maritime commerce and security. Currently, all of the Nation’s ports, 

waterways and coastal zones fall within one of the 35 established Coast Guard SecVerDate Nov 24 2008 12:39 May 06, 2011 Jkt 066171 PO 00000 Frm 00068 Fmt 6601 Sfmt 6621 S:\GPO\DOCS\66171.TXT SCOM1 PsN: JACKIE
65 

tors, which are the coordinating force behind Coast Guard, joint and interagency 

maritime operations. Each of these Sectors has a Sector Command Center (SCC) 

that enables command and control, communications and coordination among partner 

agencies to facilitate mission execution. 

The SCC is the primary conduit for daily collaboration and coordination between 

the Coast Guard and its port partner agencies. All 35 Sector Command Centers currently provide some form of inter-agency operational coordination; however, each 

Command Center is unique in the level of coordination based on a variety of factors 

within the port and coastal region. In some cases, port partners are formally 

imbedded in the SCC (e.g., San Diego, Hampton Roads), and in others, there are 

daily coordination meetings between partner agencies. 

Many Coast Guard Command Centers host a variety of agencies, however, only 

the following Command Centers are designated as ‘‘joint centers:’’ 

• Charleston, South Carolina (DOJ/CG) 

• Hampton Roads, Virginia (CG/Navy) 

• San Diego, California (CG/Navy) 

Technically speaking, Joint Harbor Operations Centers (JHOCs) are Sector Command Centers where the Coast Guard is partnering with the U.S. Navy to provide 

specialized Anti-Terrorism/Force Protection (AT/FP) services in areas with high 

naval fleet concentrations. Plans are also being developed for joint Command Centers (e.g., JHOC) at the following ports: 

• Jacksonville, Florida (CG/Navy) 

• Seattle, WA (CG/Navy) 

The Coast Guard is continuing to work with our sister agencies in the Department of Homeland Security, other Federal partners, state, local and private sector 

interests to facilitate commerce and protect the Nation’s interests in the port and 

coastal regions. 

Question 2. What role do you see the Joint Operations Centers playing in our future port security efforts? 

Answer. Sector Command Centers, including the Joint Operations Centers, serve 

as the ‘‘7/24’’ command and control node for port security operations. Sector Commanders use their Command Centers to coordinate among all Federal, state and 

local port partners who have a stake in port security operations. Inter-agency coordination and collaboration from these Command Centers assists operational commanders in prioritizing activities and maximizing resource allocation among the 

various partner agencies. 

Question 3. The Deepwater Program has been plagued with significant problems. 

For example, the replacement of the Coast Guard’s 110′ cutters with the Fast Response Cutter has now fallen off track. The cost of replacing the engines on the HH– 

65 helicopters has more than doubled in cost to $300 million. The Government Accountability Office (GAO) also has criticized the contract. Should the Coast Guard 

award a new contract to the lead contractor? 

Answer. Yes the Coast Guard has determined that a new contract period award 

to the lead contractor is warranted. The Coast Guard used a disciplined, deliberate, 

and decisive process in determining whether to award additional time to the lead 

contractor and could have awarded anywhere from zero to 60 months based on performance in operational effectiveness, total ownership cost, and customer satisfaction. The Coast Guard used a balanced decisionmaking approach to evaluate performance. The following criteria were evaluated when analyzing the Deepwater contract renewal: 

1. Operational Effectiveness (50 percent), measuring the expected impact on operations of the assets under contract during the base evaluation period; and 

2. Total Ownership Cost (TOC) (30 percent), measuring the expected impact on 

reducing TOC for the assets under contract during the base evaluation period; 

3. Customer Satisfaction (20 percent), measuring the perceptions of Coast 

Guard on the performance in the various portions of the acquisition during the 

base evaluation period. 

Based on this review, the Coast Guard deployed a very strict ‘‘Award Term Determination’’ process and awarded 43 months out of a possible 60 to the lead contractor. Both the Coast Guard and the lead contractor have learned much during 

the first 4 years of the Deepwater Contract. Based on continuous improvement, the 

Coast Guard will focus on changes in the next 43 month award period that will enhance government oversight. 

66 

The contract is structured to reflect the updated requirements approved in the 

Deepwater Post 9/11 Mission Needs Statement and the Post 9/11 Implementation 

Plan. Additionally, the government will work to negotiate favorable terms and conditions with the Integrated Coast Guard System (ICGS) that allow for: 

1. Establishment of meaningful contract measurement criteria (with greater objectivity) that will strongly incentivize cost, schedule, and performance parameters; as well as strengthen ICGS actions as a joint partnership. 

2. A greater focus on cost control by using: 

a. Matching contract type selections with risk 

b. Performance incentives within each Delivery Task Order 

c. Award fees to support the Award Term Criteria. 

3. A realistic pricing philosophy understanding the flexibility required due to 

appropriation fluctuations. 

4. A greater focus on requirements stability so that management can be more 

effectively established and better monitored. 

5. Greater ICGS accountability by ensuring that government members of the Integrated Product Teams understand their roles and responsibilities. This will 

ensure that the Contractor maintains responsibility for decisions it makes. 

These changes will improve the Coast Guard’s oversight of the lead contractor. 

Question 4. The Deepwater Program has been plagued with significant problems. 

For example, the replacement of the Coast Guard’s 110′ cutters with the Fast Response Cutter has now fallen off track. The cost of replacing the engines on the HH– 

65 helicopters has more than doubled in cost to $355 million. In light of such increased costs, is the Coast Guard considering the purchase or construction of alternatives? 

Answer. Where prudent or cost-effective to do so, the Coast Guard would consider 

the purchase or construction of alternatives for specific assets. An example of this 

involves the Fast Response Cutter recent Request for Information (RFI) for an off 

the shelf patrol boat design. In order to assess the world marketplace for patrol boat 

designs that closely approximate operational requirements the Coast Guard issued 

an RFI to address the design and schedule issues. The RFI is less time consuming 

for a contractor to address, is not contractually binding, and is submitted at no cost 

to the government. The RFI response period closed on May 7, 2006 with the Coast 

Guard receiving 23 design submittals from 19 vendors. The Deepwater Program has 

chartered an RFI working group of experts that include representatives from the 

Deepwater Program Management Directorate, the Office of Response Deepwater 

Sponsor’s Representative, Coast Guard Engineering and Logistics, Integrated Coast 

Guard Systems, and a Naval Architecture Engineering firm that specializes in patrol boat design. The working group will conduct an in depth review and validation 

of respective design characteristics and expects to complete its review by August 

2006. A report of their findings is expected in September 2006. 

The HH–65 re-engining project is doing very well as evidenced by over 300 people 

being saved directly by the re-engined HH–65Cs in Hurricane Katrina. The Coast 

Guard anticipates that this project will continue as planned. This project remains 

within the $355M cost estimates provided in 2005 and is on schedule to deliver 84 

operational aircraft by June 2007. 

Question 5. Were you aware of all these problems when the decision was made 

to extend the contract? 

Answer. Yes, the Coast Guard was aware of these issues during the Award Term 

determination period. In fact, the Award Term Determining Official (ATDO) determined the customer satisfaction assessment to be on the high end of ‘‘Marginal’’ 

based on input factors from multiple categories. A balanced input of factors, as discussed in a previous response, was evaluated depicting strength in some areas and 

weakness in others. Survey results across a broad base of stakeholders as well as 

program management and the award fee evaluations, were considered. These were 

carefully reviewed by both the Award Term Evaluation Board as well as the ATDO. 

Overall survey results support the marginal rating based on the following: 

• Field surveys indicate a lack of satisfaction with the 123′ Patrol Boat project, 

but trends were improving. 

• Survey results for the HH–65C re-engining project and C4ISR legacy upgrades 

denote satisfaction and systematic improvement. 

• Contractor responsiveness was assessed in relation to customer satisfaction. It 

was noted that: 

67 

—ICGS was highly responsive to change, accelerating the HH–65C reengining, Fast Response Cutter, the Offshore Patrol Cutter projects. 

—Execution of the Helicopter Interdiction Tactical Squadron (HITRON) contract and the C–130J missionization project was noted as positive. 

In the area of Program Management, customer survey responses indicated that: 

• Systematic improvement in customer satisfaction was reflected in Award Fee 

determinations. Over the first 4 years of execution, evaluations rose from 87 to 

91.5 percent, with attainment of 100 percent of objective factors accomplished 

in the latest period of evaluation. 

• The Government Accountability Office has validated and closed the issue of 

award fee evaluations, denoting an appropriate objective/subjective framework 

for analysis. 

• Surveys indicate a strong improvement with the Integrated Product Data Environment system, making it far more user friendly. 

Question 6. Are other parts of the Deepwater Program experiencing increased 

costs or unforeseen problems, such as the CASA Maritime Patrol Aircraft, the Unmanned Aerial Vehicle, and the National Security Cutter? 

