Report to the Chairmen, 

Subcommittees on Homeland Security, 

Committees on Appropriations, House 

of Representatives and U.S. Senate 

United States General Accounting Office 

GAO

June 2004 COAST GUARD 

Deepwater Program 

Acquisition Schedule 

Update Needed 

GAO-04-695 
www.gao.gov/cgi-bin/getrpt?GAO-04-695.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Margaret 

Wrightson at (415) 904-2200 or 

wrightsonm@gao.gov. 

Highlights of GAO-04-695, a report to the 

Chairmen, Subcommittees on Homeland 

Security, Committees on Appropriations, 

House of Representatives and U.S. 

Senate 

June 2004

COAST GUARD

Deepwater Program Acquisition Schedule 

Update Needed 

The degree to which the Deepwater program is on track with its original 

2002 integrated acquisition schedule is difficult to determine because the 

Coast Guard has not updated the schedule. Coast Guard officials said they 

have not updated it because of the numerous changes Deepwater 

experiences every year and the cost, personnel, and time involved. However, 

in similar acquisitions—those of the Department of Defense (DOD)—cost, 

schedule, and performance updates are fundamental to congressional 

oversight. DOD is required to update the schedule at least annually and 

whenever cost and schedule thresholds are breached. In practice, DOD 

continually monitors and reports schedules for management on a quarterly 

basis. Updating the acquisition schedule—including phases such as design 

and fabrication, interim phase milestones, and critical paths linking assets—

on a more timely basis is imperative so that annual Coast Guard budget 

submissions can allow Congress to base decisions on accurate information. 

GAO used available data to develop the current acquisition status for a 

number of selected Deepwater assets and found that they have experienced 

delays and are at risk of being delivered later than anticipated. 

GAO analysis of current acquisition of selected Deepwater assets 

The additional $168 million in fiscal year 2004, while allowing the Coast 

Guard to conduct a number of Deepwater projects that had been delayed or 

would not have been funded in fiscal year 2004, will not fully return the 

program to its original 2002 acquisition schedule. Reasons include: all work 

originally planned for fiscal year 2004 was not funded and some will have to 

be delayed to fiscal year 2005; delivery of some assets has fallen so far 

behind schedule that ensuring their original delivery dates is impossible; and 

nonfunding reasons have caused delays, such as greater than expected hull 

corrosion of patrol boats delaying length extension upgrades. 

In 2002, the Coast Guard began its 

$17 billion, 20-year Integrated 

Deepwater System acquisition 

program to replace or modernize 

its cutters, aircraft, and 

communications equipment for 

missions generally beyond 50 miles 

from shore. During fiscal years 

2002-03, Deepwater received about 

$125 million less than the Coast 

Guard had planned. In fiscal year 

2004, Congress appropriated $668 

million, $168 million more than the 

President’s request. 

GAO has raised concern recently 

about the Coast Guard’s initial 

management of Deepwater and the 

potential for escalating costs. GAO 

was asked to review the status of 

the program against the initial 

acquisition schedule and determine 

the impact of the additional $168 

million in fiscal year 2004 funding 

on this schedule. 

GAO recommends the Coast Guard 

update the original 2002 Deepwater 

acquisition schedule in time to 

support the fiscal year 2006 

Deepwater budget submission to 

the Department of Homeland 

Security and Congress and at least 

once a year thereafter to support 

each budget submission. The 

updated schedule should include 

the current status of asset 

acquisition phases, interim phase 

milestones, and the critical paths 

linking assets. In written 

comments, the Coast Guard 

generally concurred with GAO’s 

findings and recommendation. 
Page i GAO-04-695 Deepwater Program Acquisition Schedule Update Needed 

Letter 1

Background 3

Results 4

Conclusions 8

Recommendation for Executive Action 8

Agency Comments 9

Appendix I Briefing Slides 11 

Appendix II Coast Guard’s Comments 33 

Abbreviations 

C4ISR Command, Control, Communications and Computers, 

Intelligence, Surveillance, and Reconnaissance 

Deepwater Integrated Deepwater Systems program 

DHS Department of Homeland Security 

DOD Department of Defense 

EVMS Earned Value Management System 

GAO General Accounting Office 

ICGS Integrated Coast Guard Systems, LLC 

IMS Integrated Master Schedule 

MPA Maritime Patrol Aircraft 

OPC Offshore Patrol Cutter 

UAV Unmanned Air Vehicle

Contents 

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. It may be reproduced and distributed in its entirety without further 

permission from GAO. However, because this work may contain copyrighted images or 

other material, permission from the copyright holder may be necessary if you wish to 

reproduce this material separately. 
Page 1 GAO-04-695 Deepwater Program Acquisition Schedule Update Needed 

June 14, 2004 

The Honorable of Thad Cochran 

Chairman, Subcommittee on Homeland Security 

Committee on Appropriations 

United States Senate 

The Honorable Harold Rogers 

Chairman, Subcommittee on Homeland Security 

Committee on Appropriations 

House of Representatives 

In 2002, the Coast Guard began the acquisition phase of the largest and 

most complex procurement in its history, the Integrated Deepwater 

System program (Deepwater). Under this program, the Coast Guard will 

replace or modernize its cutters, aircraft, and communications equipment 

used for missions generally beyond 50 miles from shore but which may 

start at ports, waterways, and coasts and extend seaward to wherever the 

Coast Guard is required to take appropriate action. In developing the 

program, the Coast Guard chose a contracting approach that relies heavily 

on a “systems integrator”—a contractor that will translate the Coast 

Guard’s mission requirements into specific acquisitions and upgrades. This 

contracting approach also relies heavily on a steady, predictable funding 

stream throughout the program’s anticipated 20-year acquisition span.1

When the program began, we expressed concern that, given this 

approach’s particularly heavy dependence on funding at planned levels, 

the Coast Guard risked schedule slippages and cost escalation if program 

funding fell short of planned funding amounts.2

 During the program’s first 

2 years (fiscal years 2002-03), the total amount of funding available was 

nearly $125 million less than the amount the Coast Guard had planned and 

$32 million less than the President’s request. The Congress then increased 

the Deepwater appropriation for fiscal year 2004 to about $668 million, or 

 1

The Deepwater program is scheduled to last for 30 years, the assets are expected to be 

delivered in the first 20 years, and the contractor is to be retained an additional 10 years to 

continue implementing the program. 

