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THE STATUS OF COAST GUARD CUTTER 

ACQUISITION PROGRAMS 

(114–32) 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

COAST GUARD AND MARITIME TRANSPORTATION 

OF THE

COMMITTEE ON 

TRANSPORTATION AND 

INFRASTRUCTURE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

SECOND SESSION 

FEBRUARY 3, 2016 

Printed for the use of the 

Committee on Transportation and Infrastructure 

( 

Available online at: http://www.gpo.gov/fdsys/browse/ 

committee.action?chamber=house&committee=transportation 

(II) 

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE 

BILL SHUSTER, Pennsylvania, Chairman 

DON YOUNG, Alaska 

JOHN J. DUNCAN, JR., Tennessee, 

Vice Chair 

JOHN L. MICA, Florida 

FRANK A. LOBIONDO, New Jersey 

SAM GRAVES, Missouri 

CANDICE S. MILLER, Michigan 

DUNCAN HUNTER, California 

ERIC A. ‘‘RICK’’ CRAWFORD, Arkansas 

LOU BARLETTA, Pennsylvania 

BLAKE FARENTHOLD, Texas 

BOB GIBBS, Ohio 

RICHARD L. HANNA, New York 

DANIEL WEBSTER, Florida 

JEFF DENHAM, California 

REID J. RIBBLE, Wisconsin 

THOMAS MASSIE, Kentucky 

MARK MEADOWS, North Carolina 

SCOTT PERRY, Pennsylvania 

RODNEY DAVIS, Illinois 

MARK SANFORD, South Carolina 

ROB WOODALL, Georgia 

TODD ROKITA, Indiana 

JOHN KATKO, New York 

BRIAN BABIN, Texas 

CRESENT HARDY, Nevada 

RYAN A. COSTELLO, Pennsylvania 

GARRET GRAVES, Louisiana 

MIMI WALTERS, California 

BARBARA COMSTOCK, Virginia 

CARLOS CURBELO, Florida 

DAVID ROUZER, North Carolina 

LEE M. ZELDIN, New York 

VACANCY 

PETER A. DEFAZIO, Oregon 

ELEANOR HOLMES NORTON, District of 

Columbia 

JERROLD NADLER, New York 

CORRINE BROWN, Florida 

EDDIE BERNICE JOHNSON, Texas 

ELIJAH E. CUMMINGS, Maryland 

RICK LARSEN, Washington 

MICHAEL E. CAPUANO, Massachusetts 

GRACE F. NAPOLITANO, California 

DANIEL LIPINSKI, Illinois 

STEVE COHEN, Tennessee 

ALBIO SIRES, New Jersey 

DONNA F. EDWARDS, Maryland 

JOHN GARAMENDI, California 

ANDRE ́ CARSON, Indiana 

JANICE HAHN, California 

RICHARD M. NOLAN, Minnesota 

ANN KIRKPATRICK, Arizona 

DINA TITUS, Nevada 

SEAN PATRICK MALONEY, New York 

ELIZABETH H. ESTY, Connecticut 

LOIS FRANKEL, Florida 

CHERI BUSTOS, Illinois 

JARED HUFFMAN, California 

JULIA BROWNLEY, California 

SUBCOMMITTEE ON COAST GUARD AND MARITIME TRANSPORTATION

DUNCAN HUNTER, California, Chairman 

DON YOUNG, Alaska 

FRANK A. LOBIONDO, New Jersey 

BOB GIBBS, Ohio 

MARK SANFORD, South Carolina 

GARRET GRAVES, Louisiana 

CARLOS CURBELO, Florida 

DAVID ROUZER, North Carolina 

LEE M. ZELDIN, New York 

BILL SHUSTER, Pennsylvania (Ex Officio) 

JOHN GARAMENDI, California 

ELIJAH E. CUMMINGS, Maryland 

CORRINE BROWN, Florida 

JANICE HAHN, California 

LOIS FRANKEL, Florida 

JULIA BROWNLEY, California 

PETER A. DEFAZIO, Oregon (Ex Officio) 

(III) 

CONTENTS Page 

Summary of Subject Matter .................................................................................... iv 

TESTIMONY 

Rear Admiral Joseph M. Vojvodich, Assistant Commandant for Acquisition 

and Chief Acquisition Officer, U.S. Coast Guard .............................................. 3 

Michele Mackin, Director, Acquisition and Sourcing Management, U.S. Government Accountability Office ............................................................................. 3 

Ronald O’Rourke, Specialist in Naval Affairs, Congressional Research Service 3 

PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS 

Hon. John Garamendi of California ....................................................................... 33 

PREPARED STATEMENTS SUBMITTED BY WITNESSES 

Rear Admiral Joseph M. Vojvodich ........................................................................ 36 

Michele Mackin ........................................................................................................ 43 

Ronald O’Rourke ...................................................................................................... 65 

SUBMISSIONS FOR THE RECORD 

Rear Admiral Joseph M. Vojvodich, Assistant Commandant for Acquisition 

and Chief Acquisition Officer, U.S. Coast Guard, post-hearing responses 

to requests for information from the following Representatives: 

Hon. Bob Gibbs of Ohio referenced instances of cracked diesel engine 

cylinder heads among National Security Cutters and asked if the repairs were covered under contract or warranty, or paid by the U.S. 

Coast Guard or other entity ......................................................................... 12 

Hon. Garret Graves of Louisiana requested an explanation of efforts 

by the U.S. Coast Guard to work with the Maritime Administration 

to maintain a list of vessels for disposal ..................................................... 18 

Hon. Duncan Hunter of California asked why it wasn’t until the testing 

of National Security Cutter No. 3 that operational capability issues 

were identified yet were not identified in Nos. 1 and 2 ............................. 24 

Hon. Duncan Hunter of California requested the U.S. Coast Guard’s 

perspective on using multiyear procurement contracting and block buy 

contracting ..................................................................................................... 30 

Hon. Jim Bridenstine of Oklahoma submitted written questions for the 

record ............................................................................................................. 40 

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(1) 

THE STATUS OF COAST GUARD CUTTER 

ACQUISITION PROGRAMS 

WEDNESDAY, FEBRUARY 3, 2016 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON COAST GUARD AND MARITIME

TRANSPORTATION, COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE, Washington, DC. 

The subcommittee met, pursuant to notice, at 10 a.m., in room 

2167, Rayburn House Office Building, Hon. Duncan Hunter (Chairman of the subcommittee) presiding. 

Mr. HUNTER. Good morning. The subcommittee will come to 

order. 

The subcommittee is meeting today to discuss the status of Coast 

Guard cutter acquisition programs. 

The Government Accountability Office issued a report on January 12th entitled ‘‘National Security Cutter: Enhanced Oversight 

Needed to Ensure Problems Discovered During Testing and Operations Are Addressed.’’ It raises concerns with the timing of testing 

during production, the guidance available to guide production, testing and oversight of corrected actions, and the additional costs to 

address the deficiencies and operational issues. 

An important discussion I would like to have today is how we ensure the end assets operate as intended and are what the taxpayers paid for. What lessons have we learned during the National 

Security Cutter and Fast Response Cutter acquisition programs 

that can be applied to the OPC [Offshore Patrol Cutter] program 

to minimize, if not eliminate, the same issues. 

As I have said before, the Coast Guard is operating tens, and in 

some cases, hundreds of hours short of its operational targets, 

which puts our Nation at risk. Assets are not available for the 

Service to secure our ports, protect our environment, and ensure 

the safety of our waterways. 

We heard in 2014 the lack of available assets resulted in historic 

lows in drug interdiction rates. The lack of assets must have affected other mission areas as well. The fact that the new assets 

may not be performing as intended is a problem that could continue to impact mission capabilities. 

We have also previously discussed issues with the President’s annual budget requests and the Capital Investment Plans, both of 

which have not supported the infrastructure needs of the Coast 

Guard. According to the Coast Guard’s fiscal year 2016–2020 CIP, 

annual funding for acquisitions will be roughly $1 billion less than 

the GAO [Government Accountability Office] and Coast Guard offiVerDate Aug 31 2005 11:44 May 01, 2017 Jkt 000000 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 P:\HEARINGS\114\CG&JOI~1\2-3-16~1\98459.TXT JEAN
2 

cials have testified is needed on an annual basis to keep the current acquisition program on schedule and on budget. 

The Capital Investment Plan is nothing more than a roadmap to 

additional acquisition delays, increased costs for taxpayers, and ongoing mission performance failures. 

The President’s budget requests have followed the poorly designed roadmap provided in the Capital Investment Plan. The fiscal year 2016 request cut funding needed to acquire critically needed replacement assets by 17 percent. 

The budget request also failed to guarantee the funding needed 

to begin detailed design for the OPC, and failure to move into detailed design on the OPC by the end of fiscal year 2016 could result 

in significantly higher costs and substantial acquisition delays. 

Moving this, and other, acquisitions further to the right will only 

further degrade Coast Guard mission performance. 

As we move into reviewing the fiscal year 2017 budget, it would 

be a welcome change to see the President’s budget support funding 

for the Coast Guard’s acquisition programs. 

Another component of the recapitalization is the Coast Guard’s 

mission need statement. It is used to inform us and everybody the 

evolution of the Coast Guard’s Capital Investment Plan. Up until 

last month, the Coast Guard was working on a mission need statement from 2004. So it only took them about 11 years to update it. 

On January 8th the Coast Guard released a new mission need 

statement, as required by this committee, the Appropriations Committee, and our Senate counterparts. 

The Howard Coble Coast Guard and Maritime Transportation 

Act of 2014 required an updated mission need statement to include 

information on current and projected gaps in Coast Guard mission 

capabilities and how major acquisition programs would address 

those gaps. 

However, that is what it was supposed to do. What the Coast 

Guard released on January 8th actually states this: ‘‘This document does not seek to identify a material solution to meet future 

mission needs, but rather to identify the enduring, high-level capabilities required for the Coast Guard to execute its broad statutory 

authorities effectively and efficiently.’’ 

So it took the Coast Guard 11 years to do an updated mission 

need statement, and in that mission need statement, they said they 

are not going to do a future mission need statement. 

While having an updated mission need statement is better than 

working off one developed over a decade ago, if it does not provide 

information on what assets are needed to perform certain missions, 

does it properly inform the evolution of the Capital Investment 

Plan and subsequently the President’s budget request for Coast 

Guard assets? 

Those are questions we have today. I look forward to discussing 

all of the issues before us today, including any lessons learned from 

the NSC [National Security Cutter] and the Fast Response Cutter 

acquisition programs so they could be applied to the Offshore Patrol Cutter acquisition program. 

In the end, the American public deserves assets that perform as 

intended and expected. We do not need missions to be continually 

3 

compromised due to the limitations of old vessels and flaws in new 

ones. 

With that I yield to Ranking Member Garamendi. 

Mr. GARAMENDI. Thank you, Mr. Chairman. 

I am listening carefully to your opening statement, and I am 

thinking, ‘‘What could I add?’’ Maybe welcome and good morning. 

I look forward to your testimony. 

This chairman has laid out a series of issues. My opening statement repeats much of what he has already covered, and actually 

covered much more than my opening statement. 