Answer. Some assets being constructed or converted in the Deepwater Program 

are projected to have higher cost than reported in the Post-9/11 Deepwater Implementation Plan of 2005. However, the program is committed to delivering the Deepwater functionality within budget. There are some common reasons for these projected cost changes which are: 

• Significant increases in the price of steel and increases in average labor rates. 

• Differences between the President’s budget and the annual appropriation. This 

requires additional costs to readjust the Plan to match the appropriation. For 

those assets that are delayed, there will be a higher cost in the future due to 

inflation and expiration of certain price agreements from subcontractors. 

• Some cost and labor hour estimates were low and cost control measures are 

being put in place such as design-to-cost to hold the asset as close to the 

planned amount as reasonable. 

Question 7. What is the Coast Guard doing to improve oversight and increase 

competition of subcontracts to prevent these kinds of problems from occurring in the 

future? 

Answer. The Coast Guard has refined its award term criteria for the next Deepwater Award term to encourage and reward competition and more objectively measure contractor performance. These new award term criteria were recently briefed to 

your staff and take effect on August 1, 2006. 

To help measure the effectiveness of competition, the Coast Guard commissioned 

an independent assessment by Acquisition Solutions, Inc. (ASI). This study determined that competition was ‘‘adequate at the second-tier subcontractor level of the 

program.’’ That is, ICGS and its first tier subcontractors Lockheed Martin and Northrop Grumman exercised appropriate competitive procedures using their open business model for their subcontracts. Further, the Coast Guard has taken steps to conform with additional recommendations by the GAO regarding competition including 

a requirement that Integrated Coast Guard Systems (ICGS) notify the Coast Guard 

for any ‘‘make or buy’’ decisions greater than $5 million. 

According to the ASI Study on Deepwater competition, Lockheed Martin and Northrop Grumman had approximately $210 million during the period from 1 January 

2004 through 31 December 2004 that was available to be used for subcontracts. The 

total amount that was competitively awarded, using their Defense Contract Management Agency approved open business model, was approximately 50 percent or 

$107.7 million as shown in the below table: 

68 

ASI reported in Fiscal Year 2004 that the Naval Air Systems Command, that element of the U.S. Navy with acquisition projects that most closely resemble the effort 

by LM on behalf of the Coast Guard, competed 41.6 percent of its awards. For the 

same period, Naval Sea Systems Command, the element in the U.S. Navy concerned 

with the acquisition of ships, awarded 53.6 percent of its contracts on a competitive 

basis. The overall Navy figure for Fiscal Year 2004 was 56.4 percent. Clearly, differences are substantial between these figures and those of LM and NGSS. For one 

thing, the Navy figures are prime contract awards, while the two sets of corporate 

figures are subcontract awards. At the same time, the kinds of awards the Navy 

makes, supporting as they do both ships and aircraft programs, as well as electronic 

and information technology programs, probably are as close a comparison as possible to the kinds of awards being made by the two first-tier subcontractors in support of the Deepwater program. To the extent the numbers are comparable, competition on Deepwater at the subcontract level compares favorably in the case of LM, 

but to a somewhat lesser extent in the case of NGSS. 

Some notable subcontractors who were awarded contracts even though NGSS and 

LM are primary producers or co-producers of competing products: 

• EADS CASA vice a LM Aircraft such as C–27. 

• Bell Textron VUAV vice NG FIRESCOUT (Navy’s VUAV). 

• Telephonics radar on VUAV vice NG or LM radar unit. 

• MTU cutter diesel propulsion vice other propulsion producers with work share 

agreements in place. 

• C–130J aircraft missionization where the Deepwater standard electronic systems are being installed instead of LM Aero Division standard C–130J electronics systems. 

Question 8. Why has the Coast Guard failed to fully implement all of the Government Accountability Office’s (GAO) recommendations for improving management of 

Deepwater? 

Answer. The Coast Guard has devoted considerable attention to concerns raised 

by the GAO audit in 2004 and the 11 recommendations that were made to help improve Deepwater Program management and oversight as noted in the table below. 

In short, five recommendations have been fully implemented and closed by GAO. An 

additional five recommendations have been implemented by the Coast Guard and 

GAO is periodically monitoring the Coast Guard approach. Until the GAO monitoring is complete, GAO’s description of this situation is that the recommendation 

has been implemented. The Coast Guard and GAO are in agreement that the Coast 

Guard has taken positive action for these five recommendations. The final remaining recommendation will not be implemented, as the Coast Guard disagrees with 

a recommendation to update its cost baseline to determine whether the Deepwater 

Acquisition approach is costing more than a conventional acquisition approach. The 

GAO has indicated that it does not intend to pursue this recommendation further. 


re1.eps
69 

Implemented (GAO Monitoring) Status Contract Management Audit 

# GAO Recommendation Status 

1 IPT Effectiveness USCG: Measures of Success indicate substantial performance improvement 

GAO: Too early to tell if steps taken will 

eliminate the problems. 

2 Measurable award fee criteria Implemented (GAO Accepted) 

3 Human Capital Plan (HCP) Policy Implementation Implemented (GAO Accepted) 

4 Provide field personnel with guidance and 

training on transitioning to new assets 

USCG: Established the Transition Communications Team 

GAO: Considers problematic; many decisions on maintenance training need to be 

made quickly due to schedule of asset delivery. 

5 CG notification of subcontracts over $5M 

awarded to LM and NG 

Implemented (GAO Accepted) 

6 Better input from USCG performance monitors Implemented (GAO Accepted) 

7 ICGS Accountability for improved IPT effectiveness in future award fee determinations 

Implemented (GAO Accepted) 

8 Competition among second-tier suppliers USCG: Award Term assessment found 

competition adequate at the second tier 

subcontractor level. Independent review 

by Acquisition Solutions, Inc. (ASI) found 

eight of nine ASI recommendations fully 

implemented. 

GAO: Fully implemented when all ASI recommendations are complete. 

9 Measurement of Contractor’s performance 

toward improving Operational Effectiveness 

USCG/GAO: Too few Deepwater assets currently in operation to determine system 

integrator’s actual performance. 

10 TOC baseline comparison to traditional acquisition Will not be implemented 

11 Establish criteria to determine when to adjust the project baseline and document 

reasons 

USCG: DHS policy directive is in draft 

form. 

GAO: Fully implemented when directive is 

finalized. 

Question 9. I am extremely concerned by reports from the Coast Guard and the 

Government Accountability Office (GAO) that the Rescue 21 program is behind 

schedule, has significant cost overruns, and may not deliver the functionality originally promised. Please explain what caused these problems and what you are doing 

to correct them. 

Answer. Rescue 21’s delays can be attributed to problems completing software development needed to integrate the multiple commercial items into a consolidated 

control interface and resolving performance issues stemming from System Integration Testing (SIT). Those software integration and SIT issues have since been resolved and the project is currently in Full Rate Production. Subsequently, in April 

2006, DHS approved Rescue 21’s Acquisition Program Baseline (APB) Revision 4, 

which reset the Full Production Completion milestone to 2011 and reflects a more 

realistic schedule based on the lessons learned in planning, building, and installing 

the Initial Operating Capability (IOC) and Low Rate Initial Production (LRIP) regions. Additionally, to contain cost overruns and stay within the $730M total acquiVerDate Nov 24 2008 12:39 May 06, 2011 Jkt 066171 PO 00000 Frm 00073 Fmt 6601 Sfmt 6621 S:\GPO\DOCS\66171.TXT SCOM1 PsN: JACKIE
70 

sition cost, APB Revision 4 includes performance trade-offs with respect to the Vessel Subsystem (VSS) and three Western Rivers regions. 

The Coast Guard has worked extensively with the contractor to establish a credible and realistic Rescue 21 project schedule, considering timelines for compliance 

with the National Environmental Policy Act, the significant number of outstanding 

real property acquisitions and new tower construction required, and the contractor’s 

production capabilities. 

At the same time, to ensure that project completion stays on schedule several 

management and oversight actions have been initiated, to include: 

• Establishing a Coast Guard Project Resident Office near the contractor’s manufacturing facility to increase government oversight, awareness, and involvement. 

• Initiating use of the Defense Contract Management Agency and Defense Contract Audit Agency to assist in validating the contractor’s technical proposals 

and cost reasonableness. 

• Scheduling a Program-level Integrated Baseline Review (IBR) in 2006 to verify 

the contractor’s proposed cost, schedule, and performance efforts in the first 15 

Full Rate Production regions. Subsequent IBRs will be conducted for the remaining regions. 

• Soliciting input from Defense Acquisition University (DAU) professionals to develop a strategic way-forward for the program to maintain schedule and stay 

within cost thresholds. DAU staff is partnering with the Coast Guard and General Dynamics to help implement practical program management and contract 

changes to improve program performance. 

• Initiating monthly Integrated Project Schedule reviews between the Coast 

Guard and General Dynamics. 

• Conducting quarterly Coast Guard executive-level/General Dynamics Vice President-level program reviews to resolve outstanding issues and increase senior 

level oversight. 

