Department of Homeland Security 

U.S. Coast Guard’s Acquisition of the 

Sentinel Class – Fast Response Cutter 

OIG-12-68 (Revised) August 2012
 
August 31, 2012
 
Office of Inspector General 

U.S. Department of Homeland Security 

Washington, DC 20528 

 August 31, 2012

Preface 

The Department of Homeland Security (DHS) Office of Inspector General (OIG) was 

established by the Homeland Security Act of 2002 (Public Law 107-296) by amendment 

to the Inspector General Act of 1978. This is one of a series of audit, inspection, and 

special reports prepared as part of our oversight responsibilities to promote economy, 

efficiency, and effectiveness within the Department. 

This report addresses the effectiveness of the United States Coast Guard's Sentinel 

Class - Fast Response Cutter acquisition. It is based on interviews with employees and 

officials of relevant agencies and institutions, direct observations, and a review of 

applicable documents. 

The recommendations herein have been developed to the best knowledge available to our 

office, and have been discussed in draft with those responsible for implementation. We 

trust this report will result in more effective, efficient, and economical operations. We 

express our appreciation to all of those who contributed to the preparation of this report. 

Anne L. Richards 

Assistant Inspector General for Audits 
Table of Contents/Abbreviations 

Executive Summary ........................................................................................................... 1
 

Background ........................................................................................................................ 2 


Results of Audit ................................................................................................................. 4 


The Coast Guard’s Oversight of the Fast Response Cutter Contract ........................... 4 


The Coast Guard’s Schedule-Driven Procurement Strategy ........................................ 6 


Recommendations ............................................................................................................ 13
 

Management Comments and OIG Analysis .................................................................... 13 


Appendices 

Appendix A: Purpose, Scope, and Methodology ..................................................... 18 


Appendix B: Management Comments to the Draft Report ..................................... 20 


Appendix C: Comparison of Island-Class Patrol Boat and Fast Response Cutter .. 23 


Appendix D: Major Contributors to This Report .................................................... 24 


Appendix E: Report Distribution ............................................................................ 25 


Abbreviations 

DHS Department of Homeland Security 


DOT&E Director, Operational Test and Evaluation
 

FRC Fast Response Cutter 


OIG Office of Inspector General 

 

OIG
 

Department of Homeland Security 

Office of Inspector General 

Executive Summary 

In September 2008, the Coast Guard awarded Bollinger Shipyards, 

LLC, an $88.2 million fixed-price contract for the detailed design 

and construction of the lead Sentinel Class Fast Response Cutter. 

The contract contains six options to build a maximum of 34 

cutters, worth up to an estimated $1.5 billion. As of September 

2011, the Coast Guard had awarded three contract options for 

12 cutters, with a total contract price of $597.3 million. We 

performed this audit to determine whether the Coast Guard’s 

oversight of the Fast Response Cutter acquisition ensures that the 

provisions of the contract reflect the Coast Guard’s stated 

operational requirements and the contractor is meeting the 

contract’s provisions. 

The Coast Guard’s oversight of the Fast Response Cutter 

acquisition has helped ensure that the provisions of the contract 

reflect the Coast Guard’s operational requirements and that the 

contractor is meeting the contract’s provisions. However, the 

Coast Guard has executed an aggressive, schedule-driven strategy 

that allowed construction of the Fast Response Cutters to start 

before operational, design, and technical risks were resolved. 

Consequently, six cutters under construction required rework that 

resulted in at least 270 days of schedule delays for each cutter and 

a total cost increase of $6.9 million for the acquisition. This 

aggressive acquisition strategy also allowed the Coast Guard to 

procure 12 Fast Response Cutters before testing the lead cutter in 

actual operations. It is uncertain whether the Fast Response Cutter 

will perform as intended until it completes operational test and 

evaluation in actual maritime environments. 

If operational test and evaluation on the lead Fast Response Cutter 

reveals deficiencies, the Fast Response Cutters may incur 

additional costly rework and delays, or the Coast Guard may have 

to accept Fast Response Cutters that do not fully meet its mission 

requirements. This may hinder the Coast Guard’s ability to fill the 

critical shortages in its patrol boat fleet. The Coast Guard 

concurred with two recommendations and partially concurred with 

the remaining three recommendations to improve this and future 

acquisitions. 

U.S. Coast Guard’s Acquisition of the Sentinel Class – Fast Response Cutter 

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Background 

The U.S. Coast Guard is acquiring the Sentinel Class Fast Response 

Cutter (FRC) to fill its critical need for additional patrol boats and 

to replace the aging Island-class 110-foot patrol boats. The FRC is 

intended to perform multiple missions, including search and 

rescue, migrant interdiction, drug interdiction, and law enforcement. 

It is the first major acquisition to be brought under the direct 

management of the Coast Guard after being formerly contracted 

through the Deepwater program. Deepwater was a major 

integrated systems acquisition program, administered by a lead 

systems integrator, designed to replace, modernize, and sustain the 

Coast Guard’s aging fleet of ships and aircraft. The Coast Guard 

elected to bring the FRC acquisition in-house to achieve faster 

delivery, reduced cost, and increased contract competition. 

Figure 1: Lead Fast Response Cutter – Bernard C. Webber (U.S. Coast Guard). 