2

See U.S. General Accounting Office, Coast Guard: Progress Being Made on Deepwater 

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

United States General Accounting Office 

Washington, DC 20548 
Page 2 GAO-04-695 Deepwater Program Acquisition Schedule Update Needed 

about $86 million more than the agency’s original plan for that year and 

$168 million more than the President’s request. 

You asked us to assess the Deepwater program’s status in light of this 

increased funding. We focused our work on (1) reviewing the status of the 

program against the initial acquisition schedule and (2) determining the 

impact of the additional $168 million in fiscal year 2004 funding on 

returning the program to this schedule. You also asked us to provide 

information on the Coast Guard’s status in revising Deepwater’s mission to 

meet increased homeland security requirements and the amount of 

assistance the Department of Defense (DOD) has provided for Deepwater 

from fiscal years 2002 to 2004. On March 12, 2004, we briefed your offices 

on the preliminary results of our work to date. This report and the briefing 

slides in appendix I provide our final results. 

Our work for this report involved reviewing and analyzing a variety of 

documents and interviewing officials from the headquarters of the Coast 

Guard and Integrated Coast Guard Systems, LLC, (ICGS). To determine 

the status of Deepwater’s acquisition schedule for selected assets, we 

analyzed (1) the delivery task orders and their associated statements of 

work for individual Deepwater assets to establish what work was started, 

when it was started, and the period of performance for that work, and (2) 

the monthly assessment reports of Deepwater program managers on the 

performance of executing the delivery task orders. We compared these 

start and end dates of the delivery task orders with the acquisition 

schedule laid out in the original June 2002 Integrated Deepwater System 

Implementation Plan, which covers the first 5 years of the program. To 

determine the specific assets that were originally planned to have been 

funded by fiscal year 2004 but were not, we compared the Coast Guard’s 

original plan listing the work scheduled to begin (contract line item 

numbers) for each fiscal year with the work that was actually begun (the 

delivery task orders that were issued for those line items). We interviewed 

Coast Guard and ICGS officials about the reliability of the data in the 

Integrated Master Schedule (IMS) management tool. On the basis of those 

discussions, we determined that the data within IMS were not reliable 

enough for use in our report. To determine the amount of funding support 

DOD provided to the Deepwater program from fiscal years 2002 to 2004, 

we interviewed officials and analyzed documents from the Navy. We also 

interviewed officials from other DOD components; however, they all 

referred us back to the Navy. We conducted our work from January 

through June 2004 and did our work in accordance with generally 

accepted government auditing standards. 
Page 3 GAO-04-695 Deepwater Program Acquisition Schedule Update Needed 

In June 2002, the Coast Guard awarded a contract to ICGS to begin the 

acquisition phase of the Deepwater program. Rather than using the 

traditional approach of replacing classes of ships or aircraft through a 

series of individual acquisitions, the Coast Guard chose to employ a 

“system of systems” acquisition strategy that would replace its aging assets 

of ships, aircraft, and communication capabilities with a single, integrated 

package of new or modernized assets and capabilities. The focus of the 

program is not just on new ships and aircraft, but rather on an integrated 

approach to modernizing existing or “legacy” assets while transitioning to 

newer, more capable assets, with improved command, control, 

communications and computers, intelligence, surveillance, and 

reconnaissance (C4ISR) capabilities. At full implementation, the 

Deepwater program will replace the Coast Guard’s entire fleet of current 

deepwater surface and air assets, comprising three classes of new cutters 

and their associated small boats, a new fixed-wing manned aircraft fleet, a 

combination of new and upgraded helicopters, and both cutter-based and 

land-based unmanned air vehicles (UAVs). In addition, all of these assets 

will be linked with state-of-the-art C4ISR capabilities and computers and 

will be supported by an integrated logistics management system. 

ICGS, a business entity jointly owned by Northrop Grumman and 

Lockheed Martin, acts as the system integrator to develop and deliver the 

Deepwater program. They are the two first-tier subcontractors for the 

program and either provides Deepwater assets themselves or award 

second-tier subcontracts for the assets. The Coast Guard’s contract with 

ICGS has a 5-year base period with five additional 5-year options. The 

Coast Guard is scheduled to decide on whether to extend ICGS’s contract 

by June 2006, which is 1 year prior to the end of the first 5-year contract 

term. Although ICGS is responsible for designing, constructing, deploying, 

supporting, and integrating Deepwater assets, the Coast Guard maintains 

responsibility for oversight and overall management of the program. To 

help fulfill this responsibility, the Coast Guard uses several management 

tools to track progress in the program, such as monthly status reports 

called quad reports, a performance-based management tool called the 

Earned Value Management System (EVMS), and a schedule management 

system called IMS. The quad reports are monthly summaries of the work 

performed on the various deepwater assets and were developed to give 

managers a monthly progress report on the performance of the program in 

such areas as cost, schedule, and contract administration. EVMS is used to 

track cost and schedule for certain delivery orders that have been placed 

to manage the risk of the major assets and activities. IMS is a three-tiered, 

calendar-based schedule used to track the completion of tasks and 

milestones of the individual Deepwater delivery task orders. However, 

Background 
Page 4 GAO-04-695 Deepwater Program Acquisition Schedule Update Needed 

data reliability with IMS has been an area of concern for the Coast Guard, 

and it is currently working with a private contractor and ICGS to address 

these concerns. Currently, the Coast Guard only maintains the lowest and 

most detailed level of IMS with monthly updates. These updates reflect the 

status of active contracts of individual assets and feed into EVMS’s 

monthly cost performance reports of those individual contracts, which 

allow program management to monitor the cost, schedule, and technical 

performance of ongoing work at these lowest and most detailed levels. 