• Conducting monthly Risk Management and Earned Value Management (EVM) 

cost performance reviews to increase program management oversight for improved risk mitigation and taking actions based on the EVM data. 

• Incrementally re-pricing expired Contract Line Items for Full Rate Production 

regions. Leveraging actual cost data and instilling program-level lessons learned 

during the IOC regions, resulting in more reasonable cost targets for future 

work. 

The Coast Guard remains committed to a 2011 program completion date. It 

should be noted that the significant technical challenges of initial system design 

have been met and the program is in Full Rate Production (FRP). The remaining 

regional installation work should be more standardized. The contractor is starting 

to realize production efficiencies, by leveraging installation experience and institutionalizing lessons learned from each regional deployment. 

Question 10. The Coast Guard told us it will be working this year on an updated 

baseline review for Rescue 21. The GAO recently recommended the Coast Guard establish a schedule to complete this review and use it to develop a revised cost and 

schedule estimate to more effectively manage the program. Can you tell us when 

the revised baseline review and cost and schedule estimates will be available? 

Answer. The Coast Guard plans to conduct an Integrated Baseline Review (IBR) 

with General Dynamics in 2006 for the applicable contract items of the first 15 full 

rate production regions. To support the planned September 2006 IBR, we anticipate 

completing contract negotiations in July 2006. 

Following the September baseline review, the USCG will use IBR results to vali- date the $730M Total Acquisition Cost established in Rescue 21’s Acquisition Program Baseline (APB) Revision 4 that DHS approved in April 2006 and which reset 

R21’s cost and schedule baselines. 

Question 11. You know that District 14 is responsible for the largest geographical 

area, yet it receives relatively few Coast Guard personnel, cutters, or aircraft. It has 

the fewest billeted personnel and is about tied with District 8 (includes the Gulf and 

heartland) for the fewest cutters and aircraft. During Fiscal Year (FY) 2005, none 

of the nine suspected illegal incursions of foreign fishing vessels within the Western/ 

Central Pacific area of the U.S. Exclusive Economic Zone (EEZ) were detected by 

the Coast Guard. The Coast Guard also has indicated that it does not have sufficient assets in District 14 to implement its own protocols in the event that the maritime security level is raised. I agree that improvements in technology and intelligence contribute greatly to the effectiveness of the Coast Guard, but for certain 

71 

missions, there is still no replacement for the deterrence created by a physical presence. Does the Coast Guard have enough assets and personnel to fully implement 

all of its missions in District 14? 

Answer. The Coast Guard distributes available assets and personnel to Areas and 

Districts according to the overall risks and goals across all mission programs. The 

Coast Guard then adjusts those assets and personnel, as necessary, through realtime asset tracking and annual budget requests. All Coast Guard District Commanders must then carefully and judiciously balance available resources against 

mission demands. Generally speaking, they accomplish this by applying their resources to best meet our statutory requirements across all eleven Coast Guard missions, while concentrating on those missions and geographic areas that present the 

greatest risk. To assist Coast Guard Area Commanders in this process, each year 

Coast Guard Headquarters issues Mission Planning Guidance, which facilitates 

operational resource apportionment and allocation decisions to achieve program performance goal targets in support of national goals. 

Question 12. Does the Coast Guard have plans to increase the number of assets 

and personnel in District 14 in the future? 

Answer. While there are no immediate plans to increase the number of assets or 

personnel in District 14, the Coast Guard has added several important resources to 

D14 over the past year. Specifically, the Coast Guard Cutter AHI, a brand new 87- 

foot coastal patrol boat, was placed in service in Honolulu on April 15, 2006. Additionally, a total of three new boats have been added to Coast Guard Stations in the 

Hawaiian Islands including a Response Boat—Small (RB–S), a Motor Lifeboat 

(MLB) and a Utility Boat—Medium (UTM). Finally, this August all four HH–65 helicopters based in Hawaii will be re-engined. This upgrade will provide improved 

speed and lifting capacity, as well as enhanced flight safety. 

Question 13. While maritime security is a top priority, we continue to rely on the 

Coast Guard for other missions, such as search-and-rescue, maritime safety, maintaining aids-to-navigation, and protecting our natural marine resources. In the 

aftermath of Hurricane Katrina, the entire Nation is now well aware of the life and 

death importance of these critical missions. Yet the Coast Guard’s Fiscal Year (FY) 

2007 budget would decrease funding for all six of its ‘‘non-security’’ missions. Does 

this mean the Coast Guard had too many resources for these missions last year? 

Answer. No, it does not. The Coast Guard is a multi-mission agency, whose personnel are trained to be ready for any situation, whether it be to interdict drugs 

or migrants, or prosecute a Search and Rescue case, Coast Guard resources are not 

dedicated to a single mission. As such, the Coast Guard does not allocate funding 

by mission. The Mission Cost Model we use is simply a tool used to show how funding has been utilized—estimates of how funding is spent via missions is based on 

a multi-year average of resource hours spent on each mission. 

For example, from 1998 to 2004, Search and Rescue (SAR) resource hours dropped 

over 14,000 hours. In 2005, SAR hours increased 11,000 hours over the past year, 

mainly due to hurricane rescue operations. If that trend continues, then future cost 

estimates will be adjusted accordingly. 

Performance remains our primary concern, and in Fiscal Year 2005, the Coast 

Guard met or exceeded its performance goals in five of the six missions mentioned. 

The one mission that did not meet its goal, Living Marine Resources, achieved a 

96.4 percent compliance rate against the goal of 97 percent. This was attributed to 

variable economic conditions outside Coast Guard control, such as high fuel costs 

and lucrative seafood prices that create greater incentive for fishermen to violate 

the law. 

Question 14. Is the Coast Guard now carrying out its non-security missions at a 

pre-September 11 level of effort or higher? 

Answer. Since 9/11, the Coast Guard has improved its mission performance across 

almost every program. We strive to optimize resource allocation based on performance outcomes and the greatest need—as dictated by the changing risk picture in 

the maritime domain. Our performance measures focus on outcomes (e.g., mariners 

saved) and not outputs (number of flight hours flown on search-and-rescue). 

Our inherent multi-mission capabilities, coupled with a risk-based approach to resource allocation, have allowed for improved efficiencies and effectiveness in both 

our homeland and non-homeland security roles. 

Indeed, in Fiscal Year 2005, we achieved our performance targets for seven of 

eight non-homeland security missions having missed the last performance goal by 

less than 1 percent. The missed performance goal for the Living Marine Resources 

program was mostly due to factors outside the Coast Guard’s control: changes to 

fisheries regulations following Hurricane Katrina. 

72 

* See table on page 69. 

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. MARIA CANTWELL TO

ADMIRAL THAD W. ALLEN

Question 1. The Deepwater program is experiencing major problems including cost 

overruns, faulty designs, and problems after delivery. 

The Fast Response Cutter project—the replacement for the 110-foot cutter—has 

been particularly worrisome, with bad design work and poor contract oversight leading to a complete work stoppage and lengthy delays. The problems with the Fast 

Response Cutter signal more fundamental issues within Deepwater’s contracting approach. Despite these problems, the Coast Guard has moved forward with steps that 

are expected to extend the Deepwater contract to the current prime contractor. GAO 

has advised on the risks of this contract, particularly with respect to the lack of adequate oversight by Coast Guard and the lack of competition for subcontracts. 

Admiral, despite these problems, the Coast Guard has made a decision that all 

but guarantees that the prime contractor will continue in its role under this unique 

and risky contract approach. Has the Coast Guard even considered reverting to a 

more conventional procurement approach to avoid the problems that we are seeing 

with Deepwater? 

Answer. The Coast Guard had a study conducted by an independent federally 

funded research and development center, Logistics Management Institute (LMI), on 

pursuing Deepwater as a traditional asset replacement acquisition where each asset 

was acquired by a distinct project manager. LMI found there would be at least an 

estimated 15 percent cost avoidance by using the Deepwater system of systems approach with a lead contractor. 

Question 2. Is the Coast Guard considering renegotiating the contract to ensure 

that the contractor does not merely give lip service to competition of subcontracts? 

What specifically will the Coast Guard seek to include in the contract? 

Answer. The Coast Guard has issued award term criteria in the new award term 

period that will hold the contractor more accountable. A specific feature of this 

award term criteria rewards potential future award term based upon the amount 

of competition to subcontractors. Additional criteria will include the following: 

1. Establishment of contract measurement criteria (with greater objectivity) 

that will strongly incentivize cost, schedule, and performance parameters, as 

well as strengthen ICGS actions as a joint partnership. 

2. A greater focus on cost control by using: 

a. Matching contract type selections with risk 

b. Performance incentives within each Delivery Task Order 

c. Award fees to support the Award Term Criteria 

3. A realistic pricing philosophy, accommodating the flexibility required due to 

appropriation fluctuations. 

4. A greater focus on requirements stability so that management can be more 

effectively established and better monitored. 