The FRC will perform the same missions as the Island-class 

110-foot patrol boats, but has key improvements in seakeeping, 

command and control, and weapon systems (see appendix C for a 

comparison between the Island-class 110-foot patrol boat and the 

FRC). The FRC also added a small boat stern launch and recovery 

system to achieve safer and more efficient operations. The FRC’s 

small boat is critical to the successful execution of the FRC’s 

U.S. Coast Guard’s Acquisition of the Sentinel Class – Fast Response Cutter 

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primary missions. It can hold up to five crewmembers and reach 

speeds of 40 knots. 

Additionally, the Coast Guard elected to use a proven design 

(parent craft) to mitigate FRC performance and schedule risk. The 

Coast Guard based the FRC’s design on the Damen 4708, with the 

following modifications: 

•	 Increase of flank speed from 23.8 to 28+ knots; 

•	 Addition of a stern ramp for small boat launch and recovery; 

•	 Modification of propeller design to save weight, reduce 

complexity, and improve speed; 

•	 Inclusion of watertight bulkheads; 

•	 Modification of electrical systems; and 

•	 Reconfiguration of interior arrangements to enhance 

habitability, incorporate stern launch, and support increased 

command, control, communications, computers, 

intelligence, surveillance, and reconnaissance systems. 

Furthermore, the FRC is being designed and constructed to meet 

the American Bureau of Shipping High Speed Naval Craft rules 

and guidelines, which provide additional assurance that the FRC is 

structurally and mechanically sound. 

In September 2008, the Coast Guard competitively awarded 

Bollinger Shipyards, LLC, an $88.2 million fixed-price contract 

for the detailed design and construction of the first FRC. The 

contract contains six options to build a maximum of 34 cutters, 

worth up to an estimated $1.5 billion. As of September 2011, the 

Coast Guard had exercised three contract options for 12 FRCs at a 

total contract price of $597.3 million. Per the FRC’s Acquisition 

Program Baseline Document, which represents the minimum cost, 

schedule, and performance measures approved by DHS for the 

acquisition, the lead FRC was to be delivered no later than 

December 31, 2011. However, the lead FRC was delivered on 

February 10, 2012, subsequent to the issuance of our draft report. 

The Coast Guard has notified DHS of the schedule breach and is 

currently revising its FRC Acquisition Program Baseline. The 

Coast Guard plans to submit the revised Acquisition Program 

Baseline to DHS for approval by June 2012. 

The Coast Guard has attributed the schedule delay to rework that 

occurred for six FRCs under construction and a protest that was 

filed which required a work stop order for 97 days when the FRC 

U.S. Coast Guard’s Acquisition of the Sentinel Class – Fast Response Cutter 

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contract was awarded, neither of which was reflected in the 

Acquisition Program Baseline. Although the Coast Guard 

modified the contract schedule delivery date to January 30, 2012 to 

account for these delays, the contractor still delivered the lead FRC 

11 days late under the modified contract delivery schedule. The 

Coast Guard has withheld approximately $200,000 from payment 

against the fixed-price contract for the late delivery. According to 

the Coast Guard, the contract price will be reduced or other 

consideration of equal value will be obtained from the contractor 

for the late delivery, pending a final determination by the 

Contracting Officer. 

The FRCs are being built at Bollinger’s Lockport, LA, shipyard, 

where the Coast Guard has established an onsite project resident 

office to oversee the project. The Coast Guard plans to procure a 

total of 58 FRCs to fill its critical patrol boat gap and requested 

$27.2 million in fiscal year 2012 appropriations to purchase the 

design and data rights to recompete the contract for the remaining 

FRCs. 

We conducted this audit to determine whether the Coast Guard’s 

oversight of the FRC acquisition ensures that the provisions in the 

contract reflect the Coast Guard’s stated operational requirements 

and that the contractor is meeting the contract’s provisions. 

Results of Audit 

The Coast Guard’s oversight of the FRC acquisition has helped ensure that the 

provisions of the contract reflect the Coast Guard’s stated operational 

requirements and the contractor is meeting the contract’s provisions. However, 

the Coast Guard’s schedule-driven strategy allowed construction of the FRCs to 

start before operational, design, and technical risks were resolved. Consequently, 

six FRCs under construction needed modification, which increased the total cost 

of the acquisition by $6.9 million and caused schedule delays of at least 270 days 

for each cutter. This aggressive acquisition strategy also allowed the Coast Guard 

to procure 12 FRCs before testing it in actual operations. It is uncertain whether 

the FRC will perform as intended until it completes operational test and 

evaluation in an actual maritime environment. 

The Coast Guard’s Oversight of the Fast Response Cutter 

Contract 

The Coast Guard uses a collaborative approach to oversight. The Coast 

Guard’s project sponsor, project resident office, and technical authorities 

U.S. Coast Guard’s Acquisition of the Sentinel Class – Fast Response Cutter 

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provide direct oversight of the FRC acquisition. This oversight has helped 

ensure that the FRC contract reflects the Coast Guard’s stated operational 

requirements and that the FRC will be delivered with the capabilities 

specified in the contract. However, the Coast Guard cannot determine 

how suitable and effective the FRC’s delivered capabilities are at 

conducting required Coast Guard missions until the FRC is tested during 

operational test and evaluation in an actual maritime environment. 