So I am just going to submit my statement for the record, and 

we will just get into it and go from there. 

One thing that the chairman did not cover was our favorite subject, icebreakers. Maybe you did. Did you discuss that? 

Mr. HUNTER. No, I did not. 

Mr. GARAMENDI. Come on. 

Mr. HUNTER. This one day, you got me. 

Mr. GARAMENDI. So we want to talk about icebreakers a little bit 

to see where we are with that, but everything else that is in my 

opening statement he has already talked about. I could repeat it, 

but welcome, and I will submit it for the record. 

Mr. HUNTER. One reason this is important this morning is because your National Security Cutters are almost done. You only 

have a block of what, 40 or 50 ships, FRCs [Fast Response Cutters] 

and OPCs, coming up, and then you are not going to have any acquisition for quite a while. This is it. 

So we kind of get one shot at this to do it right and to do it as 

efficiently and as effectively as possible. So hopefully we hear this 

morning on how we are going to do that. 

And with that, on the first panel for today’s hearing we will start 

with Rear Admiral Joseph Vojvodich, boom, right there, the Coast 

Guard’s Assistant Commandant for Acquisition and Chief Acquisition Officer. 

Rear Admiral, you are recognized to make your statement. 

TESTIMONY OF REAR ADMIRAL JOSEPH M. VOJVODICH, ASSISTANT COMMANDANT FOR ACQUISITION AND CHIEF ACQUISITION OFFICER, U.S. COAST GUARD; MICHELE MACKIN, 

DIRECTOR, ACQUISITION AND SOURCING MANAGEMENT, 

U.S. GOVERNMENT ACCOUNTABILITY OFFICE; AND RONALD 

O’ROURKE, SPECIALIST IN NAVAL AFFAIRS, CONGRESSIONAL RESEARCH SERVICE 

Admiral VOJVODICH. Chairman Hunter, Ranking Member 

Garamendi, members of the subcommittee, good morning. 

Thank you for the opportunity to speak about the Coast Guard’s 

ongoing activities to recapitalize the surface fleet. On behalf of the 

Commandant and the men and the women of the United States 

Coast Guard, I want to express my appreciation for your oversight 

and continued support of our Service. 

I also want to note the Service’s thanks for including several 

Coast Guard priorities in the recently passed authorization bill. 

These new authorities will allow the Service to improve command 

structure and overall performance. 

4 

Our internal efforts to achieve continuous improvement are complemented by the valuable oversight performed by this subcommittee and the organizations represented by my distinguished 

fellow panel members today. 

We continue to have a very effective working relationship with 

the Government Accountability Office, Ms. Mackin, and her team. 

This was evident during GAO’s recent review of the National Security Cutter operational test and evaluation activities, which concluded with recommendations that are consistent with our plans to 

achieve OT&E. 

We likewise benefit from the research and knowledge of Mr. 

O’Rourke and the Congressional Research Service. I am honored to 

have the opportunity to jointly testify with these committed professionals. 

As the chief acquisition officer, I have the distinct pleasure to 

lead a talented team in delivering assets and capabilities needed 

to accomplish the Service’s many missions. The importance of this 

work is reflected by the efforts put forward by this subcommittee 

and your colleagues to fully support the Coast Guard acquisition 

priorities in fiscal year 2016. We are fully prepared to execute 

these funds in an effective and efficient manner. 

I can say this because we have made investment to mature our 

acquisition enterprise. We continue to grow a deep and talented acquisition workforce capable of performing critical program management, contract and support functions. We are actively applying lessons learned from each program to improve decisionmaking across 

the portfolio. 

From cutter to cutter, program to program, we are approving our 

processes in a quality of delivered assets. In the end we are providing more capable products to our end users: the men and women 

in the field who are responsible for executing the missions. 

We continue full rate production of the National Security Cutter 

and the Fast Response Cutter, and we are working hard on designing and delivering an affordable and capable Offshore Patrol Cutter. We recently completed preliminary and contract design phase 

of the OPC, and we are on schedule to award a follow-on contract 

for detail design before the end of this fiscal year. 

At the same time, we are acting on the President’s direction to 

accelerate the acquisition of a heavy icebreaker and begin planning 

construction of additional icebreakers. We recently completed the 

operational requirements document and released a draft technical 

package late last month, which outlines key requirements for a 

heavy icebreaker to advance our industry outreach strategy. 

Additionally, we started a preservation and material condition 

assessment of Polar Star, and we anticipate having results later 

this summer. 

The Commandant continues to make fleet recapitalization one of 

the Service’s highest priorities, and we recognize the need to 

achieve affordability in everything that we do. 

Thank you for your support of the Coast Guard’s effort to provide 

our men and women in uniform with the mission capability they 

need in the 21st century. 

I appreciate the opportunity to testify, and I look forward to the 

questions that you may have. 

5 

Mr. HUNTER. Thanks, Admiral. 

Our next witness is Ms. Michele Mackin, Director of Acquisition 

and Sourcing Management for the U.S. Government Accountability 

Office. 

Ms. Mackin, you are recognized. 

Ms. MACKIN. Thank you, Mr. Chairman. 

Good morning, Ranking Member Garamendi, members of the 

subcommittee. Thank you for having me here this morning to discuss the Coast Guard’s cutter acquisitions, in particular, issues 

identified in the National Security Cutter’s testing and in ongoing 

operations. 

As was noted, we reported on these issues last month at the request of the subcommittee. 

I will also share some observations on lessons learned from the 

NSC and from our work on commercial best practices as the Coast 

Guard moves forward with the Offshore Patrol Cutter. 

By all accounts, the NSC is a more capable vessel than the High 

Endurance Cutters it is replacing. For example, it has increased 

range and a larger flight deck. 

The NSC had an important event in the spring of 2014, its initial 

operational test and evaluation conducted by the Navy’s test agent. 

This kind of operational testing is the only way to ensure that an 

asset is ready to meet its missions. 

At the time of the testing, seven of eight NSCs were either delivered or under contract, and three were operational. The test was 

done on the third NSC, the Stratton. The Navy determined that the NSC is operationally effective, 

meaning capable of performing its missions, and operationally suitable, meaning it can sustain operations in terms of availability and 

reliability. 

At the same time, however, the Navy identified 10 major deficiencies that could affect the ship’s operations. In addition, 7 of the 

19 key performance parameters were not fully met. Some areas of 

concern pertain to the combat systems suite. Others pertain to the 

sea state requirements for the cutter boats that launch from the 

NSC. 

Of note, the unmanned aerial system, key to the NSC’s planned 

capabilities, could not be tested because the Coast Guard has not 

yet acquired a UAS [unmanned aircraft system]. 

The Coast Guard has plans to address most of the identified 

issues, and the items will be assessed again during follow-on operational testing, which is expected to start later this year and continue into 2017 or longer, at which point at least six NSCs will 

have been delivered. 

In addition to the testing issues, the Coast Guard will need to 

replace certain equipment after all NSCs have been built. Examples include the gantry crane, which was not designed for a maritime environment and is experiencing significant corrosion, and the 

single point davit which cannot be operated in high seas as intended. These and other retrofits will cost over $200 million. 

Further, we identified problems that have arisen during the 5 

years the NSCs have been operational. Some of the problems are 

proving difficult to fix. Key areas of concern are high engine temperatures, which limit the speed of the NSC in certain conditions; 

6 

cracked cylinder heads, which are occurring at a rate higher than 

expected; and overheating generator bearings, which have caused 

at least one patrol to be cut short. 

Until corrective actions are identified and implemented, the 

Coast Guard faces increased costs and the potential for NSC missions to be limited. 

Finally, regarding lessons learned from the NSC, one element is 

competition. Our work on commercial shipbuilding best practices 

has found that competition can save money. The NSC procurement 

was sole-sourced under the Deepwater program, and the Coast 

Guard is taking steps to inject competition into the OPC acquisition. 

Another observation is that the Coast Guard plans to conduct 

initial operational test and evaluation when one of the 25 OPCs is 

operational as compared to 3 of the 8 NSCs. 

A third area is warranty provisions. Who pays for the defects and 

retrofits? In the case of the NSC, the Coast Guard generally will 

pay. The planned OPC warranty, which according to the Coast 

Guard will be similar to that of the Fast Response Cutter, would 

have stronger provisions that should be more effective in protecting 

taxpayer dollars. 

And finally, the Coast Guard has opportunities to incorporate 

best practices in terms of ensuring that the OPC design is solidified 

and stable before construction begins, and that quality assurance 

at the shipyard is robust. 

Mr. Chairman, Ranking Member Garamendi, members of the 

subcommittee, this concludes my prepared remarks. 

Thank you. 

Mr. HUNTER. Thank you, Ms. Mackin. 

Our last witness is Mr. Ronald O’Rourke, a specialist in naval affairs for the CRS [Congressional Research Service]. 

Mr. O’Rourke, you are recognized. 

Mr. O’ROURKE. Chairman Hunter, Ranking Member Garamendi, 

distinguished members of the subcommittee, thank you for the opportunity to appear before you today to discuss Coast Guard cutter 

acquisition programs. 

Mr. Chairman, with your permission I would like to submit my 

written statement for the record and summarize it here briefly. 

As requested, my testimony focuses on how multiyear procurement and block buy contracting could reduce acquisition costs for 

new Coast Guard cutters. I have seven points I would like to make. 

The first is that multiyear procurement can reduce acquisition 

costs by roughly 10 percent compared to costs under annual contracting, and that block buy contracting can reduce acquisition 

costs by comparable amounts if the authority granted for using 

block buy contracting includes authority for making economic order 

quantity purchases of components. 

The second point is that the Navy has used multiyear procurement and block buy contracting extensively in recent years in its 

shipbuilding and aircraft acquisition programs, and as a result estimates that it has saved billions of dollars in acquisition costs. That 

is billions with a ‘‘B.’’ 

Among other things, using multiyear procurement helped the 

Navy and Congress to convert a 9-ship buy of DDG–51 destroyers 

7 

into a 10-ship buy and to convert a 9-ship buy of Virginia-class attack submarines into a 10-ship buy. 

The third point is that although the Navy in recent years has 

made extensive use of multiyear procurement and block buy contracting to reduce acquisition costs, the Coast Guard to date has 

not used multiyear procurement or block buy contracting in its cutter acquisition programs. The Coast Guard has used contracts with 

options in cutter acquisition programs. A contract with options may 

look like a form of multiyear contracting, but operates more like a 

series of annual contracts. 

Contracts with options do not achieve the reductions in acquisition costs that are possible with multiyear procurement and block 

buy contracting. 

The fourth point is that the Offshore Patrol Cutter program and 

the polar icebreaker program can be viewed as candidates for using 

block buy contracting, and the Fast Response Cutter program can 

be viewed as a candidate for using either multiyear procurement 

or block buy contracting. 