In recent months, we have issued two reports that have raised concern 

about the Coast Guard’s initial management of the Deepwater program 

and the potential for escalating costs. In March 2004,3

 we reported that key 

components needed to manage the Deepwater program and oversee the 

system integrator’s performance have not been effectively implemented. 

We recommended that the Secretary of Homeland Security direct the 

Commandant of the Coast Guard to take a number of actions to improve 

Deepwater program management and contractor oversight. In April 2004,4

we testified that the most significant challenge the Coast Guard faces as it 

moves forward in the Deepwater program is keeping the program on 

schedule and within planned budget estimates. We noted that the Coast 

Guard was at risk of having to expend funds to repair deteriorating legacy 

assets that otherwise had been planned for Deepwater modernization 

initiatives, which could potentially further delay the program and increase 

total program costs. We noted further that the Coast Guard’s current 

estimate for completing the acquisition program within the 20-year 

schedule has risen to $17.2 billion, an increase of $2.2 billion over the 

original $15 billion estimate.5

The degree to which the Deepwater program is on track with regard to its 

original 2002 acquisition schedule is difficult to determine, because the 

Coast Guard has not maintained and updated the acquisition schedule. The 

original acquisition schedule included acquisition phases (such as concept 

 3

See U.S. General Accounting Office, Contract Management: Coast Guard’s Deepwater 

Program Needs Increased Attention to Management and Contractor Oversight, 

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

4

See U.S. General Accounting Office, Coast Guard: Key Management and Budget 

Challenges for Fiscal Year 2005 and Beyond, GAO-04-636T (Washington, D.C.: Apr. 7, 

2004). 

5

These amounts are in nominal (current-year) dollars. 

Results 
Page 5 GAO-04-695 Deepwater Program Acquisition Schedule Update Needed 

technology and design, system development and demonstration, and 

fabrication), interim phase milestones (such as preliminary and critical 

design reviews, installation, and testing), and the critical paths integrating 

the delivery of individual components to particular assets. However, while 

the Coast Guard has what is called an integrated master schedule, it 

currently uses it only at the lowest and most detailed levels and have not 

updated it to demonstrate whether individual components and assets are 

being integrated and delivered on schedule and in the critical sequence. 

There are a number of reasons why tracking the current integrated 

schedule on a major government investment or acquisition is important, 

but two stand out. First, our work has shown that it is important to 

identify potential risks in major acquisitions as early as possible so 

problems can be avoided or minimized. The ability to achieve scheduled 

events is a key indicator of risk. Second, cost, schedule, and performance 

are fundamental to the Congress’s oversight of major acquisitions. In fact, 

by law, DOD’s major defense acquisition programs have to report cost, 

schedule, and performance updates to the Congress at least annually and 

whenever cost and schedule thresholds are breached. In practice, 

schedules on DOD’s major defense acquisitions are continually monitored 

and reported to management on a quarterly basis. 

While Coast Guard officials indicated that the management tools they use 

are sufficient for tracking delivery dates throughout the acquisition, we 

found that these tools could not provide a ready and reliable picture of the 

current integrated Deepwater acquisition schedule. For example, IMS has 

had problems with data reliability and the monthly status reports, while 

assessing the progress of individual assets, do not translate those 

individual assessments into an overall integrated Deepwater acquisition 

schedule. In fact, the February 2004 status report noted that because there 

was no accurate overall integrated schedule for the command and control 

design phase, the linkages with the development of other assets were 

largely unknown. Although maintaining a current integrated schedule is a 

best practice for ensuring adequate contract oversight and management 

and is a requirement for DOD acquisitions, Coast Guard officials said they 

have not done so because of the numerous changes the Deepwater 

Program experiences every year and because of the cost, personnel, and 

time involved in crafting a revised master plan with the systems integrator 

on an annual basis. The officials said they have not planned to update the 

original acquisition schedule until just prior to deciding whether to extend 

the award of the next 5-year Deepwater contract in 2007. However, we 

have found that in acquisitions of similar scope—and in particular, 

acquisitions made by DOD—maintaining a current schedule is a 

fundamental practice that the department considers necessary. 
Page 6 GAO-04-695 Deepwater Program Acquisition Schedule Update Needed 

While the Coast Guard could not provide us with an updated integrated 

schedule, we developed the current acquisition status of a number of 

selected Deepwater assets from documents provided by the Coast Guard. 

Our analysis indicates that several Deepwater assets and capabilities have 

experienced delays and are at risk of being delivered later than anticipated 

in the original implementation plan. For example, the delivery of the first 

two maritime patrol aircraft is behind schedule by about 1 year, and the 

delivery and integration of the vertical-take-off-and-land unmanned air 

vehicle to the first national security cutter has been delayed 18 months. 

The $168 million appropriated in fiscal year 2004 for the Deepwater 

program above the President’s request of $500 million will allow the Coast 

Guard to conduct a number of projects that had been delayed or would not 

have been funded in fiscal year 2004, but it will not fully return the 

program to its original 2002 acquisition schedule. Our analysis indicates 

there are several reasons for this result. First, even with the additional 

amount, the program still had a cumulative funding shortfall of $39 million 

through fiscal year 2004, as compared to the Coast Guard’s planned 

funding amount. Second, because part of the additional $168 million was 

needed to start work delayed from fiscal year 2003, it did not provide 

enough funding for the delayed work and for all the work that the Coast 

Guard had originally planned for fiscal year 2004. As a result, some of this 

work will have to be delayed to fiscal year 2005. Third, the delivery of 

some assets has fallen so far behind schedule that it is impossible to 

ensure their delivery according to the original 2002 implementation 

schedule by simply providing more money. For example, according to the 

2002 implementation schedule, nine maritime patrol aircraft were to be 

delivered by the end of 2005; according to the current contract, none will 

be delivered in 2005 and two will be delivered by the end of 2006. 

