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DEEPWATER: CHARTING A 

COURSE FOR SAFER WATERS 

JOINT HEARING 

BEFORE THE

SUBCOMMITTEE ON BORDER, 

MARITIME, AND GLOBAL 

COUNTERTERRORISM 

WITH THE

SUBCOMMITTEE ON MANAGEMENT, 

INVESTIGATIONS, AND OVERSIGHT 

OF THE

COMMITTEE ON HOMELAND SECURITY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TENTH CONGRESS 

FIRST SESSION 

MAY 17, 2007 

Serial No. 110–38 

Printed for the use of the Committee on Homeland Security 

Available via the World Wide Web: http://www.gpoaccess.gov/congress/index.html 


Congress.#13
COMMITTEE ON HOMELAND SECURITY 

BENNIE G. THOMPSON, Mississippi, Chairman 

LORETTA SANCHEZ, California, 

EDWARD J. MARKEY, Massachusetts 

NORMAN D. DICKS, Washington 

JANE HARMAN, California 

PETER A. DEFAZIO, Oregon 

NITA M. LOWEY, New York 

ELEANOR HOLMES NORTON, District of 

Columbia 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

DONNA M. CHRISTENSEN, U.S. Virgin 

Islands 

BOB ETHERIDGE, North Carolina 

JAMES R. LANGEVIN, Rhode Island 

HENRY CUELLAR, Texas 

CHRISTOPHER P. CARNEY, Pennsylvania 

YVETTE D. CLARKE, New York 

AL GREEN, Texas 

ED PERLMUTTER, Colorado 

PETER T. KING, New York 

LAMAR SMITH, Texas 

CHRISTOPHER SHAYS, Connecticut 

MARK E. SOUDER, Indiana 

TOM DAVIS, Virginia 

DANIEL E. LUNGREN, California 

MIKE ROGERS, Alabama 

BOBBY JINDAL, Louisiana 

DAVID G. REICHERT, Washington 

MICHAEL T. MCCAUL, Texas 

CHARLES W. DENT, Pennsylvania 

GINNY BROWN-WAITE, Florida 

MARSHA BLACKBURN, Tennessee 

GUS M. BILIRAKIS, Florida 

DAVID DAVIS, Tennessee 

JESSICA HERRERA-FLANIGAN, Staff Director & General Counsel 

ROSALINE COHEN, Chief Counsel 

MICHAEL TWINCHEK, Chief Clerk 

ROBERT O’CONNOR, Minority Staff Director 

SUBCOMMITTEE ON MANAGEMENT, INVESTIGATIONS,AND OVERSIGHT 

CHRISTOPHER P. CARNEY, Pennsylvania, Chairman 

PETER A. DEFAZIO, Oregon 

YVETTE D. CLARKE, New York 

ED PERLMUTTER, Colorado 

BENNIE G. THOMPSON, Mississippi (Ex 

Officio) 

MIKE ROGERS, Alabama 

TOM DAVIS, Virginia 

MICHAEL T. MCCAUL, Texas 

PETER T. KING, New York (Ex Officio) 

JEFF GREENE, Director & Counsel 

BRIAN TURBYFILL, Clerk 

MICHAEL RUSSELL, Senior Counsel 

SUBCOMMITTEE ON BORDER, MARITIME, AND GLOBAL 

COUNTERTERRORISM 

LORETTA SANCHEZ, California, Chairwoman 

JANE HARMAN, California 

ZOE LOFGREN, California 

SHEILA JACKSON-LEE, Texas 

JAMES R. LANGEVIN, Rhode Island 

HENRY CUELLAR, Texas 

AL GREEN, Texas 

BENNIE G. THOMPSON, Mississippi (Ex 

Officio) 

MARK E. SOUDER, Indiana 

BOBBY JINDAL, Louisiana 

DAVID G. REICHERT, Washington 

MICHAEL T. MCCAUL, Texas 

GUS M. BILIRAKIS, Florida 

PETER T. KING, New York (Ex Officio) 

ALISON ROSSO, Director 

DENISE KREPP, Counsel 

CARLA ZAMUDIO-DOLAN, Clerk 

MANDY BOWERS, Minority Senior Professional Staff Member 

(II) 

(III) 

C O N T E N T S 

Page 

STATEMENTS 

The Honorable Loretta Sanchez, a Representative in Congress From the 

State of California, and Chairwoman, Subcommittee on Maritime, and 

Global Counterterrorism ..................................................................................... 1 

The Honorable Mark E. Souder, a Representative in Congress From the 

State of Indiana, and Ranking Member, Subcommittee on Maritime, and 

Global Counterterrorism: 

Oral Statement ..................................................................................................... 2 

Prepared Statement ............................................................................................. 3 

The Honorable Christopher P. Carney, a Representative in Congress From 

the State of Pennsylvania, and Chairman, Subcommittee on Management, 

Investigations, and Oversight ............................................................................. 6 

The Honorable Mike Rogers, a Representative in Congress From the State 

of Alabama, Ranking Member, Subcommittee on Management, 

Investigations, and Oversight: 

Prepared Statement ............................................................................................. 7 

The Honorable Yvette D. Clarke, a Representative in Congress From the 

State of New York: 

Oral Statement ..................................................................................................... 30 

Prepared Statement ............................................................................................. 30 

The Honorable James R. Langevin, a Representative in Congress From the 

State of Rhode Island ........................................................................................... 38 

The Honorable Sheila Jackson Lee, a Representative in Congress From the 

State of Texas: 

Oral Statement ..................................................................................................... 66 

Prepared Statement ............................................................................................. 65 

The Honorable Ed Perlmutter, Representative in Congress From the State 

of Colorado ............................................................................................................ 33 

The Honorable David G. Reichert, a Representative in Congress From the 

State of Washington ............................................................................................. 36 

WITNESSES

PANEL I 

Captain Steven T. Baynes, Chief, Atlantic Area Response Enforcement 

Branch, United States Coast Guard: 

Oral Statement ..................................................................................................... 25 

Prepared Statement ............................................................................................. 10 

Read Admiral Gary T. Blore, Program Executive Officer, Integrated 

Deepwater System, United States Coast Guard: 

Oral Statement ..................................................................................................... 8 

Prepared Staement .............................................................................................. 10 

Mr. Richard Skinner, Inspector General, Department of Homeland Security: 

Oral Statement ..................................................................................................... 18 

Prepared Statement ............................................................................................. 20 

Page

IV 

PANEL II 

Mr. James E. Anton, Sector Vice President and General Manager, U.S. Coast 

Guard Programs, Northrop Grumman: 

Oral Statement ..................................................................................................... 54 

Prepared Statement ............................................................................................. 56 

Mr. Fred Moosally, President, Lockheed Maritime Systems and Senors: 

Oral Statement ..................................................................................................... 44 

Prepared Statement ............................................................................................. 46 

FOR THE RECORD

Letter submitted by the Honorable Loretta Sanchez ........................................... 51 

Article submitted by the Honorable Mark E. Souder ........................................... 4 

APPENDIX

Additional Questions and Responses: 

Responses from Mr. Richard L. Skinner ............................................................ 71 

Attachments .................................................................................................. 79 

(1) 

DEEPWATER: CHARTING A COURSE 

FOR SAFER WATERS 

Thursday, May 17, 2007 

U.S. HOUSE OF REPRESENTATIVES, COMMITTEE ON HOMELAND SECURITY, SUBCOMMITTEE ON BORDER, MARITIME, AND

GLOBAL COUNTERTERRORISM, JOINT WITH THE

SUBCOMMITTEE ON MANAGEMENT, INVESTIGATIONS, AND OVERSIGHT

Washington, DC. 

The subcommittees met, pursuant to call, at 2:23 p.m., in Room 

311, Cannon House Office Building, Hon. Loretta Sanchez [chairwoman of the Subcommittee on Border, Maritime, and Global 

Counterterrorism] presiding. 

Present from the Subcommittee on Border, Maritime, and Global 

Counterterrorism: Representatives Sanchez, Jackson Lee, Langevin, Cuellar, Green, Souder and Reichert. 

Present from the Subcommittee on Management, Investigations, 

and Oversight: Representatives, Carney, Clarke, Perlmutter and 

Rogers. 

Ms. SANCHEZ. The Subcommittee on Border, Maritime and Global Counterterrorism and the Subcommittee on Management, and 

Investigations and Oversight will come to order. 

The two subcommittees are meeting today to receive testimony 

on Deepwater: Charting a Course for Safer Waters. Good afternoon, 

and I thank the witnesses for joining us and for their testimony on 

the Coast Guard’s Deepwater procurement program. 

We are interested, of course, in the Deepwater Program because 

we all recognize that the Coast Guard desperately needs new and 

modernized assets. 

The Coast Guard has a wide variety of challenging missions, and 

the list seems to get longer. These missions include intercepting illegal migrants and drug smugglers, securing our Nation’s ports, 

providing assistance to recreational boaters, and we are also very 

proud of the Coast Guard’s excellent operations during Hurricane 

Katrina, which was one of the highlights in, I think, one of the situations where our government response was not so great. 

Given the Coast Guard’s critical role in our Nation’s security, 

they must ensure that they receive air and sea assets needed to 

perform their missions. And unfortunately, we have heard and we 

know some of the Deepwater program has encountered serious setbacks. And over the past several years, many investigations have 

been conducted, findings have been reported, and recommendations 

2 

for change have been made, and I believe that these situations are 

valuable because it is really a way for the program to be able to 

be turned around for us to fully understand the problems that occurred, what caused them, and how we can better get back on 

track. 

We all have to be vigilant in overseeing the progress of the Deepwater program and ensuring that it operates effectively and delivers to the Coast Guard its much-needed assets. And I hope this 

hearing actually assists in that process. 

I have a number of questions about the setbacks in the Deepwater program and what is being done to identify the root of those 

problems so we can learn from the mistakes, of course, specifically 

the 123-foot patrol boat conversions that we still seem to be a little 

hazy on what is going on and how we are going to get those assets 

back into the water. We need to fully understand what happened 

so that our engineers can use that information in the future. 

I am also interested in implementing—in what is going on with 

the procurement process for the Coast Guard for future programs 

because, of course, this is a very, very big program. 

I am looking forward to having the dialogue and to listening to 

my colleagues, of course, bring up their issues. We are all concerned about it, and I would like to thank the Ranking Member 

Souder and the Chairman and the Ranking Member of the Subcommittee on Management, Investigations, and Oversight for their 

interest in this important issue. 

Ms. SANCHEZ. And the Chair now recognizes the Ranking Member of—is that true? No. The Ranking Member of the Subcommittee on Border, Maritime, and Global Terrorism, the chairman from Indiana. 

Mr. SOUDER. The largest and most complete acquisition effort of 

the Deepwater proposal includes 91 cutters, 124 small service craft 

and 244 new or converted airplanes, helicopters and unmanned 

aerial vehicles. 

We are here today to look at what has been accomplished to date, 

where the needs remain, how contract mismanagement is being addressed, and what additional resources are necessary to ensure the 

Coast Guard is able to continue its missions while waiting for the 

delivery of Deepwater assets. 

I think we are all aware we are dealing with a 25-year acquisition program with a $24 billion price tag; that challenges, anticipated and unforeseen, will always arise. However, we have seen a 

significant amount of money expended on Deepwater and are now 

looking at eight 110 patrol boats that are now useless because of 

a flawed modification proposal, delays in the Fast Response Cutter, 

and hull problems with the National Security Cutter, in addition 

to other problems. 

I also want to talk to the witnesses about the Deepwater air assets, including problems with the vertical UAV and what air support is available to continue the hit-run counterdrug mission. 

3 

I would like to provide a special welcome to Captain Steven 

Baynes, a Chief of the Major Cutter Forces for the Atlantic Area. 

Captain Barnes formerly commanded the Coast Guard Cutter Decisive, a legacy 210 that faced a multitude of operational and qualityof-life issues. This included fuel pump leaks, faulty radar in global 

positioning systems and an inability to deploy the over-the-horizon 

small boat farther than the line of sight due to poor radio communications. Many of these problems were chronicled in the U.S.A. 

Today article where the reporter described the list of the ship as 

in shambles. 

I ask unanimous consent to place the article in the record. 

[The information follows:] 

PREPARED OPENING STATEMENT OF THE HONORABLE MARK SOUDER, A

REPRESENTATIVE IN CONGRESS FROM THE STATE OF INDIANA

Thank you Madame Chair. The largest and most complex acquisition effort in 

Coast Guard history, the Deepwater proposal includes 91 cutters, 124 small surface 

craft, and 244 new or converted airplanes, helicopters, and unmanned aerial vehicles. 

We are here today to look at what has been accomplished to date, where the 

needs remain, how contract mismanagement is being addressed, and what additional resources are necessary to ensure that Coast Guard is able to continue its 

missions while waiting for the delivery of Deepwater assets. 

I think we are all aware that when dealing with a 20–25 year acquisition program 

with a $24 billion price tag, challenges—anticipated and unforeseen—will arise. 

However, we have seen a significant amount of money expended on Deepwater 

and are now looking at eight 110 patrol boats that are now useless because of a 

flawed modification proposal, delays in the Fast Response Cutter, and hull problems 

with the National Security Cutter, in addition to other problems. 

I also want to talk to the witnesses about the Deepwater air assets, including 

problems with the vertical UAV and what air support is available to continue the 

Hitron counterdrug mission. 

I would like to provide a special welcome to Captain Steve Baynes, the Chief of 

Major Cutter Forces for the Atlantic Area. Captain Baynes formerly commanded the 

Coast Guard Cutter DECISIVE, a legacy 210 that faced a multitude to operational 

and quality of life issues. This included fuel pump leaks, faulty radar and global 

positioning systems, and an inability to deploy the over the horizon small boat further than line of site due to poor radio communications. Many of these problems 

were chronicled in a USA Today article, where the reporter described the ship as 

‘‘in shambles.’’ I ask unanimous consent to place the article in the hearing record. 

(Note: article is attached.) 

I think that Captain Baynes’ testimony will provide us a better picture of the 

state of the Coast Guard’s legacy assets and reinforce why Deepwater modernization 

is critical. 

I would also like to take an opportunity to thank Captain Baynes for his service 

and the work of the crew of the Decisive in the aftermath of Hurricane Katrina. 

While many of the crew had lost homes, belongings and had displaced families, they 

helped distribute food and water and provided other critical services. 

I hope at the end of this hearing, we have a better understanding of how the 

Deepwater problems occurred and what is necessary to move the program forward 

to ensure that the Coast Guard has robust and reliable capabilities. The Nation 

needs these assets to protect its citizens from illicit drugs, illegal migrants, and terrorist threats. Congress has a responsibility to ensure that resources are available 

and that taxpayer money is spent responsibly. 

Thank you Madame Chair. I yield back the balance of my time. 

4 

FOR THE RECORD

Sailing far from smooth on Coast Guard’s Decisive 

By Mimi Hall, USA TODAY 

Posted 7/5/2005 11:18 PM 

KEY WEST—The 210-foot Coast Guard cutter Decisive is an imposing figure on the 

horizon as it slices through turquoise waters 10 miles off the Florida shore. 

But from the bridge above the deck to the bilge below, Cmdr. Steve Baynes’ ship 

is in shambles. 

It’s week three of a six-week patrol, and the Decisive has a fuel pump leak, a broken 

water heater, haphazard radar and global-positioning system, faulty air conditioning, a major hydraulic leak in a patrol boat, high-frequency radios that don’t 

work and a broken anchor winch. 

When they’re not racing to make emergency repairs, members of Baynes’ crew, some 

suffering from mold-related respiratory problems, replace the saturated rags tied 

around cold-water pipes that drip onto their bunks at night. They also mop up sewage that routinely backs up and floods their quarters. 

In their spare time, they lift weights in a tiny laundry room where rusty washers 

and dryers hum and a wall-mounted thermometer reads 100 degrees. 

And they labor over machine tools, making parts from scratch for mechanical equipment so old that the manufacturers have long since gone out of business. 

Coast Guard officers such as Baynes and the men and women they lead have been 

contending with such problems for years. 

FLEET SHOWING ITS AGE 

Many of the Coast Guard’s primary oceangoing vessels and planes are nearing the 

end of their projected life, and millions of dollars in scheduled maintenance is needed. 

Aircraft Projected life Fleet average age Maintenance cost 

HC–130 30 years 21.9 $17.4 million 

HU–25 20 years 22.1 $0.2 million 

HH–60 20 years 12.6 $35.9 million 

HH–65 20 years 17.6 — 

Ships Projected life Fleet average age Maintenance cost 

378-foot 40 years 35.3 $13.7 million 

270-foot 30 years 17 $2.9 million 

210-foot 49 years 37.3 $1.9 million 

110/123 20 years 15.4 $4.1 million 

Source: Government Accountability Office

While the average age of the Navy’s frigates, destroyers and other ‘‘surface combatants’’ is 15.2 years, and the average age of its supply and refueling ships is 20.5 

years, the Coast Guard uses ships nearly twice as old, according to the Government 

Accountability Office. The average age of the Coast Guard’s 14 210-foot cutters is 

37.3 years, and the average age of its dozen 378-foot cutters is 35.3 years. 

‘‘It’s just getting more and more difficult to keep these old dogs going,’’ says Baynes, 

commander of the Decisive’s 75-member crew. 

The Coast Guard’s unofficial motto is ‘‘We can do more with less.’’ 

‘‘As admirable as that stance is,’’ Sen. Olympia Snowe, R–Maine, says, ‘‘the cold, 

hard truth remains that the Coast Guard is experiencing a record number of casualties and mishaps like never seen before, and it’s becoming simply unsafe for our 

young men and women to serve aboard these aging assets.’’ 

Given the Coast Guard’s new anti-terrorism duties, ‘‘it’s a disgraceful state of affairs,’’ says maritime security expert Stephen Flynn, a former Coast Guard officer. 

With homeland security added to the Coast Guard’s responsibilities, security experts 

and members of Congress say it’s time to give the Coast Guard the tools it needs 

to help protect the nation. They’re pushing to speed up a 20- to 25-year, multibillion-dollar program to replace the Coast Guard’s ‘‘deepwater’’ fleet, the 88 large 

ships and 186 aircraft capable of operating many miles offshore. 

New mission 

The Decisive has been patrolling U.S. waters for nearly 40 years. In the 1970s, it 

enforced fishing zones in the frigid waters off northern New England. In the 1980s 

5 

and 1990s, it was based in Florida, where the crew seized more than 125 tons of 

cocaine and marijuana and rescued more than 2,500 Haitian and Cuban migrants 

trying to get to the USA. 

Today, the Decisive mostly patrols Caribbean waters, sometimes a few hundred 

miles offshore, as part of what has become the Coast Guard’s most important mission: protecting the nation from terrorism. 

That work is being compromised by a fleet that was well beyond its prime even 

before the Sept. 11 terrorist attacks. 

Last summer, the 9/11 Commission reported, ‘‘While commercial aviation remains 

a possible target, terrorists may turn their attention to other modes. Opportunities 

to do harm are as great, or greater, in maritime or surface transportation.’’ 

The Coast Guard, which became part of the Homeland Security Department in 

2003, is responsible for stopping terrorists who could try to smuggle weapons of 

mass destruction into the USA through its ports. 

In addition to its traditional missions of boat safety, migrant and drug interdiction and fisheries enforcement, the maritime military service must board and inspect cargo ships bound for U.S. ports, share intelligence about threats and possible 

efforts to smuggle terrorists or weapons into the country, and conduct surveillance 

on the high seas. 

Like much of the Coast Guard’s ‘‘deepwater’’ fleet, the Decisive is in very rough 

shape. 

Baynes says its problems affect its new mission: 

• About half the time, he can’t send his 24-foot ‘‘over-the-horizon’’ boat on night patrols to look for migrants, drug smugglers or anyone trying to illegally enter the 

USA because the ship’s high-frequency radios and Global Positioning System devices 

aren’t working. To send six-man teams out of sight of the ship without radios and 

GPS would put them in too much danger, Baynes says. 

• His ship often can’t detect other vessels even a couple of miles away because its 

radar system is old and temperamental. When it goes down—which it does at least 

once a day—Baynes’ crew relies on a small, inexpensive radar system available at 

any marine supply store for use by recreational boaters. 

‘‘We’re pretty limited in figuring out who’s out there and what they’re doing,’’ 

Baynes says. 

• The communication systems are so primitive that ‘‘half the time, we can’t even 

talk to other Coast Guard ships,’’ he says. 

• ‘‘Crewmembers have to spend so much time on repairs and maintenance—often 

18 hours a day—there’s no time for training or safety classes. 

• ‘‘Crew fatigue is one of the biggest things I’m worried about,’’ Baynes says. 

Chief engineer Lt. Greg Tarpey says he can’t even begin to catalog all the things 

that have gone wrong on the Decisive since it set sail May 31. 

Migrant rescues 

While contending with all the breakdowns, crewmembers have had to handle scores 

of migrants plucked out of the perilous waters. In mid–June, on the 18th day of the 

Decisive’s latest patrol, Baynes and his crew took on 99 Cuban migrants. One group 

of 26 had been floating on a ramshackle boat for 21 days. When the Coast Guard 

found them, two were unconscious. 

Baynes is mindful of what probably would have happened to the migrants if his 

cutter hadn’t been patrolling the area. He’s also mindful of the new stakes after 9/ 

11. After 20 years in the service, he’s used to the ‘‘do more with less’’ approach. 

But the problems have become ‘‘a constant drain on us,’’ he says. ‘‘It’s going to 

get to where one day, I’m just going to have to call my commanders and say, ’I can’t 

sail.’ ’’ 

Mr. SOUDER. I thank Captain Baynes. I think his testimony 

today will provide us with a better picture of the state of the Coast 

Guard’s legacy assets and reinforce why Deepwater modernization 

is absolutely critical. 

I would also like to take the opportunity to thank Captain 

Baynes for the service and work of the crew Decisive in the aftermath of Hurricane Katrina. While many of the crews had lost 

homes, belongings, and had displaced families, they helped distribute food and water and provided other critical services. 

6 

I hope at the end of this hearing we have a better understanding 

of how Deepwater problems occur and what is necessary to move 

the program forward to ensure that the Coast Guard has robust 

and reliable capabilities. 

The Nation needs these assets to protect its citizens from illicit 

drugs, illegal migrants, and terrorist threats. Congress has a responsibility to ensure that resources are available and that taxpayer money is spent responsibly. 

Thank you, Madam Chair, and I yield back the balance of my 

time. 

Ms. SANCHEZ. The Chair now recognizes the Chairman of the 

Management, Investigations, and Oversight Subcommittee, the 

gentleman from Pennsylvania Mr. Carney for an opening statement. 

Mr. CARNEY. Thank you, Madam Chair. 

I am glad we could work together to hold these hearings. I would 

also like to commend Chairman Thompson for his hearings on 

these issues. Also, I would be remiss if I didn’t recognize my 

friends, Ranking Members Mr. Souder and Mr. Rogers, for your cooperation here as well. 

The problems afflicting Deepwater are clearly nonpartisan. We 

must examine and correct Deepwater as a matter of national security and of fiscal responsibility. I am glad to know that we have 

also—that we also have a full slate of experts with us today from 

the Coast Guard, the Office of the Inspector General, DHS, as well 

as industry partners involved in Deepwater contract. 

Before I came to Washington, I was shocked to learn about the 

compounding problems with Deepwater. Between election day and 

my swearing in, eight Coast Guard cutters were dry-docked as a 

result of significant and potentially catastrophic flaws that were 

part of the Deepwater modifications. I don’t want to dwell on this, 

but not having eight ships patrolling our Nation’s shores is a serious issue, especially at a time when we could have a mass exodus 

out of Cuba. As a lieutenant commander in the Navy, I was happy 

to learn that the service was able to fill some gaps with six of its 

own patrol boats. That said, using Navy patrol boats to fill the 

Coast Guard mission is robbing Peter to pay Paul. We don’t have 

the naval capacity between the Coast Guard and the Navy to be 

sharing boats right now as much as we would like to. 

I was relieved to hear last month that the Coast Guard was taking over the role of lead systems integrator from the Lockheed 

Martin and the Northrop Grumman team. That relief, however, 

was short-lived. It was replaced by a simple but overriding concern: 

Can the Coast Guard and the Department of Homeland Security 

successfully manage the Deepwater project themselves? There was 

apparently a lack of ability when the contract was first awarded, 

and I think we all want to ensure that the appropriate number of 

qualified staff are now in place to provide the management this 

project so desperately needs. 

I think there is now a common understanding, even with the 

Coast Guard, that to date the Coat Guard relied too heavily on contractors to run the Deepwater program and provide services that 

the Coasties should be performing themselves. 

7 

I want to assure that the Coast Guard and DHS have the necessary resources to manage Deepwater to a successful completion. 

The shortage of qualified procurement staff and contract officers at 

DHS and the Coast Guard worries me. The staff currently in place 

may be talented, but they are overburdened, which undoubtedly led 

to the Coast Guard to delegate so much of its responsibility to 

ICGS. 

Also, we have heard about the problems afflicting the naval aspects of Deepwater, but what about the aviation piece? Are there 

problems that have yet to surface with older equipment that is 

being upgraded similar to the issues with the 110-foot cutters that 

were upgraded to the 123-foot that is now dry-docked? 

The Coast Guard’s role has certainly expanded since the Deepwater deal was struck. Congress needs to ensure that all aspects 

of the program are managed well and completed successfully. We 

don’t have the luxury of hoping that all of this will work itself out 

on its own. Our national security is on the line. So is $24 billion 

of taxpayers’ funds. We have to be careful with that. We need to 

ensure that we are getting a return on that investment. Sitting 

here today, I don’t think we are. 

I look forward to hearing your thoughts on Deepwater so far, as 

well as your answers on what I am sure will be some tough questions. Thank you. 

Ms. SANCHEZ. Thank you to the gentleman from Pennsylvania. 

Ms. SANCHEZ. The Chair now recognizes the Ranking Member of 

the Subcommittee on Management, Investigations, and Oversight, 

the gentleman from Alabama Mr. Rogers, for an opening statement. 

Mr. ROGERS. Thank you, Madam Chair. 

Since we have just been notified we are going to be called for 

votes in about 30 minutes, in the interest of time, I would ask 

unanimous consent to offer my opening statement for the record 

and take this opportunity to welcome our witnesses, and I look forward to hearing from them. 

Ms. SANCHEZ. Great. 

[The information follows:] 

PREPARED STATEMENT OF THE HONORABLE MIKE ROGERS, RANKING MEMBER, 

SUBCOMMITTEE ON MANAGEMENT, INVESTIGATIONS, AND OVERSIGHT

Thank you, Chairwoman Sanchez. 

Today this joint Subcommittee hearing will examine financial and operational 

problems associated with the Coast Guard’s acquisition program, known as Deepwater. 

First, I also want to welcome our witnesses—and welcome back the Inspector 

General, who has testified often before the Management Subcommittee. 

Deepwater began in 1998 as a 24 billion dollar acquisition over 25 years to repair 

or replace the Coast Guard’s air and maritime fleet. 

In 2001, the Government Accountability Office identified Deepwater as quote— 

‘‘risky’’—close quote—and susceptible a waste, fraud, and abuse. 

The folks at the GAO were right. 

Six years later, audits by the GAO and Inspector General have uncovered extensive mismanagement, lack of oversight, operational failures, and millions of dollars 

wasted. 

Unfortunately, this sounds way too familiar to what we found in the border security camera program. 

In the 109th Congress, the Management, Integration, and Oversight Subcommittee, examined the camera system on our borders known as the Integrated 

8 

Surveillance Intelligence System, or ISIS, and found extensive mismanagement, financial waste, and operational failures. 

Last September, DHS announced the award of the new Secure Border Initiative 

contract, known as SBInet. 

This multi-year, multi-billion dollar program is intended to cover both the Northern and Southern borders with an extensive network of cameras, sensors, and other 

technologies. 

We held a hearing on the contract, where the Inspector General testified and 

questioned whether DHS can effectively manage a new major acquisition program 

like SBInet. 

A number of problems in the Deepwater program appear to be similar to those 

we found in ISIS and, unfortunately, to those that appear to be developing in 

SBInet. 

DHS must get both contracts right. 

At stake is not only safeguarding billions of taxpayers’ dollars, but also the security of our country’s land boders, ports, and coastlines. 

Therefore, I look forward to hearing form the Inspector General today about the 

similar problems facing both Deepwater and SBInet and what steps need to be 

taken to ensure their proper management. 

I also look forward to hearing from our witnesses about what went wrong and 

what lessons were learned that can be used to improve both programs. 

Thank you, Chairwoman Sanchez. 