The fifth point is that from a congressional perspective tradeoffs 

in making use of multiyear procurement and block buy contracting 

include reduced congressional control over year-to-year spending 

and tying the hands of future Congresses; reduced flexibility for 

making changes in Coast Guard acquisition programs in response 

to unforeseen changes in strategic and budgetary circumstances; a 

potential need to shift funding from later years to earlier years to 

fund economic order quantity purchases of components; the risk of 

having to make penalty payments to shipbuilders if multiyear contracts need to be terminated due to unavailability of funds; and the 

risk that materials and components purchased for ships to be procured in future years might go to waste if those ships are not eventually procured. 

The sixth point is that using block buy contracting might save 

about $1 billion in the Offshore Control Cutter program; that using 

multiyear procurement or block buy contracting might save more 

than $100 million in the Fast Response Cutter program; and that 

using block buy contracting might save upwards of $100 million in 

a two-ship polar icebreaker program. 

The $1 billion in potential savings in the OPC program would be 

about enough to pay for a polar icebreaker, and the combined potential savings across all three programs of about $1.2 billion is 

about equal to the average annual funding level in the Coast 

Guard’s acquisition, construction and improvements account. 

My seventh and final point is that in considering whether to 

grant authority for using multiyear procurement or block buy contracting, Congress may weigh the potential savings of these contracting mechanisms against the tradeoffs I just listed. 

Mr. Chairman, this concludes my remarks. Thank you again for 

the opportunity to testify, and I look forward to the subcommittee’s 

questions. 

Mr. HUNTER. Thanks, Mr. O’Rourke. 

I am not going to ask questions right now, but I would like you 

to explain just one thing really quickly and then we will start asking questions. 

8 

Can you just explain in layman’s terms what a block buy does 

and tie it into appropriations and authorizations here in Congress 

and how the money is appropriated if you do a block buy and you 

give money for lead materials through the appropriations process 

here? How does it actually work? 

Mr. O’ROURKE. A block buy contract is similar to a multiyear 

procurement contract. You can consider it to be the less formal 

stepchild or step-sibling of a multiyear procurement contract. Like 

a multiyear procurement contract, it is one contract. It covers several years’ worth of procurement, and it gives the manufacturer, in 

this case the shipbuilder, the assurance that that firm needs to 

make investments in its capital plant and in its workforce to optimize the situation for the production of the units covered under the 

period of the contract. That saves money at the shipyard. 

A block buy contract, if it also has written into it authority for 

making economic order quantity purchases of components, that is, 

batch purchases of components upfront, can save money at the 

component manufacturers. 

And when you add those savings together, the savings under a 

block buy contract can be comparable to those of a multiyear procurement contract, on the order of roughly 10 percent, and this has 

occurred in a number of shipbuilding and aircraft acquisition programs that the Navy and the other DOD services have pursued in 

recent years. 

Mr. HUNTER. How was the money appropriated? So if you do a 

multiyear, so say you are buying ships over 3 years, for example. 

How does the appropriations process work here in the House? 

Mr. O’ROURKE. The appropriations are generally the same. You 

are doing annual appropriations. There is no need to fund the entire thing upfront. So you are funding the ships in this case one 

at a time. 

The one change from annual contracting is that if you are doing 

economic order quantity, or EOQ, purchases of components—— 

Mr. HUNTER. Say that again. 

Mr. O’ROURKE. If you are doing economic order quantity, or 

EOQ, purchases of components and you are ordering those components upfront that would be installed across all the ships in the 

group, then you do bring some money from later years into earlier 

years to pay for that. 

Mr. HUNTER. Do you mind pulling that closer to you? I have artillery ears, and the rest of these guys are just old. 

Mr. O’ROURKE. The one difference is that if you are making EOQ 

purchases of components, batch purchases of components, upfront 

as part of your strategy for achieving savings, then the money to 

pay for that is moved from later years into earlier years. 

So in the first year of block buy contract for a group of cutters, 

you would pay for that first cutter in that year, but you would also 

make a payment for some of the components for the downstream 

ships, and that would be in addition. 

So there is a shifting or re-phasing of a little bit of the money 

to the extent that you want to use your authority for making economic order quantity purchases—upfront batch purchases of components. 

9 

But in general, you are still paying for the ships one at a time 

as you would under annual contracting. 

Mr. HUNTER. So could the manufacturer buy all the steel they 

want to as the steel market goes up and down? They can wait and 

time their buys or no? 

Mr. O’ROURKE. It is usually discussed in terms of components, 

but the authority may extend I believe to materials as well. You 

can think about pumps and valves, for example, being the kind of 

thing that the shipbuilder would then order in batch fashion from 

the component manufacturer so that they can make them in an 

economically efficient manner, and then they would be ready for installation on each of the ships as those ships are then funded and 

produced through the life of the contract. 

Mr. HUNTER. What is the difference between lead time materials 

and having the money appropriated upfront to buy lead materials, 

and what you are talking about, or is there a difference? 

Mr. O’ROURKE. Somewhat similar. Long lead time materials are 

ordered ahead of the ship that it is going on so that they will be 

ready in time for installation on that one ship. 

In this case if you are doing 25 OPCs or as many as 26 Fast Response Cutters, you are getting as many as 25 things or maybe 11 

things for the OPC program, 11 sets of pumps and valves, all upfront, and they would sit there and wait then to be installed on 

each of the first 11 OPCs or the 26 Fast Response Cutters. 

Mr. HUNTER. OK. And thanks. 

We are going to jump right back into this, but I would just like 

to recognize Mr. Garamendi. 

Mr. GARAMENDI. Well, let us not jump out of this for a few moments. 

So the experience of the National Security Cutter and the Offshore Patrol Cutter would indicate that we may be better off looking at a block buy or a multiyear procurement contract for the 

OPCs; is that correct, Mr. O’Rourke? 

Mr. O’ROURKE. What I would say is that the Navy’s experience 

in reducing shipbuilding and aircraft acquisition costs through the 

use of both multiyear procurement contracts and block buy contracting offers an example that can be considered by this committee and the Congress for application in Coast Guard cutter acquisition. In weighing whether to do this or not, you would balance 

the potential savings of these contracting mechanisms against the 

tradeoffs that I listed earlier in my opening statement. 

Mr. GARAMENDI. Ms. Mackin, do you tend to agree with the theory that Mr. O’Rourke is putting forward? 

Ms. MACKIN. I think block buy multiyear can result in savings, 

but I will just mention Littoral Combat Ship. That was a block buy 

contract. It has not gone well in large part because the requirements were not firm, and now the Navy, you know, had 10 ships 

for each shipyard in these block buy contracts, and that was their 

strategy. 

So I think it can result in savings, but the key really is to have 

the requirements nailed down and firm before construction. You 

may build a few ships and then move into a block buy situation 

afterwards, for example. 

So that would be my only caveat there. 

10 

Mr. O’ROURKE. If I could just add very quickly, the Littoral Combat Ship program has had issues and controversy and difficulties, 

but I view those as being independent of the Navy’s use of block 

buy contracting in that program, and the actual construction of the 

ships that are under the block buy contract under the LCS program has gone a lot more smoothly than the construction of the 

earlier ships that were done under annual contracting. 

Mr. GARAMENDI. Why was that? 

Mr. O’ROURKE. In part because the stability provided by working 

out the problems with the initial designs fed into the block buy contracts, and the shipbuilders were in a position where they could 

then produce them on a recurring, regular basis. 

Mr. GARAMENDI. The first ships in any of these three and I suppose the Littoral Combat Ship also, the first ones are kind of like 

we are going to discover all of the errors and mistakes and problems and hopefully know what they are and get them out of the 

way, and then move into a more production type procedure. 

Is that basically what happens all the time? 

Mr. O’ROURKE. I think as a general matter the Navy discovers 

design issues and experiences cost growth on lead ships that is 

then, yes, fed into its understanding of the remainder of—— 

Mr. GARAMENDI. These three programs are all new ships. Excuse 

me. Each program is a new program. It is a new ship that had not 

previously been in the fleet; is that correct? I think so. I am wrong? 

Mr. O’ROURKE. No, the Fast Response Cutter program is well underway, and so if you were to do a contract for that program, you 

are in the middle of it already. 

Mr. GARAMENDI. I did not communicate well. My apologies. What 

I am saying is that all three of these ships, each one is a new ship 

at its outset. When the contract was let, it was a new ship. National Security Cutter had never been built before. 

There are going to be problems. You are going to find out that 

this did not fit. You really did not want it done that way. What you 

really needed was something different. That is kind of like the way 

it is, is it not? 

I guess the point to us is we should expect that to happen with 

the first one off the line. It gets into the water; hopefully it floats, 

and you go from there. Is that more or less correct, Admiral? 

And then you find the problems. You solve it. You figure out the 

solutions to the problems, and then hopefully the next ships coming 

off the line do not have the same problem, correct? 

Admiral VOJVODICH. Yes, sir, there is a great deal of learning 

that goes on in the shipyard. 

Mr. GARAMENDI. In that process. So we might expect for the first 

cutter coming off in any of these three, first ships coming off in any 

of these three different types of ships to have problems, right? 

Wrong? It is going to be perfect? 

Ms. MACKIN. I doubt it will be perfect, but I think this is where 

the commercial shipbuilding best practices could help inform the 

OPC acquisition. They are not the same kind of ships, but the principle of building them, the whole mechanical, electrical, the basic 

construction of the ships, there are definitely lessons to be learned 

there. 

11 

In the commercial world, they deliver a ship that works right off 

the bat, and largely because they make sure that the design is stable before they begin construction. 

The Navy typically does not do that, and so I think here is an 

opportunity for the Coast Guard to try to get that part right on the 

OPC. 

Mr. GARAMENDI. Very interesting. So you want to know before 

you begin to lay the keel what it is you want it to look like when 

it is completed. Is that what I heard you say? 

Ms. MACKIN. Yes, sir. 

Mr. GARAMENDI. And all of the little elements, including the unmanned aerial vehicle? 

Ms. MACKIN. Those are additional capabilities. You know, I think 

here we are kind of dealing with a legacy Deepwater issue when 

you talk about the UAS, the cutter boats. The stern doors have 

problems. A lot of this is the way that procurement went. It was 

in a sole source environment. The Government had very little control over the requirements in those days. 

The Coast Guard obviously has come a long way since then. 

Mr. GARAMENDI. So I think what I am trying to get is a good 

sense of lessons learned, which I think is what we are here for 

today, and the application of those lessons learned to this next 

class of ships. 

Mr. O’ROURKE. One of the oldest lessons in shipbuilding that has 

been learned many times over is to avoid design construction concurrency, and the Navy has moved in recent years to get away 

from that and to take its designs to a high stage of completion prior 

to starting the construction of the ships, and the degree of completion of design has been moving upward over time. 

But, yes, that is one of the oldest and most—— 

Mr. GARAMENDI. Now, with that foundation in place I am out of 

time, well out of time, and so I am going to yield back, but I want 

to come back and circle back around as to whether those lessons 

are being applied by the Coast Guard. 

Thank you, Mr. Chairman. 

Mr. HUNTER. Mr. Gibbs from Ohio is recognized. 

Mr. GIBBS. Thank you, Mr. Chairman. 