Contract Reflects Operational Requirements 

Operational requirements specify the desired capabilities of an 

asset and are usually described in an Operational Requirements 

Document. The Operational Requirements Document is intended 

to serve as a source document to a contract’s technical 

specification and supports a host of design activities. Initially, the 

Coast Guard did not develop a formal Operational Requirements 

Document or define the FRC’s critical operational issues prior to 

contract award. Instead, it used a set of Top Level Requirements 

to develop the contract. 

This approach introduced additional risk that some operational 

requirements might not be included in the design. However, the 

Coast Guard mitigated this risk by developing the FRC 

Operational Requirements Document in December 2009. The 

Coast Guard also conducted an Early Operational Assessment in 

2009 to validate that the FRC’s preliminary design met the Coast 

Guard’s needs. Coast Guard technical authority review of the FRC 

design disclosed that enhancements were needed to certain areas of 

the FRC’s structure to further mitigate risks posed by the unique 

missions of the Coast Guard. The Coast Guard modified its 

contract in February 2011 to include the provisions needed to help 

ensure that the FRC would meet its structural requirements for 

mission operations. 

We reviewed and analyzed the Coast Guard’s Operational 

Requirements Document and the contract’s technical specifications. 

The FRC’s operational requirements were reflected in the 

contract’s technical specifications. Therefore, the provisions of the 

contract reflect the Coast Guard’s stated operational requirements. 

Contractor Is Meeting Contract Requirements 

The Coast Guard technical authorities and onsite project resident 

office provide the oversight needed to ensure that the contractor is 

U.S. Coast Guard’s Acquisition of the Sentinel Class – Fast Response Cutter 

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meeting the contract’s provisions. The Coast Guard’s technical 

authorities review and make recommendations on the FRC’s 

design. Project resident office personnel perform contract 

administration and provide technical, production, and logistics 

oversight of the contractor. The technical authorities have 

provided timely review and comments to the contracting officer on 

submitted drawings, calculations, and analysis. Furthermore, 

Coast Guard personnel plan to participate in shipboard tests and 

sea trials to verify the performance of major components and 

systems. 

The contract requires that the design and construction of the FRC’s 

basic hull mirror that of its parent craft used in patrol boat 

operations. It also requires land-based testing of some major 

components and systems, such as the FRC’s main engines. Also, 

the contractor has provided a full-scale mockup of the FRC bridge 

for testing and training purposes. 

The Coast Guard’s oversight of the contractor, as well as the use of 

a parent craft design, land-based testing, and sea trials, helps 

ensure that the FRC will be delivered with the capabilities 

specified in the contract. These requirements establish the basic 

seaworthiness and mechanical soundness of the vessel. However, 

the Coast Guard will not be able to establish how suitable or 

effective the FRC is at conducting the required missions until it is 

tested in actual operations. According to the Coast Guard, it plans 

to complete testing of the FRC in actual operations by March 2013. 

The Coast Guard’s Schedule-Driven Procurement Strategy 

The Coast Guard’s use of a schedule-driven procurement strategy has 

allowed it to award contract options for FRCs before operational, design, 

and technical risks were resolved. This strategy also allowed the Coast 

Guard to procure 12 FRCs before operational test and evaluation of the 

lead cutter was completed and before determining the suitability and 

effectiveness of the FRC in meeting the Coast Guard mission needs. 

The Coast Guard’s Major Systems Acquisition Manual specifies that the 

Coast Guard must use a knowledge-based acquisition process. Best 

practices in federal contracting recognize that acquisition strategies should 

be based on knowledge gained at specific milestones. Decision-makers 

should use information gained from milestone meetings to make informed 

acquisition decisions. The Government Accountability Office reports that 

implementing a knowledge-based approach to acquisitions reduces the risk 

U.S. Coast Guard’s Acquisition of the Sentinel Class – Fast Response Cutter 

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of cost, schedule, and quality shortfalls. The Coast Guard’s Major System 

Acquisition Manual also generally requires that production be limited to 

what is required to minimally sustain production until operational test and 

evaluation is completed. 

The Coast Guard’s schedule-driven acquisition strategy was reflected in a 

November 2006 decision memo, approved by the U.S. Coast Guard 

Agency Acquisition Executive, which directed the Coast Guard to pursue 

an “expeditious acquisition of patrol boat capability to ameliorate the 

current ...operating hour shortfall.” This memo further stated that the 

“delivery date will be a prime determinant in decisions made throughout 

this procurement program.” 

The Coast Guard has acknowledged that its aggressive procurement 

strategy places the FRC at an increased risk of costly rework. However, 

the Coast Guard stated that the need to fill mission-critical shortages in its 

patrol boat fleet justified its schedule-driven procurement strategy. 

Further, the Coast Guard stated that it has mitigated the risks presented by 

its strategy through use of a parent craft design, the American Bureau of 

Shipping classification requirements, an Early Operational Assessment, 

technical authority involvement in design reviews, and land-based testing 

requirements for major FRC components. 

However, the Coast Guard’s aggressive procurement strategy allowed the 

contractor to start FRC production before the Coast Guard resolved 

important issues identified in the Early Operational Assessment, design 

reviews, and testing. Further, the Coast Guard’s contract structure limited 

its ability to minimize low-rate initial production levels by requiring it to 

contract annually for a specified number of FRCs. 