I yield back. 

Ms. SANCHEZ. And the Chair will advise members of the committee that they if they have opening statements, they could submit them for the record. 

Ms. SANCHEZ. So we will get started. And I hope we have a little 

bit more than 30 minutes so that we can get through this first 

panel. As you know, we are going to have two panels. The first 

panel—and I welcome our witnesses. 

Our first panel consists of Rear Admiral Gary T. Blore, the program executive officer of the Coast Guard’s Integrated Deepwater 

System. There is a lot of biography and background on this, but in 

the interest of time, I think I will try to cut through that. 

Our second witness is Mr. Richard Skinner, inspector general for 

the Department of Homeland Security. Welcome. We have seen you 

before our committee and before the overall committee. So we welcome you. 

And the third witness is Captain Steve Baynes. Captain Baynes 

is currently the Chief of the Coast Guard’s Atlantic Area Response 

Enforcement Program. You have a long biography also. 

I will cut it short here and thank you gentlemen for being before 

us. You each will have 5μminutes to summarize your testimony, 

whatever it is you really want to tell us, and then we will begin 

the questioning. 

So I will begin with Admiral Blore. 

STATEMENT OF RADM GARY T. BLORE, PROGRAM EXECUTIVE 

OFFICER, INTEGRATED DEEPWATER SYSTEM, UNITED 

STATES COAST GUARD 

Admiral BLORE. Thank you. 

Good afternoon, Mr. Chairman, distinguished members of the 

subcommittee. I respectfully request that my written statement be 

entered into the official record. 

I am grateful for the opportunity to discuss with you what your 

Coast Guard is doing to strengthen the Integrated Deepwater System program. I am also pleased to be here with my departmental 

colleague Mr. Skinner, and to note how valuable it is to have CapVerDate Nov 24 2008 10:57 Jul 02, 2009 Jkt 000000 PO 00000 Frm 00012 Fmt 6633 Sfmt 6601 H:\DOCS\110-HRGS\110-38\48913.TXT HSEC PsN: DIANE
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tain Steve Baynes at the table to represent the operational perspective on this issue. 

In regards to our Coast Guard operations, we must always bear 

in mind that the Deepwater program is not an academic exercise. 

Rather, Deepwater is about giving real people the real tools they 

need to do real-world missions, securing our maritime borders, saving lives, ensuring national security and protecting natural resources. 

The Coast Guard awarded the Deepwater contract in June of 

2002 to Integrated Coast Guard Systems, a joint venture of Northrop Grumman and Lockheed Martin. From the beginning, 

Deepwater’s scope was broad, encompassing recapitalization, modernization and sustainment of legacy cutters, aircraft and command and control, and communication systems. 

In 2005, the Department of Homeland Security approved a revised post-September 11th mission needs statement and implementation plan for Deepwater. That revised plan, as mentioned, represents a 25-year, $24 billion program, the largest in Coast Guard 

history. 

In preparing to come before you, I considered whether to highlight the challenges that we have faced and the hard lessons we 

have learned and are building upon, but your hearing theme, 

charting a course for safer waters, leads me to direct these opening 

remarks towards our efforts to develop and implement a plan of action as we move forward. 

As you know, the Commandant has led the charge in our efforts 

to strengthen Deepwater. In fact, Admiral Allen’s first action as 

Commandant was to direct a consolidation of all Coast Guard acquisition functions, aggregating the 15 Deepwater projects with the 

service’s other acquisition programs under a single management organization. 

With the Commandant’s full support, we have begun to implement the blueprint for acquisition reform, our plan for restructuring and reprioritizing the service’s acquisition enterprise. The 

plan will strengthen our capabilities and program execution, support, contracting and human capital management. 

On July 13th, I will transition to lead the consolidated directorate, as Rear Admiral Robbigo, seated behind me, will have 

stepped into my place as Program Executive Officer of Deepwater. 

Fundamentally, the acquisition consolidation is aimed at balancing our program’s approach to cost, schedule and performance. 

Of course, I agree with the inspector general that lower risk in 

each of these areas is best, but in the Coast Guard, holding out for 

the lowest risk solutions or approaches hasn’t always been the option. I believe the inspector general would agree with me that we 

have real-world requirements to meet today even as we are executing programs to deliver future capabilities. This doesn’t mean 

that the tyranny of daily activities should allow us to compromise 

good acquisition program management, but rather that the importance of mission execution should inform acceptable risks. 

Regarding program management, by incorporating recommendations from the Department of Homeland Security and DOD senior 

leadership, OMB, GAO and this Congress, and under the direction 

of our Commandant, the program has incorporated 12 significant 

10 

initiatives during the last year. These include government 

transitioning into the role of systems integrator, independent thirdparty assessments, a more robust relationship with NAVSEA and 

NAVAIR, reinvigorating the business case analysis and strengthening acquisition training. 

In conclusion, while I believe the Nation continues to be well 

served by its Coast Guard, I also believe recapitalization is paramount to our ability to conduct future missions. 

As you will hear from Captain Baynes, our crews have seen firsthand the advantages Deepwater equipment brings to the fight, and 

they want and deserve more. We have assembled a team of dedicated personnel who are revitalizing our acquisition forces to reinstitute project and process discipline. 

I ask for your continued support for the Deepwater program to 

enable us to build on the progress made in recapitalizing the Coast 

Guard. 

Thank you. I look forward to your questions. 

[The statement of Admiral Blore follows:] 

PREPARED JOINT STATEMENT OF RADM GARY T. BLORE AND CAPT GARY STEVEN

BAYNES

Introduction 

Good afternoon, Chairpersons Carney and Sanchez, and distinguished members of 

the Subcommittees. It is an honor to be here today to discuss the state of the Integrated Deepwater System, its recent milestones and challenges, and provide you 

with the Coast Guard’s proposed way forward. 

It is my goal this morning to provide you the facts related to this program and 

reassure you of the Coast Guard’s absolute commitment to sound stewardship, robust oversight and to review the corrective actions the Coast Guard’s is taking to 

ensure this critical recapitalization program is able to effectively re-outfit our fleet 

to meet 21st-Century threats and requirements. 

Our ability to save lives, prevent and respond to terrorist attacks, interdict drugs 

and alien smugglers, and protect ports, waterways and natural resources depends 

on our successful accomplishment of that goal. We have to get this right: the Coast 

Guard’s future readiness depends on it. America depends on it. I echo the commitment of our Commandant, Admiral Allen, to do just that. 

Past as Prologue 

Before I discuss the current state of Deepwater and the program’s way ahead, I 

ask you to bear with me briefly to consider how we got here. By the mid 1990s, 

most of our ships and aircraft were approaching the end of their service lives. Our 

cutter fleet was then, and remains, one of the oldest among the world’s naval fleets. 

Some of our cutters are old enough to be eligible for Social Security! In light of a 

looming aviation and surface fleet block obsolescence, it wasn’t sensible to attempt 

piecemeal, one-for-one replacement of each class of assets. We also didn’t have the 

capacity in the late 1990’s to manage that many projects in parallel. 

Because of these anticipated challenges, we knew an innovative approach was required. And because maritime threats were evolving in the post–Cold War environment in which Deepwater was conceived, we knew expectations for maritime security were changing as well, so our asset mix would need to support these dynamic 

requirements. We determined, therefore, that it would be most cost effective and efficient to acquire a wholly-integrated system of ships, aircraft, sensors and communications systems, or, as it is commonly called, a ‘‘system of systems’’. The idea is 

based on the concept that the whole is greater than the sum of its parts; all elements combine to generate greater capabilities across the entire system. Given that, 

our goal is not to replace ships, aircraft, and sensors with more ships, aircraft, and 

sensors, but to provide the Coast Guard with the functional capabilities required to 

safely achieve mission success. 

This wholly-integrated acquisition strategy called for progressive modernization, 

conversion and recapitalization using a mix of new and legacy assets, replacing 

those that are obsolete, while upgrading existing ones until a new fleet is acquired. 

This complex strategy, and the fact that the Coast Guard had not built a ship the 

size of the National Security Cutter for more than three decades, drove our decision 

to engage the services of a commercial systems integrator with proven technical exVerDate Nov 24 2008 10:57 Jul 02, 2009 Jkt 000000 PO 00000 Frm 00014 Fmt 6633 Sfmt 6621 H:\DOCS\110-HRGS\110-38\48913.TXT HSEC PsN: DIANE
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pertise in the acquisition of large systems. Following a rigorous, multiple year selection process, the result was our contract with Integrated Coast Guard Systems 

(ICGS), a joint venture of Lockheed Martin and Northrop Grumman. 

Adding to the program’s complexity was adoption of an innovative performancebased acquisition strategy. Compared to more traditional methods, performancebased acquisition is designed to promote innovation and spread risk more evenly between government and industry. 

Following nearly ten years of planning, beginning in 1993, the Coast Guard 

moved toward contract award believing that we had addressed many of the concerns 

likely to arise from this transformational acquisition strategy. However, like most 

Americans, we never expected the larger challenge that lay ahead for the Coast 

Guard and the nation in the wake of the terrorist attacks of September 11, 2001. 

Following the Service’s transfer to the Department of Homeland Security in March 

2003, we conducted a Performance Gap Analysis, drafted a new Mission Needs 

Statement, and developed a revised, post-September 11th Implementation Plan to 

ensure Deepwater capabilities would support new mission sets assigned to the Coast 

Guard. All of these steps were carried out in full consultation with the Administration and Congress. As Deepwater requirements were expanded in the post-September 11th environment, the program’s timeline expanded and its overall projected 

cost increased from $17 to $24 billion. 

Where we are Today in Deepwater 

Last month, I completed my first year at the helm of the largest acquisition program in Coast Guard history. Five years into this 25 year acquisition we’ve achieved 

many successes, but also faced daunting challenges—and indeed learned some lessons the hard way—but I assure you that education has not been wasted. As a result of those lessons learned and with the full support of the Commandant and the 

Department of Homeland Security (DHS), we are taking aggressive action every day 

to strengthen program management and execution and to ensure past mistakes will 

not be repeated. 

While acknowledging that we need to learn from past mistakes, we also need to 

leverage off the positive experience of significant recent accomplishments. Deepwater assets are in the fleet today, contributing to the successful execution of an 

array of Coast Guard missions. 

Phase 1 of our three-phase conversion of our workhorse helicopter, the HH65, is 

on schedule. As of the end of March, all air stations with HH–65 Dolphin helicopters 

are now flying the ‘‘C’’ model with new Turbomeca Arriel 2C2 engines and upgraded 

gearboxes, installed as part of our legacy asset modernization program. With a 40 

percent power increase and greater reliability, the HH–65C has re-established itself 

as the deployable mainstay of our helicopter fleet and played an invaluable part 

during the Coast Guard’s response to Hurricane Katrina. And, just last July, a hiker 

in the Olympic National Forest fell down the side of a mountain and owes his life 

to a daring rescue by a well-trained Coast Guard aircrew, flying a newly delivered 

HH–65C helicopter—recently re-engined as part of the Deepwater program. That 

rescue would not have been possible without Deepwater. 

12 

We have also recently marked crucial shore-based facility milestones. During a 

ribbon cutting ceremony on March 14, a new Deepwater training facility was dedicated at the Coast Guard’s training center in Petaluma, CA. The facility houses 

high-tech shipboard operation simulators and state-of-the-art radar and electronics 

systems and will provide critical command, control, communications, computers, intelligence, surveillance, and reconnaissance (C4ISR) training for Coast Guard and 

U.S. Navy crews. And, the Coast Guard Communications Area Master Station Atlantic (CAMSLANT) in Chesapeake, VA is being remodeled and upgraded to support 

Deepwater’s interoperable systems. Specifically, the 22-year old building is being 

outfitted with High Frequency Automatic Link Establishment (HF–ALE) systems, 

Automatic Identification Systems (AIS), and a Global Positioning System/Differential Global Positioning System (GPS/DGPS). This new Deepwater-funded equipment 

will allow CAMSLANT to execute its core mission to maintain and deploy contingency communications and provide command and control support for disaster recovery, special operations, and other emergencies. 


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Also in late March, the crew of CGC SHERMAN made use of Deepwater-enhanced 

command and control capabilities while seizing more than 42,000 tons of cocaine 

from the Motor Vessel GATUN off the coast of Panama. SHERMAN’s commanding 

officer noted that this largest bust in Coast Guard history would not have been possible before the service’s high—and medium-endurance cutters were equipped with 

Deepwater-provided upgraded tracking capabilities and the ability to communicate 

securely over great distances, which was provided by Deepwater. 

On April 26, 2007, the first 110-foot Island Class patrol boat to enter the Deepwater-funded Mission Effectiveness Project (MEP)—CGC TYBEE—was returned to 

the fleet following a very successful year-long MEP process. This project includes 

refurbishing and replacing aging and obsolete equipment on the ships and is improving operational effectiveness across the fleet. The goal of the MEP is to maintain effective missions for legacy cutters and patrol boats until those vessels can be 

replaced by new and more capable Deepwater assets such as the Offshore Patrol 

Cutter (OPC) and the Fast Response Cutter (FRC). 

This is an exciting time, with two National Security Cutters (NSC) under construction in Mississippi and HC–144A maritime patrol aircraft Nos. 1 and 2—the 

first new aviation assets acquired under Deepwater—being missionized at the Aviation Repair & Supply Center in North Carolina. Aircraft No. 3 is expected to be delivered for missionization later this year and Nos. 4 and 5 are already in production. 

Aircraft Nos. 4 and 5 were contracted for in January 2007 at a cost of approx. 

$34.89 million per aircraft. Earlier this month, we put aircraft Nos. 6 thru 8 on contract, at a price of approx. $33.99 million per aircraft. This is a cost reduction of 

almost $900,000 per aircraft between Nos. 4 and 5 and Nos. 6 thru 8. These are 

but a few examples of the program’s progress and results. 


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14 

These milestones and successes just begin to illustrate the tremendous need for 

Deepwater. As Deepwater’s system of assets continue to be delivered, we’ll meet or 

exceed not just capability requirements, but patrol and response capacity needs as 

well. 

Room for Reflection 

As I indicated earlier, we are committed to benefiting from lessons learned. Obviously, one area where we are very disappointed is the 123-foot patrol boats. Based 

on initial budget constraints, the conversion of these cutters was planned as a bridging strategy until we could deliver the more capable Fast Response Cutter (FRC). 

The decision to proceed with these conversions was based on consideration of limited 

resources, a growing gap in patrol boat hours, and identified risk associated with 

the conversion design. At the time, the conversion was seen as the lowest risk option given available resources and operational requirements. 

But, early hull deformation led the Coast Guard to re-examine the plan for the 

123-foot patrol boats and halt conversions in May 2005 at just eight hulls, instead 

of 46 as originally planned. When repeated efforts to repair the hulls proved unsuccessful and even more significant structural problems surfaced, last November Admiral Allen suspended operation of the cutters until a comprehensive engineering 

solution was identified. When a feasible solution couldn’t be found, the Commandant 

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commissioned. As the Program Executive Officer for Deepwater, I have worked with 

the Commandant, DHS OIG, GAO, and this Congress to ensure that adequate managerial and oversight changes have been made in this acquisition program to prevent false starts, such as the 123-foot patrol boat program, from being repeated. 

I’d also like to take just a moment to discuss the National Security Cutter (NSC). 

The Inspector General reported his findings earlier this year from an audit of the 

NSC earlier this year. That report highlighted concerns with our approach to potential fatigue structural integrity issues with the NSC hull. The issue here, which we 

have communicated to the DHS OIG and which we have been actively addressing 

for several years, is a question of fatigue life over the course of the cutter’s 30-year 

service life. 

I want to be very clear that there has never been a question of crew or ship safety 

related to the ship’s structure, nor have we ever anticipated any operational restrictions related to its design. As you are well aware, we drive our ships hard, so service and fatigue life of new cutters is of critical concern to us. An early Coast Guard 

review of the design of the NSC indicated that the ship might experience fatiguelevel stresses sooner than anticipated. Because we want to ensure that all of our 

ships meet the service and fatigue life requirements our missions demand, we are 

implementing changes and enhancements to the design of the NSC. 

Some have wondered why we didn’t suspend construction of the first NSC when 

we learned of these concerns. The Coast Guard’s decision to continue production of 

the NSC reflects more than simply the naval engineering perspective. It also encompasses considerations of cost, schedule, and performance. After extensive research 

and deliberation and with all of these considerations in mind, the Coast Guard decided that the need for enhancements to NSC No. 1 could be effectively addressed 

by later retrofits and did not justify the schedule and cost risk associated with stopping the production line. These kinds of issues are not unusual in production of a 

first-in-class vessel, and I believe the decision to move forward was prudent. We will 

fix NSC No. 1 and 2 during post-delivery availabilities and design the fix into future 

hulls’ production. In fact, through ongoing meetings and negotiations between the 

Coast Guard and CEOs from Northrop Grumman and Lockheed Martin, we’ve recently reached agreement on the engineering solution to resolve all fatigue concerns 

with NSCs No. 3–8. 

Moving Beyond 

As the Deepwater program has evolved, we have reinvigorated our workforce 

planning process and continue the effort to increase staff to the appropriate level 

to allow effective government oversight and ability of the government to perform as 

the system integrator. I appreciate Congress acting to authorize additional billets 

for this endeavor. As a direct result of these efforts, the Coast Guard will have 52 

full-time government personnel at our Gulf Coast PMRO by the end of this fiscal 

year. The Navy’s Supervisor of Shipbuilding Office (SUPSHIP) also assigned 12 people to our PMRO in Pascagoula, Miss., where they are supporting construction of 

the NSC at Northrop Grumman Ship Systems. During a trip to Pascagoula last 

month, I had a chance to visit with many of these acquisition and technical professionals and I am confident their active oversight of contractor performance during 

NSC construction will pay dividends. 

Obtaining more appropriate staffing levels also means the Coast Guard is able to 

better respond to contractor requests for deviation and waivers. These requests demand intense scrutiny from the government prior to any action being taken; to facilitate this, we’ve developed a new Class I Engineering Change Proposal (ECP)/Request for Deviation (RFD)/Request for Waiver (RFW) review process, a recommendation of our DHS OIG. This process requires that, prior to implementation; each 

ECP/RFD/RFW is reviewed in detail by a board of technical experts and contracting 

officers, based on pre-determined guidelines. It also mandates thorough documentation of each contractor request, the formal review process, and decision of the Coast 

Guard in regard to each request. This will facilitate timely and consistent handling 

of each ECP/RFD/RFW. 

The Coast Guard will use the American Bureau of Shipping (ABS) to certify Deepwater equipment and vessels according to High Speed Naval Craft (HSNC) and 

Naval Vessel rules as appropriate. Specifically, the Coast Guard is working with industry to maximize the use of HSNC standards for our patrol boats and smaller surface assets and Naval Vessel rules for the National Security Cutter and Offshore 

Patrol Cutter. By implementing this certification expectation, we can ensure that 

equipment and assets meet requirements and that standards are enforced consistently. There is a growing market today for external rules and standards bodies, and 

we’ll use those rules and bodies to assist with certification in the future. But, the 

government needs to be the final arbiter of those standards. 

16 

Leading Change 

The lessons we have are being applied across the program. In fact, these lessons 

are improving acquisition management throughout the Coast Guard. 

The role of the Coast Guard’s technical authority has been reaffirmed and the dynamic relationship between the technical authority and acquisition programs has 

been strengthened. This means that for all vessel designs and design changes, the 

Coast Guard will not proceed with contract award or contract changes without 

agreement from the technical authority. Fatigue enhancements to the National Security Cutter are an illustration of this constructive relationship. While contractors 

follow direction from program and contracting officers, those officers don’t give direction until first consulting and reaching agreement with the Coast Guard technical 

authority. 

We are also improving the effectiveness of our Integrated Product Teams (IPTs). 

These teams can serve a useful function by enabling regular oversight of the contractor and by providing an avenue for resolution of non-major technical concerns 

or, where concerns persist, an avenue for them to be raised to program managers 

and contracting officers. Our IPTs were previously chaired by Integrated Coast 

Guard Systems (ICGS) and haven’t always functioned as envisioned. That needed 

to change. So, based on direction to all program managers, each IPT is now led by 

a government employee and IPT charters are being examined to determine if/where 

additional changes should be made. 

The complexity of the Deepwater program and the diverse missions of planned assets makes design review a crucial element of the successful execution of this program. To ensure that designs and assets will meet Coast Guard needs, we have increased our use of independent, third-party review and analysis for all new starts 

or substantial design changes. Inherent in this initiative is a renewed commitment 

to utilize full business case analyses for all new acquisition decisions to instill confidence that we are building and buying the right tools for our Coast Guard men 

and women and at best value for taxpayers. 

Of particular note, we recently contracted with the Defense Acquisition University 

(DAU) to conduct a ‘‘quick-look’’ review of Deepwater to examine the program’s key 

management and technical processes, performance-based acquisition strategy, organizational structure and our contract with ICGS. The Coast Guard’s Research and 

Development Center has also completed a study of the planned Deepwater VerticalLaunch Unmanned Aerial Vehicle; in the study’s second phase, we are re-examining 

the way ahead for unmanned vehicles based on recommendations from that analysis. And, we’ve initiated an independent review of workload and workforce management issues. Based on findings and recommendations from these and other independent reviews, we will make ‘‘course corrections’’ where needed in order to guarantee successful execution of the Deepwater program. 

Our ongoing and positive relationship with the Naval Sea and Air Systems Commands have provided the Coast Guard with valuable third party assessments. It is 

the preference of the Coast Guard that future third party assessments be kept within the government whenever possible. Specifically, NAVSEA’s Carderock Surface 

Warfare Center has provided us with valuable design reviews and recommendations. As funding allows, we will continue this exchange to the maximum extent possible. 

Our partnerships and cooperative relationships with the U.S. Navy and others extend beyond third party assessments. The Coast Guard is leveraging sound principles of systems engineering and integration to derive high levels of sub-system and 

component commonality, improve interoperability with the U.S. Navy and other 

agencies, and achieve significant cost avoidances and savings. This approach conforms with and directly supports the National Fleet Policy. 

As the Program Executive Officer of Deepwater, I have a formalized collaborative 

partnership with my Navy counterparts in order to identify common systems, technologies and processes for improved interoperability. By incorporating common and 

interoperable Navy systems into Deepwater assets, the Coast Guard has also avoided paying unnecessary costs. 

As examples, the National Security Cutter (NSC) and Off-Shore Patrol Cutter 

(OPC) will use 75 percent of the Navy’s AEGIS Command and Decision System. 

Deepwater assets also will incorporate Navy Type/Navy Owned systems, including 

the 57mm deck gun, selected for major Deepwater cutters and the Navy’s Littoral 

Combat Ship and DD(X) programs. The Operation Center Consoles on the NSC use 

70 percent of the design of the Navy’s Display Systems (AN/UYQ–70). And, by using 

more than 23,000 lines of software code from the Navy’s Antisubmarine Warfare Improvement Program (AIP) in the CASA Maritime Patrol Aircraft’s command and 

control systems, we are maximizing the use of mission systems that are installed 

on more than 95 percent of the world’s maritime surveillance aircraft. The CASA 

17 

Maritime Patrol Aircraft will utilize more than 50 percent of the functionality of the 

Navy’s P–3 Aircraft Improvement Program system. For example, the U.S. Navy and 

Coast Guard personnel routinely train side-by-side at the Coast Guard’s training facility in Petaluma, California. 

A Consolidated Coast Guard Acquisition Directorate 

One of the most significant changes we are making in the Coast Guard’s acquisition community is bringing together all acquisition-related activities—traditional 

programs as well as system-of-system, policy, and research and development—under 

one organization. Consolidating our acquisition efforts will provide immediate benefits, including better allocation of human capital assets (such as contracting officers 

and acquisition professionals) along with an integrated ‘‘product line’’ approach to 

our management of acquisitions, thereby allowing projects to be handled by knowledgeable and experienced personnel with the same linkages to the technical authorities. 

Defense Acquisition University’s (DAU) Quick Look study report of the Deepwater 

program concluded that our recently developed Blueprint for Acquisition Reform 

plan, which outlines many of the change management efforts related here, ‘‘is comprehensive and responsive to the human capital, organization, process and governance related findings and recommendations.’’ 

Along with our analysis to right-size staffing levels, we have reinvigorated our acquisition training and certification process to ensure that technical and support 

staff, program managers and contracting officers have the requisite skills and education needed to manage complex acquisitions. Our desired end state is to become 

the model for mid-sized federal agency acquisition and procurement, in full alignment with the Department of Homeland Security acquisition objectives. 

Other Insights 

Some insights gained over the past year and during the program’s first five years, 

may not be as intuitive as the need to increase staffing or refine oversight processes. 

In that vein—and this has particular relevance to the 123-foot patrol boats—we 

must consider the ever-present tension between the trend in government agencies 

to seek to purchase Commercial Off-the-Shelf (COTS) equipment and the sometimes 

conflicting requirement to certify that equipment to federal agency standards. Often, 

these competing desires cannot be reconciled without making trade-offs from one or 

the other. The fact is, while COTS equipment is often less expensive, easier to buy 

and more available, it seldom meets the sometimes very long list of federal agency 

performance requirements. The practical impact is that contracting officers and program managers are left trying to balance affordability, schedule and risk in meeting 

contract requirements. 

The requirement on the 123-foot patrol boats for low-smoke cabling is one example of this challenge. When this safety-related requirement is pitted against the 

competing requirement to use COTS equipment in onboard systems, program and 

contracting officers must consider trade-offs. If COTS equipment contains pre-fabricated circuitry that utilizes non-low smoke cables, the cost to modify that equipment can be very steep—not to mention schedule impacts from such modifications. 

Often, COTS equipment may even have components that meet certification standards but that lack manufacturer testing data to the needed level of specificity. Program and contracting officers must thus seek to balance performance, cost, and 

schedule factors and make decisions based on perceived risk. The federal government needs to balance using COTS equipment and certifying that equipment to all 

federal agency standards, in order to best serve the public. 

We’ve also learned a great deal about performance-based contracts, especially as 

they relate to complex acquisitions like a Coast Guard cutter. When Deepwater was 

developed it was envisioned as a purely performance-based acquisition. The thought 

was that we’d simply lay out performance requirements of our assets and then allow 

industry the freedom to design and build assets that met those requirements. What 

we’ve found is that this approach doesn’t work in our complex system acquisition. 

While there may be some elements of performance-based acquisition that we 

would wish to retain, we have concluded that our Deepwater ship contracts should 

be much more specification-based. That means the government has a responsibility 

to establish specifications, including certification requirements, and to not change 

them mid-stream without good cause. Requirements are dynamic and the need for 

detailed specification and constant collaboration and oversight from the government 

is intense. Based on this realization, we’re working with industry to redefine future 

procedures and contract development to ensure more adequate, detailed specification and oversight. In fact, Admiral Allen recently signed a joint letter of strategic 

intent with the CEOs of Lockheed Martin and Northrop Grumman to encourage further alignment as we move toward the new award term. 

18 

This leads me to a final, critical point—one which perhaps seems obvious on the 

face of it, but which has been brought home to me in more ways over the last 12 

months than I can enumerate. The contract is the key to a successful acquisition. 

It’s while the contract is being developed and negotiated that the government maintains the greatest influence in the acquisition process. Granted, the government 

must always be heavily involved in contractor oversight to ensure that assets are 

designed, constructed and delivered to meet requirements. But, those requirements 

and specifications must be clearly established within the contract document. In fact, 

while the contract is the key to a successful acquisition—stable requirements are 

a key to a successful contract. It is absolutely essential that the contract be precise. 

Specifications must be clear. Requirements must be documented. Construction parameters must be defined. Expectations must be understood. And swift and appropriate action must be taken to enforce contracts when contractor performance falls 

short of our expectations. 

In Summary 

All of the program management changes I have described are positioning the 

Coast Guard to take on more responsibility as the system integrator for the Deepwater program, and to be sound and effective stewards, regardless of who the integrator is. 

In conclusion, I want to assure you we are listening to concerns of the Inspector 

General, the Government Accountability Office, Congress, and this committee, and 

are benefiting from their recommendations. We’ve learned from our past and are 

making changes to successfully step out into the future. Open and honest dialogue 

between the Coast Guard and our stakeholders is essential and we’ll continue to advise you of challenges and successes, and to make additional changes where needed. 

