COAST GUARD 

ACQUISITIONS

Better Information on 

Performance and 

Funding Needed to 

Address Shortfalls

Report to Congressional Requesters

June 2014

GAO-14-450

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-14-450, a report to 

congressional requesters

June 2014

COAST GUARD ACQUISITIONS

Better Information on Performance and Funding Needed to 

Address Shortfalls

Why GAO Did This Study

The Coast Guard is managing a multibillion dollar effort to modernize aging 

assets, including ships, aircraft, and 

information technology to provide new 

capabilities to conduct missions 

ranging from marine safety to defense 

readiness. GAO has reviewed the 

Coast Guard’s acquisitions since 2001 

and has found it faces challenges 

managing its portfolio. In 2007, the 

Coast Guard established a cost 

baseline of $24.2 billion for 13 assets. 

GAO was asked to examine the Coast 

Guard’s current and planned

acquisition portfolio. 

This report assesses: (1) operational 

performance and testing of selected 

assets; (2) the current cost of the 

Coast Guard’s portfolio and funding 

plans; and (3) the extent to which the 

Coast Guard is experiencing capability 

gaps, if any, given known affordability 

issues. To conduct this work, GAO 

analyzed the operational performance 

and test reports for all 4 newly fielded 

assets that the Coast Guard planned to 

test and the costs and capabilities of its 

major system acquisition portfolio. 

GAO also interviewed Coast Guard, 

DHS, and Navy officials. 

What GAO Recommends

Congress should consider requiring the 

Coast Guard to include additional 

information in its Capital Investment 

Plan. In addition, the Secretary of DHS 

should clarify when minimum 

performance standards should be 

achieved, conduct C4ISR testing, and 

develop a long-term modernization 

plan. DHS concurred with the 

recommendations, but its position on 

developing a long-term plan does not 

fully address GAO’s concerns as 

discussed in the report. 

What GAO Found

The selected Coast Guard assets that GAO reviewed are generally 

demonstrating improved performance—according to Coast Guard operators—but 

GAO found that they have yet to meet all key requirements. Specifically, two 

assets, the HC-144 patrol aircraft and Fast Response Cutter, did not meet all key 

requirements during operational testing before being approved for full-rate 

production, and Department of Homeland Security (DHS) and Coast Guard 

guidance do not clearly specify when this level of performance should be 

achieved. Additionally, the Coast Guard changed its testing strategy for the 

Command, Control, Communications, Computers, Intelligence, Surveillance, and 

Reconnaissance (C4ISR) system and, as a result, is no longer planning to test 

the system’s key requirements. Completing operational testing for the C4ISR 

system would provide the Coast Guard with the knowledge of whether this asset 

meets requirements.

As acquisition program costs increase across the portfolio, consuming significant 

amounts of funding, the Coast Guard is farther from fielding its planned fleet 

today than it was in 2009, in terms of the money needed to finish these 

programs. In 2009, GAO found that the Coast Guard needed $18.2 billion to 

finish its 2007 baseline, but now needs $20.7 billion to finish these assets.

The Total Cost of and Cost to Complete the Coast Guard’s Original 2007 Baseline in 2009 and 

2014

To inform Congress of its budget plans, the Coast Guard uses a statutorily 

required 5-year Capital Investment Plan, but the law does not require the Coast 

Guard to report the effects of actual funding levels on individual projects and, 

thus, it has not done so. For example, the Coast Guard has received less funding 

than planned in its annual budgets, but has not reflected the effects of this 

reduced funding in terms of increased cost or schedule for certain projects.

Without complete information, Congress cannot know the full cost of the portfolio.

The Coast Guard has repeatedly delayed and reduced its capability through its 

annual budget process and, therefore, it does not know the extent to which it will 

meet mission needs and achieve desired results. This is because the Coast 

Guard does not have a long-term fleet modernization plan that identifies all 

acquisitions needed to meet mission needs over the next two decades within 

available resources. Without such a plan, the Coast Guard cannot know the 

extent to which its assets are affordable and whether it can maintain service 

levels and meet mission needs.