Admiral, you know, I listened to the testimony from Ms. Mackin 

and Mr. O’Rourke, and I hear a common theme about the purchasing problems. We could save $1 billion if they do purchasing 

differently. That would pay for an icebreaker. I hear about the warranty. I have got a paper in front of me that talks about some of 

the challenges the Coast Guard has had, averages four cracked cylinder heads a year. Then the Coast Guard paid for it. Warranty did 

not pay for it or the manufacturer. Generator bearings, propulsion 

systems, stern doors maybe leak, may cause the boat to capsize. 

I am trying to understand these issues. Why are taxpayers paying for these fixes? I mean, how do you guys negotiate contracts 

here? I mean, how does this work? 

I think the other two witnesses, the Government Accountability 

Office and the Congressional Research Service are pretty critical 

about the procurement and what is happening. So can you expound 

or enlighten me why this is happening? 

12 

Admiral VOJVODICH. Yes, sir. Thank you for the opportunity to 

address that. 

The National Security Cutter is obviously a very complex cutter 

derived with many complex systems, and so over time as we learn 

to operate them in the operational environment, we are going to 

encounter issues out there. And so, you know, when those issues 

come up, we engage our technical authority to make sure we understand the engineering aspect of it. 

We engage the shipbuilder as well as the originating equipment 

manufacturers to understand the solutions. We put plans in place 

whether it is in design or prototypes or optimization studies, and 

we look at mission impact. 

What we have observed with the National Security Cutter, we 

are able to meet mission. We are encountering issues along the 

way, and again, through this whole process of technical authority 

and the shipbuilder, we are addressing those efficiently to make 

sure that we have the best capability that we can provide to our 

operators. 

Mr. GIBBS. So I guess what you are saying is some of this technology, you are developing it as you are building the ship, and so 

it is not as clear-cut. 

I mean, we are talking about cracked cylinder heads on a diesel 

engine. I mean, I would think I missed something here. 

Admiral VOJVODICH. The application of these technologies in a 

maritime environment in these complex, harsh environments, and 

again, when we looked at the initial design, a crane, a boat launch, 

a certain type of engine that has been used, and then we put it in 

the operator’s hands in terms of how we actually apply and use it 

from a—— 

Mr. GIBBS. Well, let me ask you. OK. So you have a problem. So 

it is the cylinder heads, and you go back to the manufacturer. I 

mean, what kind of discussion do you have about who is responsible? 

Why does it fall on the taxpayers? Do they assume some responsibility for the defect, or do you think it is all because of the stress 

and the pressures that the Coast Guard is putting on these ships? 

It is above the norm? 

Admiral VOJVODICH. In terms of addressing who pays for it depends on the construct of the contract, whether it is in a warranty 

or it is missing a capability that we put on contract. In these particularities, it depends, sir, and in the case of the engine and the 

cracked cylinder head, I would like to get back to you and provide 

you the accurate detail for that particular case. 

[The information follows:] 

The Coast Guard has been responsible for paying for replacement cylinder 

heads on the propulsion diesel engines. The Coast Guard continues to work 

with the engine manufacturer to study the root cause of these issues and 

is committed to developing an engineering solution to reduce the frequency 

of this repair. 

There have been other component repairs on the propulsion diesel engines, 

separate from the cylinder heads, where the Coast Guard and manufacturer 

have shared costs of failure analyses and repairs, and also situations where 

the manufacturer assumed all costs. In each instance, responsibility for the 

repairs was determined based on the specifics of that situation. 

13 

Mr. GIBBS. Ms. Mackin, do you want to respond since you talked 

about that this morning? 

Ms. MACKIN. I think generally this is one of the lessons learned 

that we would point to for the OPC. The NSC, the way that procurement was under, you know, the former Deepwater program, it 

did not have a strong warranty provision. It just did not. 

The Fast Response Cutter’s warranty is much stronger, more 

what we would think of as a typical warranty, and as I mentioned, 

that is the same kind of warranty that is planned for the OPC. So 

if that plays out as planned, it should be better at protecting the 

taxpayer investment. 

Mr. O’ROURKE. Could I just add one comment though? 

Mr. GIBBS. Yes, go ahead. 

Mr. O’ROURKE. Warranties are not free. If you tell the contractor 

that he is going to operate with a contract under warranty, he is 

going to price that into the contract. So the idea that you can get 

warranty protection and not have to pay for it, you know, you could 

be deluding yourselves on that. 

It is not a question of avoiding a cost to the taxpayer. It is of balancing risk and when the taxpayer might pay for it. If you do not 

have a warranty provision, the Government might have a bad surprise down the road and the taxpayer would have to pay for it at 

that point, but if you put the warranty into the contract, the contractor will price that in, and the taxpayer is paying for it along 

the way. There is no bad surprise. 

Mr. GIBBS. No, I would agree with that, but I just want to make 

sure that the Coast Guard is doing their due diligence here to 

make sure that they are not getting taken for a ride. 

Mr. O’ROURKE. But when you weigh the cost of that warranty 

against the risks, it may or may not make sense to have that warranty. 

When you go to a store and you buy some new piece of electronics equipment, the salesperson says, ‘‘Well, do you want to get 

a warranty on that?’’ 

Now, how many of you have bought that warranty? Probably not 

many because it is priced in a way that it is not actually a good 

deal. So from the Coast Guard’s standpoint, it is a matter of weighing what the extra cost of that warranty is against the risks and 

the exposure that it has. 

That is not an easy task to do because there is some uncertainty 

involved, but I wanted to make that point because warranties may 

or may not make sense based on how they are priced into the contract. 

Mr. GIBBS. I think that is an excellent point, and I appreciate 

and would agree with that. But I wanted to make sure that there 

should be some responsibility in some instances back on the manufacturer when trying to do our due diligence. 

Mr. O’ROURKE. And the Coast Guard needs to address that issue 

with eyes open and take a careful look at it. That is what really 

needs to happen, and then make as informed a decision as you can 

on it. 

Mr. GIBBS. Thank you, Mr. Chairman. 

Mr. HUNTER. I thank the gentleman. 

14 

I would say, too, just looking at the NSC equipment problems 

that Mr. Gibbs was just nailing off, it looks like three or four of 

those are Coast Guard things, and the rest, the cylinder heads, the 

generator bearings, the propulsion systems, those are not Coast 

Guard-centric, right? I mean, those are just boat things. Those 

have nothing to do with weaponization or launching a UAS or 

launching a small boat off the back. It is not the gantry crane. That 

is none of those things. It is the engines, right? 

Admiral VOJVODICH. Yes, sir. 

Mr. HUNTER. And I would separate. I mean, you can expect to 

have issues with new things like the single point launching for the 

small boats and the crane and the UAS stop and maybe the modules for weapons, but not the engines. I think that is what is kind 

of surprising to me at least. 

The gentlelady from California is recognized. 

Ms. BROWNLEY. Thank you, Mr. Chairman. 

And I apologize for being late. I was attending another meeting, 

but I am glad to be here as of now. So if my questions are repetitive, I apologize. 

But the first question I had had to do with NSC retrofits, and 

I believe, Ms. Mackin, in your testimony you noted that the GAO 

review identified several issues that will require retrofits. 

The Coast Guard plans to maintain the original equipment for 

the production of the remaining NSCs and conduct retrofits after 

accepting delivery. So my question is: does the GAO believe that 

this decision will result in a cost savings for the Coast Guard? 

And how long would the new NSCs be out of service while these 

retrofits are being made? 

Ms. MACKIN. Some of the retrofits have been known for many 

years, for example, the structural enhancements on the first two 

NSCs. I am not sure exactly what the timeframe will be, but I 

would expect many months for those two ships. 

Others like the gantry crane were never intended for a maritime 

environment. So obviously it is experiencing corrosion. That will 

need to be replaced on all the ships, and there are prototypes right 

now, which is one reason they are testing the prototype on the 

third NSC before they go back and do the retrofits. 

Maybe the admiral will have a better idea about how long the 

retrofits will take. 

Ms. BROWNLEY. Can you speak to any cost issues relative to 

that? Is it going to cost more? Will there be cost savings? 

Ms. MACKIN. The Coast Guard estimates a little over $200 million for the known retrofits. How that will play out time will tell 

because they have not taken place yet, and some of that will depend on how they contract for these and what that will look like, 

and that is not known at this point. 

Ms. BROWNLEY. Thank you. 

Admiral, thank you for your service. If you have any comments. 

No comment? 

I mean, any terms of downtime with the retrofit, will it impact 

the Coast Guard’s mission readiness at all? 

Admiral VOJVODICH. Ma’am, thank you for the question. When 

we leave the cutter production at the shipyard, we incur costs, and 

sometimes we try to optimize the overall cost in terms of delivering 

15 

a mission complete cutter. Sometimes it is to our advantage to be 

able to get it out of the shipyard and put it in the hands of our 

sailors to operate it, to understand it, and then we get to pick the 

time and choose the time in between a deployment or an opportunity to learn more about the cutter to put in those retrofits in 

a place that we could perhaps compete and thoroughly understand 

the design with our technical authorities, as well as any of the 

manufacturers that we are involved with. 

Ms. BROWNLEY. Thank you. 

Ms. Mackin, again, in your testimony you noted that several 

weapons systems and the radar were repaired following initial 

operational test and evaluation, but the post-operational reports indicated persistent problems with these systems. 

So what types of problems do persist? 

Ms. MACKIN. There have been some problems with the combat 

systems suites. The air search radar, for example, has had some 

parts fail, and it is taking some time to get replacement parts from 

overseas. So that is one issue that has been coming up in operations. 

In the test event itself, some of the weapons systems did not 

function as intended. As I noted, the Coast Guard has plans to fix 

those problems, and we will see how they do in the follow-on testing. 

Ms. BROWNLEY. So would you describe these problems as isolated 

incidences or reoccurring in terms of other cutters and issues? 

Ms. MACKIN. Frankly, until the follow-on testing is complete, 

which as I mentioned will not be until 2017 or later, it is hard to 

answer that question for sure. The Coast Guard will continue, I am 

sure, during operations to get more information, but really that 

operational testing that is very rigorous is the best way to ensure 

that these are not repeatable problems. 

Ms. BROWNLEY. And who are the providers of the parts that are 

late? You said they came from overseas. 

Ms. MACKIN. It is a German firm. I do not recall the name off 

the top of my head. 

Ms. BROWNLEY. Thank you. 

I yield back, Mr. Chairman. 

Mr. HUNTER. Great question there on the end, too. I did not 

know we were buying German stuff with our taxpayer dollars. That 

is good. 

Mr. Sanford, the gentleman from South Carolina is recognized. 

Mr. SANFORD. Thank you, Mr. Chairman. 

Two quick questions. One, we had a brief conversation about 

multiyear contracting and block buy contracting, which is ultimately I guess all about fleet modernization, and what hit me is 

the real next cusp of fleet modernization is really tied to the air. 

You know, vessels are important in terms of patrol, but ultimately 

if you really want to leverage that capacity in terms of intelligence, 

surveillance, reconnaissance, et cetera, you really need to have 

things attached to you that give you a much wider view than a patrol would. 

And yet it seems that the stuff that I have read has suggested 

that we are really behind with Guard unmanned aerial systems on 

16 

the new National Security Cutters. Bring me up to speed on that. 

Why the lag? 