This is an exciting time for the Coast Guard and for Deepwater. Our past challenges have made us stronger today. All one has to do is look at the operational 

capabilities already being provided to the fleet to see the tremendous impact Deepwater is making. From the Coast Guard’s record drug seizure in March to the enhanced rescue and response capabilities demonstrated in Olympic National Forest 

and during our response to Hurricane Katrina, Deepwater-upgraded assets are contributing to overall mission success. Deepwater is helping to build a 21st Century 

Coast Guard. The capabilities and capacity we are delivering will better enable the 

service to push out and secure our maritime borders and protect Americans all 

along our shores. 

Together, we’re going to deliver those capabilities. We are making the changes 

necessary to propel the program to ultimate success and provide the critical cutters, 

aircraft and sensors needed to meet our dynamic mission requirements. We are all 

anxious for positive results. We are on the path to change and I am confident that 

it is the correct path. 

Thank you for the opportunity to testify before you today. I am happy to answer 

any questions you may have. 

Ms. SANCHEZ. Mr. Skinner. 

STATEMENT OF RICHARD L. SKINNER, INSPECTOR GENERAL, 

DEPARTMENT OF HOMELAND SECURITY 

Mr. SKINNER. Good afternoon. As always, it is an honor to be 

here. I am especially pleased to have the opportunity to be able to 

testify side by side with Admiral Blore and Captain Baynes. I believe together we can paint a clearer picture of the challenges facing the Deepwater program and the efforts under way to improve 

the management and oversight that is very important in this complex acquisition program. 

Over the past 2–1/2 years, my office has completed four audits, 

including the Deepwater program. They involve one 123-foot cutter 

extension, the National Security Cutter, the command-and-control 

information technology systems, and reengining of the HH–65 helicopters. 

Four common themes and risks have emerged in each of these 

audits. The first, the dominant influence of expediency, that is 

schedule concerns, trumped performance concerns. It is best illustrated by the National Security Cutter procurement. The Coast 

19 

Guard proceeded with the construction of the NFC knowing well in 

advance that its technical experts had engineering design and future performance concerns. The Coast Guard repeatedly told us 

that the decisions regarding the NFC reflected more than simply 

the naval engineering perspective. Rather, they also encompass 

considerations of cost, schedule and performance. However, the 

Coast Guard has been unable to provide any documentation to support this. The design and performance concerns still remain outstanding today, and the cost to mitigate these concerns has yet to 

be determined. 

Second, the terms and conditions of the contract were flawed. 

Under the Deepwater program, the Coast Guard essentially agreed 

to ride shotgun, turning the reins over to the systems integrator. 

Consequently, the Coast Guard was reluctant to exercise its authority to influence the design and production of its own assets. 

This was demonstrated in all four of our audits over the past 2– 

1/2 years. 

Third, our reviews have raised concerns with the definition and 

clarity of operational and performance specifications. This has compromised the Coast Guard’s ability to hold the contractor accountable for its performance. For example, the performance specifications associated with the upgrading the information systems on the 

Coast Guard’s 123-foot cutter did not have a clearly defined expected-level performance, causing the Coast Guard to accept delivery of assets that did not meet its anticipated requirements. 

And finally, and simply put, the Coast Guard does not have a 

sufficient staff or sufficient number of staff in the mix of expertise 

to manage an acquisition as large and complex as the Deepwater 

program. This is most evident in the areas of program management, acquisition management and financial management. 

Also, many of the staff who have been assigned to the Deepwater 

program have little experience or training in such a large, complex, 

performance-based contract. 

As you heard today from Admiral Blore, the Coast Guard recognizes these challenges, and, through its recently published blueprint for acquisition reform, has taken aggressive action to 

strengthen program management and oversight. The blueprint outlines the Coast Guard’s plans for reorganizing, rebuilding its acquisition workforce, including such actions as reasserting the technical 

authority of the Chief Engineer, its Chief Engineer; using independent, third-party assessments of performance; consolidating acquisition activities under one directorate; and redefining the terms 

and—the contract terms and conditions, including provisions to ensure that the government involvement in subcontract—to ensure 

government involvement in subcontract management in make or 

buy decisions. 

Furthermore, and most importantly, I believe, Admiral Blore has 

pointed this out, the Coast Guard is increasing its staffing for the 

Deepwater program and reinvigorating its acquisition, training and 

certification processes to ensure that staff has the requisite skills 

and education needed to manage the program. However, many of 

these corrective measures will take time, such as building an acquisition or procurement workforce to manage the broad scope and 

complexity of the program. Until this is accomplished, the Coast 

20 

Guard needs to proceed with caution, taking advantage of all of the 

tools at its disposal to mitigate risk and avoid future problems. The 

devil is in the details. 

The Coast Guard needs to develop a performance baseline; that 

is, something which you can measure the progress being made to 

achieve the goals outlined in the blueprint. These include the specific numbers of—and types of acquisition professionals needed; 

when they are scheduled to arrive on board; and the financial costs 

associated with realignment, reorganizing, retraining and rebuilding of the acquisition workforce. 

I would like to conclude just by simply pointing out that our office is highly committed to the oversight of this program. We have 

embedded auditors and inspectors in the Deepwater program and 

will continue to provide that oversight as they proceed over the 

next several years, just like other procurements that we have within the Department; for example, the SBInet and the FEMA acquisition programs. 

This concludes my remarks. I will be happy to answer any questions. 

Ms. SANCHEZ. Thank you. 

[The statement of Mr. Skinner follows:] 

PREPARED STATEMENT OF RICHARD L. SKINNER

Introduction 

Good afternoon, Chairwoman Sanchez, Chairman Carney, and Members of the 

Subcommittees. I am Richard L. Skinner, Inspector General for the Department of 

Homeland Security (DHS). Thank you for the opportunity to discuss the challenges 

facing the United States Coast Guard, in particular, its Deepwater Program. 

My testimony today will address the contract and program management challenges associated with the Deepwater Program and how these challenges have impacted specific Deepwater assets. I will also address the actions and challenges associated with the Coast Guard’s decision to reorganize its acquisition workforce as outlined in their Blueprint for Acquisition Reform. 

I want to note that Admiral Allen has been very responsive to our audit recommendations and has begun to institute changes that, if fully implemented, should 

improve program delivery. I have imbedded OIG staff into the Deepwater Program 

and will continue to monitor the effectiveness of these corrective actions and other 

aspects of the Deepwater Program. Given the broad scope of Deepwater, we have 

also prepared a scorecard summarizing the overall status of the program. We will 

release the scorecard soon as part of our Semiannual Report to Congress. The scorecard summarizes our existing work, supplemented by interviews with Coast Guard 

officials to update their efforts to enhance the Coast Guard’s acquisition management system. We plan to produce this scorecard on an annual basis, along with 

scorecards covering other key management challenges throughout the Department 

of Homeland Security. 

Deepwater Program 

The Integrated Deepwater System Program (Deepwater) is a $24 billion, 25-year 

acquisition program designed to replace, modernize, and sustain the Coast Guard’s 

aging and deteriorating fleet of ships and aircraft. The Deepwater acquisition strategy provided for private industry to not only propose and develop an optimal system-of-systems mix of assets, infrastructure, information systems, and people solutions designed to accomplish all of the Coast Guard’s Deepwater missions, but also 

to provide the assets, the systems integration, integrated logistics support, and the 

program management. Under a more traditional acquisition strategy, the government would have provided the program management support needed to oversee the 

administration of the contract. 

In June 2002, the Coast Guard awarded Integrated Coast Guard Systems (ICGS) 

with a 5-year contract to serve as the Deepwater systems integrator. The current 

base contract expires in June 2007 and the Coast Guard may authorize up to five 

additional 5-year award terms. In May 2006, the Coast Guard announced its decision to award ICGS an extension of the Deepwater contract for 43 out of a maxVerDate Nov 24 2008 10:57 Jul 02, 2009 Jkt 000000 PO 00000 Frm 00024 Fmt 6633 Sfmt 6621 H:\DOCS\110-HRGS\110-38\48913.TXT HSEC PsN: DIANE
21 

imum 60 months for the next award term beginning in June 2007. ICGS is a joint 

venture of Northrop Grumman and Lockheed Martin. The 2002 award decision followed a multiyear competitive phase where two other industry teams vied with 

ICGS. 

Deepwater Program Management and Oversight 

We have identified several common themes and risks from our audits of assets 

and information technology systems being acquired under the Deepwater contract. 

These include the dominant influence of expediency, unfavorable contract terms and 

conditions, poorly defined performance requirements, and inadequate management 

and technical oversight. These deficiencies contributed to schedule delays, cost increases, and asset designs that did not meet minimum Deepwater performance requirements. 

Systems Integrator Approach—The Coast Guard’s decision to outsource program 

management to the systems integrator fully empowered the contractor with authority for making day-to-day decisions regarding all aspects of the contract. According 

to the Coast Guard, its acquisition workforce did not have the requisite training, 

experience, and certification to manage an acquisition the size, scope, and complexity of the Deepwater Program. Further, the Coast Guard was reluctant to exercise a sufficient degree of authority to influence the design and production of its own 

assets. As a result, the Systems Integrator (ICGS) assumed full technical authority 

over all asset design and configuration decisions while the Coast Guard’s technical 

role was limited to that of an expert ‘‘advisor.’’ 

However, there was no contractual requirement that the Systems Integrator accept or act upon the Coast Guard’s technical advice, regardless of its proven validity. 

Furthermore, there are no contract provisions ensuring government involvement 

into subcontract management and ‘‘make or buy’’ decisions. The Systems Integrator 

decided who is the source of the supply. Also, as the primary management tool for 

the Coast Guard to contribute its input on the development of Deepwater assets, 

the effectiveness of the contractor-led Integrated Product teams (IPTs) to resolve the 

Coast Guard’s technical concerns, has been called into question by both the Government Accountability Office (GAO) and my office. 

Contractor Accountability—Our reviews have raised concerns with the definition 

and clarity of operational requirements, contract requirements and performance 

specifications, and contractual obligations. For example, in our National Security 

Cutter (NSC) report, we reported that the Coast Guard and the American Bureau 

of Shipping jointly developed standards that would govern the design, construction, 

and certification of all cutters acquired under the Deepwater Program. These standards were intended to ensure that competing industry teams developed proposals 

that met the Coast Guard’s unique performance requirements. Prior to the Phase 

2 contract award, the Coast Guard provided these design standards to the competing industry teams. Based on their feedback, the Coast Guard converted the majority of the standards (85% of the 1,175 standards) to guidance and permitted the 

industry teams to select their own alternative standards. Without a contractual 

mechanism in place to ensure that those alternative standards met or exceeded the 

original guidance standards, the competing teams were allowed to select cutter design criteria. 

Additionally, the Deepwater contract gave the Systems Integrator the authority 

to make all asset design and configuration decisions necessary to meet system performance requirements. This condition allowed ICGS to deviate significantly from 

a set of cutter design standards originally developed to support the Coast Guard’s 

unique mission requirements, and ICGS was further permitted to self-certify compliance with those design standards. As a result, the Coast Guard gave ICGS wide 

latitude to develop and validate the design of its Deepwater cutters, including the 

NSC. 

Deepwater Performance Requirements Are Ill-Defined—Vague contract terms and 

conditions have also compromised the Coast Guard’s ability to hold the contractor 

accountable by making possible competing interpretations of key performance requirements. For example, the performance specifications associated with upgrading 

the information systems on the Coast Guard’s 123’Island Class Patrol Boats did not 

have a clearly defined expected level of performance. Also, in our review of the Helicopter Interdiction Tactical Squadron (HITRON) lease, we determined that vague 

contract performance requirements challenged the Coast Guard’s ability to assess 

contractor performance. In another example, the performance specifications for the 

NSC were not clearly defined, which resulted in disagreements, both within the 

Coast Guard and between the Coast Guard and ICGS, regarding the actual intent 

behind the cutter performance requirements. 

22 

Deepwater Cost Increases—The cost of NSCs 1 and 2 is expected to increase well beyond the current $775 million estimate, as this figure does not include a $302 million Request for Equitable Adjustment (REA) submitted to the Coast Guard by 

ICGS on November 21, 2005. The REA represents ICGS’s re-pricing of all work associated with the production and deployment of NSCs 1 and 2 caused by adjustments to the cutters’ respective implementation schedules as of January 31, 2005. 

The Coast Guard and ICGS are currently engaged in negotiations over the final cost 

of this REA. ICGS has also indicated its intention to submit additional REAs for 

adjusted work schedules impacting future NSCs, including the additional cost of 

delays caused by Hurricane Katrina. In addition, the $775 million cost estimate for NSCs 1 and 2 does not include the 

cost of structural modifications to be made to mitigate known design deficiencies. 

The cost of these modifications and the cost of future REAs could add hundreds of 

millions of dollars to the total NSC acquisition cost. We remain concerned that these 

and other cost increases within the Deepwater Program could result in the Coast 

Guard acquiring fewer and less capable NSCs, FRCs, and OPCs under the Deepwater contract. 

Impact on Coast Guard Operational Capabilities—Short and Long Term 

The problems the Coast guard is experiencing with the Deepwater Program could 

impact the Coast Guard’s short and long-term operational capabilities. For example, 

while the re-engining of the HH–65B helicopters resulted in aircraft with significantly improved capabilities, the program has experienced schedule delays and cost 

increases. The delivery of the first 84 re-engined HH–65Cs will be completed by the 

end of this month, 11 months beyond the Commandant’s original July 2006 deadline. Extending the delivery schedule unnecessarily exposed HH–65B aircrews to additional risk due to the rate in which in-flight loss of power mishaps were occurring. 

There are also problems with Coast Guard’s acquisition of the Vertical Unmanned 

Aerial Vehicle (VUAV). VUAVs have the potential to provide the Coast Guard’s 

flight-deck-equipped cutters with expanded air surveillance, detection, classification, 

and identification capabilities. Currently, the VUAV acquisition is over budget and 

more than 12 months behind schedule. On May 8, 2007, the Coast Guard issued a 

second work stop order and the Commandant recently testified that the VUAV was 

under review by Coast Guard’s Research and Development Center. The review is 

expected to provide recommendations for the way ahead with the VUAV. 

Not having VUAV capability would significantly reduce the long-range surveillance capability of the NSC and the Offshore Patrol Cutter (OPC) from 58,000 

square nautical miles to that of the Coast Guard’s Hamilton class high endurance 

cutters (13,500 square nautical miles). This represents a 76% reduction in Deepwater surveillance capability. The Coast Guard’s Revised Deepwater Implementation Plan of 2005 called for the acquisition of 45 VUAVs at a total cost of approximately $503.3 million. As of March 31, 2007, the Coast Guard had obligated $113.6 

million (76.9%) of the $147.7 million to the project. According to the Coast Guard 

estimates, it would take an additional $50 million and 18 months to deliver the first 

two VUAV systems. 

The increased cost, schedule delays, and structural design problems associated 

with the 123-foot patrol boat have further impacted the Coast Guard’s patrol boat 

operational hour and capability gap. The Coast Guard is attempting to mitigate the 

problem by extending an agreement with the U.S. Navy to continue the operation 

of the 179-foot ‘‘Cyclone’’ class patrol boats from 2009 to 2011, and to extend the 

operational capability of the 110-foot Island Class fleet through the use of multiple 

crews. While the increased operations tempo will help in the short-term, it will further increase the wear and tear (e.g., equipment breakdowns and other unscheduled 

casualties, etc.), on these aging patrol boats in the long term. As a result, we expect 

the maritime patrol boat gap (which has been reported to be in excess of 20,000 

hours) to increase rather than decrease until which time the service life extensions 

on the 110’s are completed and the FRC–Bs deployed. 

Recent OIG Reports 

Over the past 2 years, my office has issued reports on various assets being acquired under the Deepwater contract including: 

• the re-engining of the HH–65B helicopter; 

• the acquisition and implementation of Deepwater command, control, communications, computers, intelligence, surveillance, and reconnaissance (C4ISR) systems; 

• the acquisition of the national security cutter, and, 

• the modernization of the 110/123-foot maritime patrol boat. 

We found serious cost, schedule, performance, and management oversight issues 

with each of the aforementioned Deepwater projects. 

23 

Re-engining of the HH–65B—We reviewed the Coast Guard’s HH–65 Dolphin helicopter re-engining project. The review was initiated in response to concerns that the 

re-engining requirements specified for the HH–65 helicopter were not sufficient for 

the needs of the Coast Guard over the Deepwater project time frame. Specifically, 

the HH–65 was experiencing a sharp increase in the number of in-flight loss of 

power mishaps that jeopardized the safety of HH–65 flight crews. We also identified 

concerns that the ICGS proposal did not meet the Coast Guard’s desire to have 84 

HH–65s re-engined by July 2006, as originally mandated by the Commandant. 

Our review of the HH–65 re-engining project determined the replacement of the 

HH–65 engines with the Ariel 2C2 engine would resolve the safety and reliability 

issues that had plagued the HH–65 fleet for much of the past decade. Our report 

also determined that it would be timelier and more cost-effective to have the reengining performed at the Coast Guard Aircraft and Repair Supply Center (ARSC) 

rather than to have responsibility for the re-engining placed under the auspices of 

ICGS. The Coast Guard’s Assistant Commandant for Operations made a similar recommendation in May 2004. 

The Coast Guard did not concur with any of our HH–65 recommendations. Coast 

Guard officials opined that ICGS minimized the operational, legal, cost, and contract 

performance risks associated with the re-engining. The Coast Guard also said it believed that it received significant benefits from the current ICGS contract that far 

outweighed the benefits of having Coast Guard aviation manage the project. We did 

not and do not believe that these benefits have been demonstrated in this instance. 

To date, 84 re-engined HH–65s have been delivered to the Coast Guard. The remaining 11 HH–65 helicopters are to be delivered to the Coast Guard by the end 

of fiscal year 2007. As of March 31, 2007, the Coast Guard had obligated $324 million (94.4%) of the $343 million funded for the project. 

C4ISR Systems Review—We also reviewed the Coast Guard’s efforts to design and 

implement C4ISR systems to support the Deepwater Program. We determined that 

the Coast Guard had limited influence over contractor decisions toward meeting information technology requirements. The lack of discipline in change management 

processes provided little assurance that the requirements remain up-to-date or effective in meeting program goals. Certification and accreditation of Deepwater C4ISR 

equipment was difficult to obtain, placing systems security and operations at risk. 

Further, although the Deepwater Program had established information technology 

testing procedures, the contractor did not follow them consistently to ensure the 

C4ISR systems and the assets on which they are installed performed effectively. 

Recently, the Coast Guard provided an update regarding the progress being made 

to implement the recommendations contained in our report on C4ISR systems. In 

its response, the Coast Guard stated that the language contained in the Deepwater 

contract, including the contract’s ‘‘award term’’ criteria, will be revised to further 

clarify contractor responsibilities for developing Deepwater C4ISR systems. 

NSC Review—We also conducted a review of the Coast Guard’s acquisition of the 

NSC to determine the extent to which the cutter will meet the cost, schedule, and 

performance requirements contained in the Deepwater contract. We determined that 

the NSC costs have significantly increased and, as designed and constructed, will 

not meet performance specifications described in the original Deepwater contract. 

Due to design deficiencies, the NSC’s structure provides insufficient fatigue strength 

to achieve a 30-year service life under Caribbean (General Atlantic) and Gulf of 

Alaska (North Pacific) sea conditions. 

The Coast Guard’s technical experts first identified and presented their concerns 

about the NSC’s structural design to senior Deepwater Program management in December 2002, but this did not dissuade the Coast Guard from authorizing production 

of the NSC in June 2004, or from its awarding the systems integrator a contract 

extension in May 2006. We were unable to ascertain the basis underlying the Coast 

Guard’s decision to proceed with the production of the first two cutters that had 

known design flaws. To mitigate the effects of these deficiencies, the Coast Guard 

has advised us that it intends to modify the NSC’s design to meet the service and 

fatigue life requirements specified in its contract. However, this decision was made 

after the Coast Guard authorized production of 2 of the 8 cutters being procured. 

NSC 1 was christened on November 11, 2006, and final delivery to the Coast 

Guard is scheduled for December 2007 or January 2008. NSC 2 is under construction and scheduled for delivery during the summer of 2008. As of March 31, 2007, 

Coast Guard had obligated $769.6 million (50.6%) of the $1,519.7 million funded for 

the project. 

We recommended that the Coast Guard ensure the NSC is capable of fulfilling 

all performance requirements outlined in the Deepwater contract and improve the 

level of Coast Guard technical oversight and accountability. Although the Coast 

Guard has concurred with these recommendations, their written responses (to date) 

24 

have not provided the requisite details. For example, the Coast Guard’s 90-Day response did not specify whether the Engineering Change Proposals (ECPs) prepared 

by the Coast Guard and ICGS to address the structural design and performance 

issues associated with the NSC, would be fully-evaluated by an independent and 

qualified third party (e.g., U.S. Navy’s Surface Warfare Center—Carderock Division). The response also did not include a detailed and verifiable plan (e.g., 

timelines, quarterly reporting requirements, identity of responsible parties, or the 

cost) as recommended in the final NSC report. We believe that such details need 

to be forthcoming before the Coast Guard goes ahead and authorizes construction 

of NSCs 3 through 8. In the meantime, we plan to monitor the Deepwater Program 

closely and report on the effectiveness of the Coast Guard’s corrective actions. 

110’/123’ OIG Hotline Allegation—In response to an OIG Hotline allegation, we 

reviewed certain deliverables under the Coast Guard’s 110/123-foot Island Class Patrol Boats (123-foot patrol boats). Specifically, the complainant alleged that: 

• the safety of the 123-foot patrol boat’s crew was compromised by the contractor’s failure to utilize low smoke cabling; 

• the contractor knowingly installed external C4ISR systems aboard the 123- 

foot patrol boats that did not meet specific environmental requirements outlined 

in the Deepwater contract; 

• the cable installed during the upgrade of the 123-foot patrol boat’s C4ISR system represented a security vulnerability; and, 

• the video surveillance system installed aboard the 123-foot patrol boat did not 

meet the vessel’s physical security requirements. 

We determined that low smoke cabling was not installed and that there were instances where the contractor installed C4ISR equipment aboard the 123-foot cutters 

that did not meet the design standards set forth in the Deepwater contract. 

Our review raised many concerns about the Coast Guard’s program and technical 

oversight of the Deepwater contractor responsible for the 110’/123’ Modernization 

Project. For example, the contractor purchased and installed hundreds of non-low 

smoke cables prior to Coast Guard’s approval of the Request for Deviation. In effect, 

the Coast Guard accepted delivery and operated four 123’ cutters without knowing 

the extent of the hazards associated with the use of the non-low smoke cabling. The 

contractor also purchased and installed hundreds of C4ISR topside components 

aboard the 123’ cutter and prosecutor knowing that they either did not meet contract performance requirements or compliance with the requirements had not been 

verified. Had the Coast Guard reviewed the contractor’s self-certification documentation more thoroughly, it would have determined that the contractor had not 

complied with the specified weather environment standard. For these reasons, we 

are concerned that similar performance issues could impact the operational effectiveness of C4ISR system upgrades recently installed aboard its legacy fleet of cutters. 

We recommended that the Coast Guard investigate and address the low smoke 

cabling and environmental issues associated with the equipment installation and 

take steps to prevent similar technical oversight issues from affecting the remaining 

assets to be modernized, upgraded, or acquired through the Deepwater Program. 

The Coast Guard concurred with our findings and recommendations and said it is 

in the process of implementing corrective measures. Subsequent to our review and 

for reasons unrelated to the issues identified during our inquiry, the 123-foot cutter 

fleet has been withdrawn from service and will be formally decommissioned. 

Coast Guard’s ‘‘Way Forward’’—Blueprint for Acquisition Reform 

To its credit, the Coast Guard recognizes that urgent and immediate changes are 

needed to meet the management challenges facing its Deepwater acquisitions program. As part of its endeavors to improve the Deepwater Program, the Coast Guard 

recently issued its Blueprint for Acquisition Reform (Blueprint), which catalogues 

many of the aforementioned challenges and risks that have impeded the efficient 

execution of the Deepwater contract. According to the Coast Guard, implementing 

this Blueprint will enhance its ability to execute asset-based ‘‘traditional’’ acquisition projects, effectively use a governmental or commercial entity as a systems integrator for complex acquisitions, and execute minor acquisitions contracts for goods 

and services. 

According to the Coast Guard, the Blueprint outlines its plans for reorganizing 

and rebuilding its acquisition workforce. Specifically, the Blueprint calls for the: 

• Consolidation of all Coast Guard acquisition functions under one directorate; 

• Reassertion of Coast Guard’s technical authority; 

• Use of independent, third party assessments; and, 

• Redefinition of the contract terms and conditions. 

25 

While the Blueprint contains a number of key initiatives, the Coast Guard should 

adopt measures of performance or desired outcomes that would enable it to assess 

the progress being made. These include the specific numbers and types of acquisition professionals needed, when they are scheduled to arrive onboard, and the financial cost associated with the realignment, reorganization, retraining, and rebuilding 

of its acquisition workforce. 

The Coast Guard is beginning to take aggressive action to resolve some of the 

management oversight issues identified in recent OIG reports. In the long term, if 

all goes as planned, the Coast Guard’s reorganization of its Acquisitions Directorate 

will be fully implemented during fiscal year 2010. But in the meantime, the Coast 

Guard is planning to move ahead with the second phase of the Deepwater contract 

with Award Term I, which will entail the estimated expenditure of more than $3 

billion dollars over a 43 month period starting June 2007. 

Conclusion 

We are encouraged that the Coast Guard recognizes these challenges and is beginning to take aggressive action to strengthen program management and oversight— 

such as technical authority designation; use of independent, third party assessments; consolidation of acquisition activities under one directorate; and redefinition 

of the contract terms and conditions, including award fee criteria. Furthermore, the 

Coast Guard is beginning to implement its plan to increase its staffing for the Deepwater Program, and to reinvigorate its acquisition training and certification processes to ensure that staff has the requisite skills and education to manage the program. 

These steps should improve the Coast Guard’s ability to oversee major acquisitions. However, we are mindful that the Coast Guard’s system-of-systems approach 

will require the highest levels of planning and coordination to mitigate cost overruns, schedule delays, asset performance shortcomings, or potential operational gaps 

due to delays in asset acquisition. Most importantly, we believe that there is considerable risk associated with Coast Guard assuming the lead systems integrator role 

at this time without having fully implemented its Blueprint for Acquisition Reform, 

specifically without having closed the Deepwater human capital gap. We also believe 

the Coast Guard should exercise caution and take a slower or phased approach to 

assuming the systems integrator role. 

In conclusion, we remain committed to the oversight of the Deepwater Program 

and other major acquisitions within the department. We are working with the Coast 

Guard to identify milestones and due dates to assess the most appropriate cycle for 

reporting the program’s progress. If properly and fully-implemented, Coast Guard’s 

steps should significantly increase its level of management oversight over the air, 

surface, and C4ISR assets that are acquired or modernized under the Deepwater 

Program. We look forward to working closely with the Coast Guard to continue the 

improvement of the efficiency, effectiveness, and economy of the Deepwater Program. 

Chairwoman Sanchez and Chairman Carney, this concludes my prepared remarks. I would be happy to answer any questions that you or the Members may 

have. 

Ms. SANCHEZ. And now Captain Baynes, 5 minutes. 

STATEMENT OF CAPTAIN STEVEN BAYNES, CHIEF, ATLANTIC 

AREA RESPONSE ENFORCEMENT BRANCH, U.S. COAST GUARD 

Captain Baynes. Good afternoon, Chairwoman Sanchez and distinguished members of the subcommittees. I am Captain Steve 

Baynes of the U.S. Coast Guard, Chief of Major Cutter Forces for 

the Atlantic Area. It is an honor to be here to discuss my experiences as a commanding officer of a major cutter and also to discuss 

in my present assignment some of our efforts in sustaining the legacy major cutter fleet. 

During my tenure as commanding officer of an almost 40-yearold 210-foot cutter, Coast Guard Cutter Decisive, from 2004 to 

2006, we experienced numerous engineering and communication 

casualties mainly dealing with antiquated or obsolete systems. A 

large part of the crew’s efforts were geared toward emergency casualty repairs, routine preventative maintenance. Only due to the 

26 

extraordinary efforts of the crew were we able to successfully complete all our assigned missions. In many instances, my engineers 

had to manufacture parts from scratch to effect repairs because the 

equipment was so old, the parts no longer existed. 

However, Decisive was also the benefactor of several Deepwater 

upgrades, and I personally observed firsthand some of the positive 

contributions of these upgrades during real-time operations. 

For example, during Katrina, Decisive pulled into Gulfport, Mississippi, 4 days after landfall and successfully coordinated the maritime response along the entire Mississippi coastline and inland 

waterways. This coordination of over 20 interagency assets was 

only made possible due to the numerous Deepwater command-andcontrol upgrades that the Decisive had received which greatly enhanced the cutter’s capabilities. 