5. Greater ICGS accountability by ensuring that government members of the integrated product teams better understand their roles and responsibilities. This 

will ensure that the contractor maintains responsibility for decisions it makes. 

Question 3. GAO has testified today that only 5 of 11 specific recommendations 

to improve Coast Guard management of Deepwater—provided in March, 2004—have 

been implemented. Why has Coast Guard failed to fully implement these recommendations? 

Answer. The Coast Guard has devoted considerable attention to concerns raised 

by the GAO and the 11 recommendations that were made to help improve Deepwater Program management and oversight as noted in the table below. In short, five 

recommendations have been fully implemented and closed by GAO. An additional 

five recommendations have been implemented by the Coast Guard and GAO is periodically monitoring the Coast Guard approach. Until the GAO monitoring is complete, GAO’s description of this situation is that the recommendation has been implemented. The Coast Guard and GAO are in agreement that the Coast Guard has 

taken positive action for these five recommendations. The final remaining recommendation will not be implemented, as the Coast Guard disagrees with a recommendation to update its cost baseline to determine whether the Deepwater Acquisition approach is costing more than a conventional acquisition approach. The 

GAO has indicated that it does not intend to pursue this recommendation further. * 

73 

Question 4. It seems that one obvious problem here is that the Coast Guard’s 

Deepwater office has moved ahead with approving designs and contracts before it 

has all of the information it needs to make these decisions. 

For example, according to GAO, the Deepwater office moved ahead with the Fast 

Response Cutter even when the Coast Guard’s own experts—the Engineering Logistics Center—raised significant concerns back in January 2005. Although the Deepwater office finally asked for an independent review and hired an outside company 

(John J. McMullen & Assocs.), the Deepwater office approved the preliminary design 

and authorized ICGS to award the contract for a detailed design in September 2005 

while this review was still pending. Only after an interim report from John J. 

McMullen in February of this year found major problems with the design, the Coast 

Guard finally suspended the design work. 

Would you agree that at least for substantial subcontracts, there should be a requirement put into place that no contracts or approvals be given to ICGS until there 

has been an independent review? Or, alternatively, that such an independent review 

be conducted if the Coast Guard’s own technical experts raise concerns with the direction that the Deepwater office is heading with respect to specific subcontracts? 

Answer. The Deepwater office has been responsive to the concerns raised by the 

Coast Guard’s technical authority, the Assistant Commandant for Engineering & 

Logistics (CG–4); the Engineering Logistics Center (ELC) is part of CG–4’s organization. There is a logical and methodical approach to cutter design that is widely accepted in the acquisition discipline. The initial concerns raised by the ELC occurred 

just prior to the Fast Response Cutter (FRC) Systems Requirements Review (April 

27, 2005). At that point, the program expressed those concerns to ICGS and took 

actions to address them. Those actions included the establishment of an asset 

weight reduction working group composed of both ICGS subject matter experts and 

members from the ELC. Anticipating a successful effort, ICGS concurrently employed the services of the Maritime Research Institute of the Netherlands (MARIN) 

to initiate numerical optimization of an FRC that weighed less than the current 

FRC. Additionally, the Coast Guard requested a more detailed calculation to fully 

understand the total ownership cost associated with a four-engine propulsion plant 

configuration. 

It is relatively common in the ship acquisition industry to have unresolved issues 

at a Preliminary Design Review that must be resolved prior to the Critical Design 

Review, the point in time where a firm Functional Baseline is established. Although 

ICGS met the exit criteria for the Preliminary Design Review (September 16, 2005), 

it was stated in the Coast Guard Preliminary Design Review letter (October 6, 2005) 

that there were a number of programmatic and technical areas of concern that remained open and must be resolved prior to the Critical Design Review. 

As such, it was prudent in September 2005 to award a contract design effort that 

contained firm well-defined entrance criteria for the Critical Design Review scheduled for January 13, 2006. During this period, the Coast Guard and ICGS focused 

oversight of the progress being made toward addressing the identified technical and 

programmatic issues. As evidenced by the program’s suspension of design work in 

February 2006, resolution of these issues was not achieved. 

Consequently, the Coast Guard does not believe the history of the FRC project 

warrants the need to mandate the use of independent design reviews for either the 

award of substantial subcontracts, or to address technical issues raised within the 

Coast Guard. Although independent reviews are an excellent tool within the acquisition world, mandating their use via a ‘‘one solution fits all’’ approach would not be 

a prudent use of taxpayers’ money. Independent design reviews should be used on 

a case-by-case basis, dependent upon the magnitude of the issue and the potential 

return on investment. 

Question 5. I understand that the Coast Guard is negotiating new award criteria 

on cost control, operational effectiveness, performance, competition and other areas 

to improve Deepwater. While encouraging, it seems that these will only come into 

play during performance reviews of the prime contractor for determining bonuses 

and future contract extensions—far too late to have an impact on each asset subcontract. I see these as helpful, but not as a substitute for more direct oversight by 

the Coast Guard and more independent review. Would you like to comment on that? 

Answer. In determining how to incentivize future success, the CG evaluated lessons learned and consulted experts from industry and government to assess evaluation criteria. This resulted in identifying five criteria (three objective and two subjective criteria) that will be used to determine length of Award Term II (AT II): 

• The objective criteria include cost control, Operational Effectiveness (OpEff) 

performance, and competition. 

• The subjective criteria include program management/execution and logistics. 

74 

• The CG may unilaterally establish AT II criteria via contract modification if determined before 28 July 06. After this date, the CG must negotiate the criteria 

with ICGS. 

• The CG will use these five criteria to evaluate ICGS performance from the date 

of contract modification through approximately December 2009 (41 months) or 

whenever the USCG will begin the process to evaluate the length of AT II. 

• AT II begins 25 January 2011 and continues for 0–60 months as determined 

by the Award Term Determining official. 

To address contractor accountability: 

• The CG has refined the format to standardize input and increased the objectivity of the criteria to annually assess ICGS performance. 

• For constant contractor oversight, the CG employs a constantly developing ‘‘balanced score card’’ and Earned Value Management System that measure contractor performance and customer satisfaction throughout contract execution. 

• Use of Award Fee mechanisms and contract incentives. 

Question 6. The Deepwater plan calls for the purchase of Unmanned Aerial Vehicles, or UAVs. The aircraft selected by the prime contractor is the HV–911 ‘‘Eagle 

Eye,’’ to be produced by Bell Helicopter. Bell Helicopter received a contract from 

Coast Guard for the design phase in February 2003. The Coast Guard scaled back 

the number of UAVs it intends to purchase in its revised Deepwater plan from 69 

to 45, but modified the design to include chemical, biological, radiological, nuclear 

and explosive detection capabilities. The first three UAVs are supposed to be delivered in 2007. 

According to news reports, Bell lost its only prototype of this UAV in tests earlier 

this year due to a malfunction that caused the aircraft to crash. Is this accurate? 

And if so, are there delays or cost overruns that we can expect to see with respect 

to this Deepwater asset too? 

Answer. The Bell prototype (developed by Bell from its own funds; no Coast 

Guard funding) crashed during flight test on April 5, 2006. Official correspondence 

to date from Bell has indicated the cause of the crash was a Flight Termination System (FTS) that errantly shut off fuel to the UAV turbine engine. The FTS is a safety 

device to terminate flight if an air vehicle experiences an uncontrolled deviation 

from its pre-programmed flight path and strays outside assigned airspace. The 

Coast Guard VUAV will not have this FTS. 

There are increased costs and schedule delays associated with the Deepwater 

Eagle Eye but they are not associated with the crash of the Bell prototype. The cost 

increases are primarily related to requirements changes to include radar sensors onboard the UAV for surface and air contact detection and avoidance. 

Question 7. The importance of the Coast Guard in Washington State is profound, 

particularly in the Puget Sound where the Ports of Seattle and Tacoma move more 

than 4 million TEU’s annually, representing our Nation’s third largest load center. 

Washington State is also home to the Washington State Ferry system—our Nation’s 

largest, ferrying more than 26 million passengers annually. 

With urban centers surrounding the Puget Sound in close proximity to ports and 

other critical infrastructure, the role of the Coast Guard in providing security to this 

region is of the utmost importance to our economy and the safety of our citizens. 

Despite these challenges, in the past, funding levels have been inadequate for the 

Coast Guard to implement the vast array of new and vitally important initiatives 

laid out in the Maritime Transportation Security Act of 2002 (MTSA). However, the 

Administration has requested increased funding for the Port and Waterways Security Mission of the Coast Guard—an increase of nearly 15 percent from this year. 

One specific area that still needs to be addressed is the lack of adequate funding 

for personnel needed to conduct foreign port inspections to validate that mandated 

international security standards are being met. 

What is the current timeframe for completing these inspections? 

Answer. With existing resources, the Coast Guard anticipates completing these inspections with our trade partners by the end of 2008. 