Because it seems to me if you are really going to leverage taxpayer dollars, that is a vital way of doing so. 

Admiral VOJVODICH. Sir, thanks for that question. 

So the unmanned aerial system requirement exists in the National Security Cutter. We have looked at other solutions in terms 

of optimizing from an affordability perspective in delivering capability. We are working through a number of options, and one of the 

ones that we want to team up with is making sure that we are acquiring mature technologies that provide some capability, that 

some of the risks are wrung out, if you will. 

So we partnered up with the Navy who has a small UAS program that delivers some capability. Right now we are looking at 

the design aspect, integrating with the National Security Cutter, 

and we anticipate in a year or so to be able to deliver some capability on the National Security Cutter here and test its capability 

accordingly. 

Mr. SANFORD. Yes, ma’am. You had a thought as well? 

Ms. MACKIN. I was just going to note that the UAS capability has 

long been an integral planned part of the NSC’s capability as you 

mentioned, and it has been delayed. It was supposed to be initially 

available in 2007. 

It turned out to be way too expensive and some technology problems existed there. So the Coast Guard has been studying it for 

many years since then. 

As the admiral noted, it sounds like a small UAS will be available to be assessed in the follow-on testing. 

Mr. SANFORD. But we still move forward with these vessels, but 

not the part that really leverages the vessels’ capacity. It just 

seems to me we have got a little bit of that backward, but I will 

skip to a second question. 

The GAO report suggested, I guess, the Fast Response Cutter 

and the HC–144 Maritime Patrol Aircraft that the initial testing 

basically said it was not fully operational, and this really goes back 

to my colleague’s point with regard to things going wrong on ships 

and yet full procurement was approved. 

Why would you go forward with something where in essence 

there are bolts in the system that are not working so well, yet you 

are going to go ahead with full production? 

Help me understand that sequencing. 

Admiral VOJVODICH. We follow a very rigorous process to understand what we are acquiring, and so we go through this initial operating, test and evaluation, and we get in our operators’ hands. 

We demonstrate through an independent operational test authority, again, that it is operational, it is suitable, and effective, and 

that allows us to move forward to do mission. It allows us to get 

it into the operator’s hand to be able to do—— 

Mr. SANFORD. So let me just interrupt then. So what you’d say 

is the GAO was off in their report? Because I mean their words 

were that neither asset met all key, ‘‘key’’ in their words, key requirements during initial operational testing. 

17 

Admiral VOJVODICH. At the high level we are ready to operate. 

There are aspects of the cutter that did not meet some of the testing criteria. 

Mr. SANFORD. So you disagree with their definition of ‘‘key.’’ 

Admiral VOJVODICH. Those are our words. Those are key elements of the cutter. We have to demonstrate that. We are committed to complete the testing in the fall, operating test and evaluation. 

Mr. SANFORD. I have got 22 seconds. So let me just throw one 

other thought at you and respond as best you can, which is the 

GAO report was also critical with regard to Coast Guard notifying 

Congress of performance breaches. Anything new that the committee ought to be aware of on that front? 

Ms. MACKIN. We did make a recommendation there largely pertaining to the guidance of the Department of Homeland Security. 

It was not really clear. If you did not meet a key performance parameter during the testing, does that mean you are in breach and 

should report to Congress? 

DHS has since, based on our recommendation, revised its guidance to allow for the follow-on testing to prove that those key parameters can be met before a breach is reported. 

Mr. SANFORD. Thank you very much for your testimony. 

Thank you, Mr. Chairman. 

Mr. HUNTER. I thank the gentleman. 

Mr. Garamendi is recognized. 

[Inaudible.] 

OK. Mr. Graves is recognized. 

Mr. GRAVES OF LOUISIANA. Thank you, Mr. Chairman. 

The acquisition schedule for NSC, FRC, OPC is concerning for a 

number of reasons when you look at the increased mission of the 

Coast Guard, and I think that has come up in several hearings 

that we have had over the last few years. 

Mr. O’Rourke, one thing that the Navy last year retired the USS 

Simpson, which is the last of the Perry-class frigates; those served 

as a law enforcement platform for Coast Guard law enforcement 

detachments for operations particularly in the Caribbean. 

Last year at a hearing Admiral Z noted that he had his eyes, I 

think, on 90 percent of the transit of drugs, but only had the capabilities to address 20 percent. What does the loss of that Perry-class 

platform do to the Coast Guard’s capabilities? 

Mr. O’ROURKE. I think the admiral was better prepared than I 

am to speak to that. I have been at hearings where this issue was 

discussed, and, yes, the shortfall in available cutter hours down in 

the southern region has reduced the fraction of drug interdiction 

warnings that the Coast Guard is actually prepared to act on, and 

they have intelligence that they sometimes cannot act on due to 

lack of assets. 

Mr. GRAVES OF LOUISIANA. Is it safe to say that the acquisition 

schedule for the vessels I mentioned is not meeting demand, I 

guess, for lack of a better term, in regard to the Coast Guard’s mission? 

Mr. O’ROURKE. In a couple of ways. One is that the total number 

of cutters planned under the Coast Guard’s program of record is 

well short of the number that the Coast Guard has previously calVerDate Aug 31 2005 11:44 May 01, 2017 Jkt 000000 PO 00000 Frm 00027 Fmt 6633 Sfmt 6633 P:\HEARINGS\114\CG&JOI~1\2-3-16~1\98459.TXT JEAN
18 

culated would be needed to fully perform all of the Coast Guard’s 

projected missions in coming years. In fact, the number is about 60 

percent. 

So the program of record would get you about 60 percent of the 

cutters that the Coast Guard feels it will need in future years 

under an earlier calculation to do all of its missions. 

Mr. GRAVES OF LOUISIANA. OK. 

Mr. O’ROURKE. A second way that the schedule is problematic is 

that the speed at which you are bringing on those ships is late 

compared to the end-of-service lives of the older assets they are replacing. 

Mr. GRAVES OF LOUISIANA. Sure, sure. OK. 

Mr. O’ROURKE. And that is well established as a function of the 

schedule. 

Mr. GRAVES OF LOUISIANA. Thank you. 

Admiral, switching topics, the inspector general reported that the 

MarAd [Maritime Administration] should maintain an inventory of 

vessels, U.S. vessels that are to be disposed and suggested that 

MarAd work with folks like the Coast Guard to maintain that inventory of vessels. 

Are you aware of any efforts by the Coast Guard to work with 

MarAd to maintain a list of vessels to be disposed for scrapping 

purposes? 

Admiral VOJVODICH. I am not aware of the specific list that you 

refer to with MarAd. We do work with MarAd, but I am not—I do 

not have any knowledge. 

Mr. GRAVES OF LOUISIANA. Would you mind submitting on the 

record just an explanation of efforts by the Coast Guard to work 

with MarAd? 

In that same regard, the Coast Guard vessel Storis was scrapped 

by MarAd, and as I recall, that vessel was scrapped in Mexico, 

which I believe was contrary to U.S. law, which required that 

scrapping efforts take place in the United States. 

Are you aware of any efforts by the Coast Guard to address that 

inconsistency with MarAd? 

Admiral VOJVODICH. I will provide a response for the record. 

[The information follows:] 

MarAd is the program manager regarding scrapping of a variety of 

mothballed ships in the National Defense Reserve Fleet (NDRF). MarAd 

does not provide a list of NDRF vessels to the U.S. Coast Guard that are 

pending scrapping. MarAd does post a list of those vessels available for disposal in our open ship disposal solicitation DTMA–91–Q–2013–0014 posted 

on the Federal Business Opportunity Web site. The Coast Guard has no engagement regarding the selection of ship recycling facilities used by MarAd. 

Mr. GRAVES OF LOUISIANA. Great. Thank you. 

Mr. O’Rourke, one last question. Certainly you are familiar with 

increased activities in the Arctic, and could you just give a quick 

assessment of U.S. ice breaking capabilities compared to some of 

the other Arctic nations? 

Mr. O’ROURKE. Yes. The Coast Guard currently has two operational polar icebreakers, one heavy polar icebreaker. That is the 

Polar Star, and one medium polar icebreaker. That is the Healy. 

There is one additional heavy polar icebreaker. That is the Polar 

Sea. That ship is nonoperational. So the operational fleet can be 

19 

characterized as one plus one, one heavy, one medium, and one additional heavy in nonoperational status. 

Mr. GRAVES OF LOUISIANA. Do you see those capabilities as being 

sufficient, noting again increased activities in changes in the Arctic? 

Mr. O’ROURKE. What I can tell you is that the Department of 

Homeland Security has issued their own mission need statement. 

That is an official requirement statement expressing the view of 

the Department of Homeland Security, which states that the Coast 

Guard in coming years will potentially need up to three plus three 

polar icebreakers. 

Mr. GRAVES OF LOUISIANA. And you mentioned that is in the 

Homeland Security report. Do you see that mission as solely being 

a Homeland Security or Coast Guard mission, or do you see other 

agencies, again, looking at what other nations are doing; do you see 

other agencies perhaps with the Department of Defense are having 

additional needs outside the scope of that report? 

Mr. O’ROURKE. Oh, it is well established that the Coast Guard 

is operating its polar icebreakers as a national asset that serves 

the needs not only of core Coast Guard missions, but for other 

agencies as well, in particular, the National Science Foundation. A 

lot of what we use our polar icebreakers for is to support scientific 

research activities. 

Mr. GRAVES OF LOUISIANA. What about military defense missions? Do you see a need there? 

Mr. O’ROURKE. The icebreakers also have requirements under 

our military plans to meet national defense requirements. 

And part of the reason for going up to three plus three potentially is to meet presence requirements for polar icebreakers that 

the Department of Defense has communicated to the Department 

of Homeland Security. 

Mr. GRAVES OF LOUISIANA. Thank you. 

Mr. Chairman, I am going to note that CRS just endorsed your 

bill. 

Thank you. 

Mr. HUNTER. I thank the gentleman. 

Mr. Garamendi is recognized. 

Mr. GARAMENDI. I am trying to figure out how to structure my 

work and in a way that has the maximum potential of resolving 

problems in the two projects that are going forward. 

Ms. Mackin and Mr. O’Rourke, you have done extensive research 

on the problems that exist in the National Security Cutter and the 

OPC. Both the Fast Response Cutter and OPC have work to be 

done, new ships to be built, new contracts to be let. In reviewing 

the testimony and reviewing your work, you have information that 

I think can be put into a checklist, a list of things that need to be 

done to reduce the potential for problems. 

But I do not have a list, nor do I see a list in your testimony. 

I think it would be very, very helpful. I can spend a lot of time asking questions, and I would probably learn a lot, but it seems to me 

that if we could have the development of a checklist. These are 

things that the Coast Guard should and must do to avoid problems 

that we have seen develop in the previous National Security Cutter 

program or the OPC. 

20 

Can the two of you, individually or together, develop such a 

checklist? And we can then hold the Coast Guard responsible to addressing. ‘‘Yep, we did that one. That problem is not going to happen again because we are paying attention. Maybe we ought to pay 

attention to this one because we have not paid attention to it.’’ 

Is that possible for you guys to do? 