In my present assignment as Atlantic Area Chief of Major Cutter 

Forces, which includes 30 major cutters on the east and gulf coast, 

my main concern is their readiness. Over the years, these legacy 

assets have experienced declining readiness to perform their assigned missions due to obsolete, unsupportable or maintenance-intensive equipment. We have seen an increased trend of casualties 

to our aging systems on board these cutters. The increased use of 

the cutters’ routine maintenance funding to cover the cost associated with these increased casualties creates an additional burden 

on our engineers by further limiting the use of these funds for preventative maintenance. 

In order to counter this trend, the Deepwater program funded a 

comprehensive Mission Effectiveness Project, MEP, for medium endurance cutters that was started in 2005 to bridge the gap between 

our legacy fleet and our Deepwater fleet. This extensive maintenance project will provide these cutters with capability enhancements and replacement of antiquated and labor-intensive equipment. Therefore, our engineers can get back to conducting routine 

preventive maintenance vice emergency repairs. 

However, due to funding constraints, we are not replacing all 

major systems on board, only those having a high rate of casualties. Therefore, we still continue to be challenged with sustaining 

our legacy cutter fleet until a Deepwater fleet comes on line. 

In conclusion, the Coast Guard men and women on board our 

cutters continue to do an exceptional job maintaining equipment on 

hand and successfully completing all assigned missions. But in 

order for us to push out our borders, keeping all maritime threats 

as far away from U.S. soil as possible, the Coast Guard is going 

to need more modern, more capable and more reliable assets. 

Therefore, it is imperative that the new fleet be delivered on time. 

Thank you for the opportunity to testify before you today. 

Ms. SANCHEZ. And in the interest of time, Mr. Carney, if you are 

ready with your questions, I will let you go ahead. 

Mr. CARNEY. Thank you, Madam Chair. 

And Inspector General Skinner, in your prepared testimony, you 

spoke of, quote, the Deepwater human capital gap, unquote. Very 

interesting phrase, I think. Can you explain what you mean by 

this, and tell me what impact it is having on the program now and 

how you think it should affect the Coast Guard’s plans? 

27 

Mr. SKINNER. One of the issues that we are concerned about is 

the impact that it is going to have on the Coast Guard as it assumes additional responsibilities as the systems integrator. In their 

acquisition reform, the blueprint for acquisition reform, the Coast 

Guard has announced that it intends to start assuming those responsibilities and, by the year 2010, to have complete control or to 

act as a systems integrator for this major acquisition. 

If you look at the workforce that is currently within the Coast 

Guard, they do not have right now adequately—an adequate number or adequately trained staff to provide oversight over its acquisition programs, particularly something as large and complex as the 

Deepwater program. 

Mr. CARNEY. I know in your report that you encountered significant difficulties obtaining information that you needed to do your 

work, and, Admiral Blore, I know that the Coast Guard has done 

a complete turnaround and is now cooperating well with the IG, 

and I want to commend you on that. But as I recall, there were 

also difficulties getting information from ICGS and its parent companies. 

Inspector General Skinner, has this improved? 

Mr. SKINNER. No, it was not. I must say that our relationship 

with the Coast Guard itself has improved very noticeably. There 

are some issues out there that we are still negotiating with. But 

with—so far as our relationship with the contractor, that we are 

not getting the access to people or records that we think we should 

have. 

Mr. CARNEY. Will you include clauses in any future contracts requiring your contractors to comply with the inspector general? 

Admiral BLORE. We would certainly look at that. I think—it is 

the government’s intent to fully cooperate with the IG. I think 

where we are taking the Deepwater acquisition, there would not be 

any information that companies would hold that we wouldn’t share. 

I would have to check directly with the contracting officer, and I 

would be happy to get back to your question as far as a specific 

clause, but we are diligently and aggressively enforcing all of the 

clauses in the Federal acquisition regulations, and any information 

that is due to flow to the government will be shared with the IG 

at the same time we get it. 

Mr. CARNEY. So that is a maybe? 

Admiral BLORE. I would just like to ask the technical question 

of the contracting officer, but it is certainly our intent that any information that the inspector general needs, the inspector general 

would have, because, one, it is his benefit to do his research, and 

it is to our benefit to see his recommendations. 

Mr. CARNEY. Mr. Skinner, can you detail the problems you have 

had? 

Mr. SKINNER. Right now let me give you the examples that we 

experienced with the National Security Cutter review. We asked to 

interview to get a full perspective. We had the Coast Guard perspective. We wanted the contractor perspective as to the issue that 

we were raising with the cutter, the problems with the design of 

the cutter. We asked to have access to some of their employees so 

that we could interview those employees. 

28 

The contractor would not allow us direct access to those employees. We were first asked or required to document or submit a list 

of questions, every question we wanted to ask the employee; plus 

the employee, the contractor insisted that a supervisor, manager or 

legal counsel sit in on all of the interviews, violating confidentiality 

issues, and that is totally unacceptable in our perspective. 

Mr. CARNEY. Is that standard procedure? 

Mr. SKINNER. No. This is the first time that I have ever encountered anything like this in 39 years of business. 

Mr. CARNEY. I yield my time. 

Ms. SANCHEZ. I go to our Ranking Member Mr. Souder for 5 minutes. 

Mr. SOUDER. You say you haven’t seen this in 39 years. Have you 

been in a similar situation where there might be legal liability? In 

other words, we have got cracked ships. I mean, it wouldn’t seem 

illogical to have an attorney present, but denying access would 

seem to be pretty extreme. 

Mr. SKINNER. I have to go through my memory here, but I am— 

the access that we are asking for here in no way would interfere 

with any type of criminal liability or any other form of liability that 

may lay ahead as a result of the negotiations going on right now 

to mitigate or to find who caused the problem, or where the problem first was discovered, and who was responsible for it. 

Mr. SOUDER. You are saying none of these interviews would affect the— 

Mr. SKINNER. No. They would not have. What we were trying to 

get, a set of facts from people that were working on this, information dealing with the cost, information—getting their perspective as 

to any issues that may have been raised during the course of the 

construction or the design of the ships. 

Mr. SOUDER. If information was concealed. 

Mr. SKINNER. If that was ever an issue, Congressman, we would 

have vetted that through appropriate channels within the Department as well as our own office to obtain legal counsel review. 

Mr. SOUDER. Is it possible that you could find in this information 

something that had been concealed, and then wouldn’t it all of a 

sudden become— 

Mr. SKINNER. Yes, it could. 

Mr. SOUDER. I am not defending the company. 

Mr. SKINNER. Yes. It could. And then in that case we may have 

opened a criminal or civil investigation. 

Mr. SOUDER. We come back to a fundamental question I have 

been having difficulty understanding, trying to read everything I 

can and track this. That is how much of this—I mean, clearly you 

made a statement that the criteria for what was expected wasn’t 

clear. How much—I mean, clearly one of the things is don’t have 

cracks in the ship. It has to float. Helicopters have to fly. Presumably that was in the guidelines. 

What wasn’t in the guidelines and how much is—is this—the 

length of how long it was supposed to go until a potential crack 

would appear, but that wouldn’t necessarily be why you would 

have to dry-dock it immediately. How much of this looks like it was 

conceptually flawed from the beginning, and how much of this 

could be actually either rushing too fast, not clearing logical engiVerDate Nov 24 2008 10:57 Jul 02, 2009 Jkt 000000 PO 00000 Frm 00032 Fmt 6633 Sfmt 6601 H:\DOCS\110-HRGS\110-38\48913.TXT HSEC PsN: DIANE
29 

neering things? I mean, some of this stuff just seems kind of incredible. 

Mr. SKINNER. Before the construction, the task order was given 

to the integrated—systems integrator to begin construction. The 

Coast Guard’s own engineers spotted problems with the design. 

The Coast Guard— 

Mr. SOUDER. You mentioned that a couple of times. By ‘‘problems,’’ do you mean there is a 5 percent chance that something 

could be here, or where we think that this thing may actually 

crack? 

Mr. SKINNER. Over the lifetime, we entered into a contract to 

build a cutter that would have a 30-year lifetime under certain conditions. The Coast Guard’s own engineers studied the design and 

expressed concerns that the design would not meet the specifications of that contract; that is, a cutter that would work under severe conditions for 30 years. 

Mr. SOUDER. Admiral Blore, why wouldn’t—if your own engineers were questioning whether these boats were going to, in effect, 

repeat what we are seeing in the old boats—I mean, I have been 

out on so many of these boats, they are trying to stitch these things 

together, trying to figure out how to catch a cocaine dealer while 

they are trying to figure out how to get the radio to work, how to 

have the engine not die, the amount of time they have been spending in ports trying to stitch this stuff together. 

Why wouldn’t there have been an absolute panic inside the Coast 

Guard if your own engineers were saying, hey, we don’t think these 

new boats were going to work? 

Admiral BLORE. I understand the question. Just one comment before I start in regards to the inspector general comments on criminal activity. 

If the Coast Guard thought a company was withholding information from us, we would turn it over to the Department of Justice. 

I just want to make sure, you know, while we would expect the inspector general to do that also, you don’t need the inspector general 

to do it, we would do it because that would be—if they engaged in 

that sort of activity. 

I think it is important to separate the National Security Cutter 

from the 123s, and sometimes in the conversations, since we have 

been speaking about both of them, I think we are primarily talking 

about the National Security Cutter, which did have an issue as far 

as the Coast Guard was concerned with fatigue life, meaning that 

within the 30 years of its use, we would have to do some major repairs. We don’t want to do major repairs within the 30 years of its 

life because it is always more expensive when the cutter has already been built, and we have to pull the cutter out of service to 

do that. So that is why we have an enhancement. We have technical agreement with the company on how that enhancement will 

be done. 

In regards to did our engineers know this, yes, they did. There 

were numerous changes made in the design from the original submission in 2002. Many changes were made to the National Security 

Cutter. Both I and the Commandant have testified that in the period of 2004, 2005, we should have taken more aggressive action 

on what our engineers presented us. We did take action. We work 

30 

with the Chief Engineer of the Coast Guard. We worked with a division of NAVSEA called Carderock, to develop a solution typical 

referred to as the one-break solution, so that the National Security 

Cutter will meet its performance requirements. 

So we are very aware of it. We just feel that we have in place 

the necessary changes so that it is not an issue. 

Mr. SOUDER. Wasn’t it in the contract that they had to float for 

30μyears without major overhaul? 

Admiral BLORE. The contract specification was for a 30 year service life. I think industry’s perspective on that—you may want to 

ask directly of industry. My understanding of that is they felt the 

design attributes that they were using which met naval standards 

would infer the 30-year fatigue life. We disagreed with that primarily because we don’t use the naval combatant as a naval combatant. We use a naval combatant as a Coast Guard cutter, which 

puts different strains on it, puts different times under way, different days under way per year on a different ocean environment. 

And that is why we feel there are certain enhancements that 

need to be made, as the inspector general said, so it can be used 

for 30 years without a major repair. 

Ms. SANCHEZ. Ms. Clarke for 5 minutes. 

Ms. CLARKE. Thank you very much, Madam Chair. 

Thank you, Mr. Chair. 

Madam Chair, I would like to ask that my statement be placed— 

my opening statement be placed into the record. 

Ms. SANCHEZ. Without objection. 

Ms. CLARKE. Thank you. 

[The information follows:] 

PREPARED STATEMENT OF THE HONORABLE YVETTE D. CLARKE, A REPRESENTATIVE

IN CONGRESS FROM STATE OF NEW YORK

Madame Chairwoman and Mr. Chairman: 

Although I have been a member of this committee for only a short time, I have 

quickly come to learn that one of the most pervasive problems within the Department of Homeland Security is how it handles contracting. Although the Coast 

Guard’s Deepwater program was begun prior to the creation of the Department, this 

program appears to epitomize these problems at DHS. 

The Coast Guard provides an invaluable service to America by securing the 

waters around our country. When I travel back home, I regularly see Coast Guard 

boats patrolling the waters and keeping New York City safe. 

Deepwater was expected to provide the new equipment necessary for the Coast 

Guard to continue this mission into the 21st century. Instead, it has provided some 

unusable boats and a great lesson in how not to handle government procurement. 

I hope recent changes to the program will turn the Deepwater program around 

and provide the Coast Guard with the equipment they need to protect our nation. 

Ms. CLARKE. I just want to get straight to a question for the rear 

admiral and captain. With less equipment currently available to 

the Coast Guard, and with much of its current equipment aged, 

has there been any, any reduction in the ability to operate; and if 

not, do you believe that the Coast Guard would be forced to reduce 

its operations in the future if Deepwater maintains its current 

pace? 

Admiral BLORE. I am going to let Captain Baynes jump in here 

in a minute. 

From a more global oversight, one of the tensions we have in 

Deepwater, which the Inspector General alluded to, is we have attempted to advance some things in the Deepwater program for the 

31 

very reasons you stated, and there is always the tension of not 

making it so fast that you don’t do the necessary prudence and due 

diligence to have good program management for acquisition. So we 

struggle with that on a daily basis. 

I do believe, and the Commandant has testified, that we have 

sufficient resources. We have a transition plan. The Coast Guard, 

since 1790, has developed the ability to surge resources where necessary. I guess for specific examples in Atlantic area, I am sure the 

captain probably has some examples. 

Captain Baynes. Yes, ma’am. 

We haven’t seen any decline in operations in the Atlantic area 

mainly due to—we are—we have the bridging strategy for—called 

MEP, Mission Effectiveness Project, which is replacing a lot of the 

antiquated and obsolete systems on board our cutters. 

So again, like I said in my opening statement, the engineers can 

get back to the business of doing routine preventative maintenance 

rather than—I mean, routine preventive maintenance rather than 

emergency repairs. 

Also, we have received numerous Deepwater command-and-control upgrades that has greatly enhanced the cutters’ capabilities 

out there. So we are still able to do our job. 

Ms. CLARKE. Notwithstanding the fact that you sort of have to 

double up because you are missing eight cutters? 

Captain Baynes. What we are doing right now trying to mitigate 

the loss of those eight cutters is we are multicrewing eight of our 

110s down in south Florida. We are also surging other capabilities 

out of other districts to the area. Like the 87-footers. We have buoy 

tenders down there we use for migrant holding platforms, and also 

the WPCs, the 179-foot patrol craft. We just extended the lease 

with the Navy to extend them 3 more years. We have those crafts 

for—until 2011. 

So we are doing things to cover the gaps for those loss of eight 

123s until the FRCs come on line. 

Admiral BLORE. I think the captain would agree with me. You 

are absolutely correct in your assertion we are missing patrol boat 

hours. That is a critical concern of the Coast Guard’s. What we are 

talking about is our ability to compensate for that. 

Ms. CLARKE. It is my understanding that the Navy is going to 

be taking their ships back shortly? 

Admiral BLORE. The original agreement we had with the Navy 

was to operate the five 179s to the end of fiscal year 2008. The 

Commandant has just recently renegotiated, because we are going 

to lose all five of them at the end of 2008 for three of them to remain with the Coast Guard. So again, just one of many actions we 

are trying to take to compensate for further loss of patrol boat 

hours. 

Ms. CLARKE. And let me just ask Captain Baner—I am sorry. 

Captain Baynes. 

It is my understanding that Coast Guard engineers were really 

alerted to, you know, the challenges that were being faced in Deepwater, and one would wonder, you know, why we would go forth 

knowing that the technicians who really understand how all of this 

stuff works have flagged it. 

32 

I want to know whether you have heard of any instances of retribution of Coast Guard members and officers who may be forthcoming with information that are germane to all of our concerns 

here today. 

Captain Baynes. No, ma’am. I haven’t heard of any retribution 

whatsoever. 

Ms. CLARKE. So if you were directly contacted by the IG, you 

would have no trepidation or fear of complying with the IG’s inquiry? 

Captain Baynes. No, ma’am. 

Ms. CLARKE. Thank you, Madam Chair. I yield back. 

Ms. SANCHEZ. Admiral, I just have a quick question for you. 

So you took these eight ships, and they are out. You have six out 

in the Persian Gulf or somewhere out there, I am assuming, I 

think I heard. And then you were supposed to have five that are 

going to expire, but now you are going to get three of those back. 

You are still down quite a few ships. 

Admiral BLORE. Yes, ma’am. We are. We are short on patrol boat 

hours. The things that the captain referred to are used sometimes 

of oceangoing buoy tenders in place of a patrol boat. Not an ideal 

replacement, but it provides us some hours. The Navy has also provided some assets. They are doing their own submarine security 

patrol in Puget Sound. And some of the main—where the main 

submarine bases are. The Coast Guard used to provide that. The 

Navy is picking it up so that we can use those patrol boat hours 

in the Coast Guard. 

Ms. SANCHEZ. So when you say you are double-crewing, does that 

mean instead of having 10 people on the boat, you have 20 on the 

boat; or does that mean that one ship goes out, and then they come 

in, and they use the crews to go out for a second ship or the third 

ship? 

Admiral BLORE. Yes, ma’am, or the latter. Some people have referred to it as like blue-gold crews. In the Coast Guard we are blue 

and white, so it would blue and white crews. But the idea that one 

crew takes it out; once they are at their endurance for 4 days, they 

bring it back. The next crew takes it out. 

And as the Captain mentioned, the challenge then really becomes 

an engineering challenge. You have a lot more personnel in the 

crew and can take the vessel out. But the vessel has limits. It 

needs more maintenance, more deep-level maintenance. You need 

to put more money into it. 

Ms. SANCHEZ. Thank you. 

To the Ranking Member Mr. Rogers. 

Mr. ROGERS. Thank you, Madam Chair. 

I want to follow up on Ms. Clarke’s question, Captain. I didn’t 

hear you answer the first part of her question. That is. Why do you 

think that the Coast Guard didn’t react to the warnings by the engineers about the structural problems? 

Captain Baynes. Sir, that is not in my area of expertise, but I 

will pass that to Admiral Blore. 

Admiral BLORE. Because the acquisition program wasn’t operating as well as it should have been back then. I think the inspector general has done us a great service by reviewing that era and 

making recommendations to us that we have incorporated. 

33 

There is no reason that we shouldn’t have been following more 

of the guidance of our own engineers, and that is not the way we 

are or organized today. Today we have a unique distinctive role by 

commandant instruction for the Chief Engineer and technical authority and Naval Administrator. He wears three hats of the Coast 

Guard. That is my colleague, Admiral Gabel, and we work with 

him on a daily, sometimes hourly, basis. 

Mr. ROGERS. So in your opinion, this wouldn’t happen now if you 

had those same warnings either by your engineers or by the outside experts? 

Admiral BLORE. In my opinion, it would not happen now. It 

would not be repeated. 

Mr. ROGERS. Why do you think the Coast Guard didn’t act? 

Mr. SKINNER. I do agree with Admiral Blore. 

Under the current organizational structure, it is a lot better 

today than it was 2 years ago in 2005 when we were conducting 

our review. And the Commandant made it very clear by—with a 

policy memo going out to everyone, not only the Coast Guard, but 

to others that are working on the Deepwater project, that reasserts 

the technical authority of its Chief Engineer. 

And now we have the acquisition folks that were also sitting outside of the Deepwater box are now part of the project management 

team. Also, the integrated project team head was at one time lead 

by the systems integrator. That is now being lead by a Coast 

Guard official. So that there has been some major changes in that 

regard. 

Mr. ROGERS. Okay. Thank you. 

That is all I have. 

Ms. SANCHEZ. And thank you to the gentleman from Alabama. 

And the next one will be Mr. Perlmutter from the great State of 

Colorado. 

Mr. PERLMUTTER. Thank you, Madam Chair. Just a quick question. 

Admiral you said there was a difference—we were confusing the 

123 and the National Security Cutter, and you sort of went halfway 

into it and didn’t quite finish it. Can you give me the 20-second distinction? 

Admiral BLORE. Sir, I don’t think I have a reputation for ever answering a question in 20 seconds, but the distinction I was trying 

to make is the National Security Cutter is a new construction, new 

design. It was primarily an issue of fatigue. So over a 30-year life, 

it was never an issue of structural strength or that sort of issue. 

The 123 issue is an old cutter, older cutter, that was being converted. So there is some legacy, what kind of good shape was it in 

as you did the conversion. There is the conversion itself, and the 

characteristic that it showed was deformation of the hull, which 

means the outside of the hull was actually wrinkling, and buckling 

of the deck; not actually a crack, but a deformation, which alerted 

the crews to the issues that was going on. 

So it is two different situations. I didn’t mean to suggest anybody 

was confusing it, but they are just different. 

Mr. PERLMUTTER. Okay. What resource does the Coast Guard 

have for this ICGS or the loss of the eight ships, and what actions 

are you taking? 

34 

Admiral BLORE. Let me answer the second part, sir, if I could, 

because I think it answers the first part. 

We are frustrated in our attempts to bring the eight 123s back 

on line. We are disappointed in the acquisition. We are disappointed that we had to decommission eight Cutters. 

During the life of the program, several modifications were made 

to the cutters to bring those back on service—in service that did 

not work. Now that we have taken them out of service, we have 

formed a team. It has a lawyer on it, technical individuals, and 

contracting officers. They are basically going through a discovery 

period. We are coming to the end of that discovery period where 

they are basically presenting all of the facts that can be gathered 

so the government can build its case. 

I hope you would appreciate if I don’t go into too much detail 

since industry is here, but the next logical step would be for us, if 

we determine the consideration is owed us in whatever form, to 

issue a letter of revocation which basically is the government saying we no longer accept the cutters; that you delivered them to us, 

we accepted them at the time, but we no longer accept them, knowing what the condition is, and we issued that letter this morning. 

Mr. PERLMUTTER. Okay. Thank you. So let us go forward then. 

The Defense Department has this stopgap. You know, if it goes 

over a certain percent, there is a cost overrun or delay, I don’t 

know, Nunn-McCurdy. Do we have anything like that? I would ask 

you or Mr. Skinner for Coast Guard acquisitions or Coast Guard, 

you know, construction and new products or boats. 

Admiral BLORE. In the Coast Guard we use the Major Systems 

Acquisition Manual, and we go by Department of Homeland Security regulations, which we call it a breach, which I think is the 

same term DOD would use, and we use 10 percent. So basically we 

are due to alert the Department at 8 percent. I think 10 percent 

is technically called a breach. And then they report that to the Office of Management and Budget. 

But we have a similar structure. I don’t know if it is exactly the 

same as the Department of Defense. 

Mr. PERLMUTTER. Have you looked at sort of your personnel approach to this Department of Defense? And I noticed there was 

something in the notes from Homeland Security from Mr. Skinner, 

that DOD, you can actually have a kind of a career track in acquisitions, whereas opposed to you, as under—in the Coast Guard, you 

move—you know, you basically are assigned to one area and then 

maybe another area, then another area. You said you are moving 

out of this particular field. Are you making any changes in that respect? 

Admiral BLORE. Yes, sir. And the inspector general and I are actually very close in the sense that human capital is an issue today, 

it is going to be an issue tomorrow, and we need to address it. I 

think it is important to have a matter of perspective. We are not 

the United States Navy. We don’t intend to be. Naval Sea Systems 

Command is the same size as the Coast Guard. So the entire Coast 

Guard has as many employees as the Naval Sea Systems Command. 

Mr. PERLMUTTER. How many employees do you have? 

35 

Admiral BLORE. We have about 41—, 42,000 within the Coast 

Guard. Within the Deepwater program and within acquisition, we 

started at about 250. We have built that up to 450. We have a 

human capital plan that grows at about 10 percent per year. But, 

more importantly, and it is the way we are really investing in the 

inspector general’s comment, is in the very beginning of Deepwater, 

the concept was a partnership between government and industry, 

which I think we have demonstrated has a lot of room for improvement. 

Really where we are today is a partnership between government 

and government. We are partnering with the United States Navy. 

We have a—I have NAVSEA embedded in my office. I have 

NAVSEA embedded in Pascagoula, Florida, in Mississippi at the 

shipyard. So we have heavily leveraged NAVSEA technical advice, 

contracting advice, naval engineering, naval architecture, and I 

think that is why we feel maybe a little more comfortable that 

while we still need to grow at 10 percent per year, do the training, 

and do the certification, where we lack bench strength, we will depend on our partners in the Navy. 

Mr. PERLMUTTER. Thank you, Madam Chair. 

Ms. SANCHEZ. Thank you from the gentleman from Colorado. 

Let me ask a quick question before I kick it over to the gentleman from Seattle. You are patterning in a sense to what the Department of Defense does in acquisition as far as you have—I believe you have captains slated to go in this arena. 

Do you have a career path, and aren’t you worried that with no 

career path, people are going to get out, and then you are going to 

be in the same place you are where you have all of this turnover, 

and people don’t really acquire the skills and have the ability to 

really do a Deepwater program and the type that you have? 

Admiral BLORE. Well, I am always worried. That is my assignment here, to worry about acquisition. 

We are different in the way we are set up in that DOD, the 

Navy, does have a career path for their military personnel, and 

they do put those military personnel in program management positions. 

If you look at—and I would be happy to submit this for the 

record—the new organization that we are building for acquisition, 

we basically partner a military with a senior civilian. So if you 

have a military program manager, we have a senior civilian deputy. If you have a civilian program manager, we have a senior officer as a deputy. And that is one way we are leveraging the experience of our senior civilians and cross-training into the military. 

We are not large enough to have a career path within acquisition. We can certainly have it as a specialty where officers, such 

as the way we use our lawyers today, rotate in and out of legal, 

go back to a ship, back to legal, back to a ship. We will do that 

within acquisition. And there actually is some benefit to keep infusing that operational experience back into acquisition. 

But, Madam Chairwoman, you are absolutely correct that we 

don’t have a career path, and we will always keep that partnership 

with our civilian corps so that we can have the right expertise in 

the right place. 

36 

Ms. SANCHEZ. As the performance auditor, Mr. Skinner, do you 

have any comment on what the admiral is thinking about doing? 

Mr. SKINNER. The proposals that they have in their blueprint 

most certainly come with a lot of risk. Our concern is if you have 

a military type that does not have acquisition management skills 

in charge, they have the authority, they are partnered with a civilian type that has the responsibility, and neither one has—the civilian does not have the authority, although they may have the responsibility. That is a concern that we have. It doesn’t mean it 

can’t work or won’t work. I think it is something that we need to 

watch very, very carefully. 

I would like to applaud the Coast Guard for what—the actions 

they are taking to do the stopgap, that is, partnering with the 

Navy until they can build their resources, because right now they 

need to obtain additional resources, human capital, and the right 

mix of resources. By partnering with the Navy right now, it gives 

them an opportunity to do this. And because it is going to take 

years to do this, and it is the just reorganization itself is going to 

cause cultural change, and you just don’t do this overnight or in 

1 year. It is going to take 2 to 3 to 5 years to do this. 

Ms. SANCHEZ. I began my career as a performance auditor, so I 

have a little bit of background in it. 

Mr. Reichert for 5 minutes. 

Mr. REICHERT. Thank you, Madam Chair. 

First of all, I am going to guess during the history of the Coast 

Guard, you had major equipment changes and major acquisitions 

and changes over the years? 

Admiral BLORE. Yes, sir. 

Mr. REICHERT. Did you have trained people in that area prior to 

this? 

Admiral BLORE. I can only speak for the last 20, 25 years. At one 

point we did have a larger acquisition corps than we did about 2 

or 3 years ago. I think we are about the largest acquisition corps 

other than like maybe during World War II, that sort of thing. But 

I don’t know before World War II if we had acquisition corps. 

Mr. REICHERT. So how many trained acquisition officers do you 

now have? 

Admiral BLORE. Again, it is a specialty, not a career path, and 

if you will permit me, I will submit it for the record. It is again 

450 total civilians and military working acquisition, but I will give 

you a breakout on the difference in numbers, and if you would like 

pay grades, too, so you can tell the difference between captains 

versus lieutenants and 15s versus 12s. 

Mr. REICHERT. And there was a mention of reassigning personnel 

to cover these positions. Where would those people come from, 

what assignments? 

Admiral BLORE. It varies quite a bit, sir. 

You are speaking of the military? 

Mr. REICHERT. You are going to be reducing some services somewhere else. You are taking these people from some other job to put 

in these jobs? 

Admiral BLORE. No, sir, Because the overall Coast Guard is 

growing through the support of this Congress through the fiscal 

year 2007 budget and also the fiscal year 2008 budget. So there 

37 

is—not a cutter there is missing a deck watch officer because they 

have been assigned to acquisition. We are fortunate in the fact now 

that our entire agency has grown. 