Similarly, the original schedule called for completing 18 123-foot patrol 

boat conversions by the end of 2005; according to the current contract, 8 

will be completed by the end of 2005.6

 Fourth, the acquisition of some 

assets has been delayed for reasons other than funding. For example, 

greater than anticipated hull corrosion in the 110 ft. patrol boats has 

delayed the conversion of those into 123 footers and delays in the 

availability of faster satellite service for legacy cutters has delayed the 

delivery of those upgraded legacy cutters. Finally, in keeping with 

appropriations conference committee directives for how the additional 

 6

The conversion is to extend the 110-foot patrol boats by 13 feet to incorporate a stern 

ramp. 
Page 7 GAO-04-695 Deepwater Program Acquisition Schedule Update Needed 

amount was to be spent, part of the additional funding went for design of 

the offshore patrol cutter, work that, under the original schedule, would 

not begin for another 6 to 8 years. This work may speed up acquisition of 

these assets, but they were not on the original schedule this early in the 

program. 

The Coast Guard is currently revising Deepwater’s mission needs 

statement in response to increased homeland security requirements 

resulting from the terrorist attacks of September 11, 2001. According to 

the Coast Guard, in May 2004 it submitted the revised statement to the 

Department of Homeland Security’s (DHS) Joint Requirements Council, 

which conditionally accepted it until the Deepwater contractor, ICGS, 

completes a new estimate of the costs needed to acquire the necessary 

functional capabilities resulting from the revised mission needs statement. 

The council further directed the Coast Guard to complete the new cost 

estimate in order to brief the DHS Investment Review Board in October 

2004. Acting as an agent of the DHS, the board will approve any increases 

in the Deepwater total ownership cost associated with the revised mission 

needs statement and any growth in the Deepwater budget. Specifications 

for some specific Deepwater assets—most notably the National Security 

Cutter—will be changed in light of the Coast Guard’s added homeland 

security responsibilities. Coast Guard officials said the main impact of the 

revision would be to close the gaps in Deepwater asset capabilities created 

by the expansion of Coast Guard mission requirement after September 11.7

Regarding DOD’s assistance to the Coast Guard for Deepwater, the Navy 

budgeted $25 million for the Deepwater program in fiscal years 2002-04, 

mainly to help outfit the National Security Cutter. The Navy budgeted 

these funds to provide capabilities and equipment it regarded as important 

for the Coast Guard to have for potential national defense missions that 

would be carried out in conjunction with Navy operations.8

 7

An April 2004 RAND Corporation study concluded that the Coast Guard will need twice 

the number of cutters and 50 percent more aircraft to meet new national security 

requirements. U.S. Coast Guard’s Deepwater Force Modernization Plan: Can it Be 

Accelerated? Will Meet Changing Security Needs?, The Rand Corporation, Santa Monica, 

Calif., April 2004. 

8

Through a 1987 agreement, the Navy provides to the Coast Guard all Navy-owned, military 

readiness equipment and associated support materials that the Navy deems necessary to 

enable the Coast Guard to carry out assigned missions while operating with the Navy. Upon 

declaration of war, or when the President directs, the Coast Guard operates as a service of 

the Navy and is subject to the orders of the Secretary of the Navy. 
Page 8 GAO-04-695 Deepwater Program Acquisition Schedule Update Needed 

The 2002 Deepwater acquisition schedule showed not only the individual 

planned phases and interim milestones for designing, testing, and 

fabricating assets but also the integrated schedules of critical linkages 

between assets. The absence of an up-to-date integrated acquisition 

schedule for the Deepwater program is a concern, because it is a symptom 

of the larger issues we reported in March 2004 that are related to whether 

this complicated acquisition is being adequately managed and whether the 

government’s interests are being properly safeguarded. Since the inception 

of the unique contracting approach to this project, we have pointed out 

that it poses risks, in that it would be expensive to alter and, because of 

the unique “systems integrator” approach, does not operate like a 

conventional acquisition. The recent disclosure that, just 3 years into the 

acquisition, costs have risen by $2.2 billion points to the need for a clear 

understanding of what assets are being acquired, when they are being 

acquired, and at what cost. This lack of such a current schedule lessens 

the Coast Guard’s ability to monitor the contractor’s performance and to 

take early action on potential risks before they become problems later in 

the program. 

The Coast Guard has so far maintained that it is not worth the time and 

cost involved to update the acquisition schedule until just before the 

award of the next 5-year Deepwater contract, but we disagree. We 

recognize that there are costs involved with keeping an acquisition 

schedule updated. However, for Department of Defense acquisitions of 

such scope, maintaining a current schedule is a fundamental and 

necessary practice. Deepwater remains a program in transition, in that the 

Coast Guard is currently revising the program’s mission requirements to 

include increased homeland security requirements. The major 

modifications that may result to key assets make keeping the program on 

track that much harder. As evolving mission requirements are translated 

into decisions about what assets are needed and what capabilities they 

will need to have, it becomes even more imperative that Coast Guard 

officials update the acquisition schedule on a more timely basis, so that 

budget submissions by the Coast Guard can allow DHS and Congress to 

base decisions on accurate information. 

We recommend that the Secretary of Homeland Security direct the 

Commandant of the Coast Guard to update the original 2002 Deepwater 

acquisition schedule in time to support the fiscal year 2006 Deepwater 

budget submission to DHS and Congress and at least once a year 

thereafter to support each budget submission. The updated schedule 

should include the current status of asset acquisition phases (such as 

Conclusions 

Recommendation for 

Executive Action 
Page 9 GAO-04-695 Deepwater Program Acquisition Schedule Update Needed 

concept technology and design, system development and demonstration, 

and fabrication), interim phase milestones (such as preliminary and 

critical design reviews, installation, and testing), and the critical paths 

linking the delivery of individual components to particular assets. 