Mr. O’ROURKE. It is not only possible. I have already developed 

a list of well-established lessons in shipbuilding. I am sometimes 

asked for it. I will be happy to provide it for you after the hearing. 

Ms. MACKIN. And for our part, I think in my statement I mentioned several items that there are lessons learned from NSC and 

commercial practices that could be applied to OPC. We could provide that. 

Mr. GARAMENDI. I have noticed it is not to say that you have not 

thought about it because you have, but you know, maybe we can 

just get a little computer file and it says, ‘‘Check this off. Let us 

see. We are going to have some sort of a cannon, and does the Navy 

have that cannon already and can we just use the Naval cannon 

and, by the way, the control system for it and radar systems which 

may be available?’’ 

Anyway, just a checklist, if you could develop that, that would 

certainly be useful to me and save probably a whole round of questions as I pursue trying to figure it out. 

So I am asking for it from both of you, and if you want to work 

together that would be OK, too. 

Ms. MACKIN. OK. 

Mr. GARAMENDI. Thank you very much. 

And with that I yield back. 

Mr. HUNTER. I thank the gentleman. 

OK. Now it is just you and me. Let us go back, multiyear procurement, block buy contracting, advanced procurement. Admiral, 

what does the Coast Guard have the statutory ability to do out of 

those three, if any? 

Admiral VOJVODICH. Mr. Chairman, we have authority through 

title 10 to be able to do a multiyear procurement. We understand 

the benefits of that in terms of once we have a stable design, enduring need, and a good understanding of the cost. Those are great 

criteria to use. 

We are also looking at potential downside. It does commit the 

Government well in advance of the year of appropriation in terms 

of things that we are going to buy, and so the downside is that if 

we are not able to meet that obligation, there could be a real downside in that contract in terms of not providing the expected funding 

for the multiyear buy. 

Mr. HUNTER. But that is not your job. That is our job. 

Admiral VOJVODICH. Yes, sir. Right. 

Mr. HUNTER. So you have the statutory ability to do advanced 

procurement. 

Admiral VOJVODICH. Yes, sir, advanced procurement, yes, sir. 

Mr. HUNTER. And multiyear. 

Admiral VOJVODICH. Multiyear procurement, yes, sir. 

Mr. HUNTER. Have you ever used multiyear procurement? 

Admiral VOJVODICH. I have not. I will have to go back in the archives and research that. 

21 

Mr. HUNTER. Well, we have the research right over here. 

Have they ever used multiyear procurement? 

Mr. O’ROURKE. I am not aware of the Coast Guard having used 

it in the past. I cannot prove a negative on it, but in the years that 

I have been here I have not seen it. 

Mr. HUNTER. So I guess that leads to you already have the statutory ability to do multiyear procurement, which you could have 

done with the FRCs and did not do. You could have done it with 

the NSC. You did not do it. 

Did you use advanced procurement? Advanced procurement I am 

guessing is the batch buys, or is that buying stuff for the one vessel? 

Admiral VOJVODICH. We buy long lead time material that is in 

front of what is going to come in product. 

Mr. HUNTER. That is per one vessel, right? 

Admiral VOJVODICH. That is per one or a number of vessels that 

might be coming up in that production cycle within that particular 

fiscal year. 

Mr. O’ROURKE. Right. That is only for 1 year’s worth of procurement. 

Mr. HUNTER. OK. 

Mr. O’ROURKE. Either the ship or the multiple ships being procured that year, and that helps to optimize the construction schedule just for those ships, but that is still implementing annual contracting. 

Mr. HUNTER. So Mr. O’Rourke says you could have saved $1 billion, could have saved, not can still save, but could have saved with 

the NSC. 

Mr. O’ROURKE. The savings in my testimony are all future savings out there that could be realized. We missed opportunities for 

doing that with the National Security Cutter and the first 36 ships 

in the Fast Response Cutter program. 

Mr. HUNTER. OK. So why not do it? If the Coast Guard has the 

ability to do it, why didn’t the Coast Guard do it? Why not save $1 billion? 

Admiral VOJVODICH. We chose a contract strategy that encouraged options, sir. We can look at that further. We will have to work 

with the Department administration to really understand the upside and the downside of that, but we are willing to take another 

look at that. 

Mr. HUNTER. Well, let me ask you this, Ms. Mackin and Mr. 

O’Rourke. When it comes to the Coast Guard then and the administration, where does OMB play in terms of what the Coast Guard 

can do, meaning what type of contracting strategies they can use? 

Do they have a play in it? I mean, how does the administration 

play in terms of what their strategies are for contracting future 

ships? 

Mr. O’ROURKE. In general, my understanding is that OMB can 

give directions to agencies regarding the ways in which it can carry 

its programs forward. Now, what OMB may or may not have said 

about the use of multiyear procedure or block buy contracting for 

these programs I do not know, but as a general issue, OMB can 

issue instructions to executive branch agencies, guidance if you 

will, for how programs are to be executed. 

22 

Mr. HUNTER. Ms. Mackin? 

Ms. MACKIN. All I would say is for the National Security Cutter, 

I am not sure that would have been a good approach because the 

requirements were not stable. We are still seeing problems now. 

The first two ships are going to have to go through these structural 

enhancements. They are not representative of the rest of the ships, 

and so I think, again, not that it is a bad idea, not that it cannot 

save money, it is just that, as the admiral mentioned, it needs to 

be carefully considered. 

Mr. HUNTER. And the one example, the LCS is a horrible ship, 

ships, right? The requirements were not set for and now they are 

lowering the number of LCS they are going to make in the future 

because they realize it was not the right ship. They just wanted to 

get numbers, et cetera, and all of the problems that they had. 

I am look at one of the big retrofits. It is like $80 million for the 

C4ISR [command, control, communications, computers, intelligence, 

surveillance and reconnaissance] in the NSC. Why are things like 

that not simply taken from the Navy? It is not like the Coast 

Guard has to do special things that are tens of billions of dollars 

Navy budgeting has not already had to look at, in terms of weapons systems, C4ISR, radar, UAS. 

You already talked about piggybacking with the Navy on UAS, 

thank God. Why the C4ISR retrofit? Why would the Coast Guard 

possibly need their own type of C4ISR modules or platform? There 

is no way it is more all-encompassing than what the Navy has. 

There is no way. 

Ms. MACKIN. One thing I would offer, and the admiral can weigh 

in, is this, again, is a legacy Deepwater issue. The original C4ISR 

was an ICGS, Integrated Coast Guard Systems, a contractor system, very proprietary. 

Mr. HUNTER. But why would the Coast Guard want to do that 

even then? I mean why would you have people in the Coast Guard 

say, ‘‘Let us develop our brandnew system that is probably much 

more limited than what the Navy has anyway, but let us do it all 

for us’’? 

Why would they decide that, even with the flawed Deepwater 

system, a program that was flawed for other reasons? 

Who in the Coast Guard would say it is a great idea for us to 

develop our own multimillion-dollar communication C4ISR platform? 

Ms. MACKIN. That was inherent in the Deepwater strategy. The 

contractor said, ‘‘Here it is,’’ and frankly, the Government did not 

have adequate insight into the requirements, and the contractor 

made that call and so now the Coast Guard is opening up, opening 

up the architecture and implementing actually a very more cost-effective C4ISR system. 

Mr. O’ROURKE. Mr. Chairman, if I could go back to your earlier 

question about the missed opportunity on the National Security 

Cutter, Ms. Mackin is right, of course, that there were problems 

with the design of that ship, but one of the statutory requirements 

for using multiyear procurement is that the item being procured 

has to have a stable design. 

23 

In shipbuilding programs, stable design is demonstrated by completing the construction of the first ship in class and putting it 

through its initial testing to show that there are no problems. 

At that point, once those problems had been identified and, in 

fact, they were cranked into later ships in the NSC, you had a design that might then have met the statutory requirement for stable 

design, and the follow-on ships in the program could have been 

pursued under multiyear procurement. 

So it is correct that you do not want to do this if you think that 

the design is not stable, but as you review the schedule of how 

these events transpired, multiyear procurement is never used on a 

lead ship anyway because of the requirement for stable design. It 

was a question of whether the program was ready for multiyear 

procurement for the follow-on ships in the class, and that is a question that people could have looked at and decided, well, yeah, it 

might have been. 

Mr. HUNTER. I am not clear on that. On the NSC when you had 

some testing done, you had the first couple of ships done, were the 

problems that we are looking at, and we are looking at this. We 

already got this, but this is a nice, little page that has a lot of the 

issues, right? 

These were not recognized right away? No one realized that 

there were issues until the fourth ship, fifth ship? At what point 

did you realize there were some issues? 

Admiral VOJVODICH. Sir, some of those issues were revealed during operational test and evaluation through the test event. 

Mr. HUNTER. Oh, the first ship? 

Admiral VOJVODICH. In this particular case we used a third ship 

to demonstrate. 

Mr. HUNTER. But the first ship was working well or these same 

issues were on the first ship as well? 

Admiral VOJVODICH. Not that I know of, but I can get back to 

you. If there is a lineage that we can provide, we certainly will do 

that. 

A number of those items, sir, if we leverage a Navy program of 

record like you just commented, that we need a weapons system 

and we need a particular sensor system; we leveraged the Navy on 

a number of those things outlined, and we will follow the Navy’s 

priorities and look to them to, you know, help us develop those solutions and implementation. 

And then over time as we get smarter and better users, we have 

brought more cutters, and we have more sailors that are accustomed to using the equipment. You know, we will become better 

and more proficient with the usage of the system. 

Mr. HUNTER. I still do not understand that. OK. So you have one 

NSC goes into the water and people start operating it and it goes 

and does its thing. There are no issues there. 

The second NSC jumps in the water. It goes out and starts being 

tested, and it is used operationally while it is being evaluated, and 

no problems there. Nothing changes. 

You built the third NSC, put it in the water, and you have all 

of a sudden realized all of these different issues on the third one 

that no one saw on the first one or second one? 

24 

Admiral VOJVODICH. The third one was our opportunity to really 

have the capability that is reflective. So Ms. Mackin alluded to the 

changes—— 

Mr. HUNTER. Can you explain that though? Why is number 3 the 

charm? Why could you not recognize the operational capability of 

the first or second ones? 

I mean, why did you have to wait until number 3 to really delve 

into it? I am just not understanding. 

Admiral VOJVODICH. I would like to get you a finer detail for the 

record sir, for that one. 

Mr. HUNTER. No, no, just tell me how. I do not need fine detail. 

Why is it boat number 3 is the one that we started recognizing 

issues and not the first one? 

I am not trying to get you. I just do not understand. 

Admiral VOJVODICH. Right. So that is the one that we said that 

is the one that we will have crews on it that is going to be indicative of future National Security Cutters. We want that one to be 

tested because that is going to demonstrate the initial operating capability. 

Mr. HUNTER. Did you dramatically change design after the first 

two on the third one? 

Admiral VOJVODICH. We did, and I will have to give you a level 

of detail on that, sir. 

[The information follows:] 

The third NSC, USCGC Stratton, was chosen for Initial Operational Test 

and Evaluation (IOT&E) because it was the first cutter considered representative of the fleet for the foreseeable future. That is to say Stratton’s 

fundamental characteristics and capabilities represent that which is intended for all NSCs. 