Question 8. Has funding been the primary issue that has limited the Coast 

Guard’s ability to complete inspection of foreign ports? 

Answer. No. The ability to conduct foreign port visits is driven not only by funding, but the availability of qualified personnel as well. Coast Guard officers assigned 

to performing these visits must have certain required skill sets and qualifications 

and, on average, have 12 to 15 years of Coast Guard experience. Hiring contract employees for this program has not been an acceptable option. 

75 

Additionally, many foreign governments are generally not open to hosting Coast 

Guard inspection teams comprised of contract employees because of the sensitive security information contained in their port facility operations. It routinely takes a 

minimum of several months of negotiations before an inspection of a foreign country’s port infrastructure can be scheduled. 

Question 9. With less than 30 percent of foreign ports that handle cargo arriving 

in the U.S. having been inspected, how much funding do you need to complete this 

important task by 2008? Is this feasible? 

Answer. The Coast Guard anticipates completing this task by 2008 under existing 

funding levels. To date, more than 50 countries have been visited, which equate to 

approximately 35 percent of the foreign countries the Coast Guard intends to visit. 

The countries visited so far account for over 80 percent of the vessel arrivals to the 

United States. 

Question 10. What other limitations have delayed the inspection of these ports? 

Answer. Gaining access to some countries has been a factor in delaying some of 

the visits. Many countries have sovereignty issues and concerns regarding the visits, 

and some countries have been reluctant to allow the Coast Guard in to observe the 

conditions in their ports. The Coast Guard must negotiate the timing and scope of 

the visits. For example, entry into European Union countries was preceded by over 

a year of negotiations with the European Commission to develop a working document detailing visit procedures. 

Question 11. The Transportation Security Administration (TSA) and Coast Guard 

face an extremely difficult and complex challenge in implementing TWIC. It is essential, however that we get a system up and running as soon as possible. 

The initial roll-out currently being conducted is a good start, but challenges remain in implementing the program in the trucking industry and individuals involved with independently contracted services. Furthermore, the security of our 

ports is greatly dependent on coordination of security protocols with our trading 

partners. Lack of international standards for background and security checks of 

workers at foreign ports that load cargo and containers that ultimately arrive on 

our docks is troubling. 

Have the types of biometric information that will be collected such as fingerprints 

or iris-retinal scans been established? If not, what types of biometric information is 

currently being considered for collection? 

Answer. The Transportation Worker Identification Credential (TWIC) will use fingerprints as the biometric identifier. Each TWIC will have an individual’s name, 

photograph, TWIC expiration date and a unique credential number on the face of 

the card with the biometric information recorded on a chip embedded in the card. 

That chip will hold the finger minutia templates of two fingers, the finger pattern 

templates of two fingers, a personal identification number, and a Federal Agency 

Smart Credential number. 

Question 12. Although the International Ship and Port Facility Security Code 

(ISPS Code) calls for port facilities to monitor and control access to secure areas, 

my understanding is that no such requirements exist. 

Answer. There are requirements in the ISPS Code to control access to the port 

facility (Section 14.2.2) and monitor restricted areas to ensure that only authorized 

persons have access (Section 14.2.4); however, there are no standards for these requirements. Much like the Maritime Transportation Security Act, the ISPS Code is 

written to be performance based, not prescriptive. 

Question 13. Is there any coordinated global effort, perhaps through the IMO, to 

establish standards for screening individuals with unescorted access to secure areas 

within ports? 

Answer. No. Each country signatory to the International Maritime Organization’s 

(IMO) International Convention for the Safety of Life at Sea (SOLAS) is bound by 

the International Ship & Port Facility Security (ISPS) Code. As such, they must 

abide by the provisions of the ISPS Code for access control. Those provisions do not 

stipulate background screening of persons claiming a need for unescorted access to 

secure areas of ports. Each sovereign authority determines if a background check 

needs to be performed and how thorough it needs to be. This is often driven by their 

perceived need for the check and the limits of their data on citizens and resident 

aliens, as well as their confidence in that data. The disparity in policies and capabilities between nations would make the establishment of an overarching, international standard difficult. 

Question 14. Has the Coast Guard proposed that any such standards be promulgated? 

76 

Answer. No, the Coast Guard has not proposed an international standard for 

background screening for individuals seeking unescorted access to the secure areas 

of a port. 

Question 15. How do you recommend we move forward on this front to get international participation in a global effort? 

Answer. The Coast Guard will continue to work with our Nation’s international 

partners to establish workable vulnerability mitigation measures, including background screening where possible. Our international inspection effort to ensure compliance with the ISPS Code has been successful and provides an avenue for discussion with IMO member countries for specific improvements in ports based on the 

available resources, capabilities and policies. 

Question 16. A report issued by the Justice Department’s Inspector General in 

March of this year highlights a number of serious vulnerabilities in the maritime 

domain, including ranking the Washington State Ferries along with Gulf Coast fuel 

tankers as the #1 target for terrorism in the U.S. Regardless of whether this is due 

in part to aggressive reporting of suspicious incidents in the Puget Sound region, 

this is still very concerning. 

The report cites the FBI’s National Threat Assessment of 2004 which reports that 

‘‘. . . vehicle-born improvised explosive devices as the type of weapon that al Qaeda 

will most likely use for a maritime attack, and cites maritime infrastructure, merchant vessels, and warships as the most likely maritime targets.’’ The report goes 

on to state ‘‘. . . the second most likely weapon is a bomb used against a cruise 

ship or ferry.’’ 

The Washington State Ferry system is our Nation’s largest system serving more 

than 26 million passengers and 11 million vehicles annually. Washingtonians depend greatly on this mode of transportation and a terror incident within our ferry 

system would have catastrophic consequences for our state and economy. 

In light of FBI’s findings, what extra measures has the Coast Guard taken to address these threats? 

Answer. The Coast Guard recognizes that high capacity vessels such as ferries 

present an attractive target to terrorists. From a larger perspective, the Coast 

Guard has developed a strategic plan for combating maritime terrorism which emphasizes identifying and intercepting threats well before they reach U.S. shores by 

conducting layered, multi-agency, maritime security operations and by strengthening the port security posture of militarily and economically strategic ports. This 

strategic plan prescribes three courses of action: 

• Achieve Maritime Domain Awareness (MDA). 

• Lead and conduct effective maritime security and response operations. 

• Create and oversee a Maritime Security Regime. 

All three courses of action speak directly to our overall efforts to reduce risk within the maritime environment, and all three are pertinent to the ferry vulnerability. 

MDA: In order to maximize our domain awareness, the USCG has established 

Field Intelligence Support Teams (FISTs), capable of local information collection— 

in order to stay connected to activities in marinas, ferry terminals, and other waterside locales. Maritime Intelligence Fusion Centers (MIFCs) were established to 

share, analyze, and disseminate intelligence and terrorist threat information with 

DHS, DOJ, DOD and numerous other law enforcement partners. The gathering and 

fusion of this Intel is a key part of our MDA effort along with implementation of 

the Automated Identification Systems (AIS). 

Security and Response Operations: Recognizing the inherent vulnerabilities of any 

ferry system to water-borne, vehicle-borne, and personnel-borne Improvised Explosive Device (IED) attacks, the Coast Guard has established a robust set of operational activities under Operation Neptune Shield. Even when no specific threat is 

known to exist, Coast Guard forces escort ferries, based on risk associated with vulnerability and consequence. The Coast Guard also conducts patrols, makes periodic 

visits to maritime critical infrastructure and/or enforces security zones near key 

transportation nodes such as ferry terminals. When risk increases, the Coast Guard 

increases its Maritime Security (MARSEC) level and the operational tempo of security operations. And, when a specific threat or vulnerability is highlighted, the Coast 

Guard is able to focus its operations on that threat/vulnerability. For example, in 

the wake of the London mass transit bombings in July 2005, the Coast Guard increased its MARSEC level and focused operations on maritime mass transit (i.e., 

ferries and ferry terminals). In addition to increasing our vessel escorts, patrols, and 

security zone enforcement in general, USCG explosive detection canine teams were 

deployed to help screen passengers and vehicles at ferry terminals. 

77 

Maritime Security Regime: A key component of our layered defense is the implementation of a Maritime Security regime. The cornerstone of the domestic aspect 

of this regime is the Maritime Transportation Security Act (MTSA) of 2002. In response to some of the Act’s mandates, the Coast Guard promulgated performancebased security regulations for vessels, 33 CFR Part 104, and published amplifying 

guidance (Maritime Security Directives 104–1 and 104–5), establishing vehicle, passenger, and baggage screening requirements for ferries, cruise ships, excursion vessels. Also as directed by MTSA, we oversee and coordinate Area Maritime Security 

Committees which are made up of the key port stakeholders. 

The Washington State ferries are required to comply with 33 CFR 104 regulations; their vessels operate under a Coast Guard approved security plan and are required to complete annual security exams by the Coast Guard. During these exams, 

Coast Guard personnel verify that the vessel operators have implemented all elements of the approved security plan, including implementation of the appropriate 

Maritime Security Directives. Additionally, Coast Guard personnel conduct crew 

interviews and drills on various security scenarios to evaluate their proficiency. 