Mr. REICHERT. How does the loss of these eight boats and your 

redeployment of your resources affect your air mission, helicopters; 

is there any affect there? 

Admiral BLORE. I don’t know that there is a direct effect, because 

the patrol boats are smaller and don’t directly embark. The helicopters, certainly helicopters and fixed-wing work with the patrol 

boats and often, you know, direct or provide the actual intelligence 

for the patrol boats to respond. So in that sense, you know, that 

team still needs to be supported. 

Captain Baynes could probably talk more directly about how he 

is doing that, how he is moving assets to the right places. 

But there is still that team that needs to take place. A C–130 can 

identify somebody doing something wrong, but the C–130 itself 

can’t put a boarding team on board. That has to be done by a patrol boat. 

Mr. REICHERT. And specifically to the Northwest, you mentioned 

there was some realignment on resources there. Can you touch on 

that again since I am from the Seattle area? 

Admiral BLORE. I don’t know that I meant to say there was a realignment of resources there. What I indicated was the Navy has 

picked up some of the submarine security patrols that previous to 

this was done by the Coast Guard. In fact, they, in a partnership 

with the Coast Guard, actually joined us on a contract for the 87- 

foot coastal patrol boat and bought coastal patrol boats specifically 

for the Navy so they can use in that mission. 

It is a very important mission, but it is a very specific mission 

to escort the submarines as they go back to base. 

Mr. REICHERT. And Mr. Skinner mentioned that during your 

audit, you discovered that there was no clear defined expectation. 

Why was that? Why was there no clear defined expectation of performance? 

Mr. SKINNER. It was just the way the contract was written, and 

also I believe you can attribute this to the fact that the Coast 

Guard at that point in time did not have the right expertise to ensure that the contract had the specification needed to ensure that 

they can measure outcomes. 

Mr. REICHERT. And you also mentioned there was a—is it— 

scheduling concerns took priority over quality concerns. Why did 

that happen? 

Mr. SKINNER. Well, since 9/11, the Coast Guard has tremendous 

demands being placed on them right now, and they have a deteriorating fleet. They needed to get something out there right away. It 

is not one of these things where we wanted to sit back, study it, 

study it, study it, and just put it out for years. 

And I believe—and I was referring to the National Security Cutter. While we knew there was design problems, we were told that 

we needed to get a ship on water as soon as possible, so they chose 

to expedite the construction of the ship before they studied the 

problems to see if—what the cost/benefit analysis would demonstrate, whether it would be worthwhile just fixing it before we 

started building it. 

38 

Mr. REICHERT. One last question. 

The National Security Cutter 1 and 2 went for a combined cost 

of 517 million to 775—. Who pays for that? Is the contractor on the 

hook for some of that money? 

Mr. SKINNER. I believe right now we are paying that. 

Mr. REICHERT. The Federal Government? 

Admiral BLORE. And if I could, I think it is important to understand what the increase was for. Basically it has three large components. One component is requirements changes the government 

ordered in the cutter post-9/11. We did major changes to it. We 

lengthened the flight check. And we changed putting an intelligence center on and did some other things, really reflecting the 

post-9/11 environments. So we are paying for those changes that 

we made. 

There was Hurricane Katrina, which affects about 123—or 124 

million of that to the direct damage to the yard and the facility 

being used by the Coast Guard at the time. 

And the third, which is going to be an ongoing issue, is inflation 

and labor rates, because while in government we typically inflate 

contracts at about 1.8 percent. In naval shipbuilding, and I know 

my colleague Admiral Sullivan testified to this, we are seeing more 

than 5 to 6 percent inflation in shipbuilding construction. And the 

labor rates are affected both by higher rates in the gulf region and 

the fact that there is a lot more grade labor now than there was 

before because there was a lot of people that moved in and out. So 

that will be a challenge that we will have to keep dealing with. 

Mr. REICHERT. Thank you both for your service. 

Ms. SANCHEZ. Mr. Langevin for 5 minutes. 

Mr. LANGEVIN. Thank you, Madam Chair, and I want to thank 

the panel for the testimony here today. 

Some of the things I want to ask have already been touched on. 

You can have an opportunity to expand on them. 

Like many of my colleagues, I am concerned by the fact that the 

lengthening of the 100 ships, the 10-foot ships to 123 feet, the 

Coast Guard literally cut them in half and added 13 feet. I understand that in some cases this may have worked in the past. When 

the Navy attempted this method, I understand that they took much 

longer ships and added a much smaller portion to lengthen them, 

and another portion was added at the end of the ship, not in the 

middle. And I also understand that the Navy warned the Coast 

Guard that this extension would cause problems. 

So my question is what due diligence was done to suggest that 

this was going to work in the first place? And also—and I know 

Mr. Rogers had touched on this, and I will give you an opportunity 

to expand here on your answer—what systems are in place to ensure that a mistake of this magnitude isn’t going to happen again? 

And also, what mechanisms are in place to ensure in the future 

that all warnings are actually heeded? 

Mr. LANGEVIN. Beyond that—again for Mr. Skinner-the ships 

that were that length and had a life span of 15 years, they pretty 

much reached this point in time when they were lengthened. 

On top of that, it is my understanding that many of these ships 

may have also been put through, you know, enormous stress over 

the course of their lives. We all understand that when the Coast 

39 

Guard needs to rescue someone, they go far above and beyond the 

call of duty, which is certainly commendable. However, I would 

imagine that these extreme conditions would take a toll on the 

ships. Can you explain if these and other factors were taken into 

account when the decision was made to lengthen the 110-foot ships 

versus buying new ships? 

Mr. SKINNER. I think, Admiral Blore, if you could answer that 

question. That is something we didn’t look at as far as the decisions to convert or not to convert. 

Admiral BLORE. And, sir, to be brief, if I could submit some of 

this for the record. 

Admiral BLORE. But, basically, the situation is the Navy has a 

patrol boat. The Coast Guard has a patrol boat. The Navy’s patrol 

boat is 60 feet longer than the Coast Guard’s patrol boat. They 

were basically built by the same company, similar designs. The 

Navy cut theirs close to the stern. The Coast Guard cut theirs close 

to the stern. The Navy had initial problems with their lengthening, 

which they overcame. The Coast Guard had problems, which we 

didn’t overcome. 

The Navy did advise us at the time of the problems they did 

have. I will give you somewhat of a technical dissertation on why 

the problems the 123 has because of its size are different than the 

problems the 179 had. 

So it wasn’t that we didn’t hear from our colleagues in the Navy. 

We just feel it was a different situation. We have looked at it and 

run models of the changes they have proposed, would have been 

made if it would have affected the ship. But it does not. It does 

work for the 179, though, if you have a greater length. 

Mr. LANGEVIN. So, just so I understand, you are saying that the 

place where they cut the ship is different for the Coast Guard—I 

mean, it was the same— 

Admiral BLORE. I think it is similar. I am not as familiar with 

the 179 program. 

Mr. LANGEVIN. It was my understanding that the ship was going 

to be cut in half, but the Navy’s portion was that they are cutting 

them a much smaller section. 

Admiral BLORE. Again, sir, I am not an engineer. I would be 

happy to provide that for the record. But I think the cut is actually 

reasonably close to the stern. 

Mr. LANGEVIN. Let’s go to the issue of how we ensure this is not 

going to happen. 

Admiral BLORE. Yes, sir. Well, I think, as the IG mentioned, it 

is very, very important that we recognize the role of the technical 

authority and the chief engineer and the Coast Guard. So that is 

our primary means, because I go to him or her in the future for 

any technical opinion, ability to proceed with a new design or a 

major change. 

And we have those instructions out in a place, and I would be 

happy to provide those for the record as well. 

The other kind of combination of that is either the technical authority or I, on my own, can go out to an independent third-party 

review. We could do that either commercially or our method of 

choice is to go to NAVSEA, primarily the Carderock division, or we 

40 

go to Dahlgren for weapons, but the standard structure of the Navy 

and ask for an independent third-party opinion. 

In this case, if we were doing it again, if we were going to take 

the 210, the Decisive, and make it longer, we would go to the technical authority and we would go to Carderock and ask for their 

naval architecture and naval engineering opinions. 

Mr. LANGEVIN. Thank you. 

I yield back the balance of my time. 

Ms. SANCHEZ. I thank my friend from Rhode Island, and I believe 

that Mr. Souder had another question. 

Mr. SOUDER. I wanted to ask Mr. Skinner—and maybe the Admiral has an answer to this. It may have been in your technical answer there. 

In the bigger ships that are docked, there was a question in the 

contract why the Coast Guard didn’t have it clear that—what they 

expected in 30 years. There was a lack of clarity in the contract. 

Looking at the contractor’s questions here, that is one. 

But in the ships that are kind of—their sides are curving and 

their decks are buckling, I understood I think Mr. Skinner to say— 

that—and maybe it was Admiral Blore—that there wasμa disagreement about the state the boats were in when they were given to 

the contractor. In standard practice in government contracting, 

wouldn’t that be sorted through? I mean, how did these things 

start to curve and buckle and why wouldn’t that have been specified? It seems like just kind of like Contract 101. 

Admiral BLORE. Yes, sir. If I implied that, I didn’t mean to. 

There was an inspection done by the contractor and the government upon transfer of the vessel to the contractor to do the change. 

What I meant to say, if it didn’t come across clearly, was there is 

a certain amount of unknown about the structure of vessels. There 

are voids in areas of the ship that you just do not access during 

the life of the ship unless it has a problem. 

So especially with the Matagorda, which was the first one, what 

you don’t know is what you don’t know; and after the initial opening up of the Cutter, there was a long inspection, there was more 

work done and added to that contract than had originally been intended. But none of it suggested that there was going to be longterm buckling or deformation issues with the Cutter. 

Mr. SOUDER. Mr. Skinner, do you agree with that? 

Mr. SKINNER. Congressman, we didn’t actually review the circumstances surrounding the decision to extend the 110 to the 123. 

We looked at other issues dealing with the actual equipping the 

ship. 

Ms. SANCHEZ. Admiral, so they took the first ship and they 

opened it up and they found that fatigue or what have you. The 

hull was worse than the company had envisioned. And the company’s story is we were just told to enlarge the ship. We were not 

told to handle the defects that we found once we went in there. 

Who handled those defects? Did the company then get more contract to do that, to fix it to the point where they thought that they 

could begin to enlarge it? 

Admiral BLORE. If I could submit an answer for the record. 

41 

I actually worked in the budget shop then, but I remember that 

we did expand the contract. I can’t remember right now if we expanded it with them or somebody else. 

But when we saw the conditions of the vessels, you know, some 

of the terms that are used—and help me here, Captain—some of 

the terms that are used are the replacement of plate, for example, 

on the hull. There had been an estimate in the contract of how 

much plate needed to be replaced. Well, we increase that because 

we saw that there were other parts of the Cutter plate that needed 

to be replaced. 

If I could, ma’am, I will submit for the record whether that was 

with ICGS or through a different company. 

Admiral BLORE. There were stringers and stakes that were replaced. But, again, none of these gave the Coast Guard at the time 

or, I am assuming, the contractor, or they would have notified us, 

an indication that there would be long-term problems once you 

made those repairs. 

Ms. SANCHEZ. Okay. And the Coast Guard accepted the 123s 

with numerous defects, known defects. 

How have you changed this process for the National Security 

Cutter. 

Admiral BLORE. Well, I don’t know whether we accepted the 123 

with known defects or not. It is not unusual when you sign a 

DD250, which is the form that transfers custody from the contractor to the government, that there are some open discrepancies. 

I don’t know that we would accept something with defects. Again, 

I would have to check that. 

But with the National Security Cutter, that is done by a technical team we have within Deepwater, by our contracting officers; 

and, once again, the chief engineer will be there. We have a variety 

of both builders’ trials that it will go through. Then we are hiring, 

again, our colleagues in the United States Navy to come and do 

ship trials with it; and they will give us a complete list of everything. Every discrepancy that they feel needs to be worked off, that 

will be documented. And then the government will either work 

those off or often, again, on a complex project like this, there may 

be some things that are accepted by the government for later 

workoff. 

But, again, the important thing there is to not accept things that 

are very difficult to fix. But that is how it is done. There is going 

to be a long process starting—it has actually already started, but 

it really hits momentum starting in about November of this year 

through about April-ish of next year where the ship will be put 

through trials, and that is when all that will be documented. Everything from the paint is chipped on a particular door to the radar 

doesn’t work, which obviously would be a much bigger discrepancy. 

Ms. SANCHEZ. It is like taking a new home when you get to do 

the walk-through and figure it out. 

Mr. Carney, do you have another question. 

Mr. CARNEY. I do, madam. Thank you very much. 

Admiral given that it was Carderock and not the Coast Guard 

that identified the serious hull girders issues associated with the 

NSC, is Carderock going to do independent third-party evaluations 

from here on out? Are they going to do the structural— 

42 

Admiral BLORE. Well, it won’t always be Carderock; and let me 

just correct if I inferred it that way. 

We asked Carderock—they are in contract with us. We paid for 

the services we received from our sister service. So we hired 

Carderock to join our technical experts and help us since they had 

more familiarity with major ship construction. They consulted with 

us. We developed a technical solution. We have agreement with 

Northrop Grumman Ship Systems now on how that technical solution will be deployed. We are currently in contract negotiations 

over the cost. 

Once that solution is completely identified with cost and materials and all the red lining to the blueprint, which is typically what 

it is referred to, I know my chief engineer’s intent is to go back to 

Carderock and say, this was our final solution; how about one more 

review? 

Beyond that, the chief engineer is actually going through the entire design with Carderock again with a standing contract that the 

chief engineer has with them for review of naval design. 

Mr. CARNEY. Could we get a timeline on when we expect all this 

process to be complete? That would be really useful. 

Admiral BLORE. Yes, sir. 

Mr. CARNEY. In 2002—this is going back to the 110s 123s now. 

In 2002, we understand the Navy’s combat craft department predicted there would be problems with the plan to stretch these boats 

the recommended significant—lengthening the hulls, et cetera. 

Why were the—they weren’t—these recommendations were followed, is that correct? 

Admiral BLORE. Well, again, sir, if I could submit it for the 

record. 

There is a difference in what I believe they call the section module that is between 179-foot Cutter and 123-foot Cutter on where 

the stresses appear both on the hull and on the keel section. 

Mr. CARNEY. But isn’t it true that when they did the 179s they 

reinforced the girders or strengthened the girders on the 179s and 

that was not done in the 110s, 123s? 

Admiral BLORE. I don’t know whether it was done on the 110s 

or 123s. I know there was a discussion between the Coast Guard 

naval engineers and the NAVSEA naval engineers as to whether 

the solution that they used to be applicable to a smaller patrol 

boat. 

Mr. CARNEY. Mr. Skinner, are you aware of that? 

Mr. SKINNER. No, sir. 

Mr. CARNEY. Okay. It is our understanding that the Navy offered 

to do a very detailed analysis of your plan for about $60,000. Why 

was that not done? 

Admiral BLORE. I have heard that also, sir. That is not correct. 

The Navy offered to start a process of reviewing some documents 

we had, and I think they estimated it would take a week or two, 

and they said we could do that for $60,000. It wasn’t to go through 

all the engineering diagrams and blueprints, analyze it, run it 

through their computer models, propose a solution, implement a solution in the blueprints. It would be much more than that, but they 

did offer for $60,000 to start the process. 

Mr. CARNEY. All right. Thank you. Nothing further. 

43 

Ms. SANCHEZ. Thank you, gentlemen. 

I would just ask the Admiral, when you submit that information 

of opening up the hull and figuring out what wasn’t at the level 

that was anticipated for the contractor to do his or their work, if 

you would—if there are different pieces, major pieces—I am not 

talking about the paint chips on the door. But if there are major 

pieces and if there are different contractors, if you could give us 

that array, I would prefer it that way. 

I believe Ms. Clarke has one last question before we let the panel 

leave. 

Ms. CLARKE. Thank you very much, Madam Chair. 

Because I just wanted to get a sense—we have heard a lot about 

the collaboration between the Coast Guard and the Navy at this 

very crucial time, and it seems to be a real heavy reliance right 

now. How soon, Rear Admiral, do you project to resume your autonomy under Homeland Security, given the current situation? 

Admiral BLORE. Ma’am, first off, kind of as a philosophy the 

Coast Guard doesn’t necessarily pride itself on autonomy from the 

Navy. We are a naval service. We will always be working with the 

Navy. Again, when you look at the size of NAVSEA and the Coast 

Guard, we will always be somewhat dependent of their services; 

and for the taxpayers’ benefit, there is no reason to duplicate some 

of the services that the Navy has. 

What we have started laying out is a transition plan of about 12 

to 18 months. In some areas of the Coast Guard we have much 

greater depth and acquisition, primarily in hull and machinery, 

and in some areas like the command and control C4ISR, the electronics, we have less. So you will see us reaching out to our Navy 

colleagues more on the electronic side and less on the hull and machinery side. That will be a balance as, you know, we go through 

life here for the next 10 or 15 years when we are short on something, we will go to the Navy; and they do come to us for, frankly, 

patrol boat expertise and some other things that we have some 

strength in. 

Ms. CLARKE. Back to General Skinner, do you have some comments on that? 

Mr. SKINNER. It is my understanding that their reliance—the 

areas we are looking at, we weren’t looking in the construction or 

the operational side of the house. We are more interested in the actual management side of the house, in managing these contracts. 

And the Navy is now—they—I know the Coast Guard has said that 

they have turned to the Navy to get some technical expertise in the 

management, acquisition management, program management, 

those types of things to help support them until they can bring 

their own people on board, which is going to take time. 

I believe the blueprint Admiral Blore says— 

Ms. CLARKE. He said 12 to 18 months. 

Mr. SKINNER. I thought it said 2010. 

Admiral BLORE. Right. Well, there is a difference between the 

human capital plan, which is in the blueprint which the IG is referring to, and when we think we can fully function as a government 

system integrator, which is what I was referring to. So we are not 

stopping our capital improvements at the end of 12 or 18 months, 

but that will be the first time that we will be—I wouldn’t call it 

44 

autonomous but semiautonomous of being completely a government 

system integrator. Until then, we will depend on our other partners 

in government to help us. 

Ms. SANCHEZ. Thank you, Ms. Clarke. 

We have one vote, the budget vote, on the floor. It is a 15-minute 

vote. It already started. I suggest that we go—that we recess for 

a few minutes, 10 minutes, 15 minutes, whatever it takes. We will 

get over—we will take the vote, and those who return—I hope you 

all will—we can return for the second panel. 

I would like to thank the first panel of witnesses for their valuable testimony and the members for their questions. The members 

of the subcommittees may have additional questions for the witnesses, and we will ask you to respond quickly in writing to those 

questions. 

We are in recess, to return in about 10 to 15 minutes. Thank 

you. 

[Recess.] 

Ms. SANCHEZ. The committee is now back, and we have before 

us our second panel of witnesses. 

Our first witness is Fred Moosally, President of Lockheed Martin 

Maritime Systems and Sensors. He is a graduate of the United 

States Naval Academy, served the Nation for 24 years, during 

which he commanded a guided missile destroyer and a battleship. 

He is no stranger to Capitol Hill as he also served as the Navy’s 

Deputy Chief of Legislative Affairs. He joined Lockheed Martin in 

1997 and was appointed President of Lockheed Martin Maritime 

Systems and Sensors in October of 2002. He also serves as the 

Chairman of Integrated Coast Guard Systems. 

Our second witness is Mr. James E. Anton, the Executive Vice 

President of Integrated Coast Guard Systems. He is also a board 

member of ICGS, the Vice President and General Manager for 

Coast Guard Programs, Northrop Grumman ship systems. He is responsible for managing all aspects of the surface asset and surface 

support elements, the integrated Deepwater system for ICGS. He 

has also served in the United States Navy on a nuclear submarine 

and is a graduate of the Naval Nuclear Power School. He also holds 

a BS in business administration an MBA from the University of 

Southern Mississippi as well as a master’s degree in computer 

science technology from the University of South Alabama. He 

joined ICGS management as second in command in April of 2003. 

Welcome, gentlemen. 

Ms. SANCHEZ. Without objection, the witnesses’ full statements 

will be inserted into the record; and I now ask each witness to 

summarize his statement for 5 minutes, beginning with Mr. 

Moosally. 

STATEMENT OF FRED MOOSALLY, PRESIDENT, LOCKHEED 

MARTIN MARITIME SYSTEMS AND SENSORS 

Mr. MOOSALLY. Thank you. Good afternoon, distinguished Chairs 

and members of the Border, Maritime and Global Counterterrorism 

and Management, Investigations and Oversight Subcommittees. 

Thank you for allowing me the opportunity to discuss Lockheed 

Martin’s role in Deepwater, the significant progress we are achieving and how together we can ensure the success of this program. 

45 

A major recurring subject of Deepwater congressional oversight 

committee hearings has been the patrol boats and Cutters, specifically the effort to extend and refurbish the 110-foot patrol boats. 

Based on the terms of the ICGS joint venture, Lockheed Martin 

had no role with respect to advising the Coast Guard, providing it 

information or the actual work of refurbishing these vessels except 

as those decisions involve command, control, communications 

equipment. There are issues, however, that have been raised with 

respect to the C4ISR that Lockheed Martin installed on these vessels; and I would like to address these issues in my statement. 

The DHS Inspector General’s report discusses four issues: surveillance cameras uses part of the vessel’s security system while in 

port, shielding of electronic cabling for preventing remote electronic 

eavesdropping, use of certain electronic cables coated with conventional material rather than materials that would yield lesser 

amounts of smoke in the event of fire, and operation of the C4ISR 

equipment in certain extreme weather conditions. 

The Inspector General did not find a basis for concern regarding 

the first issue. 

For the second issue, the government determined that the installed C4ISR system was not a security vulnerability; and the system was subsequently approved to operate in a classified environment. Accordingly, I will focus my remarks on the last two issues. 

Early in the 110-foot patrol refurbishment program, Lockheed 

Martin, working with the Coast Guard, acknowledged that certain 

off-the-shelf equipment would require a low-smoke cable deviation. 

It did not make sense on one hand to use commercial off-the-shelf 

equipment whenever possible to provide best value to the Coast 

Guard and then unnecessarily replace non-low-smoke cables that 

posed no safety threat to the crew or impaired operational performance. Replacing cabling on the off-the-shelf equipment with cabling 

that met general specifications would have jeopardized warranties 

on equipment and very possibly reduced its reliability and 

functionality. 

The Coast Guard elected to waive the requirement for certain cables as the best solution because they amounted to only a small 

portion of the cabling on the vessel and were largely located in exterior or well-ventilated locations. 

I want to make this very clear to the committee. This problem 

was already being actively worked with the customer in December, 

2003, prior to the delivery of any vessel. Although we received 

verbal approval working collaboratively with the Coast Guard, paperwork for the request of deviation approval was delayed through 

administrative contract processes. The Coast Guard formalized the 

decision to approve our request for deviation on December 21, 2004. 

The actions in 2003 and 2004 are documented in communication 

which I have available for the committee. 

We made the right choices with the Coast Guard, but we had the 

wrong process. The process has been fixed. 

We have a similar situation regarding the requirement for the 

operation of C4ISR equipment in extreme weather conditions. In 

July, 2005, a Lockheed Martin engineering review in preparation 

for C4ISR engineering for the National Security Cutter was conducted. We came across information that led us to question whethVerDate Nov 24 2008 10:57 Jul 02, 2009 Jkt 000000 PO 00000 Frm 00049 Fmt 6633 Sfmt 6601 H:\DOCS\110-HRGS\110-38\48913.TXT HSEC PsN: DIANE
46 

er the environmental specifications applied to the 110-foot patrol 

boat refurbishment program were sufficiently clear and, in certain 

instances, contradictory. 

Much of the available off-the-shelf equipment was built to function in extreme weather conditions. However, because it was commercial equipment, it had not been tested to determine whether it 

would meet the general specifications referenced in the Cutter classification matrix that was invoked after contract award. 

This information was presented to the Coast Guard, a collaborative joint working group evaluation was conducted, and a decision was requested as to whether off-the-shelf equipment should be 

used or, alternatively, equipment should be built to meet general 

specifications. The Coast Guard decided the most effective course 

of action was for Lockheed Martin to submit a request for deviation. 

Congress has led the effort to require the military and other elements of the government to rely more heavily on commercial offthe-shelf-products where appropriate. As a result, we have fewer 

examples of absurd requirements being mandated, resulting in expensive purchases such as $600 hammers. 

But there are always trade-offs in terms of unique requirements 

and interpretations of general specifications. Those trade-offs must 

put the safety of personnel first and then balance mission effectiveness levels versus cost. In both the application of low-smoke and 

environmental regimens we believe the Coast Guard made the 

right decisions in selecting commercial off-the-shelf equipment with 

no impact of safety or mission effectiveness. 

We have learned many lessons in the startup of the Deepwater 

program and have implemented contract and program management 

process improvements throughout the program so that mistakes 

will not be repeated. 

I look forward to answering your questions. 

[The statement of Mr. Moosally follows:] 

PREPARED STATEMENT OF FRED P. MOOSALLY

Thank you for the opportunity to explain the progress we are achieving on the 

U.S. Coast Guard’s Integrated Deepwater System program. Speaking for the men 

and women of Lockheed Martin, we are very proud to be associated with this critical 

program. The Coast Guard is a key national asset for assuring the security and 

safety of our country’s maritime transportation system. Each of us, in accomplishing 

our daily tasks on the program, has a deep sense of the importance of achieving 

the very best for the Coast Guard and our nation. 

The Deepwater Program 

The Deepwater program began in 1997 as competing teams were established to 

develop proposed solutions for bidding the program. In fact, proposals were submitted to the government less than two weeks after 9/11. Since then, the Deepwater 

program has successfully accomplished a number of changes. Most significant were 

those resulting from the dramatically increased Coast Guard operating tempo and 

new capability requirements in the post-9/11 environment. An excellent example is 

the HH–65 helicopters as legacy equipment began to wear out far more rapidly than 

had been projected. While the plan always included re-engining of this equipment, 

the original plan was to be accomplished over a longer time period. Nevertheless, 

the team was able to process the urgent requirement for re-engining and most of 

the fleet has already been upgraded and returned to service. It is this inherent flexibility that will facilitate our working with the new acquisition organization planned 

by the Coast Guard. 

Lockheed Martin is primarily responsible for four Deepwater domains: system engineering & integration, C4ISR (the command and control network), logistics and 

47 

aviation (refurbishment of existing assets and production of new assets). Implementation of the Deepwater system-wide command and control network, C4ISR (command and control, computers, communications, intelligence, surveillance and reconnaissance), is important as this is the network ‘glue’ that permits various assets including ships, aircraft and shore stations to work together to more effectively and 

efficiently achieve a common purpose. Use and reuse of commercial-off-the-shelf, 

government-off-the-shelf and fielded maritime systems are being maximized for commonality and interoperability. The application of off-the-shelf software permits the 

Deepwater program to take advantage of the rapid changes in the commercial marketplace and the investments which commercial firms make in their ‘best of class’ 

technologies. This will facilitate Coast Guard interoperability with civil and international systems, a key consideration given their mission mix. The National Security Cutter is using 75 percent of the U.S. Navy’s open architecture command and 

decision system. The command and control system for the maritime patrol aircraft 

employs more than 50 percent of the functionality of the Navy’s P–3 Anti-Surface 

Warfare Improvement Program. The operations center consoles on the National Security Cutter utilize more than 70 percent of the design of the Navy’s UYQ–70 display systems. Use and reuse of available software and systems is the key to commonality. In addition, this approach takes advantage of the work undertaken with 

the Navy to establish the best human system interface including workspace 

ergonomics, viewing characteristics, input devices and overall system architecture. 

The common architecture deployed across multiple types of assets allows for commonality of equipment and software systems and supportability of the entire Deepwater system. In general, the Deepwater C4ISR architecture ensures an ‘open systems’ approach for design and implementation, providing a true web-enabled infrastructure. The Deepwater architecture adapts to technology insertion and enables 

the progression to future Coast Guard-wide C4ISR architectures. In ports and coastal areas, one of Deepwater’s most significant capability enhancements will be its robust C4ISR system. This fundamental building block will improve the Coast Guard’s 

ability to maintain maritime domain awareness focused on meeting the needs of decision makers engaged in operations at sea, ashore, and in the air. The networkwide system will ensure the Coast Guard possesses and maintains seamless interoperability with the forces and agencies of the Department of Homeland Security, 

the Department of Defense, and other federal and regional agencies—a true force 

multiplier in the fullest sense. 