We provided a draft of this report to DHS and the Coast Guard for their 

review and comment. In written comments, which are reproduced in 

appendix II, the Coast Guard generally concurred with the findings and 

recommendations in the report. The Coast Guard also provided technical 

comments, which we incorporated as appropriate. 

The Coast Guard, however, did not concur with three areas of discussion. 

First, the Coast Guard said that our draft report did not accurately portray 

its current acquisition tools and disagreed with our determination that 

data within one of those tools, the IMS, was not reliable enough for use in 

our report. As we noted in the report, at the time of our review Coast 

Guard officials expressed concerns about the reliability of IMS data, such 

as out-dated data and less than adequate data input and adjustment, and 

told us that they had hired a consultant to address those concerns. For 

that reason and with Coast Guard and ICGS agreement on our 

methodology, we based our analysis on the same source documents the 

Coast Guard uses as inputs to IMS’s lowest, most detailed level. The Coast 

Guard stated in its written comments that while not in the form of an 

acquisition schedule, IMS’s lower level data are reliable. According to its 

written comments, the Coast Guard is making improvements in updating 

IMS at all levels. 

Second, the Coast Guard said that we did not highlight that delays in the 

delivery schedule have been caused by a lack of funding and the 

subsequent need to sustain legacy assets rather than a lack of acquisition 

schedule updates. The scope of our review was to determine the impact of 

the additional $168 million in fiscal year 2004 on returning Deepwater to 

its original 2002 schedule, not to determine effects of receiving 

appropriations that were less than requested in previous years. However, 

in explaining why the $168 million will not return the Deepwater to its 

original schedule, we did note that part of the $168 million was needed to 

start work delayed from fiscal year 2003, and that the acquisition of some 

assets had been delayed due to greater than anticipated hull corrosion in 

legacy 110-foot patrol boats causing the delay in converting them to 123-

footers. 

Agency Comments 
Page 10 GAO-04-695 Deepwater Program Acquisition Schedule Update Needed 

Finally, we did not intend to imply that the lack of acquisition schedule 

updates caused delays in delivery schedule. However, we continue to 

believe that not updating an integrated schedule to show the acquisition 

linkages between critical assets is a management concern. We believe in 

the importance of updating acquisition schedules at least annually not only 

as a best practice for managing and overseeing a complex integrated 

acquisition such as Deepwater but also as a up-to-date source of 

information on which DHS and the Congress can base annual budget 

decisions. 

As agreed with your office, unless you publicly announce its contents 

earlier, we plan no further distribution of this report until 15 days from its 

issue date. At that time, we will send copies of this report to the Secretary 

of Homeland Security, the Commandant of the Coast Guard, appropriate 

congressional committees, and other interested parties. The report will 

also be available at no charge on GAO’s Web site at http://www.gao.gov. If 

you or your staffs have any questions about this report, please contact me 

at (415) 904-2200 or by email at wrightsonm@gao.gov, or Steve Calvo, 

Assistant Director, at (206) 287-4839 or by email at calvos@gao.gov. Other 

key contributors to this report were Shawn Arbogast, Leo Barbour, David 

Best, Michele Fejfar, Paul Francis, Sam Hinojosa, David Hooper, Michele 

Mackin, and Stan Stenersen. 

Margaret T. Wrightson 

Director, Homeland Security 

 and Justice Issues 
Appendix I: Briefing Slides 

Page 11 GAO-04-695 Deepwater Program Acquisition Schedule Update Needed 

Appendix I: Briefing Slides 

Coast Guard: Deepwater 

Acquisition Schedule Update 

Needed

Briefing to the Subcommittees on Homeland 

Security

Senate Appropriations Committee

House Appropriations Committee
Appendix I: Briefing Slides 

Page 12 GAO-04-695 Deepwater Program Acquisition Schedule Update Needed 

Table of Contents

• Objectives

• Scope and Methodology

• Summary of Results

• Background

• Status of Acquisition Schedule

• Impact of Additional Funding

• Additional Information on the Deepwater Program

• Conclusions

• Recommendation
Appendix I: Briefing Slides 

Page 13 GAO-04-695 Deepwater Program Acquisition Schedule Update Needed 

Objectives

During the Integrated Deepwater System (Deepwater) program’s first 2 years 

(fiscal years 2002-03), the total amount of funding available was nearly $125 

million less than the Coast Guard had planned. In fiscal year 2004, Congress 

appropriated an additional $168 million above the President’s request of $500 

million to help return Deepwater to its original 2002 acquisition schedule.

Our work for congressional requesters has focused on the following:

• Reviewing the status of the program against the initial acquisition schedule.

• Determining the impact of the additional $168 million in fiscal year 2004 

funding on returning the program to the original 2002 acquisition schedule.

• Providing information on

•the Coast Guard’s status in revising Deepwater’s mission to meet

increased homeland security requirements and

•the amount of funding support the Department of Defense (DOD) has 

provided for the Deepwater program for fiscal years 2002-2004.
Appendix I: Briefing Slides 

Page 14 GAO-04-695 Deepwater Program Acquisition Schedule Update Needed 

Scope and Methodology

• Interviewed Coast Guard and contractor officials.

• Examined delivery task orders and associated statements of work for 

individual Deepwater assets to establish what work was actually started, 

when it began, and the period of performance for that work; and monthly 

status reports of Deepwater program managers assessing the performance 

of the work.

• Compared the actual start and end dates of work with what was planned in 

the original 2002 acquisition schedule.

• Compared the original plan’s listing of the work scheduled to begin for each 

fiscal year with the work that was actually begun.

• Interviewed program officials regarding the reliability of data in the 

Deepwater integrated master schedule.