Risks Identified During Early Operational Assessment 

In May and June 2009, the FRC Early Operational Assessment 

identified risks to the FRC’s mission operations. Subject matter 

experts conducted this tabletop exercise to validate that the FRC 

could meet the Coast Guard’s operational needs. However, the 

Coast Guard did not implement two recommendations from the 

Early Operational Assessment to mitigate the risk that the FRC 

would not meet Coast Guard needs before it contracted for 12 

FRCs: 

1.	 The Coast Guard did not operationally assess whether the small 

boat stern launch and recovery system will be able to meet the 

Coast Guard’s needs in actual mission operations. The Coast 

U.S. Coast Guard’s Acquisition of the Sentinel Class – Fast Response Cutter 

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Guard technical authority noted that the FRC stern launch and 

recovery system has limited clearance, which may increase the 

difficulty of recovering the small boat in certain operating 

conditions (see figure 2 for illustration of stern launch system). 

2.	 The Coast Guard did not verify that the FRC is capable of 

stowing all gear (e.g., damage control equipment, onboard 

repair parts, life preservers) required for its safe operation and 

maintenance. The Coast Guard responded to this risk by 

saying, “Due to the nature of lead ship production, although we 

have stowage designs, validation of the stowage arrangement is 

limited until production is completed and onload of outfit can 

occur.” 

If operational test and evaluation shows that the small boat 

interface or the stowage is not effective, the Coast Guard may 

incur additional costly rework and delays. 

Figure 2: FRC stern launch system (U.S. Coast Guard). 

U.S. Coast Guard’s Acquisition of the Sentinel Class – Fast Response Cutter 

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Risks Identified During Design Review and Testing
 

Additional risk was demonstrated during the FRC Critical Design 

Review, which is intended to ensure that design is sufficiently 

mature prior to construction. Once construction has started, any 

design or technical deficiencies could be significantly more costly 

and time-consuming to correct. 

The Coast Guard’s Critical Design Review was approved on 

December 2, 2009, despite the existence of known design risk. For 

example, structural details and drawings ranged from 66% to 73% 

complete, and the FRC’s speed and power analysis had been 

rejected and returned by the technical authority. The Coast Guard 

approval memo for Critical Design Review documents a design 

maturity level of 80%. However, our analysis of design data 

provided by the Coast Guard’s Office of Naval Engineering 

disclosed a median design maturity of 71% as of the date of Coast 

Guard’s Critical Design Review. Design maturity is the term used 

to describe the percentage of completion of specific engineering 

and planning drawings or documents. We based our calculation of 

71% design maturity on the design requirements specified in the 

contract for Coast Guard approval at Critical Design Review. Both 

the Government Accountability Office and the U.S. Navy 

recognize that a mature design prior to the start of construction 

reduces design risk, enables a more stable construction schedule, 

and lowers the risk of increased cost. The Government 

Accountability Office has identified, as an acquisition best 

practice, that at least 90% of engineering drawings should be 

completed prior to construction.1 The U.S. Navy requires 85% 

design maturity as a prerequisite for the start of construction. 

During Critical Design Review, the technical authorities raised 

concerns about the structure of the FRC. Although the Coast 

Guard revised the contract to mitigate these concerns and reflect its 

requirements, it did not do so until 13 months after Critical Design 

Review and the award of two contract options. The Coast Guard 

attributes the 13-month delay primarily to the time required to 

review the extensive computerized modeling of the FRC structure. 

The contract required that the FRC structure be designed and 

constructed according to the American Bureau of Shipping rules. 

However, the Coast Guard ultimately determined that the 

American Bureau of Shipping rules and guidelines for structural 

1

 GAO-02-701: Capturing Design and Manufacturing Knowledge Early Improves Acquisition Outcome, 

July 2002. 

U.S. Coast Guard’s Acquisition of the Sentinel Class – Fast Response Cutter 

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design would not sufficiently mitigate risks to the FRC’s structure 

and required structural enhancements to the design of the FRC. 

These structural enhancements were not identified until 

construction of the lead FRC was 80% complete and construction 

of the next three FRCs was more than 50% complete. As a result, 

the contractor had to remove portions of completed construction to 

make the structural design changes. Because the Coast Guard 

requested these changes, the structural modifications will cost an 

additional $6.9 million and delay the delivery of each FRC by at 

least 270 days. According to the Coast Guard, this cost increase is 

well within the funds set aside for antecedent liabilities for 

necessary technical changes normally encountered during the 

design and construction of a lead ship. 

The FRC contract also requires the contractor to certify the main 

diesel engines to the American Bureau of Shipping Naval Vessel 

Rules. In December 2009, before the Coast Guard awarded the 

first option contract, it noted technical issues with the engine 

certification. Additional technical issues with the engine were 

discovered during testing in July 2010. These issues remained a 

risk until September 2011. Between July 2010 and September 

2011, the Coast Guard exercised two contract options that brought 

the number needing refits to 12 engines. 

Contract Structure and Use of Low-Rate Initial Production 

The Coast Guard’s use of a schedule-driven procurement strategy 

allowed it to procure 12 FRCs under low-rate initial production 

and before operational test and evaluation of the lead FRC is 

completed. The FRC’s contract structure limited the Coast 

Guard’s ability to minimize low-rate initial production levels by 

requiring it to contract for a specified number of FRCs annually. 