I would like to specifically address concerns about competition as Deepwater continues to perform well in this area. The Federal Acquisition Regulations stipulate 

that a contractor is responsible for awarding and managing subcontracts as well as 

determining whether to make or buy particular items to ensure the lowest overall 

cost and technical risk to the government. The applicable regulations also require 

competition to be assessed regularly via formal government-conducted purchasing 

system reviews. These government audits evaluate the degree of price competition 

obtained and the treatment of affiliates. 

Lockheed Martin is currently subcontracting with nearly 350 suppliers in 28 

states. More than 200 of these are small or small disadvantaged businesses. In the 

period from September 2003 through December 2006, Lockheed Martin placed more 

than $606 million of orders with these suppliers. Competitive procurements in accordance with our government-approved procurement system total 43 percent of the 

subcontracts awarded. To assure price reasonableness to the government, the Competition in Contracting Act of 1984 excepts from the otherwise applicable requirement for competition follow-on procurements for continued development, production 

or highly specialized services, unique supplies or services available from only one 

source, or an unusual and compelling urgency that precludes full and open competition. When these are appropriately applied to each subcontract, the qualified percentage is raised to 94 percent of the subcontracts awarded. 

In fact, of every $100 of Deepwater funding obligated to the prime contract: 

• $27 is used by Lockheed Martin for engineering and program management 

• $37 is subcontracted by Lockheed Martin to third-party suppliers for goods 

and services 

• $36 is used by other Deepwater partners (ICGS, Northrop Grumman and 

Northrop Grumman’s third-party suppliers) 

We continually search for the most appropriate products, services and technology 

to assure best value to the Coast Guard customer. We have participated in six Innovation & Industry Days across the country and have more than 3,000 prospective 

supplier-product applications in our purchasing database. 

Lockheed Martin Deepwater Program Progress 

48 

Working with our Coast Guard customer, Lockheed Martin has enabled deployment of more than 80 upgraded HH–65 helicopters featuring more powerful engines; 

delivered two new HC–144A maritime patrol aircraft with six more in various 

stages of contracting and construction; progressed through developmental test and 

evaluation of the HC–144A electronic mission system; commenced mission system 

and sensor installation on all six J-model HC–130 long range search aircraft; and 

sustained service of the eight MH–68A armed helicopters comprising the Coast 

Guard’s helicopter interdiction squadron. 

We have upgraded command and control systems aboard all of the Coast Guard’s 

39 medium—and high-endurance cutters resulting in significant increases of illicit 

drug seizures. An important program milestone was recently achieved. The Coast 

Guard issued full authority to operate the Deepwater command and control system 

at its district command center in Miami. This system provides enhanced mission 

planning tools and facilitates rapid exchange of information through a common operating picture among Coast Guard commands, cutters and aircraft. The system is 

now being installed in San Juan, Puerto Rico, soon to be followed at major Coast 

Guard commands in Massachusetts, Virginia, Alaska, Washington, Hawaii, California and Louisiana. 

The Deepwater program is delivering and is making a real difference—impacting 

drug seizures, migrant interdictions and lives saved. In Washington, earlier this 

year, the Coast Guard performed a rescue utilizing an HH–65C helicopter under 

conditions that would have been impossible for the aircraft it replaced. This month, 

the cutter Sherman utilized its Deepwater-installed electronics to passively track a 

ship of interest, to board her without alerting her, and to coordinate the seizure of 

a record 21 tons of cocaine, with a street value of $300M, via secure satellite communications. 

Recent customer statements show how well the upgrades, equipment and new capabilities are being received: 

• HH–65 Helicopter Re-Engining—‘‘Restoring this kind of reliability and stability to our HH–65 fleet is a crucial milestone in improving readiness. The fact 

that it’s being accomplished ahead of schedule reflects a true team effort by industry and our engineers, acquirers and operators.’’ Coast Guard Chief of Aviation Forces 

• Legacy Cutter C4ISR Upgrades—‘‘The Deepwater Upgrade provides vastly improved communications and interoperability. In the past year this ship has operated from above the Arctic Circle to well below the equator. We have enjoyed 

24/7 real time links to operational commanders and data base management regardless of our physical location. The upgrades have proven to be tough, dependable, and easily maintained.’’ Commanding Officer of the USCGC Morgenthau 

• National Security Cutter C4ISR Training Center—‘‘The contrast between our 

tools of 1983, and the tools of the future ships like the BERTHOLF is significant. I remember analog radar, message traffic by teletype, paper charts and 

maneuvering boards, Polaroid cameras, and slow criminal history checks by 

EPIC. No cell phones, no email—imagine that. I remember a true sense of independent operations. We were proud, but probably not as effective as we might 

have been if we had the tools of today. By contrast, our new National Security 

cutters will train. . .on computerized digital sensors, radar and charts, live 

sharable digital video, message traffic by PC, voice communications with anyone, clear or secure, and real time criminal histories and intelligence checks. 

They will benefit from a sense of connectedness and systemic information sharing making their days at sea safer and more efficient. The Coast Guard will 

have increased Maritime Domain Awareness to identify threats, and a Common 

Operating Picture to act when necessary—all to protect our coastlines and our 

citizens.’’ Commanding Officer Coast Guard Training Center 

• Maritime Patrol Aircraft—‘‘Today’s delivery of the first MRS MPA is a critical 

milestone in our ongoing efforts to acquire and deliver more capable and interoperable assets and systems to our Coast Guard crews. When this aircraft and 

others like it enter operational service, they will help to narrow our existing 

gaps in maritime surveillance in many important ways.’’ Deepwater Program 

Executive Officer 

Deepwater C4ISR is the enabler for the integrated system and is the major contributor to improved performance. It permits the Coast Guard to operate effectively 

with DoD, DHS, state and local government agencies. C4ISR provides coordinated 

tactics, multi-agency interoperability and common situational awareness necessary 

to achieve mission success. These capabilities are needed for all Deepwater assets 

including ships, aircraft, and shore site command centers. 

49 

Commitment to Congress and the Coast Guard 

We have deep respect for Congressional oversight and are committed to achieving 

our very best for our nation and the Coast Guard. We have continually sought to 

improve on this program. In particular, we are attentive to the concerns that have 

been raised by the DHS Inspector General, the Government Accountability Office 

and Members of this and other Committees with Coast Guard oversight responsibilities. As such, we are continuing to improve engineering and program management 

processes to better meet the needs of the Coast Guard customer. 

I would like to take this opportunity to address the concerns raised by the DHS 

Inspector General. We have carefully reviewed each of the findings, and, where appropriate, have made improvements to Deepwater program processes to avoid past 

mistakes being repeated. I address each of the issues raised by the DHS Inspector 

General. 

Low Smoke Cables 

During a Lockheed Martin review of 123-foot Patrol Boat C4ISR specifications, it 

was determined that 85 out of approximately 490 cables per ship could not be confirmed as having low-smoke properties. Many of these 85 ‘‘cables’’ are not large electrical cables. They are small cables such as those linking personal computers to 

printers. Others were small cables located inside commercial equipment, purchased 

as a result of the mandate to use as much commercial product as possible. The remainder of the 85 cables extend outside onto the mast or deck, and pose no threat 

to the boat or its personnel. Consistent with other military programs, a collaborative 

analysis of the non-low smoke cables determined that their use did not pose an 

undue safety risk. During the process of certifying the 123-foot patrol boat C4ISR 

design to the cutter certification matrix, the Coast Guard recommended submission 

of a ‘request for relief’ from the low smoke requirement for specific cables. The program proceeded to make progress with a reasonable expectation that the request for 

waiver would be approved. As the Inspector General determined, approval of the request for waiver was secured after four 123-foot patrol boats had been delivered. 

Collaboratively, with our Coast Guard customer, we have established additional 

process controls to help avoid a future recurrence of such a documentation issue. 

C4ISR Environmental Requirements 

A Lockheed Martin engineering review in mid-2005 identified a potential issue regarding C4ISR environmental requirements. We immediately informed the Coast 

Guard of this issue, and a joint Coast Guard and Lockheed Martin working group 

was established to resolve this issue. Rather than embark on a costly and continuous certification test process, Lockheed Martin engineers evaluated each of the 

components and the associated environmental performance information. Where possible, Lockheed Martin obtained ruggedized components, such as a de-icing capability for the FLIR sensor. After the joint working group’s consideration of the mission criticality of each component, its specification compliance, and its function 

aboard the boat, a request for waiver was jointly determined the best choice given 

customer imperatives and objectives. This approach permitted reconciliation of the 

program’s acquisition strategy to maximize the use of ruggedized off-the-shelf commercial and government equipment with a multitude of military standards incorporated into the requirements. By submission of a contractor requested waiver, the 

Coast Guard was afforded the ultimate decision as to a course of action. Much like 

the findings regarding low-smoke cabling, the Inspector General recommended that 

the Coast Guard develop and implement a plan to improve the process for reviewing 

and adjudicating contractor requests for deviations and waivers to ensure that all 

requests are resolved and fully documented prior to implementation. We are actively 

supporting implementation of this and other Coast Guard program oversight process 

improvements. 

TEMPEST 

Next, in response to concerns regarding C4ISR TEMPEST capabilities, we note 

that the government determined that the installed C4ISR system is not a security 

vulnerability. In fact, an independent third-party, the U.S. Navy Space and Naval 

Warfare Systems Center (SPAWAR), performed a visual inspection and instrumented testing. All identified discrepancies were resolved to the customer’s satisfaction and the 123-foot patrol boat C4ISR system was subsequently approved by the 

Coast Guard to operate in a classified environment. Lockheed Martin engineers 

chose a particular type of cable that was fully shielded and securely mounted to preclude compromising emissions as well as potential shielding degradation over time. 

Furthermore, SPAWAR determined that the system did not have compromising 

emissions and it was approved by the Coast Guard to operate in a classified environment. Based on input from the Coast Guard, the C4ISR system on the 123-foot 

50 

patrol boat operated effectively and securely during the time the patrol boats were 

operational and was highly regarded by their crews. The capabilities provided by the 

C4ISR system enabled the crews to develop new and highly-effective operational 

techniques for intercepting drug traffickers and illegal immigrants. 

Before the February 2007 report of the Inspector General, we improved the C4ISR 

design process for the National Security Cutter. Electronic equipment cabinets have 

been designed with improved electro-magnetic interference, cryptographic system 

configuration and cable shielding. Classified network designs were provided to the 

certified TEMPEST test authority prior to customer design reviews to facilitate risk 

mitigation early in the design. Representatives of industry, the customer and an 

independent reviewer, Craig Ocean Systems, participated in a number of technical 

interchange meetings to review current designs and make changes prior to equipment production efforts. During cabinet production, integration and test, periodic 

technical interchange meetings were conducted with the customer to review all 

emergent TEMPEST issues and correct the associated documentation. Prior to system testing, the customer conducted a final design review with government experts 

to identify potential issues and make any necessary design changes. We believe the 

approach of mitigating potential problems before customer visual and instrumented 

testing is essential. Close customer involvement, including early reviews of the design documentation and delivery schedules will continue to assure that Congressional and customer interests are best served. 

Surveillance Cameras 

Finally, as the Inspector General found, the camera system on the 123-foot patrol 

boats fully complies with the video surveillance system requirements. It was designed as part of an overlapping series of measures, including sentries and an intruder detection system. Lockheed Martin did not consider it prudent to unilaterally 

increase costs by providing functionality that the customer did not want or need. 

The Way Ahead 

We agree with the Coast Guard that the oversight has provided important recommendations for improvements to the Deepwater program. We are working with 

the Coast Guard as they have already begun to take the necessary steps to ensure 

successful execution of the Deepwater program. Our goal is to provide more capability to the Coast Guard sooner. We are dedicated to analyzing and recommending 

approaches for maximizing the value delivered to the Coast Guard, in accordance 

with the customer’s view of value, not that of industry. This requires the best talent 

from each corporation. Lockheed Martin will continue to work closely with Coast 

Guard personnel to assure constant communications and improved working relationships. The strategic policy changes that have occurred since 9/11 must be factored 

into problem solving. The Coast Guard and the Department of Homeland Security 

have needs that can be satisfied by the Deepwater program and its approach to 

value delivery. The way forward will be challenging, but given the capabilities of 

the participants and the strategic imperative to better outfit our Coast Guard so the 

safety and security of our nation is improved, the Deepwater program is eminently 

achievable. 

51 

FOR THE RECORD

LETTER SUBMITTED BY THE HONORABLE LORETTA SANCHEZ, CHAIRWOMAN, 

SUBCOMMITTEE ON MARITIME, AND GLOBAL TERRORISM


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54 

Ms. SANCHEZ. Now Mr. James Anton, please, for 5 minutes or 

less. 

*ERR11*STATEMENT OF JAMES E. ANTON, SECTOR VICE 

PRESIDENT AND GENERAL MANAGER, U.S. COAST GUARD 

PROGRAMS, NORTHROP GRUMMAN 

Mr. ANTON. Good afternoon, Chairperson Sanchez, Chairman 

Carney, and distinguished members of the committees; and thank 

you for the opportunity to appear before you to discuss the Deepwater program. 

I am the Executive Vice President of Integrated Coast Guard 

Systems and the Vice President of the Deepwater program for Northrop Grumman Ship Systems. As you may know, Northrop Grumman Ship Systems has nearly 70 years of experience designing, 

constructing, and maintaining ships of all types. In that time 

frame, NGSS’ gulf coast operations has produced a total of 534 

ships and has built nearly a quarter of the Navy’s fleet. 

On behalf of Northrop Grumman and all the men and women 

working in support of this program, I would also like to thank 

these subcommittees for their strong support of the Coast Guard 

and the Deepwater program. 

The 110-foot patrol boats have seen extensive duty since their 

entry into service some 20 years ago. The 123 conversion was intended as an interim measure to enhance the capability of the 

aging patrol fleet until the new vessel, the Fast Response Cutter, 

was available to replace it. The conversion work was performed by 

Bollinger shipyards, the original builder of the 110s under subcontract in Northrop Grumman. The conversion project underwent 

a traditional design and review process with contractor and Coast 

Guard personnel. 

After being awarded the patrol boat conversion work but before 

beginning the actual conversion work, the Coast Guard ICGS, 

NGSS and LM and Bollinger, with our joint venture partners, enVerDate Nov 24 2008 10:57 Jul 02, 2009 Jkt 000000 PO 00000 Frm 00058 Fmt 6633 Sfmt 6601 H:\DOCS\110-HRGS\110-38\48913.TXT HSEC PsN: DIANE

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55 

gaged in design reviews, including a preliminary design review, a 

critical design review and a production readiness review. During 

these reviews, the 123-foot conversion design was presented to the 

Coast Guard in increasing levels of detail. 

Although not a contract requirement, ICGS conducted the preliminary design review, or PDR, as part of the PDR process. Drawings and analysis were submitted to the Coast Guard for consideration and review. Half of the attendees at PDR were, in fact, Coast 

Guard personnel. 

The next phase was the critical design review, or CDR. In connection with CDR, the Coast Guard reviewed a series of design 

deliverables. CDR presentations included results from a number of 

design tests. The Coast Guard represented nearly half of the 

attendees at CDR. 

CDR was then followed by a production readiness review, and 

during the PRR the production process, procedures and state of the 

design to convert the 110 vessel into the 123 where were presented. 

As with the design reviews, the Coast Guard fully participated in 

the PRR process. 

Four days later, the Coast Guard delivered the Matagorda to 

Bollinger for conversion in Lockport, Louisiana. 

In addition to these various reviews with the Coast Guard, during the conversion of the first vessel, the Matagorda, the American 

Bureau of Shipping examined the design of the hull extension and 

new deckhouse and monitored key elements of the work being performed. The Coast Guard had a Program Management Resident Office on site at Bollinger to oversee the 123 conversions. At the completion of each conversion and as part of the acceptance process, 

the Coast Guard, similar to what the Navy does, established an 

INSURV inspection board to examine the performance of the converted Cutter and make a formal recommendation of acceptance. At 

the conclusion of the Matagorda work, ABS issued a letter of approval for the conversion work and expressed no reservations with 

the feasibility of the conversion. Based on all these reviews and actions, the Coast Guard accepted delivery of the Matagorda. This 

same process was applied to each of the other seven patrol boats 

delivered to and accepted by the Coast Guard. 

To date, the problems associated with 123 conversion include 

buckling and hull deformation as well as shaft alignment problems. 

Neither the Coast Guard engineers nor our engineers have been 

able to determine the root cause for the 123 patrol boat structural 

problems. 

On April 13, 2007, Admiral Allen decided to decommission the 

eight 123-foot patrol boats converted under the Deepwater program. 

We are committed and determined to identify the root cause of 

the structural problems. Reviews and analysis of the data available 

to industry on the 110 and 123 patrol boats continue in an effort 

to better understand the cause or causes of both hull buckling and 

shaft alignment problems; and we will continue to support the 

Coast Guard’s effort to address its mission needs. 

Thank you again for the opportunity to discuss with you the 

Deepwater program. 

Ms. SANCHEZ. Thank you so much for your testimony. 

56 

[The statement of Mr. Anton follows:] 

FOR THE RECORD

PREPARE STATEMENT OF JAMES E. ANTON

Good afternoon Chairperson Sanchez, Chairman Carney and distinguished members of the Subcommittees. 

Thank you for the opportunity to appear before you today to discuss the Deepwater Program. As you know, within the Integrated Coast Guard Systems (ICGS) 

structure, a joint venture established by Northrop Grumman and Lockheed Martin, 

Northrop Grumman Ship Systems (NGSS) is responsible for hull, mechanical and 

electrical design construction, installation of Command, Control, Communications 

and Computers, Intelligence, Surveillance and Reconnaissance (C4ISR) equipment 

provided by Lockheed Martin, and overall support of the surface assets, such as the 

110 foot to 123 foot converted Island Class Patrol Boats. References in this statement to ICGS or separately to Northrop Grumman or NGSS should be construed 

to mean the role of Northrop Grumman Ship Systems as part of ICGS. 

Northrop Grumman has nearly 70 years of experience designing, constructing and 

maintaining ships of all types. In that time, NGSS’s Gulf Coast operations has produced a total of 534 ships—351 ships at Ingalls and 183 at Avondale—and has built 

24 percent of the Navy’s current fleet of 276 vessels. In just the last 30 years, we 

have completed 15 new designs representing a diverse group of military and commercial seagoing ships: LSD 49; CG47, DDG993, LHD1, LHD8, LSD41, LMSR, 

USCGC Healy (Polar Icebreaker), 2 Classes of T–AO (Kaiser & Cimarron), Polar, 

NSC, LPD17, Saar5, and DDG1000. 

On behalf of Northrop Grumman and all of the men and women working in support of this program, I would like to thank these Subcommittees for your strong support of the Coast Guard, and of the Deepwater Program. We look forward to working closely with you and the Coast Guard to ensure the success of this important 

modernization. The following statement contains information that I, on behalf of 

Northrop Grumman, am submitting based on my current knowledge, information 

and belief. 

The Coast Guard’s current 110 foot patrol boats were built in the 1980s and early 

1990s by Bollinger Shipyards, Inc. These boats have seen extensive duty in support 

of the Coast Guard mission to save lives, interdict aliens and seize drugs. ICGS and 

its teammate, Halter Bollinger Joint Venture (HBJV), proposed to convert the 110 

foot boats to 123 foot boats as an interim measure to improve the capability of this 

vessel until its FRC replacement entered operation in 2018. 

ICGS proposed the conversion concept as a means to provide the Coast Guard 

with the capability to continue to meet its mission objectives while remaining within 

the confines of program funding requirements. Deepwater competitors were required 

to propose a ‘‘system of systems’’ solution that did not exceed the funding limitation 

of $500 million per year. With new assets such as the National Security Cutter 

(NSC), Maritime Patrol Aircraft (MPA) and the Vertical Unmanned Air Vehicle 

(VUAV) being developed early in the program, it was not possible to design, develop 

and construct new patrol boats at program inception while keeping within annual 

funding limitations. 

Bollinger had designed and built the original 110 foot boats and was very familiar 

with their construction. Bollinger was awarded a contract for 16 110’ Island class 

boats in August 1984 and another contract for 33 more boats in 1986. The design 

of the 110’ Island class was approximately 20 years old and was based on an existing patrol boat developed by a British firm, Vosper Thornycroft (UK) Ltd. The 110’ 

Island Class boats were commissioned between November 1985 and 1992. Notably, 

after the first boats came into service, it was discovered that the 110s suffered from 

hull problems when operated in heavy seas. As a correctional measure, heavier bow 

plating was added to hulls 17 through 49 during construction and additional stiffeners were retrofitted to earlier hulls. 

Under the proposed Deepwater conversion plan, HBJV added a 13 foot extension 

to the 110’, which was similar to the 9 foot extension they had successfully added 

to the Cyclone patrol boats starting in 2000. This extension accommodated a stern 

ramp for the launch and recovery of a small boat, used primarily to support boarding and rescue operations. In addition, the conversion installed an improved pilot 

house, enhanced C4ISR capabilities, and extensively improved habitability and 

maintenance. During the conversion process HBJV identified and renewed hull plating in areas where an ultrasonic thickness inspection indicated that the existing 

plating was deteriorated. 

57 

At the time the proposal was submitted, some general knowledge about the condition of the 110s was available, and ICGS believed that replacement of the hull plating would adequately address and offset their deteriorated condition. This is consistent with the findings of the Coast Guard’s 110’ WPB Service Life Extension 

Board, published in March 2002, which recommended a program of systematic hull 

repairs, predominantly in documented problem areas, to address the hull deterioration problems that were impacting the operational availability of the 110s. 

As is typical of ship construction projects, periodic reviews of the 123’ conversion 

design were held. Prior to each review, the contractors submitted numerous design 

documents, including engineering data, calculations and model test results, to the 

Coast Guard for its review and comment. Coast Guard comments were received in 

conjunction with each of the three primary design reviews, all of which included 

Coast Guard, NGSS, ICGS and HBJV representatives. 

The first such review was the Preliminary Design Review (PDR). The Preliminary 

Design Review was not a contract requirement, but was conducted by ICGS as part 

of the 110’ to 123’ design process. As part of the PDR process, approximately 43 contract-required data items (CDRLs), including 23 drawings and 14 analyses were delivered to the Coast Guard for consideration and review. During PDR, the Coast 

Guard was provided with an overview of procurement, model testing procedures and 

schedule, as well as the planned hull/structure inspection process, which included 

blasting the hull to the main deck, ultrasonic and visual inspection, as well as bulkhead Ultra Sonic Testing allowance. The Coast Guard represented 23 of the 46 

attendees at PDR. 

The next phase was the Critical Design Review (CDR). In connection with CDR, 

the Coast Guard reviewed 47 design deliverables. In addition to 123’ conversion design information and drawings, CDR presentations included design tests such as 

model basin testing for bare hull resistance, propeller and open water cavitation, 

self propulsion, planar motion maneuvering and course keeping, numerical simulations of turning circle and course keeping, and sea keeping. The Coast Guard represented 34 of the 75 in attendance at CDR. 

CDR was followed by a Production Readiness Review (PRR). During the PRR, the 

production process, procedures and state of the design to convert the 110’ vessel into 

a 123’ were presented. Following the PRR, ICGS received notification from the 

Coast Guard that ‘‘ICGS had presented a comprehensive assessment of the state of 

the design development and readiness for production.’’ The Coast Guard did not 

identify any risks associated with hull deformation or buckling. Four days later the 

USCG delivered Matagorda to Bollinger at Lockport, Louisiana for conversion. 

In addition to these various reviews with the Coast Guard, during the conversion 

of the first vessel, the Matagorda, the American Bureau of Shipping (ABS) examined the design of the hull extension and new deckhouse and monitored key elements of the work being performed. The Coast Guard had a Program Management 

Resident Office on site at Bollinger to oversee the 123’ conversions. At the completion of each conversion and as part of the acceptance process, the Coast Guard established an INSURV board to examine the performance of the converted cutter and 

make a formal recommendation of acceptance. At the conclusion of the Matagorda 

work, ABS issued a letter of approval for the conversion work and expressed no reservations with the feasibility of the conversion. Based on all of these reviews and 

actions, the Coast Guard accepted delivery of the Matagorda. This same process was 

applied to each of the other seven patrol boats delivered to and accepted by the 

Coast Guard. 

The Performance Specification requirement calls for the 123’ to be capable of unrestricted operation up through sea state 3, or seas averaging approximately four 

feet or less. Coast Guard operation restrictions are imposed beginning at sea state 

four, or seas less than eight feet, where the boats are to be able to sustain limited 

operations, altering course or reducing speed as required to maintain a ride which 

does not damage the boat or its machinery or overly fatigue the crew. The Performance Specification requires the 123’ to be able to survive sea state 5, or seas averaging between eight and 13 feet, maneuvering as necessary to minimize damage or 

injury to the crew, and then be capable of returning to port under its own power 

once the seas have subsided. 

In September of 2004, after all 8 hulls had entered the conversion program and 

the first 4 hulls had been delivered, the Matagorda was forced to conduct a high 

speed transit to avoid Hurricane Ivan. This operational necessity forced the Coast 

Guard to transit in a sea state and speed where the cutter was operating near or 

above the design limits of the 123’ conversion. Upon arrival at their destination, the 

crew discovered buckling of the side shell and main deck on the starboard side near 

midship. An engineering tiger team was formed consisting of Coast Guard and 

NGSS personnel. This team was dispatched to investigate the problem where it was 

58 

discovered that the Matagorda had an inherent workmanship issue in the baseline 

110’ that existed prior to the conversion and contributed to the hull buckling. Specifically, a hidden, unwelded aluminum deck stringer was discovered immediately 

beneath the area where the failure occurred. Other boats were examined, and this 

unwelded stringer was also found on one additional hull undergoing conversion. 

When modeled using finite element analysis, the stresses in the panels which failed 

on Matagorda were significantly higher than the stresses shown when the model 

was run with this stringer intact. Based on this finding, the team believed this to 

be the primary cause of the buckling on Matagorda, and repairs were made accordingly. 

In addition, a reconstruction of the engineering analysis of the 123’ structure was 

conducted. Based on this, it was also discovered that an early calculation overstated 

the strength margin for the boat. A revised calculation using a common, agreed to 

set of assumptions by a Coast Guard, Northrop Grumman and Bollinger engineering 

team showed the 123’ would still meet the required operations defined in the Performance Specification. 

In an effort to further improve the structural integrity on the 123s, three stiffener 

bands were installed; one at the upper edge of the side shell, one below this one 

and another on the edge of the main deck to increase the overall structural 

strength. While the finite element analysis and conventional calculations both 

agreed that the original hull, with the stringer under the deck intact, should be sufficient throughout the operating range of the 123’, these additional stiffeners were 

considered to provide an added margin of strength. 

By March, 2005, 6 of the 123s had received the structural upgrade and had been 

delivered. Certain operational restrictions imposed on these boats by the Coast 

Guard following repairs to the Matagorda had been lifted. Then, during a transit 

from Key West to Savannah, Georgia, the Nunivak experienced hull deformation in 

an area aft of the new reinforcing straps. This deformation occurred in a different 

area from that of the Matagorda. Further, this was not an area which had indicated 

potential for high stresses under any conditions modeled in the earlier finite element analysis. 

An outside engineering firm, Designers and Planners, was engaged by the Coast 

Guard to perform a more detailed finite element analysis of the 123’ hull, which 

showed that the overall hull structure design was adequate under all expected operating conditions up to the worst operating condition modeled. The analyses were not 

able to replicate the deformation seen on Nunivak. A more detailed look at specific 

regions on the hull showed an area with high potential for localized buckling in a 

section of the side shell where the original 110’ hull had been constructed of exceptionally thin four-pound plate. Despite this finding, no actual failures had ever been 

experienced in this area on 110’ or 123’ patrol boats. As a precaution, this thin plate 

was replaced with heavier plating on those cutters undergoing the Post Delivery 

Maintenance Availability, with plans to eventually upgrade all the boats. Lastly, a 

metallurgical analysis of the deck material determined that the particular grade of 

aluminum used on the 110s is prone to corrosion and cracking in elevated heat and 

marine conditions. We provided that information as input to the testing and analysis that was being conducted by the USCG. 

In July 2005, then Coast Guard Commandant Admiral Collins’ written testimony 

before Congress outlined the twofold reason for stopping the conversion process as 

follows: ‘‘As the first eight 110’ to 123’ conversions were conducted, the Coast Guard 

found that the 110’ WPB hulls were in much worse condition than anticipated. This 

extended the conversion timeline and would have increased projected costs for conversions after the first eight (the first eight were negotiated under a firm-fixed-price 

contract). An operational analysis of the 123’ WPBs also identified high risks in 

meeting mission needs, particularly in the post–9/11 environment.’’ Based on the deteriorated condition of the 110’ hulls and post 9/11 requirements, the Coast Guard 

accelerated FRC design and construction by ten years to meet the shortfall in patrol 

boat hours. 