• Interviewed DOD officials and examined Navy budget documents to 

determine DOD funding support for Deepwater.
Appendix I: Briefing Slides 

Page 15 GAO-04-695 Deepwater Program Acquisition Schedule Update Needed 

Summary of Results

• The degree to which the Deepwater program is on track with regard to its 

original 2002 acquisition schedule is difficult to determine, because the 

Coast Guard has not kept the acquisition schedule updated. Several assets 

are experiencing delays and are at risk for being delivered later than 

originally planned.

• The additional $168 million appropriated in fiscal year 2004 will allow the 

Coast Guard to conduct a number of projects that had been delayed or 

would not have been funded in fiscal year 2004, but it will not fully return 

the program to its original 2002 acquisition schedule.

• Additional information on the Deepwater Program.

• The Coast Guard submitted a revised Mission Needs Statement to the 

Department of Homeland Security in May 2004.

• Navy budgeted $25 million in fiscal years 2002-04 for intermediate gun 

and combat systems for cutters.
Appendix I: Briefing Slides 

Page 16 GAO-04-695 Deepwater Program Acquisition Schedule Update Needed 

Background

• Deepwater is a $17 billion, 20-year acquisition to modernize and/or replace 

of over 90 cutters and 200 aircraft used for missions that generally occur 

beyond 50 miles from shore but may start at coasts and extend seaward to 

wherever the Coast Guard is required to take appropriate action.

• In June 2002, the Coast Guard awarded a 5-year base contract to 

Integrated Coast Guard Systems (ICGS), Inc., to begin the acquisition 

phase of the Deepwater program, with five additional 5-year options.

• The Coast Guard is scheduled to decide on whether to extend ICGS’s

contract by June 2006, 1 year prior to the end of the first 5-year contract 

term.

• The Coast Guard chose to employ a "system of systems" acquisition 

strategy that would replace its aging Deepwater assets with a single, 

integrated package of new or modernized assets.

• ICGS acts as the system integrator to develop and deliver an improved 

integrated system of ships, aircraft, unmanned air vehicles, command, 

control, communications, computers, intelligence, surveillance and 

reconnaissance (C4ISR), and supporting logistics.
Appendix I: Briefing Slides 

Page 17 GAO-04-695 Deepwater Program Acquisition Schedule Update Needed 

Background (cont’d)

• ICGS is responsible for designing, constructing, deploying, supporting, and 

integrating Deepwater assets. The Coast Guard maintains responsibility for 

oversight and overall management of the program.

• The Coast Guard uses several management tools to track progress in the 

program, such as monthly status reports, Earned Value Management 

System (EVMS), and an integrated master schedule.

• However, because data reliability with the integrated master schedule has 

been an area of concern for the Coast Guard, they are currently working 

with a private contractor and ICGS to address these concerns.
Appendix I: Briefing Slides 

Page 18 GAO-04-695 Deepwater Program Acquisition Schedule Update Needed 

Background (cont’d)

• GAO recently reported concerns with the Coast Guard’s initial 

management of the Deepwater program and the potential for escalating 

costs.

• Key components needed to manage the Deepwater program and 

oversee the system integrator’s performance have not been effectively 

implemented. Contract Management: Coast Guard’s Deepwater 

Program Needs Increased Attention to Management and Contractor 

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

• The most significant challenge to the Coast Guard is keeping the

Deepwater program on schedule and within planned budget estimates 

through a well-managed and adequately funded effort. The Coast 

Guard estimates that the project’s cost is now $2.2 billion more than 

the initial estimate. Coast Guard: Key Management and Budget 

Challenges for Fiscal Year 2005 and Beyond, GAO-04-636T 

(Washington, D.C.: Apr. 7, 2004).
Appendix I: Briefing Slides 

Page 19 GAO-04-695 Deepwater Program Acquisition Schedule Update Needed 

Status of Acquisition Schedule

• The degree to which the program is on track with regard to its original 2002 

acquisition schedule is difficult to determine, because the Coast Guard 

does not maintain and update the acquisition schedule. The Coast Guard 

cannot readily and reliably present the integrated acquisition status of the 

Deepwater program. 

• The Coast Guard’s reasons for not updating the schedule include:

• Updating more regularly is impractical and unnecessary because 

Deepwater experiences numerous program changes each year and 

keeping track of those changes would consume too much funding, 

time, and personnel.

• Monthly status reports, EVMS, and other management tools are 

adequate for tracking Deepwater’s acquisition.

• The Coast Guard intends to update the schedule prior to deciding whether 

to extend the first 5-year option to the contractor in 2007.
Appendix I: Briefing Slides 

Page 20 GAO-04-695 Deepwater Program Acquisition Schedule Update Needed 

Status of Acquisition Schedule (cont’d)

• Tracking the current integrated schedule on a major government 

investments or acquisitions similar to the Deepwater program is important 

because

• identifying potential risks in major acquisitions as early as possible is 

important so problems can be avoided or minimized. The ability to 

achieve scheduled events is a key indicator of risk.

• cost, schedule, and performance are fundamental to the Congress’s 

oversight of major acquisitions.

• By law, DOD’s major defense acquisition programs have to report cost, 

schedule, and performance updates to the Congress at least annually and 

whenever cost and schedule thresholds are breached.

• 10 U.S.C. Sections 2430, 2432, 2433, and 2435, on major defense 

acquisition programs.
Appendix I: Briefing Slides 

Page 21 GAO-04-695 Deepwater Program Acquisition Schedule Update Needed 

Status of Acquisition Schedule (cont’d)

• In practice, schedules on major defense acquisitions are continually 

monitored and reported to DOD management on a quarterly basis.

• DOD Practice: Interim Defense Acquisition Guidebook (October 2002).