This also limited the Coast Guard’s ability to mitigate the risk of 

additional costly rework and delays by keeping the number of 

FRCs produced to a minimum during low-rate initial production. 

Low-rate initial production is an acquisition phase, and its approval 

authorizes the contractor to start production. The purpose of lowrate initial production is to produce enough quantities of an article 

for operational test and evaluation, to establish an initial 

production base, and to confirm soundness before full-rate 

production. Full-rate production can only officially begin once 

operational test and evaluation is complete. Low-rate initial 

production limits the risk of acquiring new or unproven technology 

U.S. Coast Guard’s Acquisition of the Sentinel Class – Fast Response Cutter 

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by minimizing the number of FRCs produced until its design is 

finalized and the FRC is tested in operational test and evaluation. 

Operational test and evaluation is conducted to determine how well 

the FRC performs its mission assignments and to examine the 

extent to which the FRC is safe, reliable, maintainable, and 

logistically supportable. The results of operational test and 

evaluation also indicate how well the performance measures for 

the acquisition have been satisfied and support the decision to 

move the acquisition into full production. 

The Coast Guard’s contract required delivery of the lead FRC 

within 2 years of contract award. Additionally, the contract 

stipulates that the Coast Guard exercise an option to purchase a set 

number of additional FRCs each fiscal year, or the remainder of 

the contract options will be terminated. The contract allows the 

Coast Guard to purchase three FRCs under option one for low-rate 

initial production, and four or six for every option thereafter under 

full-rate production. This contract structure has limited the Coast 

Guard’s ability to restrict its FRC low-rate initial production to 

fewer than three to four FRCs annually until operational test and 

evaluation is completed and the Coast Guard is certain that the 

FRC will meet its mission needs. 

The Coast Guard has already contracted for 12 FRCs, or 35% of 

the maximum of 34 FRCs that can be acquired under this contract, 

while the acquisition is still in low-rate initial production. The 

Coast Guard has a policy that major acquisitions must set 

individual limits for low-rate initial production. Initially, low-rate 

initial production for the FRC was set at three FRCs. However, by 

October 2010, the Coast Guard had raised the number of FRCs that 

could be acquired under low-rate initial production to 14. 

Best practices have shown that completing operational test and 

evaluation before producing significant quantities substantially 

lowers the risk of costly fixes and retrofits. Thus, making highpercentage buys during low-rate initial production increases the 

risk that the FRC will incur costly fixes and retrofits. The U.S. 

Navy has a general practice that only 10% of an acquisition should 

be acquired during low-rate initial production. However, the Coast 

Guard does not have a policy on how many units should be 

acquired under low-rate initial production to mitigate risk. 

U.S. Coast Guard’s Acquisition of the Sentinel Class – Fast Response Cutter 

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If the Coast Guard exercises another contract option prior to the 

completion of operational test and evaluation, it will have 

contracted for at least 16 FRCs under low-rate initial production, 

or 47% of the 34 possible FRCs to be acquired under this contract. 

Additionally, this represents 28% of the total 58 FRCs that the 

Coast Guard plans to acquire. As a result, the Coast Guard risks 

that any deficiencies discovered during operational test and 

evaluation will need to be fixed on a significant number of FRCs 

that are in production or have been delivered. 

The Coast Guard is currently planning to assess the risk related to 

its low-rate initial production decisions by conducting an 

operational assessment prior to delivery of the lead FRC. 

However, construction of the first eight FRCs has already 

significantly advanced. Therefore, this operational assessment is 

limited in its ability to mitigate the risk of cost increases or delays. 

Use of Operational Assessments To Mitigate Risk 

Operational assessments are a recognized method for identifying 

areas of risk and the ability to meet performance goals in 

operations. Operational assessments may focus on a limited set of 

operational requirements and are not required to be conducted in 

realistic maritime environments. Rather, they may be conducted at 

any time throughout the acquisition life cycle using technology 

demonstrators, prototypes, mockups, or simulations. They do not 

substitute for the operational test and evaluation necessary to 

support full-rate production decisions. The U.S. Navy requires that 

an operational assessment be performed to support a low-rate 

initial production decision on major acquisitions. 

Following the initiation of our audit, the Coast Guard requested 

that its independent test agent conduct an operational assessment 

of the lead FRC. According to the Coast Guard, this operational 

assessment is planned to take place over 2 days in early December 

2011, prior to delivery of the lead FRC. Although an operational 

assessment is not a substitute for operational test and evaluation, it 

can reveal problems at a time when they can still be corrected on 

future FRCs. Although this operational assessment may mitigate 

the risk of cost increases or delays to future FRCs, its effectiveness 

is still limited, as construction on the first eight FRCs is 

significantly advanced. 

U.S. Coast Guard’s Acquisition of the Sentinel Class – Fast Response Cutter 

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Recommendations
 

We recommend that the Assistant Commandant for Acquisitions, 

U.S. Coast Guard: 

Recommendation #1: Ensure that future acquisitions employ a 

knowledge-based acquisition strategy to the maximum extent 

practicable by revising the U.S. Coast Guard’s Major Systems 

Acquisition Manual to allow for a schedule-driven acquisition 

strategy to be employed only when it is properly authorized and 

supported by the results of a risk assessment and cost-benefit 

analysis. 