Question 17. Is additional funding for more resources for the Coast Guard to increase its patrols to secure the waters in which the ferries operate needed to fully 

address these threats? 

Answer. The Administration’s proposed 2007 budget, which the Coast Guard supports, ensures that we are able to maintain effectiveness across the wide range of 

Coast Guard missions. Should more funding become available, the Coast Guard 

would certainly spend it wisely in support of the American public. 

Question 18. Does Congress need to provide any additional authority to the Coast 

Guard to enhance its ability to secure the Washington State Ferry system? 

Answer. The Coast Guard currently has the necessary legal authorities to ensure 

the security of the Washington State Ferry system. 

Question 19. The FBI reports that a bomb would most likely be delivered by a 

vehicle and that ferries and/or cruise ships, which are prevalent in the Puget Sound, 

are likely targets. What measures are the Coast Guard taking to address this 

threat? 

Answer. Following the implementation of the Maritime Transportation Security 

Act (MTSA) in July 2004, several key measures were implemented to safeguard ferries from a Vehicle Born Improvised Explosive Device (VBIED) attack. 

In accordance with the provisions of MTSA, passenger and vessel screening standards have been implemented on all ferries embarking passengers in United States 

ports. MARSEC Directive 104–5 provides specific passenger, baggage, and vehicle 

screening protocols at the various MARSEC Levels for ferry vessels meeting the applicability requirements of 33 Code of Federal Regulations (CFR) Part 104. As such, 

at various frequencies based on individual operator’s Vessel Security Plans (VSP) 

and the Maritime Security (MARSEC) level, passengers, vehicles, baggage, and personal effects are screened prior to being permitted aboard. 

Several studies completed in Fiscal Year 2005 assessed the consequences of 

VBIED incidents onboard various categories of vehicle ferries, as well as screening 

technology, current screening standard effectiveness, and the socioeconomic effect of 

numerous screening strategies. A new deterrence study is underway and will be 

completed in September 2006. This study will provide direction to develop methods 

to quantify the deterrent effects of security policies and practices with respect to the 

Nation’s ferry system. 

Current cruise ship and ferry security initiatives are directed toward developing 

industry standards for the use of explosive detecting canines and conducting effective passenger and cargo screening. The Coast Guard currently employs 18 canine 

substance detection teams at Maritime Safety and Security Teams (MSST) across 

the country. These teams frequently work with Federal, state, and local agencies as 

needed to ensure passenger safety and compliance with the Maritime Transportation Security Act of 2004. 

Question 20. There have been reports in the press that the threat assessment for 

Washington State Ferries may be a result of ‘‘aggressive’’ reporting of suspicious incidents? Have you found this correlation to be consistent with assessments that 

have been conducted since the issuance of these findings? 

Answer. The FBI’s 2005 Washington State Ferry (WSF) Assessment update covers 

the period 11 May 2004 through 31 August 2005 and makes several key judgments 

that are consistent with Coast Guard investigations and reporting. In fact, many of 

the incidents examined by the FBI were initially or subsequently reported by Coast 

Guard investigators or field personnel. Although no credible or specific threat to the 

WSF system was identified by the FBI, reporting of suspicious incidents increased 

significantly from the FBI’s previous WSF assessment covering the period from 12 

78 

September 2001 through 10 May 2004. The noted increase in reporting does not, as 

the FBI admits, necessarily reflect a greater threat and instead may reflect increased awareness on the part of the public, WSF personnel, and law enforcement 

personnel. Although reporting may have become more ‘‘aggressive,’’ the number of 

suspicious incidents rated as either ‘‘Extremely High’’ or having ‘‘High’’ likelihood 

of being indicative of pre-operational surveillance has actually decreased significantly since the first FBI assessment. Of the 247 suspicious incidents reported on 

for the update, none were assessed as being Extremely High in likelihood of preoperational planning and only one was rated as High in likelihood of pre-operational 

planning. Contrast to this assessment with seven being rated Extremely High and 

eleven being rated High during the previous assessment. The FBI analysis, while 

based on more reporting, does not reflect a corresponding increase in the likelihood 

of a terrorist attack against the WSF. 

Question 21. I am particularly concerned about Washington State Ferries coming 

out of Sydney, B.C. because vehicles are not being scanned for explosives until they 

offload in Anacortes, Washington. An amendment to the Transportation Security 

Improvement bill that I introduced calls on Homeland Security and the State Department to work with their Canadian counterparts to develop a plan to screen vehicles before disembarking for the U.S. In light of the FBI’s findings regarding the 

delivery of bombs most likely to be ‘‘vehicle-born,’’ this is an issue that I believe 

must be addressed. Although this legislation has yet to be considered by Congress 

as a whole, has the Coast Guard identified this screening issue and is anything 

being done at this point to address this vulnerability? 

Answer. In accordance with 33 CFR 104.265 and 33 CFR 104.292, ferry vessels, 

including the Washington State Ferries, are required to ‘‘deter the unauthorized introduction of dangerous substances and devices, including any device intended to 

damage or destroy persons, vessels, facilities, or ports.’’ The methods for compliance, 

however, are tailored to individual operators per that operator’s Vessel Security 

Plan and vary with the Maritime Security (MARSEC) level in place. 

While the provisions of 33 CFR 104.265 require operators to screen persons, baggage, and vehicles for dangerous substances and devices, 33 CFR 104.292 affords 

passenger vessels and ferry operators some latitude regarding screening requirements. Specifically, ‘‘the owner or operator of a passenger vessel or ferry may ensure 

security measures are implemented that include searching selected areas prior to 

embarking passengers and prior to sailing and implementing one or more of the following: 

• performing routine security patrols; 

• providing additional closed-circuit television to monitor passenger areas; and 

• securing all non-passenger areas.’’ 

These requirements become more stringent as MARSEC levels are elevated. 

Therefore, the Washington State Ferries are in compliance with all Federal requirements. However, the one ferry running from Sydney, B.C. to Anacortes, WA 

may not necessarily be complying with the intent of the regulations by performing 

screening operations after vehicles are loaded. The Coast Guard welcomes additional 

legislation that facilitates enforcement and fosters consistent screening practices in 

Canada to keep our ferry system as safe as possible. 

Question 22. As we all know, information sharing is critical to the challenge of 

securing our homeland. Securing Washington State Ferries requires a concerted effort among the Ferries, FBI, Coast Guard and Washington State Patrol. However, 

the IG notes that there is no FBI policy that requires its field offices to provide intelligence summaries to Federal, state, and local partners in their territory. Due to 

the overlapping responsibilities of the Coast Guard and FBI in the maritime domain, I assume that information sharing between the FBI and Coast Guard occurs 

regularly? 

Answer. Yes, information sharing among the FBI and Coast Guard, as well as 

state and local law enforcement entities including the Port of Seattle, Washington 

State Patrol, Port of Seattle Police, Seattle Police, Department of Homeland Security and Washington State Ferry Security Officers occurs on a routine basis. Under 

the Puget Sound Area Maritime Security Committee, there is a Subcommittee called 

the Washington State Ferries Working Group which meets on a monthly basis and 

includes all the agencies mentioned. 

Question 23. Does the Coast Guard provide updates to any other state and local 

law enforcement on intelligence relevant to threats and security of ports and waterways? 

Answer. The USCG Sector Commander is the Chair of the Area Maritime Security Committee. The Sector Seattle Area Maritime Committee holds monthly conVerDate Nov 24 2008 12:39 May 06, 2011 Jkt 066171 PO 00000 Frm 00082 Fmt 6601 Sfmt 6621 S:\GPO\DOCS\66171.TXT SCOM1 PsN: JACKIE
79 

ferences with key port partners, including Federal, state and local law enforcement 

officials, on relevant intelligence topics—including security of U.S. ports and waterways. The Committee has an intelligence subcommittee, often led by the Coast 

Guard Command Intelligence Officer, whose duties include reviewing threat information and developing courses of action in response. 

Several states operate intelligence fusion centers, comprised mainly of state and 

regional law enforcement personnel. Coast Guard personnel, primarily Field Intelligence Support Team (FIST) members, coordinate with these centers regularly and 

exchange intelligence and threat information. Additionally, the Coast Guard ICC 

conducts port threat assessments on every U.S. strategic port. During these assessments, ICC members obtain and share intelligence with intelligence personnel at 

the Federal, state and local levels. 

Question 24. Since 9/11, the Coast Guard has been asked to expand its port and 

maritime security roles and take on new and additional homeland security responsibilities. In addition to these, we want the Coast Guard to continue to fully implement its non-security missions, such as protection of the marine environment, 

search-and-rescue, and polar icebreaking. Congress felt so strongly about this that 

we included language in the Homeland Security Act of 2002 that requires the Coast 

Guard to maintain adequate resources for its non-security missions. 