• GAO best practices reports: Best Practices: Better Matching of Needs 

and Resources will Lead to Better Weapon System Outcomes, GAO01-288 (Mar. 8, 2001); Defense Acquisitions: DOD’s Revised Policy 

Emphasizes Best Practices, but More Controls are Needed, GAO 04-

53 (Nov. 10, 2003); and Defense Acquisitions: Assessments of Major 

Weapons Programs, GAO-04-248 (Mar. 31, 2004).
Appendix I: Briefing Slides 

Page 22 GAO-04-695 Deepwater Program Acquisition Schedule Update Needed 

Status of Acquisition Schedule (cont’d)

• Although Coast Guard officials indicated that the management tools they 

use are sufficient for tracking delivery dates throughout the course of the 

acquisition, we found these tools could not provide a ready and reliable 

picture of the current integrated acquisition schedule.

• They only only track the schedules of individual assets at the lowest, most 

detailed level and not at the integrated level.

• The integrated master schedule has data reliability problems.

• The monthly status reports do not translate the progress of individual assets 

into an overall Deepwater acquisition schedule. A February 2004 status report 

noted that because there was no accurate overall integrated schedule for the 

command and control design, the linkages with the development of other 

assets were largely unknown.

• While the Coast Guard could not provide an updated integrated acquisition 

schedule, our analysis showed that a number of key Deepwater assets 

would be delivered later than originally scheduled.
Appendix I: Briefing Slides 

Page 23 GAO-04-695 Deepwater Program Acquisition Schedule Update Needed 

Status of Acquisition Schedules for 

Selected Assets (cont’d)

Note: The award of the Deepwater contract was originally planned for April 2002 but was awarded 2 months later in June 2002.
Appendix I: Briefing Slides 

Page 24 GAO-04-695 Deepwater Program Acquisition Schedule Update Needed 

Impact of Additional Funding

• Part of the additional $168 million in funding allowed the Coast Guard to 

start work delayed from fiscal year 2003 or to start work originally 

scheduled for fiscal year 2004.

Type of asset or work planned to be started Original fiscal 

year to start 

work

1 MPA w/o missionization and initial spares 2003

Detail Design and Long Lead Material for VUAV 2003

Options on four 110-123 Patrol Boat Upgrades 2003

4 Short Range Prosecutors to be delivered with 123 ft. Patrol Boats 2004

Command & Control System Upgrades on two 210' Cutters 2004

Additional C4ISR shore site upgrades at:

Atlantic area 2004

Pacific area 2004

Greater antilles section, San Juan, P.R. 2004
Appendix I: Briefing Slides 

Page 25 GAO-04-695 Deepwater Program Acquisition Schedule Update Needed 

Impact of Additional Funding (cont’d)

• However, for several reasons, the additional $168 million in fiscal year 

2004 will not fully return Deepwater to its original 2002 acquisition 

schedule.

• Reason 1: A cumulative shortfall of $39 million still exists.

• Reason 2: The additional amount did not fund all work planned for 

fiscal year 2004; some will be delayed to fiscal year 2005 or beyond.

Type of asset or work delayed to fiscal year 2005 or beyond

C4ISR Modification of 270 Class Cutter ships 10,13

CAMS CC-2 Low Rate of Initial Production

COMMSTA CC-2 Low Rate of Initial Production (CSTA-01,02,03,04,05,06)

Production and Deployment for Major Modification of 110/123 Class Patrol Cutter Lot 5 (follow ships 13-20)

Coast Guard Air Station (CGAS) Production and Deployment

Aircraft Repair and Supply Center (AR&SC) Production and Deployment

Aircraft Training Center (ATC) Production and Deployment

Aviation Technical Training Center (ATTC) Production and Deployment

Production and Deployment of MPA Low rate of initial production (aircraft 7-9)
Appendix I: Briefing Slides 

Page 26 GAO-04-695 Deepwater Program Acquisition Schedule Update Needed 

Impact of Additional Funding (cont’d)

• Reason 3: Some assets are so far behind schedule that it is impossible to 

return them to their original schedule.

• Nine maritime patrol aircraft were originally planned for delivery by the 

end of 2005; current plans show 2 to be delivered by the end of 2006.

• Eighteen conversions of 110-foot patrol boats to 123 feet were 

originally planned for delivery by the end of 2005; current plans show 8 

to be completed by the end of 2005.
Appendix I: Briefing Slides 

Page 27 GAO-04-695 Deepwater Program Acquisition Schedule Update Needed 

Impact of Additional Funding (cont’d)

• Reason 4: Acquisition of some assets has been delayed for reasons other 

than funding.

• Greater than anticipated hull corrosion in the 110-foot patrol boats has 

delayed their conversion to 123 feet and delivery several months.

• Legacy cutters are scheduled to receive a C4ISR upgrade of higher 

speed International Maritime Satellite service. However, the 

availability of the higher speed service has been delayed several times 

from early 2003 to the Coast Guard’s current projection of June 2004. 
Appendix I: Briefing Slides 

Page 28 GAO-04-695 Deepwater Program Acquisition Schedule Update Needed 

Impact of Additional Funding (cont’d)

• Reason 5: Some of the additional funding went for a project originally not 

scheduled to begin for several years.

• In keeping with fiscal year 2004 appropriations conference committee 

directives for how the additional amount was to be spent, $20 million 

went to begin the design phase for the Offshore Patrol Cutter (OPC).

• The Coast Guard had planned to begin the design phase about 2010

for delivery of the first OPC in 2012; current estimate is that the 

acquisition schedule has been accelerated by several years.
Appendix I: Briefing Slides 

Page 29 GAO-04-695 Deepwater Program Acquisition Schedule Update Needed 

Additional Information on the Deepwater 

Program

• Incorporation of new homeland security requirements into the Deepwater 

mission needs statement is still under way. In May 2004, the DHS Joint 

Requirements Council conditionally accepted it and directed the Coast 

Guard to develop new total ownership cost estimates for submission to and 

approval by the DHS Investment Review Board in October 2004.