Recommendation #2: Improve low-rate initial production 

decisions for the U.S. Coast Guard Surface Acquisition programs 

by issuing a policy memorandum that requires that it achieve a 

specific level of design maturity at Critical Design Review. 

Recommendation #3: Issue a policy memorandum that requires 

authorization to proceed with low-rate initial production be 

supported by the reported results of operational assessments. 

Recommendation #4: Revise the Coast Guard’s acquisition 

policy to require a documented risk assessment when low-rate 

initial production quantity exceeds 10%, or other Coast Guard 

established minimum, of the total quantity approved for the 

acquisition. 

Recommendation #5: Mitigate risk by executing plans for an 

operational assessment prior to delivery of the lead FRC and take 

immediate action to implement recommendations from the 

operational assessment. Any recommendations not implemented 

should be supported by the results of a risk assessment and costbenefit analysis. 

Management Comments and OIG Analysis 

The Coast Guard provided comments on the draft of this report. A 

copy of the response in its entirety is included in appendix B. The 

Coast Guard also provided technical comments and suggested 

revisions to our report in a separate document, which the Coast 

Guard stated was not intended to be included with its official 

comments on the draft of this report. We reviewed the Coast 

U.S. Coast Guard’s Acquisition of the Sentinel Class – Fast Response Cutter 

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Guard’s technical comments and made changes throughout our 

report where appropriate. 

Management Comments to Recommendation #1 

Partially Concur. The Coast Guard stated that although the FRC 

acquisition has an aggressive schedule, it properly followed the 

Coast Guard and DHS “knowledge based” acquisition 

management policies and processes. The Coast Guard agrees that 

schedule-driven acquisition strategies should be employed only 

when properly authorized and supported by the results of a risk 

assessment and cost-benefit analysis. 

OIG Analysis 

As discussed in our report, the FRC acquisition strategy employed 

an aggressive acquisition schedule and the contract required the 

annual award of options for either three or four cutters to avoid 

contract termination. This strategy served to diminish the 

usefulness of knowledge gained at specific milestones for 

acquisition investment decisions, as the Coast Guard had to either 

award the annual contract options for the set number of cutters or 

terminate the contract. The Coast Guard stated it will work with 

DHS Program Accountability and Risk Management to consider 

promulgating future guidance, as appropriate, to meet the intent of 

the recommendation. The Coast Guard needs to ensure it has a 

process in place to prevent future acquisitions that may employ a 

similarly aggressive acquisition strategy from being approved until 

supported by the results of a risk assessment and cost-benefit 

analysis. 

We consider this recommendation to be unresolved and open. This 

recommendation will remain unresolved until the Coast Guard 

provides us with an action plan to promulgate such guidance that 

includes responsible officials and the targeted completion date. 

Management Comments to Recommendation # 2 

The Coast Guard separated its comments to recommendation 2, as 

presented in the draft report, into three distinct responses to more 

effectively address the OIG intent. Therefore, we have separated 

our original recommendation number 2 into recommendations 2 

(2.1), 3 (2.2), and 4 (2.3), and recommendation 3 into 

recommendation 5. 

U.S. Coast Guard’s Acquisition of the Sentinel Class – Fast Response Cutter 

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Partially Concur. The Coast Guard recognized that design 

maturity is an important element of reducing acquisition risk. The 

Coast Guard also acknowledged that, as a general rule of thumb, 

the design should be approximately 85% complete at Critical 

Design Review. 

OIG Analysis 

As discussed in our report, both the Government Accountability 

Office and the Department of the Navy recognize that completion 

of a mature design prior to the start of construction has proven to 

reduce design risks, reduce the risk of cost increases, and enable a 

more stable construction schedule. Both the Government 

Accountability Office and the Department of the Navy recommend 

that shipbuilding programs meet a specified “rule of thumb” level 

of design maturity prior to construction. The intent of the 

recommendation is that the Coast Guard develop similar “rule of 

thumb” polices for its ship acquisition programs. The Coast Guard 

has stated that it agrees with the intent of this recommendation and 

will work with DHS Program Accountability and Risk 

Management to promulgate future guidance, as appropriate, to 

meet the intent of this recommendation. 

We consider this recommendation to be unresolved and open. This 

recommendation will remain unresolved until the Coast Guard 

provides us with an action plan to promulgate such guidance that 

includes responsible officials and the targeted completion date. 

This recommendation will remain open until we receive and 

review Coast Guard guidance issued to address the 

recommendation. 

Management Comments to Recommendation # 3 

Partially Concur. The Coast Guard stated it agrees with the intent 

but not the mandatory requirement to complete an Operational 

Assessment prior to Critical Design Review for all acquisitions and 

relies on the DHS Director of Operational Test and Evaluation 

(DOT&E) to establish test and evaluation policy. The Coast Guard 

further noted that an Early Operational Assessment is appropriate 

for Critical Design Review assessments, and stated that an 

Operational Assessment needs to have an asset on hand to 

complete the assessment. The Coast Guard also stated that an 

Early Operational Assessment for the FRC was conducted in June 

U.S. Coast Guard’s Acquisition of the Sentinel Class – Fast Response Cutter 

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2009 and that a follow on Operational Assessment was completed 

February 3, 2011, on the lead ship prior to acceptance. 