Yet the FY 2007 budget request for these missions continues to decrease. $3.9 billion is requested for non-homeland security missions, a decrease of 6.1 percent 

below the FY 2006 enacted level. The FY 2007 budget request would reduce the 

total funding (operating budget and capital investments) for all 6 non-security mission areas. For example, the FY 2007 funding request for search-and-rescue activities is 7.8 percent below the FY 2006 enacted level, for marine safety is 8.5 percent 

below the FY 2006 enacted level, and for marine environmental protection is 14.3 

percent below the FY 2006 enacted level. 

As we heard in Mr. Caldwell’s testimony, many non-security assets, such as buoy 

tenders and icebreakers, are reaching the end of their service lives and require ever 

more costly and time consuming maintenance to remain functional. As you well 

know, Admiral, these vessels ensure fast and efficient marine commerce on our 

coastal and inland waterways. In a 2002 analysis, the Coast Guard concluded that 

needed replacements or upgrades to the coastal and aid-to-navigation (ATON) icebreaker fleet would cost $550 million. This money has yet to be included in any 

budget request since completion of this analysis. Is maintaining these vehicles a priority of the Coast Guard, and if so, why is this not reflected in your budget request? 

Answer. While no funding has been requested in Fiscal Year 2007, the Coast 

Guard will continue to carefully consider and prioritize funding for this important 

program, along with other vessel replacement projects. 

Although no funding has been requested via the annual budget submission in recent years, the Coast Guard did request and receive supplemental funding in Fiscal 

Year 2006 which funded production of the new Trailerable Aids to Navigation Boat 

(TANB)—a 26-ft boat—aluminum construction and outfitted with twin Honda 150 

engines to replace boats destroyed by Hurricanes Katrina and Rita. The contract, 

awarded in March 2006, will deliver 80 boats and provide improved aids-to-navigation mission capability, increased speed/range and state-of-the-art navigation system 

and crew safety systems. 

Question 25. I am particularly worried about the decline in resources for marine 

environmental protection, which includes the Coast Guard’s activities in reducing 

the risks of oil pollution. This mission would be cut by 14.3 percent in this year’s 

budget, the sharpest decline of all non-security items in the FY 2007 budget request. 

Why did the Coast Guard choose to weaken this mission, and to such a significant 

degree? What does this mean in terms of specific areas that the Coast Guard will 

cut back on? 

Answer. The Marine Environmental Protection (MEP) has not been cut, as the 

Coast Guard does not allocate funding by mission. The Mission Cost Model we use 

is simply a tool to show how funding has been utilized; estimates of how funding 

is spent on missions is based on a multi-year average of resource hours spent on 

each mission. Recent events, such as the SELENDANG AYU incident and the 

ATHOS 1 spill caused for an unusual spike in resource hours expended for this mission—the decline in resource hours, as reflected in the Fiscal Year 2007 request, 

normalize resource hour trends within the mission. However, if the trend of extraordinary events such as these continues, then future cost estimates will be adjusted 

accordingly. 

Performance remains our primary concern, and in Fiscal Year 2005, the Coast 

Guard exceeded its performance goals in MEP—there were only 18.5 gallons of 

chemical spills per million short tons shipped—the goal was 20 or less. 

80 

Question 26. Last year’s ‘‘unfunded budget priorities’’ that the Coast Guard shared 

with Congress included funding to complete the upgrade to the Vessel Traffic Services (VTS) system in Puget Sound, yet the FY 2007 budget request includes no 

money for this upgrade. A total of $12.9 million is needed. The Coast Guard has 

testified before the Subcommittee on the importance of this VTS system in reducing 

the risk of vessel collisions including those that may result in oil spills. Why did 

the Coast Guard change its mind between last year and now as to the priority that 

should be given to this funding need? 

Answer. Due to other funding priorities, the Coast Guard did not request additional funding for the Ports and Waterways Safety System (PAWSS) for the VTS 

in Puget Sound in FY 2007. The System Integration Contract expired in FY05; 

Puget Sound and San Francisco received only the AIS portion, but were not fully 

recapitalized. 

Question 27. The Coast Guard’s other major acquisition project—Rescue 21—is 

also experiencing major problems. This system is needed not only for rescue of lives 

at sea, but was put to the test during Hurricane Katrina—when virtually all aspects 

of the older system that Rescue 21 is to replace failed. 

What specifically will you do to ensure that Rescue 21 is back on track, and that 

there will be no further slippage in the final delivery date? 

Answer. The Coast Guard has worked extensively with the contractor to establish 

a credible and realistic Rescue 21 project schedule, considering timelines for compliance with the National Environmental Policy Act, the significant number of outstanding real property acquisitions and new tower construction required, and the 

contractor’s production capabilities. As such, several management and oversight actions have been initiated to ensure project completion stays on schedule. These include: 

• Establishing a Coast Guard Project Resident Office near the contractor’s manufacturing facility to increase government oversight, awareness, and involvement. 

• Initiating use of the Defense Contract Management Agency and Defense Contract Audit Agency to assist in validating the contractor’s technical proposals 

and cost reasonableness. 

• Scheduling a Program level Integrated Baseline Review (IBR) in 2006 to verify 

the contractor’s proposed cost, schedule, and performance efforts in the first 15 

Full Rate Production regions. Subsequent IBRs will be conducted for the remaining regions. 

• Soliciting input from Defense Acquisition University (DAU) professionals to develop a strategic way-forward for the program to maintain schedule and stay 

within cost thresholds. DAU staff is partnering with the Coast Guard and General Dynamics to help implement practical program management and contract 

changes to improve program performance. 

• Establishing monthly Integrated Project Schedule reviews between the Coast 

Guard and General Dynamics. 

• Conducting quarterly Coast Guard executive level/General Dynamics Vice President-level program reviews to resolve outstanding issues and increase senior 

level oversight. 

• Conducting monthly Risk Management and Earned Value Management (EVM) 

cost performance reviews to increase program management oversight for improved risk mitigation and taking actions based on the EVM data. 

• Incrementally re-pricing expired Contract Line Items for Full Rate Production 

regions. Leveraging actual cost data and instilling program level lessons learned 

during the Initial Operating Capability regions, resulting in more reasonable 

cost targets for future work. 

The Coast Guard remains committed to a 2011 program completion date. It 

should be noted that the significant technical challenges of initial system design 

have been met, and the program is in Full Rate Production (FRP). All remaining 

regional installation work is expected to be more standardized. The contractor is 

starting to realize production efficiencies by leveraging installation experience and 

institutionalizing lessons learned from each regional deployment. 

Question 28. The Administration is again proposing that responsibility for funding 

the operation and maintenance costs of the Coast Guard’s three polar icebreakers 

be shifted to the National Science Foundation (NSF). However, the National Academy of Sciences issued an interim report on the need for polar icebreakers, and concluded that United States should maintain polar icebreaking capabilities, and that 

these operations should be funded through the Coast Guard. 

81 

Funding these assets through a separate Federal agency has proven problematic, 

and as a result, I included a provision in the Coast Guard bill (that is currently 

pending for final passage) that calls for the Coast Guard to submit a plan to Congress for operation and maintenance of these vessels in a manner that does not rely 

on the transfer of funds from another Federal agency. 

Given the difficulties in securing a funding agreement with NSF for the operation 

and maintenance of the polar icebreakers, why is the Administration once again requesting funding for these vessels through NSF’s budget rather than the Coast 

Guard’s? 

Answer. The Administration is requesting funding for the Nation’s icebreakers 

through the budget for the National Science Foundations (NSF). The Coast Guard 

will conform its budget requests to policy decisions made after the National Research Council’s final report, which is due in September 2006. 

Question 29. What steps has the Coast Guard taken to assure that the funds are 

in fact transferred in a timely manner for this year’s operations? 

Answer. In accordance with the Memorandum of Agreement (MOA) between the 

Coast Guard and the National Science Foundation, the Coast Guard will prepare 

and submit a proposed Program Plan, the annual budget request that is based on 

NSF’s schedule, with supporting documentation to the NSF annually on or before 

1 July of each year. The Coast Guard is actively negotiating the terms of the FY07 

Program Plan with NSF. 

NSF approves the Program Plan upon mutual agreement of both parties and provides the Coast Guard with a Letter of Intent that states the agreed upon level of 

funding the Coast Guard can expect. 

Subject to the availability of funds, NSF makes obligations annually and throughout the year as required per the approved Program Plan. Modifications to the approved Program Plan may be made with the mutual agreement of both parties and 

are required in the event of unanticipated maintenance, catastrophic damage, or 

damage incurred while operating in severe ice conditions. 

To date, NSF has transferred $51.4M of the $53.9M allotted to the Coast Guard 

for FY06. 

In addition to complying with the formal provisions of the MOA, Coast Guard resource staffs proactively engage with counterparts at NSF to create and maintain 

open lines of communications and ensure that our collective goals are achieved. 