On April 13, 2007, Admiral Allen decided to decommission the eight 123 patrol 

boats converted under the Deepwater Program. To date the problems associated 

with the 123’ conversion include buckling or hull deformation and shaft alignment 

problems. In addition to the actions previously described, additional and substantial 

work has been (and continues to be) done to determine cause or causes. In addition 

to the repairs and reviews of structural calculations, the review process has continued by conducting two independent finite element analyses, modeling both the original and the upgraded hull, and completing metallurgical testing that revealed an 

issue in the main deck which exists on both the 123s and across the legacy 110 fleet. 

Extensive strain gage testing has been conducted on a 123’ hull to validate the finite 

element model and to identify potential problem areas which the model may not 

59 

show. The parent craft designer, Vosper Thornycroft, was engaged by the Coast 

Guard to evaluate the 123’ hull and provide recommendations. Data has been collected on shaft alignment and maintenance procedures both during the conversion 

and since, so that the procedures for checking and correcting alignment can be validated for both the 110’ and the 123’. Elements of the 123’ design, including the propellers and the SRP stern-launch system are being reexamined and validated. 

We are committed and determined to identify the root cause of the structural 

problems. Reviews and analyses of available data on the 110’ and 123’ patrol boats 

continue in an effort to better understand the cause or causes of both hull buckling 

and shaft alignment problems. Until these efforts are complete, it is premature to 

speculate on the final cause. 

I want to assure the Subcommittees that Northrop Grumman will continue to 

work with the Coast Guard to address its mission requirements throughout the life 

of the Deepwater Program. 

Thank you for this opportunity to discuss with you the progress of the Deepwater 

Program. 

Ms. SANCHEZ. I will remind each member that he or she has 

5μminutes to question the panel. 

Mr. Carney, would you like to go ahead and take your 

5μminutes? 

Mr. CARNEY. I would. Thank you Madam Chair. 

Mr. Moosally, first of all, thank you very much for your service 

to this Nation, distinguished career indeed. I am very, very proud 

to know you, sir. 

I was also very pleased to read in your statement that, quote, 

you have deep respect for congressional oversight, end quote. But 

I will say to both of you that I am concerned that ICGS’s parents 

do not seem to have that same level of respect for oversight conducted by the DHS Inspector General. 

I was very disappointed to learn from the IG’s audit report of the 

National Security Cutter, the ICGS, in concert with both Northrop 

Grumman and Lockheed Martin, sought to put onerous restrictions 

on the IG’s ability to review this troubled program. 

Specifically, the IG was asked to submit all requests for documents in writing along with a detailed description of both the purpose of the request and the topics to be addressed. Because of these 

unacceptable preconditions, the IG conducted no formal interviews 

with ICGS, Northrop Grumman or Lockheed Martin personnel. 

Gentlemen, that is not how oversight is supposed to work. Will 

you commit today to providing the IG the access to documents and 

personnel it needs to perform the oversight function for which you 

express your respect? 

Mr. MOOSALLY. If I could respond, Chairman Carney. 

First of all, let me say that I don’t agree with Mr. Skinner’s characterization. In his 39 years, he has never been asked for what is 

the subject. That is standard practice in industry when you have 

an IG ask you a question, that what is the subject, what is the 

topic; and we as a corporation have the responsibility to protect the 

rights of our people. That is why we would ask for our lawyer to 

be present. So I don’t agree with this characterization. 

To my knowledge—and I will go back and check this—we were 

only asked one time to provide people; and we went back and I 

said, okay, what is the topic, what is the subject, and we would like 

to have a lawyer present. And we were never asked again. 

So to characterize that as this has been a continuous problem in 

my mind is not correct. And if asked properly under the right—absolutely. 

60 

And, by the way, I think we have had like I don’t know how 

many other investigations. We have had no problem having our 

people available for investigations. That is not a problem. 

Mr. CARNEY. Are lawyers always present, company lawyers always present? 

Mr. MOOSALLY. If it calls for it, yes, we would like to have the 

lawyer present to protect the rights of our people. 

Mr. CARNEY. Understood. Okay. 

Mr. ANTON. Could I just add one thing? 

Mr. CARNEY. Yes, please. 

Mr. ANTON. I would also like to support what Mr. Moosally said. 

But I would also like to inform the committee that we have supported other Office of Inspector General audits, and those audits 

followed this very same process that Mr. Moosally characterized. 

We also put our request in writing. We never refused the audit, so 

to speak. We put our request in writing, and we never got a response. 

So I just wanted to add that for clarification. 

Mr. CARNEY. Thank you. 

Mr. Moosally, I believe the NSC 1 is due for visual inspection in 

June and the C4ISR TEMPEST inspection in July. Are there any 

potential problems with the systems that you are now aware of 

that have not been disclosed to the Coast Guard? 

Mr. MOOSALLY. Mr. Chairman, we are working very closely with 

the Coast Guard. We did learn some lessons on the 123s, although 

I believe the outcome was very positive. It passed the TEMPEST 

inspection and was certified by the Coast Guard. 

What we are doing now I think is getting more collaborative, 

working together. It is kind of like the production line of the automobile industry where you put quality in from the start throughout 

the whole process. 

So we are working now with the Coast Guard. We have thirdparty people looking at what we are doing for TEMPEST and all 

the equipment; and I think you will see a much better outcome 

here, you know, because we do this all the time. We have got a 30- 

year history of working with Ingalls and Bath Iron Works building 

DDG–51s and CG–47s. We know how to do this. When the requirements are laid down and we get together with the customer and 

work this out, we know how to do it; and I think you will see a 

much better outcome here as we go forward on the National Security Cutter. 

Mr. CARNEY. Thank you. Yield back. 

Ms. SANCHEZ. Mr. Souder, for 5 minutes or however much time 

you may consume. 

Mr. SOUDER. Mr. Moosally, when you said ‘‘a lawyer present if 

it calls for it’’, what did that mean? 

Mr. MOOSALLY. We like to have a lawyer present to protect the 

rights of our people. 

Now if the people—excuse me, sir. Go ahead. 

Mr. SOUDER. Go ahead. 

Mr. MOOSALLY. If the people decide they want to go on their own, 

don’t want a lawyer, they can do that. We are not holding people 

back. We are not preventing—as you well know, if an individual in 

a company decides he wants to go talk to the IG, he can go do it. 

61 

Mr. SOUDER. Have you had cases talking to the IG where you 

haven’t had an attorney present? 

Mr. MOOSALLY. I can’t say 100 percent that that is true. 

Mr. SOUDER. Is the fact there is a potential economic dispute 

here more or less to protect company interests? What interests of 

the employee would you be protecting separate from the— 

Mr. MOOSALLY. Well, I think if—there could be a possibility of 

individual culpability, that that would be what we would be protecting. 

Mr. SOUDER. And is it standard practice that you have to seek 

questions in advance? 

I would think one of the things an Inspector General would need 

is not necessarily organized response but would want to talk to the 

individual non-synchronized. The obvious reason the company lawyer is there is because you need to be able to put it in context. 

Mr. MOOSALLY. Right. We usually ask—it is usually standard 

practice to ask what is the standard subject of your inquiry. 

Mr. SOUDER. So do you believe the Inspector General will come 

back if we ask him a follow—up question and say there was only 

one inquiry? 

Mr. MOOSALLY. To my knowledge, to the best of my knowledge, 

I think that is the case. 

Mr. SOUDER. Well, one thing I also want to say is that it is important when we look at Deepwater, those of us who have really 

supported Deepwater, that in fact there have been many upgrades 

that they have worked on. You mention Morgenthau in your written testimony, which I have been on last summer and it has dramatically changed, as have a number of the other upgrades, particularly just on the ice cutter Mackinaw; and to watch the new 

technology on these boats compared to the old technology is amazing. 

But, Mr. Anton, there is this fundamental question of, if the— 

kind of the decks buckling and the hulls curving and the shaft isn’t 

working right, that those are pretty significant things in a boat. My 

understanding from your testimony is that you still haven’t figured 

out what triggered that. Do you believe it was the boat wasn’t in 

as good a condition? Do you believe it wasn’t clear in the contract? 

Where do you think the source of the problem is? I mean, for a 

boat, these are pretty much it, other than the engine isn’t working. 

Mr. ANTON. Let me take a minute and roll the tape back a little 

bit to what the commandant said when he took them out of commission. He basically said that they had done multiple analyses 

from various experts around the country and that they, the Coast 

Guard, cannot find a root cause. 

We have not given up on that. We just completed ship check of 

the vessels back, I believe, a month or so ago. We have requested— 

when the commandant made that request in April or made that 

statement in April, we requested immediately the analysis from 

the Coast Guard that they had. 

We received that analysis last week. That analysis is probably 

six to eight inches, whatever—wherever my hand is here is how 

thick that analysis is. So we have an ongoing investigation into the 

root cause, because we need to find the root cause. Because when 

we do we will understand where the accountability lies. 

62 

Mr. SOUDER. Aren’t there multiple potential root causes here? It 

sounds like— 

Mr. ANTON. There could be. And for me to speculate on them, it 

just wouldn’t be the right thing to do. 

Mr. SOUDER. Have you had this problem with other ships you 

have built? 

Mr. ANTON. No, sir. 

Mr. SOUDER. Have you had one of the three, either deck or hull 

or shaft? 

Mr. ANTON. Maybe I didn’t hear the last question. Let me— 

Mr. SOUDER. I wondered how common this is to have this series 

of problems, where the boat basically is not useable; and, in this 

case, there were multiple reasons that appeared to be triggering it. 

The 30-year life figure is one question which may have been a 

specs question. The other, smaller boat seemed to have a whole different complex. 

Mr. ANTON. Well, you know, I think you are right. It is a very 

complex problem, and there may be more than one contributing 

cause. 

Again, we have not given up on sorting that out. We are continuing our analysis. We are not going to rest until we exhaust 

what we can to figure this out. 

Mr. SOUDER. One of the things in the written testimony was that 

in one hurricane-type condition they were running at near capacity. 

But from my impression of studying the Coast Guard, they run it 

as high as they can—as they are chasing someone that is in a cocaine boat, they are going to be using all their assets at maximum 

to even try to keep up. If they are out in Alaska, and the waves 

are going to be big out there where the fisheries are, they are going 

to be on the edges of hurricanes. Was that not in the tolerances, 

that they might be working at maximum level for much of the time 

even? 

Mr. ANTON. There is a misperception that the 123s, once converted, would be able to operate unrestricted and in the same environment as the 110s. The performance spec did not require for the 

123 to operate unrestricted in sea states greater than 3. 

Mr. SOUDER. So in a misconception—was the misconception—you 

mean by that the Coast Guard thought that they would, and you 

didn’t have it in your specs? 

Mr. ANTON. No. There has been some of the testimony in previous hearings where the comment was made that the 123s were 

spec’d to be or something of that nature—and, again, I am operating from memory—that the 123s were spec’d to operate in the 

same environments as the 110; and that is not the case. The performance spec clearly annotates that it is unrestricted operations 

in sea state 3; and in sea state 4 and 5, there are restrictions 

placed on the operation of the vessel. 

Mr. SOUDER. Thank you. 

Ms. SANCHEZ. Gentlemen, I just received a copy of the letter sent 

to ICGS from the Department of Homeland Security, the contracting officer for the U.S. Coast Guard, with respect to the letter 

we talked about earlier today. I would like to submit it, with unanimous consent, for the record. 

63 

I am trying to figure out how y’all did this. So your companies 

have a long history of working on the defense side, in particular 

on projects, and you have a long history of partnering with different companies; and even though some might call you competitors, on this particular one you are partnering together in a sense 

and, I am assuming, with Bollinger Shipyards and others. So you 

put this contracting together through a holding company or what 

have you, and you are the chairman—and you are the vice chairman or board member? 

Mr. ANTON. Executive Vice President. 

Ms. SANCHEZ. Right. So you are used to working with each other, 

and you have got all this experience of doing ships and air and integrated systems and everything. Am I correct? I mean, you have 

done this before? 

Mr. MOOSALLY. Certainly. That is our business. We put combat 

systems on ships. 

Ms. SANCHEZ. Okay. This contract had indefinite delivery, indefinite quantity, and it was performance-based, which I am told 

means as long as we think you are doing a good job we are going 

to be open-ended and keep you on and keep you doing things and 

decide how many or whatever we want and this is the way we are 

going to go. Am I correct? Is that more or less the type of contract 

you had? 

Mr. MOOSALLY. More or less. 

Ms. SANCHEZ. Is this standard? Is this the type of contract you 

see? How often do you see that type of—nebulous-type-looking contract? Ten percent of the time? All the time? 

Mr. ANTON. I don’t believe that—and I would have to go back 

and check because Northrop Grumman is a very large corporation, 

but I do not believe that we have a performance-based award term 

contract at Northrop. I would have to go back and look, okay? Because when you—I just don’t think we have one, okay? So that is 

the answer. 

Ms. SANCHEZ. You don’t have—this one is not that? Or you don’t 

have another one? 

Mr. ANTON. This one is an award. 

Ms. SANCHEZ. So you have really never seen something like that? 

This is a strange animal? 

Mr. ANTON. I am not going to say it is a strange animal. What 

I am going to say is I would have to go back and look. I don’t believe—you know, I am really from the shipyard, so I can tell you 

that the shipyard to my knowledge does not have an award term 

performance-based contract. But I have to go back and check the 

rest of Northrop Grumman. 

Mr. MOOSALLY. For Lockheed Martin, we do have some performance-based IDIQ contracts; and a lot of our contracts are based on 

incentive fees or award fees. It has to do with performance, but, 

you know, there is a lot of service-type companies but none IDIQ. 

Ms. SANCHEZ. What I am trying to get at, this is not a norm for 

the industry. You know, we are looking at this and we are trying 

to figure out—and I am sure you all probably will litigate this in 

the courts for a while, I would assume, with the government or 

whatever. But we are trying to decide what do we need to do with 

the Coast Guard to change its procurement system to make sure 

64 

we get back on track. You know, was it a problem with the engineering? Was it a problem with the actual ships, that they just 

weren’t good enough to even be upgraded? I mean, these types of 

things. 

So when I ask you about the contract, I am just trying to figure 

out, is this a very abnormal type of contract that we would see 

coming out? Which in a sense means the Coast Guard wasn’t necessarily capable of handling this procurement. 

Mr. MOOSALLY. I wouldn’t call it abnormal, and I can’t answer 

whether the Coast Guard is capable or not, you know. 

What it comes down to, we talk a lot, as I said in my opening 

statement, about the 110, 123 conversion. If you look at the other 

parts of the program, aviation side—you heard Captain Baynes 

talk about the C4ISR and what a great thing that has been for the 

Coast Guard down there, and Congressman Souder talked about it. 

So if you get outside of this specific program, there is a lot of good 

things that we are, I think, doing in the Deepwater program. 

Ms. SANCHEZ. Mm-hmm. 

Mr. MOOSALLY. You know, the aviation side, the re-engining of 

HH 65. 

There is an example of when the prior commandant came to me 

and said, you know, Fred, we have engines shutting down while we 

are out rescuing people. We had to leave a swimmer in the water 

for 3 hours because they didn’t have enough lift on the helicopter. 

He asked, could we re-engine these helicopters real fast; and we 

said yes. So now we have 80 of those helicopters out there that 

served in Katrina and have, you know, twice the power and so 

forth. 

So I wouldn’t look at this thing, hey, there is a totally broken acquisition here. There is a problem, obviously. You have the letter 

up there. The 110, 123s have been the focus of this problem. And 

for these hearings, in my view, for the most part, I talked about 

the allegations here. 

Ms. SANCHEZ. Well, it happens to be that way simply because, 

as you know, it is just like with us. When we are the government, 

the taxpayers don’t look at all the great things they are getting. 

They generally look at where did you mess up? Where did you get 

the $600 toilet seat or what have you? 

And part of oversight is that—I mean, my part from my subcommittee is to figure out, how do I get this back on track? You 

know, if we are going to keep the same players, how do they play 

well together so that we can get this done? Because absent the 

eight and the six and the five to three—I mean, I am not only 

short—not only not augmenting my Coast Guard where for homeland security I need to be doing that, but it is actually hindered 

at this point because it is down so many ships. So I am trying to 

figure out how do we move forward. 

But oversight, obviously, their job is, I would think, to look at 

what went wrong and how did it happen and who was asleep at 

the wheel or who didn’t know what they were doing. 

Now having to deal with that kind of contract, would you look 

at a different way to do that kind of contract to deliver? 

Mr. MOOSALLY. I think we have made suggestions to the Coast 

Guard in how to improve the contracting, the acquisition model 

65 

that we are using. We certainly could provide something for the 

record, Chairwoman Sanchez, if you would like this. 

Ms. SANCHEZ. That would be great. 

Ms. SANCHEZ. Mr. Anton? 

Mr. ANTON. We do—you know, as both—Lockheed Martin, Northrop Grumman have both made recommendations to the Coast 

Guard, and the Coast Guard is changing themselves, and so we— 

you know, I think I agree fully; and I am happy to take that for 

the record. 

Ms. SANCHEZ. Thank you. 

Ms. SANCHEZ. Ms. Jackson Lee, do you have any questions for 

our panel? 

Ms. JACKSON LEE. I do. 

PREPARED STATEMENT OF THE HONORABLE SHEILA JACKSON LEE, A REPRESENTATIVE

IN CONGRESS FROM THE STATE OF TEXAS

I thank the Chairman and Ranking Member for the opportunity to participate in 

this important hearing today. I look forward to hearing from the witnesses about 

this important issue of ensuring that we are employing the most effective and efficient safety measures and mechanisms necessary to keep our waters safe and secure. I am also pleased to welcome our distinguished panel of witnesses: Rear Admiral Gary T. Blore, Inspector General Richard Skinner, Captain Steven Baynes, Mr. 

Fred Moosally, and Mr. James Anton. 

Mr. Chairman, it is a great opportunity for all of us to be here for the purpose 

of discussing and considering the future of the Deepwater program and whether the 

Coast Guard has the sufficient program management capacity to run the program 

effectively. We certainly need to be informed as to whether we are using the optimal 

performing and most cost efficient tools to keep our waters safe from potential 

threats to the citizens of this country. 

In the mid-1990’s, after realizing that many of the Coast Guard’s aircraft and cutters were reaching the end of their operational lives, the Coast Guard decided to 

replace all of these assets in a single procurement program—the Integrated Deepwater System program, otherwise referred to as Deepwater. It is my understanding 

that the Coast Guard implemented Deepwater to replace or modernize the approximately 90 ships and 200 Coast Guard aircraft used for missions typically taking 

place more than 50 miles offshore. I also understand that the primary missions carried out in this ‘‘deepwater’’ zone are drug and migrant interdiction operations, 

search and rescue, homeland security, and fisheries law enforcement. 

The contract called for new ships, aircraft, and command and control systems to 

be delivered within 20 years, though the contract with ICGS could extend to up to 

30 years. Deepwater was a pre-9/11 project, but post-911 the demands placed on the 

Coast Guard changed are dramatically different. Consequently, the cost estimate increased from $17 billion to $24 billion, and the mix of assets was altered to reflect 

the Coast Guard’s greater role in homeland security. 

From its inception, Deepwater included funding to maintain the Coast Guard’s existing air and sea fleet until new ships and aircraft came online. Unfortunately, in 

recent years additional funds have been required to maintain the existing fleet, 

while at the same time delivery schedules for new equipment has slipped. Hence, 

the efficiency of cost and proficiency of performance is now under question. Hopefully, we can gain some helpful insights from this hearing to help move us in the 

direction of remedying these apparent inefficiencies. Yes, we need to use whatever 

measures necessary to keep our waters secure, but at the same time we want to 

make sure we are not operating in an unnecessarily subpar manner, whether financially, or otherwise. 

Unlike the Department of Defense, which always has large systems under development and has an acquisition infrastructure in place to support these efforts, historically the Coast Guard has not purchased major assets with regularity. Thus, 

their acquisition and program management structure was—and is—not as well developed and mature as that at the Department of Defense. 

Performance based contracts have almost universally not worked well without a 

robust program management and oversight structure to support them, as well as 

a clear understanding that it is the government in charge, not the contractor. The 

troubles with Deepwater bear this out—the Coast Guard deferred excessively to 

ICGS and did limited oversight. The Coast Guard now acknowledges that it was 

66 

‘‘naive’’ and ‘‘too reliant on the integrator’’; in the Inspector General’s words, the 

Coast Guard ‘‘abdicated’’ decisions to ICGS and failed to monitor to ensure that 

ICGS was not performing inherently governmental functions. The Inspector General 

said that there was a perception both within and without the Coast Guard that 

ICGS, not the government, was running the program. 

As I understand it, despite myriad problems, the Inspector General believes that 

Deepwater must go forward because of the problems the Coast Guard has in terms 

of its operational assets, and stopping Deepwater would set it backwards. If Deepwater remains in place, it is clear to me that Deepwater needs to be better managed 

and needs ongoing oversight—both from the Inspector General, and from Congress. 

I look forward to hearing from all of our witnesses today and hope to gain some 

valuable information to provide pertinent solutions to this very important homeland 

security concern. 

Thank you, Mr. Chairman, for convening this hearing. Again, welcome to the witnesses. 

I yield back the remainder of my time. 

Ms. SANCHEZ. You are recognized for 5 minutes. 

Ms. JACKSON LEE. Thank you. 

For many of us on our committee, this hearing has a direct impact. I represent a portion of the Houston port; and, frankly, being 

one of the more unique ports in the Nation and around the world, 

inasmuch as it is somewhat man-made, it was a brainchild of many 

of our founding fathers and mothers of Houston to dredge an area 

and to allow us to grow a port, if you will. 

So when I first came to the understanding of the inception of 

Deepwater, which included funding to maintain the Coast Guard’s 

existing air and sea fleet until new ships and aircraft came online, 

that was a good thing. But we find out in recent years that additional funds have been required to maintain the existing fleet, 

while at the same time delivery schedules for new equipment has 

slipped. 

The chairwoman and chairman—and I want to thank them both 

for this hearing. I think the chairwoman has just indicated that 

there is a letter from the Coast Guard that referred to the revocation of a contract and the dry docking of a certain number of ships 

because they are not able to function on rough seas. It seems to be 

that the Coast Guard’s whole mantra, among their many other duties, is about making sure they are able to sail the seas and to be 

the kind of front line of defense there. To me that is horrific. That 

is horrible. That is certainly a cause for our concern. 

Let me raise this question. Do you agree with the Inspector General’s assessment that the Coast Guard abdicated decisions to the 

ICGS, allowing the ICGS to perform inherently governmental functions? The Inspector General said there were no benchmarks. The 

Inspector General said that he had not seen in 39 years this kind 

of blocking. What is your response to that? 

Let me ask a second question so that you can both answer, and 

this will go to Mr. Anton. 

Mr. Anton, please tell me about the mitigation plan for the National Security Cutter. In particular, I would like to know what 

third parties you intend to bring in to certify that it will be done— 

that it will work, if you will. The first question. 

Mr. MOOSALLY. Madam, I will answer the question on the—as I 

did earlier on the IG’s allegation that in 39 years he has never seen 

somebody blocking talking to the IG. I don’t agree with that statement as far as our invoking what we believe is the right kind of 

67 

process to have, understand what the subject of the IG’s questions 

are and to protect our people with a lawyer present. 

As far as the Coast Guard—I know a lot has been made about 

the Coast Guard basically abdicated their responsibilities to the 

ICGS team to Lockheed Martin and Northrop Grumman. I don’t 

agree with that either. Because we have been involved with the 

Coast Guard in every part of this program and the IPTs that 

were—the Coast Guard was involved in. There was final decisions 

made by the Coast Guard that we ran through on equipment, et 

cetera. So I don’t necessarily agree with that statement. 

I don’t believe that they fully abdicated their responsibility to us, 

and we were kind of running around doing things on our own. I 

don’t agree with that. 

Ms. JACKSON LEE. I hope this committee will fix it, but, obviously, this program is wracked with problems. Obviously, the Inspector General had problems; and I think the Inspector General 

found gaping holes. That really speaks to the fact that we have got 

ships being dry docked because this program doesn’t work. 

Mr. Anton, the mitigation question, please. 

Mr. ANTON. On the National Security Cutter, there are some 978 

standards which are on contract. Those standards go from anywhere from structure to distributed systems to electronics and on 

to armament. 

Ms. JACKSON LEE. My time is short. My question is whether or 

not you looked at any mitigation plan and was it not true that it 

was the Navy’s CCD at Carderock, not the Coast Guard or you that 

found the problems? The defects? 

Mr. ANTON. The CCD is the 110s, 123s. In relation to your question on certification of the National Security Cutter, we are required by contract to have ABS certify the structure of the National Security Cutter, to approve the design of the National Security Cutter structure, that it is in accordance with the specifications. We are also on contract for the Navy to come in and conduct 

the in-service inspection of the National Security Cutter at acceptance trials. 

We are on contract for 46 separate certifications from third-party 

agencies. For those that are not done by third party, we are required by contract to assemble all of the artifacts which demonstrate that we have met that standard and submit those to the 

Coast Guard, and we have begun that process today. 

Ms. JACKSON LEE. And is that, in your mind, a mitigation plan 

for the structural defects? 

Mr. ANTON. The National Security Cutter is designed in accordance with the contract specifications, and let me tell you what 

those entail. 

The contract specifications for the National Security Cutter have 

been in use in ship design since World War II. Those specifications 

were modified by the Coast Guard to cause this ship to be stronger 

than a ship that you would design using those specifications. We 

made modifications to the structure along the way at the Coast 

Guard’s request; and, as a result, that ship is—not only was it designed to be stronger, the outcome of that ship is that it is stronger 

than the specification calls for. 

68 

The issue is fatigue. And fatigue is how—the outcome of the 

model that you use to forecast when something is going to crack. 

There are two methodologies that are in use. One methodology 

is you calibrate the model using a known source, something that 

has operated for 30 years and has not cracked. Or you build the 

model up from the ground up. When you use the model and calibrate the model, the fatigue life of the vessel becomes greater than 

30 years. 

Mr. ANTON. When you build the model from the ground up is 

when the prediction comes in short of 30 years. But when you then 

use that same model to predict what you know, the DDG 2 class 

that lasted 30 years without a crack, it predicted that class would 

crack in 8μyears. So the model is a science that is yet to be proven. 

The Coast Guard has opted to—because there is a degree of difference in those two answers, the Coast Guard has opted to implement a fatigue enhancement on a National Security Cutter. 

Ms. JACKSON LEE. I think the system shows that we have failed 

equipment. I appreciate the gentleman’s answer, but it gives us a 

roadmap for greater improvement in this program, and I thank you 

for holding this hearing. 

Ms. SANCHEZ. Thank you to the gentlelady from Texas. 

To my ranking member. 

Mr. SOUDER. I wanted to make one brief comment for the record, 

because it appears that, at least in the 110, 123 Cutter question, 

that the crux of the question is what conditions should these be 

sustained under. 

Now, obviously, buckling of the shaft, sides, vibrations, other 

types of questions are major flaws, particularly if they are severe, 

but the Coast Guard isn’t like the Navy that goes out on time to 

target. The Coast Guard goes out when things are bad. And that 

sailboats and things don’t tip over when the sea is flat. They tip 

over when the waves are biggest. And the commander has to have 

a flexibility on a 123, if he has got a 123 out instead of a 110, to 

be able to do that. 

I have worked narcotics. I have met drug runners from Columbia 

and elsewhere. They watch to see what our conditions are when we 

aren’t there, and they look for those conditions when they are going 

to move or right at the edge of those. And if our boats are out of 

position because we couldn’t get there, because there are vibrations 

if the waves get over 8 feet or over 12μfeet, it is not just the category of a hurricane. It is the level of the seas and their ability to 

move. It is whoever designed the concept and agreed to a concept 

or however it would work that says that the 123s can’t operate in 

high-risk conditions for extended periods means that cocaine is 

going to come into this country, heroin is going to come into this 

country, people are going to drown because we had a conceptual 

flaw. And I think that is what is a lot under this debate. 

I thank the chairwoman. 

Ms. SANCHEZ. Thank you. 

I am going to give Mr. Carney some extra time to finish up here. 

Mr. CARNEY. Thank you, ma’am. 

Mr. Anton, who built the original 110s? 

Mr. ANTON. Bollinger Shipyards. 

69 

Mr. CARNEY. Do you know the original plating on the 110s—the 

original 110s—was on the same source? 