OIG Analysis 

The Coast Guard’s Major Systems Acquisition Manual does not 

provide a specific definition for either Early Operational 

Assessment or Operational Assessment. Consistent with 

Department of the Navy definitions, we consider Operational 

Assessments to include Early Operational Assessments and do not 

differentiate between the two for the purposes of this 

recommendation. Further, although the Coast Guard’s Major 

Systems Acquisition Manual indicates that the conduct of either an 

Early Operational Assessment or an Operational Assessment is an 

elective, rather than mandatory requirement, the Major Systems 

Acquisition Manual also indicates that both are intended to assess 

how well the design is expected to provide the desired operational 

capability and are used to support low-rate initial production 

decisions, as appropriate. Given the complex nature and 

considerable expense associated with shipbuilding, the Coast 

Guard should require its shipbuilding acquisition programs to 

assess how well the design is expected to meet its needed 

operational capabilities prior to committing to production to further 

reduce the risk of schedule delays and cost increases resulting from 

design changes. The Coast Guard has stated it will work with the 

DHS DOT&E to promulgate future guidance, as appropriate, to 

meet the intent of this recommendation. 

We consider this recommendation to be unresolved and open. This 

recommendation will remain unresolved until the Coast Guard 

provides us with an action plan to promulgate such guidance that 

includes responsible officials and the targeted completion date and 

we review Coast Guard guidance issued to address the 

recommendation. 

Management Comments to Recommendation # 4 

Concur. The Coast Guard agrees that low-rate initial production 

decisions that exceed 10% of the full production quantities should 

be supported by a documented risk assessment. It noted that DHS’ 

low-rate initial production policy has been revised recently to limit 

the production quantities and the Coast Guard Major Systems 

Acquisition Manual is being revised to reflect the DHS policy. 

U.S. Coast Guard’s Acquisition of the Sentinel Class – Fast Response Cutter 

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OIG Analysis 

We consider the ongoing action to be responsive to the 

recommendation and the recommendation resolved. However, this 

recommendation will remain open until we receive and review a 

copy of the revised Major Systems Acquisition Manual with the 

updated low-rate initial production policy. 

Management Comments to Recommendation # 5 

Concur. The Coast Guard concurred with our recommendation to 

execute plans for an Operational Assessment prior to the delivery 

of the lead FRC and to take immediate actions to implement any 

recommendations from the Operational Assessment. It noted that 

an Operational Assessment was recently completed prior to the 

lead FRC acceptance and a report will be delivered in 2012. 

OIG Analysis 

We consider the actions taken by the Coast Guard to be responsive 

to the recommendation and the recommendation resolved. 

However, the recommendation will remain open until we receive 

and review a copy of the Operational Assessment report and Coast 

Guard verification that recommendations in the Operational 

Assessment report have been implemented. 

U.S. Coast Guard’s Acquisition of the Sentinel Class – Fast Response Cutter 

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Appendix A 

Purpose, Scope, and Methodology 

We conducted this audit to determine whether the Coast Guard’s 

oversight of the FRC acquisition ensures that (1) the provisions in 

the contract reflect the Coast Guard’s stated operational 

requirements; and (2) the contractor is meeting the provisions in 

the contract. 

We reviewed departmental, federal, and Coast Guard acquisition 

policies and processes, acquisition decisions, and other 

memorandums. These included the Department of Homeland 

Security (DHS) Acquisition Directive 102-01, DHS Acquisition 

Instruction/Guidebook 102-01-001, DHS Directive 026-06, Test 

and Evaluation, the Coast Guard Major Systems Acquisition 

Manual, the Coast Guard Requirements Generation and 

Management Process(Pub 7-7) Manual, and the Department of the 

Navy, Commander, Operational Test and Evaluation Force Test 

Director’s Manual. 

We also reviewed the FRC contract, the FRC Operational 

Requirements Document, the approved Top Level Requirements 

for the FRC, and the approved FRC Acquisition Program Baseline. 

To determine design maturity, we reviewed the percentage 

completion of all contract data requirement list drawings, analysis, 

and calculations required by the contract at Critical Design 

Review. We also reviewed documentation produced from design 

reviews and production meetings, as well as Coast Guard technical 

authority design review comments. We reviewed the updated 

integrated master schedule, budget requests, and cost estimates for 

the project, and we analyzed progress payments to the contractor. 

We relied on computer-processed data provided by the Coast 

Guard to calculate median design maturity and technical authority 

comment response days. We performed analytical procedures to 

identify anomalies in reported dates and determined that the data 

contained date anomalies of less than 1%. We also judgmentally 

sampled 20% of the items and confirmed the reported degree of 

maturity for each item against corroborating documentation to 

verify the accuracy of reported design maturity. 

We visited the project resident office in Lockport, LA, and 

observed Coast Guard oversight of FRC construction, a mockup of 

the pilothouse, rework conducted to enhance the FRC structure, 

and ongoing construction of the FRCs. 

U.S. Coast Guard’s Acquisition of the Sentinel Class – Fast Response Cutter 

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Appendix A 

Purpose, Scope, and Methodology 

We interviewed senior Coast Guard Acquisition Directorate 

officials, the Coast Guard technical and support authorities, 

program and project managers, and contracting and acquisition 

officials responsible for the management, oversight, and execution 

of the acquisition of the FRC. We also interviewed representatives 

of the American Bureau of Shipping, the U.S. Navy’s Naval Sea 

Systems Command, and Commander, Operational Test and 

Evaluation Force. 