As it relates to the first two NSCs (Bertholf and Waesche), there were two 

compelling reasons why the Coast Guard, Department, and the Navy’s 

Commander Operational Test and Evaluation Force (COMOPTEVFOR) 

chose not to use them for IOT&E: 

1. Cutter boat handling systems: Based on operational feedback from the 

first two NSCs, an improvement was needed for these systems. This included the original overhead gantry crane on the stern of the ship and 

the single-point davit on the starboard side of the ship. The overhead 

gantry crane was replaced with three folding boom cranes and the side 

davit was replaced with a new davit system offering improved control 

and handling during boat launch and recovery. These were first installed 

and tested on Stratton. To maximize the benefits of, and document best 

practices during formal testing, it was determined that the new cutter 

boat handling systems should be tested in IOT&E, and therefore Stratton was selected. The cutter boat handling systems for Bertholf and 

Waesche will be upgraded during their respective structural enhancement periods. 

2. Structural enhancements: Neither Bertholf nor Waesche had undergone 

the structural enhancement to ensure at least a 30-year fatigue life of 

the ship’s structure. These two cutters were too far along in construction 

to incorporate the structural enhancements during construction without 

incurring inordinate contract cost and schedule impacts. Although not a 

disabling impediment to testing, structural differences between Stratton 

and the first two NSCs were considered relevant to ensure IOT&E results were most representative of the end-state fleet. 

Mr. HUNTER. OK. And how many of these were built with the 

Deepwater boondoggle? How many NSCs were built under the 

Deepwater plan? 

25 

Mr. O’ROURKE. Well, the Coast Guard transitioned out of Deepwater in 2007, and that transition was phased with the completion 

of contracts that were legacies coming out of that period. I do not 

know what the exact cutoff point was, but this is now a nine-ship 

program, and at some point most or all of the significant design 

issues with that class became known, and any ships procured after 

that point might have been considered candidates for multiyear 

procurement or block buy contracting. 

The prices we paid for those ships suffered for a number of reasons. One is the general Deepwater contracting environment that 

Ms. Mackin mentioned, but there were two others. One is that the 

intervals that we had for procuring these ships were not regular 

and even. So the shipyard did not have a steady drumbeat. 

And the third was that the final ships in the program were not 

done under a form of multiyear contracting. 

These are all ways in which those ships turned out to be more 

expensive than they might have been. 

Mr. HUNTER. Admiral, do you agree with that? Do you agree that 

multiyear procurement and block buy contracting can save money? 

I mean, obviously it is not going to work if your first two ships 

are not really what you wanted in the first place, where you have 

actually changed so much design on the third one that it is the real 

ship that you are going to test against, but if you were going to do 

it the way that the Navy does it, meaning the right way, building, 

have all the lead time materials, do it right, do all your testing on 

that one ship, and then be able to do multiyear going out, does the 

Coast Guard have an issue with that? 

Do you think that that would save you money? 

Admiral VOJVODICH. We would have to look at it a lot closer, sir. 

We would absolutely love to—— 

Mr. HUNTER. Well, I am asking you. You do not have to look at 

it closer because in general does contracting ships like the Navy 

does it, especially when you only have really three or four types of 

ships in the entire Coast Guard, it is not too complicated, right? 

Do you think that that would save the Coast Guard money? 

Admiral VOJVODICH. As we indicate here, if we have a stable design, we have an enduring need, where the costs are well, well understood, the applicability of the multiyear procurement has some 

merits, and we will take that back for a high-level consultation. 

Mr. HUNTER. Do you disagree with Mr. O’Rourke that it will save 

you $1 billion in the NSC? 

Admiral VOJVODICH. I would have to look at that closer, sir. 

Mr. HUNTER. OK. Do you disagree that you would save $100 million with the FRC? 

Admiral VOJVODICH. Again, in the application of that particular 

strategy in terms of what we have here, I would have to look at 

it a lot closer. 

Mr. HUNTER. OK. When the Navy went to block buys and 

multiyear procurement, did they just do it on one design and did 

they pick that ship design on purpose to do this on, or was it more 

of a ‘‘we can use this in any kind of ship class; let us just jump 

into it’’? 

I mean, how did the Navy decide to do it and was there anything 

special about when they decided to do it and on what type of ship? 

26 

Mr. O’ROURKE. The Navy decides its contracting strategies on a 

program-by-program basis, but I think there was a general atmosphere within the Navy in recent years that these contracting mechanisms made sense to them, and they began to use them more extensively. 

I think it is important to note that all three of the Navy’s yearto-year shipbuilding programs where you get a ship of that kind 

every year, year after year, all three of them, the Virginia-class attack submarine, the DDG–51, and the Littoral Combat Ship, are 

now under multiyear contracting, and collectively those ships represent more than two-thirds of all the ships in the Navy’s 5-year 

shipbuilding plan. That is how extensively the Navy is using this. 

And in terms of savings, if you looked at the last DDG–51 

multiyear, the savings on that were estimated at $1.3 billion or 

$1.4 billion, and if you look at the last Virginia-class attack submarine multiyear, the savings on that were estimated in the range 

of $3 billion to $4 billion. 

So just on those two instances of multiyear procurement contracting, the Navy saved more than $4 billion. 

Mr. HUNTER. Has the Coast Guard looked at what class of ship 

would best fit the multiyear procurement contracting scheme? 

Admiral VOJVODICH. Well, we read Mr. O’Rourke’s report. We 

understand the utility of a multiyear strategy. We have considered 

it, and we have chosen the acquisition strategy that we are on 

right now. 

Mr. HUNTER. When you do multiyear procurement, do you need 

us in this committee to authorize it? 

Mr. O’ROURKE. Yes, multiyear contracts, more than a certain 

value, and these would be more than that threshold value, would 

need—— 

Mr. HUNTER. But does it have the statutory ability right now to 

do multiyear procurement? 

Mr. O’ROURKE. They have a statutory framework in which the 

Services can conduct multiyear procurement, and that framework 

requires approval by Congress on a case-by-case basis for each program. 

Block buy contracting has no title 10 or permanent statutory 

framework, and so in the instances where Congress has provided 

that for the Navy, they have done it through specific legislation. In 

one time they did it in an NDAA [National Defense Authorization 

Act], and in another time they did it in an appropriations bill. 

Mr. HUNTER. So it would be the Appropriations Committee or the 

authorizing committee can both grant that authority? 

Mr. O’ROURKE. Based on the precedent of the two block buy contracts for Virginia-class and Littoral Combat Ship, it appears that 

the authority can be provided through a single act that can be either a National Defense Authorization Act or an Appropriations 

Act. 

Mr. HUNTER. Say that the Navy did not want to do it. Say that 

the Navy was like the Coast Guard and we do not want to save 

billions of dollars. We just want to spend money. 

That is not fair, but I am kind of exaggerating. 

Can Congress make them do it? 

27 

Mr. O’ROURKE. The authorities that were granted for Virginia- class and LCS allowed the Navy to do it. They did not mandate, 

but it may be that you can write the language so that it mandates 

the use. 

For example, the Appropriations Committees in the past have 

said that the Navy will contract for the ship. It was an amphibious 

assault ship, which shall be funded on an incremental basis. And 

that is incremental funding, which is different from what we are 

talking about here. 

But the use of the ‘‘shall’’ language mandated that to the Navy 

as the way that the ship would be funded in coming fiscal years. 

And based on that precedent you might imagine that language for 

block buy contracting can use the ‘‘shall’’ language and not simply 

to say that the Coast Guard may contract or may do this. 

Mr. HUNTER. So the one last thing, I am not understanding that. 

How do you see it, and, Admiral, we will start with you; how do 

you see the Coast Guard? Let us just talk about buying ships. How 

is the Coast Guard different from the Navy? 

Now, I do not mean in what size of ship, but in the way that you 

acquire them, why should the Coast Guard be contracting differently than the Navy? 

Admiral VOJVODICH. Mr. Chairman, fundamentally we acquire 

and build ships very similarly. We use some of the same facilities 

that the Navy does. There are a level of requirements that might 

be different that might change the approach or the testing or the 

scrutiny of the hardening of the various ships, but fundamentally, 

you need steel. You need a shipyard. You need a lift. You need proficient workers to put it all together, and so there are some aspects 

that are exactly the same. 

There are other ones that are some nuances that we would have 

to look at closely, but those probably are on a case-by-case basis. 

Mr. HUNTER. Ms. Mackin, why should the Coast Guard ship acquisition be treated differently than the Navy? 

Ms. MACKIN. I think there is one thing that has not been mentioned in this discussion and that is the contract type of the ships. 

The Fast Response Cutter was firm-fixed-price, and that is consistent with commercial best practices. That is the price is nailed 

down, and that is one reason they could negotiate a very strong 

warranty. 

I believe the plan for the Offshore Patrol Cutter is to transition 

to firm-fixed-price at some point in time as well. 

So block buy is one thing to look at, but contract type can also 

be a way to save a significant amount of money. 

Mr. O’ROURKE. But the statute that regulates multiyear procurement requires that multiyear procurement contracts be fixed-price 

contracts, and the block buy contracts that are being done for the 

Littoral Combat Ship program are also fixed-price type contracts. 

Ms. MACKIN. They are fixed-price incentive (firm target), which 

is a little different than firm-fixed-price. 

Mr. HUNTER. But again, why should the Coast Guard acquisition 

be treated differently than the Navy? 

Ms. MACKIN. I mean, that is a contracting officer’s call in large 

part. There are lots of factors to consider. I am just offering the 

contract type is one very important component. 

28 

Why the Coast Guard did not consider block buy for the Fast Response Cutter, I do not know the answer to that. 

Mr. HUNTER. Admiral? We can get it right now, Ms. Mackin. 

Admiral VOJVODICH. For the OPC that is absolutely considered, 

but the path that we chose is not a multiyear procurement. I would 

be happy to take a closer look at the merits and the risks associated with that and provide a more thorough response. We would 

have to work with the Department and administration and make 

sure that we collectively understand the approach, and I am happy 

to follow up with you at some point, sir. 

Mr. HUNTER. Admiral, here is what I am not understanding. If 

you build one or two ships, whether it is an FRC or the OPC, and 

you look at it and you test it and you evaluate it and you find problems and you then fix your problems, what is the downside with 

doing a multiyear procurement? 

What is the downside, if any? If you have a design that is not 

flawed like the NSCs that we discovered on ship 3, if your design 

is good and your ship is good and your requirements are firm and 

set and fixed, what is the downside? I am not getting it. 

Admiral VOJVODICH. And I understand. Based on my understanding the downside is that if we are unable to not meet that future year commitment—— 

Mr. HUNTER. But that is not your problem. 

Admiral VOJVODICH. I understand. 

Mr. HUNTER. So what is the downside to the Coast Guard? Why 

would the Coast Guard not want to do that? 

Ms. MACKIN. Can I make an observation? 

Mr. HUNTER. Yes. 

Ms. MACKIN. The FRC had its initial operational test and evaluation and only one of its key performance parameters was even partially met. So it is not proven yet. It still has—— 

Mr. HUNTER. So you are say only one out of a bunch. 