Question 30. Are the amounts requested through NSF’s budget—$57 million, 

which is $1 million less than last year’s request—sufficient for all expected costs? 

Answer. Yes. 

Question 31. What steps is the Coast Guard taking to plan for the longer term 

replacement or recapitalization of these unique assets? 

Answer. The Coast Guard continues to investigate options to replace or upgrade 

the POLAR SEA and POLAR STAR. The Coast Guard has completed a Mission 

Analysis Report and has, at the request of Congress, contracted the National Research Council (NRC) to complete an assessment of future Coast Guard polar icebreaker needs and capabilities. 

Question 32. The Coast Guard recently provided a report to Congress on the impact of oil spills from Hurricanes Katrina and Rita on the Oil Spill Liability Trust 

Fund (OSLTF), established under the Oil Pollution Act of 1990. According to this 

report, there were six major, five medium and over 5,000 minor oil and hazardous 

materials spills resulting from these two hurricanes. Over nine million gallons of oil 

were released. Informal estimates provided by the Coast Guard suggest that at least 

$800 million in claims for cleanup costs and damages could be brought against the 

OSLTF. 

The OSLTF was originally established with a principal balance of $1 billion to ensure that adequate funds would be available for oil pollution response. At last year’s 

budget hearing, Admiral Collins reported to the Commerce Committee that the 

OSLTF was heading toward depletion. To address this concern, a provision, based 

on a bill that I cosponsored with Senators Stevens and Inouye, was included in the 

Energy Policy Act last year that reinstated the fee on oil in order to replenish the 

OSLTF. Under that provision, the per-barrel fee would continue until the balance 

of the OSLTF reaches $2.4 billion. 

However, the Coast Guard has estimated that if Katrina and Rita claims amount 

to $800 million and are paid for out of the OSLTF, the OSLTF could be reduced 

to zero in 2009, and would only reach $80 million in 2014—when the tax is set to 

stop. On March 16, I introduced the Oil Pollution, Prevention, and Response Act of 

2006, which includes a provision that protects the OSLTF from claims related to 

Hurricanes Katrina and Rita. 

82 

Does the Coast Guard have a plan for addressing these claims as they are made 

against the OSLTF? Does the Coast Guard have a plan for addressing the possible 

depletion of the Fund? 

Answer. The Coast Guard will address any and all claims as they are presented 

and as resources permit. If for any reason the fund is depleted to a point where it 

is evident that the balance will not be sufficient for its various uses, the Coast 

Guard will consider all potential methods for replenishment. 

Question 33. Does the Coast Guard have suggestions for any alternative approaches for addressing these claims in a way that does not deplete the OSLTF? 

Answer. The Coast Guard has not identified specific alternatives at this time. 

Question 34. Or, does the Coast Guard just plan to wait until the OSLTF is depleted before providing Congress with a proposal for addressing this situation? 

Answer. Well before the OSLTF is depleted, its viability would need to be addressed to ensure that all the uses it supports can continue. A single catastrophic 

oil spill could have a significant and immediate impact on the OSLTF’s viability. 

Because a catastrophic oil spill could happen at any time and is impossible to predict, we will need to address the viability of the OSLTF at the moment its viability 

is threatened. 

The Coast Guard will address any and all claims as they are presented. Claims 

that are submitted to the OSLTF can take years to process and adjudicate, which 

will allow for ample time to identify potential fund depletion and address alternative funding sources, if necessary. If the magnitude of outstanding claims develops to a level that is greater than the OSLTF can support, the Coast Guard will 

notify the Administration and Congress and consider alternatives for addressing the 

insufficiency at that time. 

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. FRANK R. LAUTENBERG TO

ADMIRAL THAD W. ALLEN

Question 1. The President has proposed $3 million to upgrade the current facilities at Coast Guard Air Station Atlantic City in order to house the new helicopter 

unit charged with enforcement of the National Capital Region no-fly zone. I understand that there are already six helicopters there, and the hangar only holds eight. 

How will this $3 million be spent to upgrade the current hangar and facilities to 

accommodate the new unit? 

Answer. There is currently sufficient hangar space at Air Station Atlantic City, 

as 3 of the 5 aircraft being used for the NCRAD mission will be forward deployed 

to Reagan National Airport at any given time. The $3 million for Air Station Atlantic City facilities will be used to expand the office, supply, parking and other facilities needed to support the 102 extra personnel and additional equipment associated 

with the NCRAD mission. 

Question 2. The President’s FY07 budget proposal included $62 million for the 

Coast Guard takeover of duties involved in the enforcement of the National Capital 

Region no-fly zone. If the Coast Guard is appropriated only $57 million for the takeover of this new function, as proposed by the Senate Appropriations Committee 

(Senate Report 109–273—Department of Homeland Security Appropriations bill, 

2007), how will it affect the ability of the Coast Guard to fully takeover this function 

during FY07? 

Answer. The $62 million included in the President’s Fiscal Year 2007 budget for 

the Coast Guard to support the National Capital Region Air Defense (NCRAD) initiative represents $48.5 million of AC&I and $13.9 million of OE funding. These 

AC&I and OE funds will be used to purchase and support additional helicopters and 

aircrews. 

Any reduction in this funding request would jeopardize the Coast Guard’s ability 

to support the National Capital Region Air Defense (NCRAD) initiative, and could 

negatively impact other Coast Guard missions by reducing flight hours available for 

helicopters service-wide. 

Question 3. The Coast Guard has estimated that at least $800 million in oil spill 

clean up claims could be filed for payment out of the Oil Spill Liability Trust Fund 

(OSLTF). How will the OSLTF be affected if these claims are allowed to be made? 

Answer. The size and number of potential removal cost and damage claims, including natural resource damage (NRD) claims, that could impact the Fund are currently difficult to estimate. Because the Coast Guard does not have an accurate estimate of the private-sector costs incurred during the post-Katrina clean up of oil 

spills, it is not possible to predict future fund liabilities with any reasonable degree 

of certainty at this time. 

83 

Well before the OSLTF is depleted, its viability would need to be addressed to ensure that all the uses it supports can continue. A single catastrophic oil spill could 

have a significant and immediate impact on the OSLTF’s viability. Because a catastrophic oil spill could happen at any time and is impossible to predict, we will need 

to address the viability of the OSLTF at the moment its viability is threatened. 

The Coast Guard will address any and all claims as they are presented. If the 

magnitude of outstanding claims is greater than the OSLTF can support, the Coast 

Guard will notify the Administration and Congress and consider alternatives for addressing the insufficiency at that time. 

Question 4. Does the Coast Guard have a method to measure how many drug 

shipments or illegal immigrants or illegal fishing incursions were not interdicted? 

If so, how accurate is it? 

Answer. The Defense Intelligence Agency annually publishes the Interagency Assessment of Cocaine Movement (IACM), a report that estimates the cocaine flow 

based on production and consumption estimates. The Coast Guard uses this report 

as the official estimate of the noncommercial maritime flow of cocaine to the United 

States each year. The difference between this number and the amount of cocaine 

removed by the Coast Guard (as determined by the Consolidated Counter-Drug 

Database) would represent the drug shipments not interdicted. The accuracy of this 

measure is dependent on the accuracy of the IACM estimates, which have a broad 

range due to the difficulty of determining actual production. 

Similarly, the Coast Guard’s Intelligence Coordination Center publishes monthly 

illegal migrant flow numbers. Their report includes the number of migrants not 

interdicted by the Coast Guard, other government agencies or foreign governments. 

The accuracy of this measure varies based on the intelligence available and credibility of the various reporting sources, but in general is most accurate for Cuban 

and Haitian migrants. 

The Coast Guard measures how many illegal foreign fishing vessel (FFV) incursions were detected and how many of those were interdicted each year. The difference between these two numbers provides an estimate of the number of incursions not interdicted. This estimate may not be very accurate, as the actual number 

of incursions is likely greater than the number detected; however, there is no current method of validating that supposition. 

Question 5. What is the Coast Guard’s implementation schedule for implementation of Section 607 of the Coast Guard and Maritime Transportation Act of 2006? 

Answer. The Coast Guard has already begun the process to establish the Delaware River and Bay Oil Spill Advisory Committee as required by Section 607 of the 

Coast Guard and Maritime Transportation Act of 2006. This work will involve close 

coordination between Coast Guard Headquarters, Area, and District staffs as well 

as personnel at Coast Guard Sector Delaware Bay, and appropriate stakeholders. 

One key step will be publishing a notice in the Federal Register announcing the 

formation of the Committee and soliciting members. We expect completion of this 

step in approximately 6 month’s time. Other important steps include writing a charter for the Committee, and selecting the most appropriate members among the various applicants. We are hopeful that this process will be complete by early 2007, 

allowing the Committee to hold its first meeting around April 2007. While there 

may be unexpected delays, the Coast Guard intends to push for as rapid an implementation process as is possible, and looks forward to the report of the Committee. 

Æ