We conducted this performance audit between June 2011 and 

October 2011 pursuant to the Inspector General Act of 1978, as 

amended, and according to generally accepted government 

auditing standards (GAGAS), except that we identified an 

impairment to our independence in appearance. Following 

completion of our audit, it came to our attention that a family 

member of a senior OIG official was employed by an entity 

associated with this audit. We took steps to re-evaluate the 

evidence supporting our findings and conclusions. In our opinion, 

the impairment to our independence in appearance did not affect 

the findings and conclusions developed during this audit. 

GAGAS requires that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based upon our audit objectives. We 

believe that the evidence obtained provides a reasonable basis for 

our findings and conclusions based upon our audit objectives, and 

that the impairment to our independence in appearance did not 

affect this evidence or any findings and conclusions. 

We would like to thank the Coast Guard, the American Bureau of 

Shipping, and the U.S. Navy for the cooperation and courtesies 

extended to our staff during this audit. 

U.S. Coast Guard’s Acquisition of the Sentinel Class – Fast Response Cutter 

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Appendix B 

Management Comments to the Draft Report 

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Appendix B 

Management Comments to the Draft Report 

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Appendix B 

Management Comments to the Draft Report 

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Appendix C 

Comparison of Island-Class Patrol Boat and Fast Response Cutter 

Attribute 110' Island-Class Patrol 

Boat 

154' Sentinel Class 

Fast Response Cutter 

Service Life 20 years 20 years 

Flank Speed 28 knots 28 knots 

Fuel Endurance 1,900 nautical miles at 

15 knots 

2,500 nautical miles at 

15 knots 

Operational Tempo 1,800 operational hours 

per year. 

2,500 operational hours 

per year 

Seakeeping Capabilities (sea state) for Operations Up to 8 feet 8.2 feet to 13 feet 

Seakeeping Capabilities (sea state) for Survivability Up to 15 feet 19.7 feet to 29.5 feet 

Small Boat Launch System 

Single-point crane boat 

launch and recovery 

Stern ramp launch and 

recovery 

Minimum five-person 

operation 

Maximum three-person 

operation 

Command, Control, Communications, Computers, 

and Intelligence Suite 

Stand-alone surface search 

radar, Automatic 

Identification System, 

Forward-Looking Infrared 

Radar, and electronic charting 

SEAWATCH: Integrated 

charting, Automatic 

Identification System, radar, 

common shared tactical 

display, and enhanced electrooptical/infrared search system 

No Secret Internet Protocol 

Routing Network capability 

Classified local area network 

with Secret Internet Protocol 

Routing chat messaging 

Stand-alone High Frequency, 

Very High Frequency, Ultra 

High Frequency 

communication. 

Integrated external and 

internal voice 

communications suite 

Limited, short-term 128 Kilo 

bits per second underway 

connectivity 

Full 256 Kilo bits per second 

underway 24/7 connectivity 

Small Boat 

(Cutter Boat) 

18'3" length, 7'5" beam 26' length, 9' beam 

Two-person crew. One 

traditional seat for operator 

with seating along air-filled 

sponson for an additional six. 

Two-person crew. Shockmitigated seating for five, 

additional four inside 

gunwales. 

28 knots maximum speed in 

calm seas 

40 knots maximum speed in 

calm seas 

Handheld Very High 

Frequency voice 

communications only 

Very High Frequency and 

High Frequency voice 

communications, integrated 

radar, and electronic charting 

Not normally operated out of 

cutter’s sight due to limited 

communications and 

navigation capability. 

200 nautical mile range. 

Capable of operating over the 

horizon from the cutter. 

Combat Systems 

One 25 millimeter cannon 

Mark38 Modification 1, 

crew-served weapon with 

traditional sight 

One 25 millimeter cannon 

Mark38 Modification 2, gyrostabilized remote-operated 

weapon with ElectroOptical/Infrared targeting 

sensor 

Two .50 caliber machine guns Four .50 caliber machine guns 

Crew Size 16 24 

Independent Operation (number of days) 5 days 5 to 7 days 

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Appendix D 

Major Contributors to This Report 

Brooke Bebow, Director 

Maryann Pereira, Audit Manager 

Tristan Weir, Program Analyst 

Dawn E. Pizarro, Senior Auditor 

Johnson Joseph, Auditor 

John Jadick, Program Analyst 

Ebenezer Jackson, Program Analyst 

Katrina Bynes, Referencer 

Ashley Smith, Referencer 

U.S. Coast Guard’s Acquisition of the Sentinel Class – Fast Response Cutter 

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Appendix E 

Report Distribution 

Department of Homeland Security 

Secretary 

Deputy Secretary 

Chief of Staff 

Deputy Chief of Staff 

General Counsel 

Executive Secretariat 

Director, GAO/OIG Liaison Office 

Assistant Secretary for Office of Policy 

Assistant Secretary for Office of Public Affairs 

Assistant Secretary for Office of Legislative Affairs 

United States Coast Guard 

Audit Liaison 

Office of Management and Budget 

Chief, Homeland Security Branch 

DHS OIG Budget Examiner 

Congress 

Congressional Oversight and Appropriations Committees, as 

appropriate 

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