Ms. MACKIN. Out of six. 

Mr. HUNTER. Was partially met. 

Ms. MACKIN. Was partially met, and so they are going to have 

the follow-on operational test beginning this fall, just like the NSC. 

So—— 

Mr. HUNTER. How many FRCs have been built now? Anybody? 

John might know? 

Mr. O’ROURKE. Well, there are 14 or 15 of the FRCs in operation. 

Admiral VOJVODICH. Commissioned number 15 a week or so ago 

and deliver number 16 at the end of the calendar year. 

Mr. HUNTER. And so is that normal to build that many when the 

operational requirements, whatever check boxes you have, are not 

met? 

Ms. MACKIN. It was a fast-paced procurement. I would not say 

that is consistent with best practices because they still have to go 

through the follow-on testing and prove that they can meet those 

key performance parameters. 

Mr. O’ROURKE. Right, but the issue is that even with the deficiencies that have been discovered through initial testing, the 

Coast Guard’s intention is still to continue getting the ships. 

So the question is: if you are still going to continue getting the 

ships, does it make sense to continue doing it under a contract with 

29 

options which operates closer to being a form of annual contracting 

or under block buy? 

Mr. HUNTER. Mr. Graves is recognized for 5 minutes. Sorry about 

that. 

Mr. GRAVES OF LOUISIANA. Yeah, that is all right. I mean, I am 

enjoying it. 

To somewhat channel the chairman’s frustration, you know there 

are two key things obviously that are, I think, his frustrations and 

ones that we share. One is that looking back over the last several 

years, certainly I think one can make a strong case for perhaps 

some taxpayer dollars not being used as wisely as they could have 

been on the acquisition, and something that is very important to 

me personally and I know the chairman shares it is the lack of capabilities. 

I made reference earlier to Admiral Z’s statement that eyes are 

on 90 percent of the drug trafficking shipments, yet capabilities 

only respond to 20 percent of them. 

I think when you look across the Coast Guard’s mission, which 

has expanded significantly over the last several years, the demand 

for the Coast Guard, the demand for the Coast Guard to have 

greater capabilities is significant, yet this acquisition schedule is 

continuing to drag on and, I think provide readiness issues that are 

not just limited to the Coast Guard but also transcends over to 

some of the support for Navy and other capabilities that are important for this Nation. 

So looking back, we can talk about Deepwater. We can talk about 

NSC, FRC, whatever you want, but let us look forward for a 

minute. Looking at OPC, can you talk about some of the lessons 

learned that you were applying to that acquisition strategy that 

will ensure, again, fair use of taxpayer dollars, and ensure that we 

are delivering solid equipment within an appropriate amount of 

time? 

Admiral VOJVODICH. Yes, I would be happy to. I appreciate the 

opportunity. 

The key to all of this is to make sure that we have well understood, stable requirements that have been vetted throughout the 

Service with industry to make sure they understand it very well. 

It allowed us to have the conversation to understand where the 

cost drivers are, if you will, and to be able to address that, to make 

those appropriate adjustments. 

We are using competition to the fullest, and we are also using 

fixed-price contracting throughout the acquisition, which is at 

times very difficult in a large ship buy because there are a lot of 

unknowns in the design. So right now we are in a limited competition, if you will, so they can mature their designs to be able to 

make a submission that is going to be a fixed-price environment as 

we move forward. 

In terms of the testing, we absolutely learn from the testing over 

time. We are going to test on the first article for the OPC. We have 

learned that that involvement with test is very important. 

We have involved the testers from both the Department and our 

operational test authority early in that development so they can 

help us make sure that the things that we put in the requirement 

are testable and it is well understood. So a lot of things that were 

30 

developed many years ago were unclear, and so even when we have 

these test events, we are sometimes not quite talking on the same 

sheet of music. 

And so those are the kinds of things that we are resolving, and 

we are clearly moving forward with a lot of lessons learned into the 

strategy for the Offshore Patrol Cutter. 

Mr. GRAVES OF LOUISIANA. Admiral, thank you. In closing I just 

want to make note that, you know, you have got a great group of 

Coasties out there, and there is increasing demand upon their services and mission requirements and making sure that we get the 

equipment out there to them that they need as soon as possible. 

I think it is critical, and again, we do not need to go through the 

entire list of drug alien interdictions and many, many other things 

that you do, but looking back over the history, I know that there 

are a lot of mistakes that you guys are trying to make up for right 

now. 

I just want to encourage you. You know, the Navy obviously, as 

the chairman pointed out, has some acquisition strategies that may 

be applicable in this case, but most importantly we have got to get 

this equipment out there as quickly as we can and make sure that 

we are respectful of taxpayer dollars moving forward. 

Thank you. I yield back, Mr. Chairman. 

Mr. HUNTER. I thank the gentleman. 

I have one last question. If the Coast Guard decided to do a 

multiyear procurement for the OPCs and the rest of the FRCs, do 

you have the authority to do that or do you have to get approval 

from the Department of Homeland Security or the administration? 

Admiral VOJVODICH. Mr. Chairman, I would like to take that 

back for the record. I will need to understand thoroughly what our 

options are with that strategy. 

I understand at a high level what a multiprocurement strategy 

will allow. I know it was considered, but it sounds like you want 

me to take it to the next level, and I will thoroughly understand 

that. 

Mr. HUNTER. I just looked at the bill we passed last year, the 

Coast Guard bill, and we grant you statutory authority for the 

OPCs to have multiyear procurement done on those. 

So my question is though you obviously looked at that, and you 

have seen that. So do you have the authority, does the Coast Guard 

have the authority to do that if they want to? 

Admiral VOJVODICH. I would like to take that one back for the 

record and make sure I thoroughly understand and provide you the 

best answer possible with that. 

[The information follows:] 

Multiyear Procurement (MYP) Contracting: The Coast Guard has considered multiyear procurement (MYP) contracting to acquire new assets; 

most recently the Coast Guard evaluated this strategy while planning for 

the Offshore Patrol Cutter. This contracting approach provides stability and 

promotes efficiencies which are more difficult to achieve when utilizing annual contracting mechanisms. 

MYP contracting provides an opportunity to generate savings through economic order quantities for materials and equipment, as well as improved 

production efficiencies and shipyard learning associated with construction 

stability. MYP contracting is also beneficial for shipyard material and labor 

cost management. Optimally phased and stable production schedules estabVerDate Aug 31 2005 11:44 May 01, 2017 Jkt 000000 PO 00000 Frm 00040 Fmt 6633 Sfmt 6621 P:\HEARINGS\114\CG&JOI~1\2-3-16~1\98459.TXT JEAN
31 

lish the best scenario for shipyard learning, leading to reduced labor costs. 

In addition, multiple ship sets of supplies and materials may be procured 

at reduced costs due to quantity buys. 

MYP contracting does introduce some risk if subsequent years’ funding 

were not available. In such circumstances the Coast Guard would be required to renegotiate or terminate the contract likely requiring the Government to pay a cancellation fee. Renegotiating the contract would also have 

a negative financial impact, and therefore one potential disadvantage of 

using MYP is that it can reduce the flexibility to make changes in future 

years. 

The Coast Guard has standing authority to enter into a multiyear contract 

under 10 U.S.C. 2306(b). In order to qualify, the Coast Guard must show 

the following: 

• Significant savings. The program must demonstrate that a MYP contract would result in ‘‘significant savings’’ compared with annual contracting. • Realistic cost estimates. The program’s estimates of the cost of the 

MYP contract and the anticipated savings must be realistic. • Stable need for the items. The program must expect its minimum need 

for the items will remain substantially unchanged during the contract in 

terms of production rate, procurement rate, and total quantities. • Stable funding request for the items. There must be a reasonable expectation that the program will request annual funding for the contract 

at a level required to avoid contract cancellation. • Stable design for the items. The design for the items to be acquired 

must be stable, and the technical risks associated with the items must 

not be excessive. 

Block Buy Contracting: Like multiyear procurement, block buy contracting may provide an opportunity to generate savings through economic 

order quantities for materials and equipment, as well as improved production efficiencies and shipyard learning associated with construction stability. While Congress has provided the Coast Guard, the other armed services and NASA standing authority for multiyear procurement under 10 

U.S.C. 2306(b), there is no similar general authority for block buy contracting. Congress has provided limited authority in specific instances to 

the Navy to use block buy contracting to acquire Virginia-class attack submarines and Littoral Combat Ships; however, no similar authority has ever 

been enacted for a Coast Guard acquisition program. 

The Coast Guard has been responsible for paying for replacement cylinder 

heads on the propulsion diesel engines. The Coast Guard continues to work 

with the engine manufacturer to study the root cause of these issues and 

is committed to developing an engineering solution to reduce the frequency 

of this repair. 

There have been other component repairs on the propulsion diesel engines, 

separate from the cylinder heads, where the Coast Guard and manufacturer 

have shared costs of failure analyses and repairs, and also situations where 

the manufacturer assumed all costs. In each instance, responsibility for the 

repairs was determined based on the specifics of that situation. 

Mr. HUNTER. Ms. Mackin, do you know if the Coast Guard has 

the authority if they choose to go multiyear after being granted the 

authority to do so by this committee? 

Ms. MACKIN. I have not looked into that. 

Mr. HUNTER. Mr. O’Rourke. 

Mr. O’ROURKE. Statutory authority versus direction that the 

Coast Guard may receive within the executive branch. As a matter 

of statutory authority, the Coast Guard has the authority to use 

multiyear procurement under title 10, 2306(d), and that is the law 

that governs multiyear procurement and establishes the statutory 

framework for conducting it. 

It states explicitly that the Coast Guard is among the Services 

that can use it. That same law states that to use multiyear proVerDate Aug 31 2005 11:44 May 01, 2017 Jkt 000000 PO 00000 Frm 00041 Fmt 6633 Sfmt 6633 P:\HEARINGS\114\CG&JOI~1\2-3-16~1\98459.TXT JEAN
32 

curement for a contract with a value above a certain level, you 

need to get congressional approval for each case in an Appropriations Act and a bill other than an Appropriations Act, which is 

typically an authorization act. 

That is all part of the legislative framework for multiyear procurement. 

For using block buy authority, block buy does not have a statutory framework. It just happens through specific legislation that 

Congress grants to the Service in question, and based on the two 

precedents of Virginia-class and Littoral Combat Ships, that can be 

a single provision in an authorization bill or a single provision in 

an Appropriations Act. 

Mr. HUNTER. All right. 

Mr. O’ROURKE. Now, none of that speaks to then the direction 

that the Service gets within the executive branch from its superiors, but as a matter of statutory authority, that is where we are. 

Mr. HUNTER. All right. I think that that is all I have got. I do 

not think there is anybody else here. 

Thank you very much for kind of getting deep into the weeds on 

this stuff. That is what we have to do in the end. We want to make 

the best decision possible. We want to save lots of money so we can 

buy other stuff, in general. 

So thank you very much for your testimony. 

With that our hearing is adjourned. 

[Whereupon, at 11:33 a.m., the subcommittee was adjourned.] 

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