Mr. ANTON. Same source as— 

Mr. CARNEY. Of all of the platings on the original 110s. Are they 

all from the same manufacturer? 

Mr. ANTON. I can take that for the record. I don’t know that answer. 

You are talking about the replacement plating against—what— 

the original plating of the ship; is that correct? 

Mr. CARNEY. Yes. 

Mr. ANTON. So was the replacement plating from the same 

source as the original plating. 

I will have to take it for the record. I don’t know. 

Mr. CARNEY. Was the plating on the original ships that was not 

a plate, are they all from the same source? Of the eight 110s, all 

the plating on all— 

Mr. ANTON. I don’t know. I would have to—we would have to go 

back into the production records at Bollinger. 

Mr. CARNEY. When the Navy stretched their 170—foot Cyclone 

ships to 179 feet, they did one on a trial basis. Why didn’t we do 

that with the 110s program? 

Mr. ANTON. In hindsight, knowing what we know today and 

knowing the process breakdowns that we had and knowing the information that is out there that we didn’t understand at the time, 

we could have done one and tested it. But we had no reason to believe that this wasn’t going to work. We took due diligence in both 

the design process and the development process, and we had no 

reason to believe this wasn’t going to work. 

Mr. CARNEY. Did you have reason to believe that the Cyclone 

would not work? 

Mr. ANTON. I was not involved with the Cyclone program, so I 

can’t answer that. Bollinger were the folks that did the PC–179. 

Mr. CARNEY. There is an enormous amount of frustration up here 

right now on this whole thing. Just common-sense things like doing 

the trial would have been great and would have saved maybe seven 

ships and hundreds of millions of dollars. 

Anyway, you know, living and learning is one thing, but we are 

now short eight ships. And while I agree the rest of Deepwater is 

generally—not perfectly, but generally—moving along in the right 

direction, this creates a major hole; and Mr. Souder is correct to 

point out the hole created by this. It seems just basic operating 

sorts of performance measures should have been done that weren’t, 

and it is criminal. 

I yield back, Madam Chair. 

Ms. SANCHEZ. I thank the gentleman from Pennsylvania. 

I think you can feel the frustration on this side, and I think it 

is going to be even more frustrating for these two gentlemen and 

for our representatives at the Department of Homeland Security to 

get this all settled out. But we appreciate you gentlemen coming 

before us to try to give us some more insight into what has happened. 

Since there are no more members and no more questions—I will 

just tell you that we may have additional questions for you as witnesses, and we will ask you to respond quickly to those in writing. 

70 

Hearing no further business in the committee, the subcommittee 

stands adjourned. 

[Whereupon, at 4:58 p.m., the subcommittees were adjourned.] 

(71) 

Appendix: Additional Questions and Responses 

Mr. Skinner, in your testimony, you state, ‘‘According to the Coast Guard, its acquisition workforce did not have the requisite training, experience, and certification 

to manage an acquisition the size, scope, and complexity of the Deepwater Program.’’ The Coast Guard has since changed their position and is in the process of 

staffing up their offices to manage Deepwater. 

Question 1.: Do you believe that with the addition of new staff, that the 

CG will now have the requisite training, experience and certification to 

manage this acquisition? 

DHS OIG Response: It is too early to tell. The Coast Guard clearly recognizes 

that urgent and immediate changes are needed to meet the management oversight 

and acquisition resource challenges facing its Deepwater Program. To address these 

challenges, the Coast Guard has developed and is currently implementing its Blueprint for Acquistion Reform and has stated its intention to assume many of the 

Deepwater systems integrator duties and responsibilities previously performed by 

Integrated Coast Guard Systems (ICGS). However, the Coast Guard’s ability to effectively reorganize and manage the Deepwater Acquisition Program will be largely 

dependent on their ability to: 

• identify the number and type of acquisition professionals needed to properly 

oversee the Deepwater Acquisition program; 

• recruit and retain acquisition professionals; 

• develop an in-house capability to train and certify acquisition professionals; 

• develop and implement an acquisitions career path for its active duty and civilian personnel; 


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• document the rationale underlying key Deepwater acquisition decisions; and 

• identify the financial costs associated with the realignment, reorganization, 

retraining, and rebuilding of its acquisition workforce. 

The Coast Guard has also acknowledged (and we agree) that it could take several 

years to fully implement the changes to its acquisitions program. Given the unknowns associated with these changes, we believe the Coast Guard needs to exercise 

caution and take a slower or phased approach to assuming the systems integrator 

role even if doing so were to result in minor delays in the delivery of key Deepwater 

assets such as the national security and fast response cutters. 

Question: 2.: Who do you believe that the Coast Guard has the expertise 

to be the systems integrator for the Deepwater Program? 

DHS OIG Response: We do not believe the Coast Guard currently has the expertise and neither does the Coast Guard. The Commandant has testified that the reason the Coast Guard went the ‘‘systems integrator’’ route was that it did not believe 

it had the requisite expertise to be the systems integrator for such a large and complex acquisition. Further, the Coast Guard has acknowledged that it could take several years to fully implement the much-needed changes to its acquisitions program 

of which the Deepwater Acquisition program is a major component. While we fully 

understand the Coast Guard’s desire to getting a handle on their system integrator 

problems, assuming the systems integrator role before sufficient acquisition personnel and resources are identified and brought on board to support the changes 

could further increase the risks associated with the Deepwater Acquisition Program. 

For these reasons, we believe the Coast Guard’s assumption of system integrator 

duties and responsibilities needs to occur in a carefully considered and methodical 

manner. 

Question 3.: Who should be held responsible for the problems with the 

Deepwater Program? 

DHS OIG Response: To date, we have not completed audit work designed to determine the culpability of DHS, Coast Guard, ICGS or its subcontractors for the 

cost, schedule, and performance problems associated with the Deepwater Program. 

However, there are several individuals that we believe have knowledge and a 

unique perspective of Deepwater’s management and oversight problems. They include: 

• Admiral James Loy, USCG (ret) who served as Commandant from May 1998 

to May 2002), less than a month before the signing of the Deepwater contract 

between Coast Guard and ICGS. Prior to the establishment of the Department 

of Homeland Security in 2002, Admiral Loy served in the Department of Transportation as Deputy Under Secretary for Security and Chief Operating Officer 

of the Transportation Security Administration (TSA), and later as Under Secretary for Security. In these roles, he served as the first administrator of the 

newly created TSA. On December 4, 2003, Admiral Loy was sworn in as Deputy 

secretary, Department of Homeland Security. In April 2005, he accepted a position with the Cohen Group as a consultant. Shortly thereafter (August 2005), 

he became a member of the Board of Directors, Lockheed Martin Corporation 

(parent company of ICGS). 

• Admiral Thomas H. Collins, USCG (ret), who served as the Commandant 

from May 2002 to May 2006. Prior to his assignment as Commandant, he was 

Vice Commandant and served on the Innovation Council, which spearheaded 

Coast Guard-wide process improvement initiatives and directed system enhancements as the Coast Guard Acquisition Executive. Prior to that, he served 

as Chief, Office of Acquisition, at USCG HQ, where he laid the foundation for 

the Deepwater Acquisition Project. 

• Vice Admiral Terry Cross, USCG (ret) retired on June 2, 2006. As Vice Commandant, he served as the Agency Acquisition Executive and had requirements 

decision authority for major Coast Guard acquisitions requirements, including 

aircraft, boats, ships, technology systems and facilities. On October 18, 2006, 

less than five months after his retirement, Admiral Cross was named as European Aeronautic Defence Space Company (EADS North America) in the newly 

created position of Director of Homeland Security Programs. EADS is the manufacturer of the Dolphin HH–65 helicopter. They also are the contractor providing the new maritime patrol aircraft (CASA 144) aircraft to the Coast Guard 

through ICGS and the Deepwater Program. 

• Admiral Patrick M. Stillman, USCG (ret) served as the Program Executive 

Officer for the Deepwater Acquisition Program (2002–2006). 

• Gregory L. Giddens was Coast Guard’s Deputy Program Executive Officer for 

Deepwater under Admiral Stillman. He has since moved to Customs and Border 

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Patrol as the current Director, Secure Border Initiative Program, Customs and 

Border Protection, Department of Homeland Security. 

Question 4.: Should Lockheed Martin or Northrop Grumman be forced to 

compensate the government for the shortcomings of the program? 

DHS OIG Response: We have not performed sufficient audit work to determine 

culpability by ICGS or its subcontractors for the problems associated with the Deepwater Program. We recommend that the Questions concerning contract compliance 

and consideration due to the government be directed to the Department and the 

Coast Guard. 

Question 5.: In your report, you state that your office encountered resistance 

from the Department in conducting your audits. Why do you think that the Department frustrated your efforts? Has the relationship improved? 

DHS OIG Response: Generally speaking, the relationship between the Coast 

Guard and the OIG has significantly improved over the past 12 months. However, 

the Coast Guard continues to be slow in responding to our requests for information 

and documentation to clarify statements made by Coast Guard personnel. For example, the Coast Guard has not provided documentation showing that the ‘‘One Break’’ 

solution developed by its Engineering Logistics Command (ELC) will address the 

structural design and performance issues identified with the NSC. Consequently, it 

is not known whether the solution will permit the NSC to operate 185 days underway for 30 years under North Pacific and General Atlantic conditions. 

Question 6 and 7.: In your testimony you stated that prior to the Phase 2 contract award, the Coast Guard provided design standards to the competing industry 

teams. Based on their feedback, the Coast Guard converted the majority of the 

standards (85% of the 1,175 standards) to guidance and permitted the industry 

teams to select their own alternative standards. Why do you think this happened? 

DHS OIG Response: We cannot be certain. In June 1999, the Coast Guard and 

American Bureau of Shipping completed a multi-year effort to develop a Generic 

Cutter Certification Matrix (GCCM). The purpose of the matrix was to ensure that 

the 123’ patrol boat, the fast response cutter (FRC), the National Security Cutter 

(NSC) and Offshore Patrol Cutter (OPC) would be capable of meeting the Coast 

Guard’s crew safety and Deepwater mission requirements. However, the feedback 

from the three industry teams that intended to bid on the Deepwater contract was 

that the GCCM standards were too restrictive and would substantially increase 

their cutter design and construction costs. The Coast Guard subsequently converted 

85% of the design standards to ‘‘guidance.’’ When the Coast Guard issued the Deepwater request for proposal in June 2001, it allowed the industry teams to select 

their own alternative standards to the ‘‘guidance’’ standards. The resulting cutter 

certification standards developed by the winning bidder (Integrated Coast Guard 

Systems of ICGS) contained potentially ill-defined or inappropriate design criteria 

that were inconsistent with the original intent of the GCCM. 

Question 8.: Why didn’t the Systems Integrator step in if the proposed alternatives would not meet cutter design criteria? 

DHS OIG Response: We do not know why the systems integrator (ICGS) did not 

adopt the more stringent generic Cutter Certification Matrix developed by the Coast 

Guard and the American Bureau of Shipping (ABS). We cannot make a determination, principally due to ICGS’ refusal to allow DHS OIG unfettered access to its personnel knowledgeable of these and other Deepwater-related decisions. However, we 

do know that the decision by ICGS to revise the cutter certification standards downward reduced cutter design and construction costs and increased the potential for 

profit. It also lowered the ‘‘performance bar’’ which made it significantly easier for 

ICGS and its shipbuilders to meet the minimum cutter performance requirements 

outlined in the Deepwater contract. 

Question 9.: During the hearing, you stated that ICGS prevented your office from 

gaining access to ICGS personnel. Please provide us with documentation on 

this denial of access. 

DHS OIG Response: Attached are three documents that outline the difficulties 

we experienced in obtaining access to Deepwater contract personnel and documentation. Additional information regarding this topic is available on request. 

Attachment 1 OIG work paper that summarizes our three-month effort to conduct 

interviews and request documents from ICGS and its Tier 1 sub contractors. 

Attachment 2 Letter from Kevin O’Neill and RADM Patrick Stillmann dated 24 

January 2006. The letter documents efforts to interview key Integrated Coast Guard 

74 

Systems Integrator (ICGS) and Northrop Grumman Ship Systems (NGSS) employees. The letter states that: 

Both Northrop Grumman Ship Systems and Lockheed Martin have formal policies regarding responses to audit requests including requests for interviews of 

employees oversight bodies, such as the OIG. How those policies fit the circumstances surrounding the OIG audit discussed on 12 January 2006 is being 

evaluated. To facilitate that evaluation, ICGS and NGSS hereby request a meeting with representatives of the Coast Guard and the OIG to discuss the scope 

and schedule of the audit in order to develop an efficient approach that will protect the employers’ and companies’ interests as well as facilitate the OIG’s audit 

objective. We ask that a USCG representative would contact Mr. Jay Boyd to 

schedule such a meeting in the near future.’’ 

To date, neither NGSS nor ICGS have provided the OIG with the written details 

of these policies. 

Attachment 3 Letter from Kevin J. O’Neill to the Coast Guard (RADM Patrick 

Stillman documenting the OIG’s request that NGSS and Lockheed Martin clarify 

their position regarding responses to requests for documents or interviews of employees originating with the OIG. 

The evidence also indicates the problem remains unchanged. During a recent 

Deepwater entrance conference, the ICGS spokesperson boldly informed the OIG 

that the access issues that we encountered when we tried to obtain unfettered access to ICGS and NGSS employees and documentations remained unresolved. Specifically, ICGS wanted all OIG Questions in advance of all ICGS interviews. ICGS 

also stated their intention to have their counsel present at all OIG interviews. The 

Coast Guard’s response on the other hand, continues to be that contractor access 

issues are a Department versus a Coast Guard problem. We respectfully disagree. 

In our view, any contractor that transacts billions of dollars worth of business with 

the government of the United States should be required to provide the government 

(in this case the OIG) with timely and unfettered access to all personnel and documentation associated with that business transaction. 

Question 10.: Has the access problem with ICGS been resolved? If not, 

why not? 

DHS OIG Response: The access to contractor personnel and information has 

never been resolved. The Coast Guard’s response to the recommendation in the NSC 

report was to defer to the Department for action. Therefore, while access to contractors currently remains unchanged, the OIG is currently pursuing resolution with 

the Under Secretary for Management. In addition, the issue of government-wide 

OIG access to contractor records and personnel has been raised with the National 

Procurement Fraud Task Force as an item requiring legislative modification. As recently as last month, ICGS had informed the OIG that our contractor access issues 

remained unresolved. 

QUESTIONS FROM THE HONORABLE CHRISTOPHER P. CARNEY GENERAL QUESTIONS

Question 11.: What is the average age of the Coast Guard’s current helicopter inventory? 

DHS OIG Response: The DHS OIG has not performed audit work that would 

enable us to respond to this Question. The Coast Guard should be able to answer 

this Question. 

Question 12.: The Coast Guard is faced with increasing demands of new 

and evolving missions. I understand that USCG is currently without a master plan to address its aviation requirements in the near and long-term? 

DHS OIG Response: The DHS OIG has not performed audit work that would 

enable us to respond to this Question. The Coast Guard should be able to answer 

this Question. 

Question 13.: Has USCG neglected to properly plan to modernize its aviation assets such as helicopters? 

DHS OIG Response: The DHS OIG has not performed audit work that would 

enable us to respond to this Question. The Coast Guard should be able to answer 

this Question. 

Question 14.: The original Deepwater aviation solution included plans to 

upgrade and modernize the Coast Guard’s inventory of rotorcraft. It is my 

understanding that the plan was scrapped in order to divert funds to ship 

programs. Where is USCG in the process of replacing the original Deepwater aviation plan with a new one, based on today’s requirements? 

75 

DHS OIG Response: The DHS OIG has not performed audit work that would 

enable us to respond to this Question. The Coast Guard should be able to answer 

this Question. 

Question 15.: USCG has fewer than 150 helicopters (41 HH–60Js and 95 HH– 

65s). Is this enough to meet the emerging and forecast needs of the Coast 

Guard, including spares and attrition? When did the previous Aviation 

Master Plan (AMP) include replacement helicopters? 

DHS OIG Response: The DHS OIG has not performed audit work that would 

enable us to respond to this Question. The Coast Guard should be able to answer 

this Question. 

HH–65 SPECIFIC QUESTIONS, INCLUDING ACQUISITION OF ADDITIONAL

NEW OR USED HH–65 AIRFRAMES: 

Question 16.: I am aware of the significant investment made to resolve a ‘‘safety 

of flight’’ issue with the Coast Guard fleet of HH–65 helicopters. What other 

changes or modifications do you anticipate having to make on this legacy 

helicopter fleet? 

DHS OIG Response: The DHS OIG has not performed audit work, which would 

enable us to respond to this Question. The Coast Guard should be able to answer 

this Question. 

Question 17.: What is the total coast of the HH–65 re-engining program? 

DHS OIG Response: The DHS OIG has not performed audit work that would 

enable us to respond to this Question. The Coast Guard should be able to answer 

this Question. 

Question 18.: Did Congress approve the expense of used airframes in the 

Coast Guard’s budget? If so, when and for how much? 

DHS OIG Response: The DHS OIG has not performed audit work that would 

enable us to respond to this Question. The Coast Guard should be able to answer 

this Question. 

Question 19.: From where did you acquire the airframes? 

DHS OIG Response: The DHS OIG has not performed audit work that would 

enable us to respond to this Question. The Coast Guard should be able to answer 

this Question. 

Question 20.: What is the total cost, not just the unit cost, but all of the 

costs associated with modifying, upgrading, and readying for missions 

those aircraft? 

DHS OIG Response: The DHS OIG has not performed audit work that would 

enable us to respond to this Question. The Coast Guard should be able to answer 

this Question. 

Question 21.: I’ve heard some concerns that the HH–60 has some structural integrity problems and the HH–65 is hampered by shipboard landing limitations. 

Why does USCG continue investing in aircraft with reduced capability and 

inherent mission degradation issues instead of planning for their replacement? 

DHS OIG Response: The DHS OIG has not performed audit work that would 

enable us to respond to this Question. The Coast Guard should be able to answer 

this Question. 

MH–68 SPECIFIC QUESTIONS: 

Question 22.: One of the biggest success stories I have heard coming out 

of Deepwater involves the elite drug interdiction squadron based at Cecil 

Field in Jacksonville, FL. I understand that the DEA soon will be removing 

its helicopters in the Caribbean, providing an even larger gap in our country’s drug interdiction efforts. Does the Coast Guard have plans to continue 

that program? 

DHS OIG Response: The DHS OIG has not performed audit work that would 

enable us to respond to this Question. The Coast Guard should be able to answer 

this Question. 

Question 23.: Does it have plans to expand that program to other traffic 

areas such as the Gulf or West Coast? If so, how? Where will you get the 

76 

aircraft from? If not, why? Do we not need such a program in these key 

areas? 

DHS OIG Response: The DHS OIG has not performed audit work that would 

enable us to respond to this Question. The Coast Guard should be able to answer 

this Question. 

Question 24.: Are you still planning to get rid of the eight MH–68 helicopters currently performing these drug interdiction missions? How will 

you fill the void with your current ill-equipped fleet? Will you not have to 

take helicopters serving in other areas of the country away from their mission to serve in this role? 

DHS OIG Response: The DHS OIG has not performed audit work that would 

enable us to respond to this Question. The Coast Guard should be able to answer 

this Question. 

QUESTIONS FROM THE HONORABLE MARK E. SOUDER, RANKING MEMBER, AND THE

HONORABLE MIKE ROGERS, MEMBER

Question 25.: Please walk us briefly through the timeline from the first 

identification of deficiencies with the NSC’s design in December 2002 to the 

Christening of NSC #1 in August of last year. 

DHS OIG Response: Below is a graphic timeline of events that depicts Coast 

Guard’s knowledge of the National Security Cutter’s (NSC) structural design flaws 

relative to major NSC acquisition milestones. 

Question 26.: In your opinion, why did the Coast Guard fail to act on the 

warnings of its lead engineer, or the independent structural analysis provided by multiple third parties? 

DHS OIG Response: The DHS OIG has not performed audit work that would 

enable us to fully respond to this Question. The Coast Guard should be able to answer this Question. However, we have testified that the dominant influence of expediency, unfavorable contract terms and conditions, poorly defined performance requirements, and inadequate management and technical oversight of the Deepwater 

contract by the Coast Guard were prime contributors to the cost increases, schedule 

delays, and performance problems associated with the national security cutter. It 

should also be noted that the Coast Guard advised us during the course of the National Security Cutter audit that: 

given the uncertainty of the validity of the ELC’s concerns and the certainty of the 

significant delay and disruption cost the Government would incur, as well as the real 

urgency of delivering NSCs to the fleet to replace rapidly-deteriorating legacy assets, 

the Program Office decided to proceed with production.’’ 

Question 27.: Do you believe the Coast Guard’s reorganization of its Deepwater, Acquisitions, and Systems Engineering directorates is a step in the 

right direction? What are some potential pitfalls you foresee with this approach? 


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DHS OIG Response: As we stated in our response to Question 1, it is too early 

to tell. While the Coast Guard clearly recognizes that urgent and immediate 

changes are needed to meet the management oversight and acquisition resource 

challenges facing its Deepwater Program, there are many challenges ahead. For example, the Coast Guard’s ability to effectively reorganize and manage the Deepwater Acquisition Program will be largely dependent on their ability to: 

• Identify the number and type of acquisition professionals needed to properly 

oversee the Deepwater Acquisition program: 

• Recruit and retain acquisition professionals: 

• Develop an in-house capability to train and certify acquisition professionals; 

• Develop and implement an acquisitions career path for its active duty and civilian personnel; 

• Document the rationale underlying key Deepwater acquisition decisions; and, 

• Identify the financial costs associated with the realignment, reorganization, 

retraining, and rebuilding of its acquisition workforce. 

The Coast Guard has also acknowledged (and we agree) that it could take several 

years to fully implement the changes to its acquisitions program. Given the unknowns associated with these changes, we believe the Coast Guard should exercise 

caution when evaluating and implementing its Deepwater Implementation plan 

even if doing so were to result in minor delays in the delivery of key Deepwater 

assets such as the national security and fast response cutters. 

Question 28.: I have a Question as to the several ‘‘Requests for Deviation’’ 

from the contract sought by ICGS. Presumably, any request for deviation 

should have minimal impact on performance and no impact on safety for 

a particular system. Can you please provide examples where deviations 

were granted that, in your opinion, had a negative impact on either performance or safety? 

DHS OIG Response: We reported in our 110’/123’ Maritime Patrol Boat Modernization Project report (123’ report) dated February 2007, that the Coast Guard 

approved a request for a deviation from ICGS for the use of non low smoke cable 

after the contractor installed the non-compliant cables in several 123’ patrol boats 

that had already been accepted and were in operation by the Coast Guard. 

The intent of the low smoke cable requirement was to eliminate the use of polyvinyl chloride jackets to encase cables, which for years produced toxic fumes and 

dense smoke during shipboard fires. The contractor indicated in its May 2004 request for a deviation that approximately 680 cables (or 85 cables per cutter) did not 

meet the low smoke requirements identified in the contract. The contractor’s request 

for a deviation from the low smoke cable requirement identified the cable, its type, 

and its function. It did not, however, indicate the flammability and toxicity characteristics of the sub-standard cables installed. We are concerned that the Coast 

Guard did not exercise due diligence in determining the flammability and toxicity 

characteristics of the replacement cables being installed prior to issuance of the deviation. Furthermore, the Coast Guard accepted delivery and operated four 123’ cutters without knowing the full extent of the hazards associated with the use of the 

non-low smoke cabling. 

The 123’ report also cited ICGS’ attempt to continue with the installation of 

C4ISR topside equipment installed aboard the 123’ and the short-range prosecutors 

(prosecutors) although they were aware that the equipment did not meet minimum 

Deepwater design and performance requirements. 

According to the Deepwater contract, the topside equipment aboard the 123’ cutters and prosecutors was required to meet the environmental performance specifications as defined by the Cutter Certification Matrix and the prosecutor performance 

specifications. The purpose of these requirements was to ensure that the C4ISR systems installed aboard the 123’ cutters and prosecutors remained fully operational 

when operated under extreme weather, sea, and atmospheric conditions. This is a 

critical requirement, given the frequency with which Coast Guard operates its cutters and small boats under such conditions. 

In the case of the 123’ cutter Matagorda, the contractor incorrectly indicated on 

the certification documentation that there were no applicable requirements stipulated with regard to weather environment requirements, and that the certification 

is ‘‘not really beneficial.’’ However, the certification documentation specifically designates MIL–STD 1399C, Section 302, as the weather environment standard for certification requirements, which clearly stipulates minimum and maximum weather 

environment limits. Additionally, the certificates of conformance provided with the 

eight 123? cutters and eight prosecutors did not indicate that the Coast Guard had 

previously approved any deviation or waiver from the environmental performance 

requirements identified in the contract. The Coast Guard stated that it was unVerDate Nov 24 2008 10:57 Jul 02, 2009 Jkt 000000 PO 00000 Frm 00081 Fmt 6601 Sfmt 6621 H:\DOCS\110-HRGS\110-38\48913.TXT HSEC PsN: DIANE
78 

aware that the 123’ cutters and prosecutors were not compliant with the environmental performance specifications until July 2005. By then it was too late as seven 

123’ cutters had already been delivered to and accepted by the Coast Guard. 

On August 29, 2006, Coast Guard received a letter from the contractor indicating 

that the C4ISR topside equipment installed aboard the 123’ cutters and the prosecutors either did not meet minimum environmental requirements as specified in the 

Deepwater contract or had not been evaluated against environmental performance 

requirements specified in the Deepwater contract prior to installation. According to 

the contractor, testing each of these components would be ‘‘time consuming, expensive, and of limited value.’’ Instead the contractor stated its intention to submit Requests For Waivers for each of the topside components whose performance either did 

not meet contract requirements or had not been evaluated against contract environmental performance requirements. The contractor stated that the Requests For 

Waivers presented ?an acceptable and reasonable approach, since most of the environmental specifications guard against weather conditions the 123’ [cutter] and 

[prosecutors] will likely never experience in their assigned duties, and due to the 

fact the environmental requirements were clarified after the 123’ [cutters] were produced and deployed.’’ 

However, we remain concerned that: 

• The C4ISR topside equipment requirements for the 123’ cutter were clearly 

defined in the Cutter Certification Matrix. If the requirements, it were unclear, 

it was incumbent on the contractor to obtain the necessary clarification before 

purchasing, installing, and certifying the installation as meeting the requirements; 

• The contractor could mistakenly assume that the 123’s would be assigned 

only to moderate climates when it was a well-known fact that the Coast guard 

intended to deploy the 123’ patrol boats along the U.S. Atlantic, pacific, and 

Gulf coasts where weather and sea conditions can be quite severe; and, 

• The Coast Guard’s original and revised Deepwater Implementation Plans 

called for the acquisition of at least 91 short range prosecutors, the majority of 

which were to be deployed aboard the 123’ cutter, the National Security Cutter, 

and the Fast Response Cutter. These cutters were originally intended to form 

the nucleus of the Coast Guard’s Deepwater surface fleet. Given the Coast 

Guard’s intention to deploy the National Security Cutter and Fast Response 

Cutter (or its replacement), offshore along the U.S. Atlantic, Pacific, and Gulf 

coasts, the contractor’s assertion that prosecutors would not be operated in 

areas where severe environmental conditions could affect performance, was not 

accurate. 

The Coast Guard never had a chance to decide whether it would grant ICGS? 

pending request for deviation given the other more serious structural design and 

crew safety issues associated with the 123? patrol boat fleet. The 123? patrol boat 

was permanently withdrawn from service in April 2007. 

Question 29.: Admiral Allen recently stated that in order to have an integrated Deepwater, you need to have an integrated Coast Guard. Do you believe that if Admiral Allen combines the Acquisitions Directorate with the 

Program Executive Office for Deepwater, the Coast Guard will be able to 

manage this enormous contract? 

DHS OIG Response: I have testified that ‘‘the devil is in the details’’ concerning 

Coast Guard’s ability and capacity to manage and assume the systems integrator 

role for Deepwater Program. The Coast Guard’s Blueprint for Acquisition Reform is 

a strategic plan and does not contain the level of detail necessary to predict the future success of the Deepwater Program. Additionally, we believe there is considerable risk associated with the Coast Guard assuming the lead systems integrator role 

at this time without having fully implemented its Blueprint for Acquisition Reform. 

In particular, the Deepwater Program needs to overcome its human capital gap. The 

Coast Guard needs to exercise caution and take a slower or phased approach to assuming the systems integrator role. 

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Attachment 1: 


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Attachment 2: 


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Attachment 3: 


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Æ 


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