• Coast Guard officials said the revision’s main impact will be an increase in 

number of assets. RAND concluded in an April 2004 study that the Coast 

Guard probably needs twice as many cutters and 50 percent more aircraft. 

• In the interim, some requirements changes have been made to individual assets, mainly the National Security Cutter. 

• Operating requirement for chemical-biological-radiological-nuclear defense 

capabilities was expanded to enable the cutter to operate in a contaminated 

environment, not just pass through it.

• Size of flight deck enlarged to accommodate Navy, Army, and Customs and 

Border Protection Agency models of the H-60 helicopter.

• Shipboard sensitive compartmented information facility added for collection and 

use of intelligence.
Appendix I: Briefing Slides 

Page 30 GAO-04-695 Deepwater Program Acquisition Schedule Update Needed 

Additional Information on the Deepwater 

Program (cont’d)

• Navy budgeted $25.1 million in fiscal years 2002-04 to support equipment 

used for Deepwater program.

• $12.6 million in fiscal years 2002-03 was for testing/evaluating an 

intermediate gun system for the National Security Cutter (and possibly 

other cutters).

• $12.5 million in fiscal year 2004 was for combat systems suites for the 

National Security Cutter.

• The Navy did not transfer the $25.1 million to the Coast Guard but will 

transfer the resulting equipment. Through a 1987 agreement, the Navy 

provides to the Coast Guard all Navy-owned, military readiness 

equipment and associated support materials that the Navy deems 

necessary to enable the Coast Guard to carry out assigned missions 

while operating with the Navy. Upon declaration of war, or when the 

President directs, the Coast Guard operates as a service of the Navy 

and is subject to the orders of the Secretary of the Navy.
Appendix I: Briefing Slides 

Page 31 GAO-04-695 Deepwater Program Acquisition Schedule Update Needed 

Conclusions

• We disagree with the Coast Guard that updating the acquisition schedule is 

not worth the time and cost involved.

• Absence of an up-to-date integrated acquisition schedule for Deepwater is 

a concern, because it is a symptom of the larger issues related to whether 

this complicated acquisition is being adequately managed.

• The recent disclosure by the Coast Guard that Deepwater costs have risen 

by an estimated $2.2 billion points to the need for a clear understanding of 

what is being acquired, when it is being acquired, and at what cost.

• Maintaining a current integrated schedule for a DOD acquisition of such 

scope is a fundamental and necessary practice.

• Evolving mission requirements and the need to evaluate contractor 

performance for contract renewal heighten need for timely and accurate 

information so the Coast Guard and Congress can base decisions on 

accurate information.
Appendix I: Briefing Slides 

Page 32 GAO-04-695 Deepwater Program Acquisition Schedule Update Needed 

Recommendation

• We recommend the Secretary of Homeland Security direct the 

Commandant of the Coast Guard to update the original 2002 Deepwater 

acquisition schedule in time to support the fiscal year 2006 Deepwater 

budget submission to the Department of Homeland Security and Congress 

and at least once a year thereafter to support each budget submission. 

The updated schedule should include

• the current status of asset acquisition phases (such as concept 

technology and design, system development and demonstration, and

fabrication);

• interim phase milestones (such as preliminary and critical design 

reviews, installation, and testing); and 

• the critical paths linking the delivery of individual components to 

particular assets.
Appendix II: Coast Guard’s Comments 

Page 33 GAO-04-695 Deepwater Program Acquisition Schedule Update Needed 

Appendix II: Coast Guard’s Comments 
Appendix II: Coast Guard’s Comments 

Page 34 GAO-04-695 Deepwater Program Acquisition Schedule Update Needed 
Appendix II: Coast Guard’s Comments 

Page 35 GAO-04-695 Deepwater Program Acquisition Schedule Update Needed (440274) 
The General Accounting Office, the audit, evaluation and investigative arm of 

Congress, exists to support Congress in meeting its constitutional responsibilities 

and to help improve the performance and accountability of the federal 

government for the American people. GAO examines the use of public funds; 

evaluates federal programs and policies; and provides analyses, 

recommendations, and other assistance to help Congress make informed 

oversight, policy, and funding decisions. GAO’s commitment to good government 

is reflected in its core values of accountability, integrity, and reliability. 

The fastest and easiest way to obtain copies of GAO documents at no cost is 

through the Internet. GAO’s Web site (www.gao.gov) contains abstracts and fulltext files of current reports and testimony and an expanding archive of older 

products. The Web site features a search engine to help you locate documents 

using key words and phrases. You can print these documents in their entirety, 

including charts and other graphics. 

Each day, GAO issues a list of newly released reports, testimony, and 

correspondence. GAO posts this list, known as “Today’s Reports,” on its Web site 

daily. The list contains links to the full-text document files. To have GAO e-mail 

this list to you every afternoon, go to www.gao.gov and select “Subscribe to e-mail 

alerts” under the “Order GAO Products” heading. 

The first copy of each printed report is free. Additional copies are $2 each. A 

check or money order should be made out to the Superintendent of Documents. 

GAO also accepts VISA and Mastercard. Orders for 100 or more copies mailed to a 

single address are discounted 25 percent. Orders should be sent to: 

U.S. General Accounting Office 

441 G Street NW, Room LM 

Washington, D.C. 20548 

To order by Phone: Voice: (202) 512-6000 

TDD: (202) 512-2537 

Fax: (202) 512-6061 

Contact: 

Web site: www.gao.gov/fraudnet/fraudnet.htm 

E-mail: fraudnet@gao.gov

Automated answering system: (800) 424-5454 or (202) 512-7470 

Jeff Nelligan, Managing Director, NelliganJ@gao.gov (202) 512-4800 

U.S. General Accounting Office, 441 G Street NW, Room 7149 

Washington, D.C. 20548

GAO’s Mission 

Obtaining Copies of 

GAO Reports and 

Testimony 

Order by Mail or Phone 

To Report Fraud, 

Waste, and Abuse in 

Federal Programs 

Public Affairs