View GAO-14-450. For more information, 

contact Michele Mackin at (202) 512-4841 or 

mackinm@gao.gov.
Page i GAO-14-450 Coast Guard Acquisitions

Letter 1

Background 3

Operators Extol New Assets’ Performance Compared to Aging 

Counterparts, but These Assets Have Yet to Meet All Key 

Requirements 9

Cost Increases Are Consuming Funding and Affordability Issues 

Have Not Been Addressed or Accurately Represented 21

Future Capabilities Uncertain as Coast Guard Makes Annual 

Budget Decisions; Alternatives Could Improve Outlook 26

Conclusions 33

Matter for Congressional Consideration 34

Recommendations for Executive Action 34

Agency Comments and Our Evaluation 35

Appendix I Scope and Methodology 38

Appendix II Comments from the Department of Homeland Security 41

Appendix III Coast Guard Acquisition Portfolio Costs 44

Appendix IV GAO Contact and Staff Acknowledgements 46

Related GAO Products 47

Tables

Table 1: Coast Guard Major Acquisition Portfolio as of March 2014 5

Table 2: Key Performance Parameter Test Results for the Fast 

Response Cutter 15

Table 3: Key Performance Parameter Test Results for the HC-144 

Maritime Patrol Aircraft 16

Table 4: Retrofits and Design Changes on the National Security 

Cutter Class Costing over $1 Million as of December 2013 18

Contents
Page ii GAO-14-450 Coast Guard Acquisitions

Table 5: Acquisition Cost Estimates, Including Cost to Complete, 

for Coast Guard Portfolio of Major Programs as of March 

2014 (dollars in millions) 44

Figures

Figure 1: Planned Endurance-Related Capabilities of New Coast 

Guard Assets Compared with Assets They Are Replacing 11

Figure 2: The Total Cost of and Cost to Complete the Coast 

Guard’s Original 2007 Baseline in 2009 and 2014 22

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Page 1 GAO-14-450 Coast Guard Acquisitions

441 G St. N.W.

Washington, DC 20548

June 5, 2014

The Honorable Bill Shuster

Chairman

Committee on Transportation and Infrastructure

House of Representatives

The Honorable Duncan Hunter

Chairman

Subcommittee on Coast Guard and Maritime Transportation

Committee on Transportation and Infrastructure

House of Representatives

The Coast Guard is managing a multi-billion dollar acquisition portfolio as

it seeks to modernize its aging assets, including ships, planes, and 

information technology. Since 2001, we have reviewed the Coast Guard’s 

acquisition programs and reported to Congress on the risks and 

uncertainties in its acquisition portfolio.1 Our prior work has highlighted 

problems with the cost, management, and oversight of the Coast Guard’s 

acquisition portfolio that have led to delivery delays and other operational 

challenges. For example, in a report issued in September 2012, we found 

that the cost and schedule of the Coast Guard’s acquisition portfolio 

remains unknown because of outdated baselines and uncertainty 

surrounding affordability. We also found that opportunities exist to 

address affordability through the requirements process. Overall, we

concluded that the Coast Guard had made strides in its efforts to improve 

its acquisition management capabilities, and the Department of Homeland 

Security (DHS) agreed with our recommendations to conduct a portfolio 

review and to identify the Executive Oversight Council as the body to 

oversee the Coast Guard’s portfolio management approach.2

You asked us to review the Coast Guard’s current and planned 

acquisition portfolio. We reviewed (1) how selected assets are performing 

operationally and to what extent they are achieving desired performance 

levels in testing; (2) the current cost of the Coast Guard’s acquisition 

 1 See list of related GAO products at the end of this report.

2 GAO, Coast Guard: Portfolio Management Approach Needed to Improve Major 

Acquisition Outcomes, GAO-12-918 (Washington, D.C.: Sept. 20, 2012).
Page 2 GAO-14-450 Coast Guard Acquisitions

portfolio as well as plans to fund its assets; and (3) the extent to which the 

Coast Guard is experiencing capability gaps, if any, given known

affordability issues.

To assess the operational performance of Coast Guard assets, we 

selected all four major acquisition programs that were fielded between 

fiscal year 2007 and 2014 that the Coast Guard planned to test. These 

assets were also part of the Coast Guard’s original 2007 baseline. The 

specific assets reviewed were the Maritime Patrol Aircraft (HC-144), Fast 

Response Cutter, National Security Cutter, and Command, Control, 

Communications, Computers, Intelligence, Surveillance, and 

Reconnaissance (C4ISR) systems. For each asset, we reviewed the 

operational performance through post deployment reports, test reports, 

and met with asset operators. We also interviewed officials at the Navy’s 

Commander Operational Test and Evaluation Force (COTF) and DHS 

Office of Test and Evaluation to discuss observations and met with 

officials from the four programs. To assess the cost and schedule of the 

Coast Guard’s portfolio and steps taken to address affordability concerns, 

we reviewed each asset’s acquisition program baseline as well as the 

Coast Guard’s budget and discussed the acquisition portfolio with Coast 

Guard, DHS, and Office of Management and Budget (OMB) officials and 

followed up on previous efforts to address affordability. We also reviewed 

the Coast Guard’s Capital Investment Plan and compared it to the 

relevant law that specifies the contents of the plan.3

 3 14 U.S.C. § 663. The Coast Guard’s Capital Investment Plan is a 5-year plan presented 

to Congress that includes, among other things, projected funding for capital assets in such 

areas as acquisition, construction, and improvements. The Coast Guard updates the 

Capital Investment Plan annually, and submits it with the President’s budget in any given 

year. The Capital Investment Plan is approved by DHS and OMB and, as we have 

reported in the past, is subject to significant change each year. See 

To assess what, if 

any, capability gaps exist given the Coast Guard’s affordability issues, we 

reviewed funding needs, mission needs, future plans, and performance 

data and reviewed the Coast Guard’s fiscal year 2014 and 2015 budgets. 

We reviewed the Coast Guard’s estimates of its overall fleet performance 

in key areas and also reviewed any current or potential performance 

gaps. We also looked at the extent to which the Coast Guard is pursuing 

alternatives that could reduce costs. Appendix I contains more 

information regarding our scope and methodology.

GAO-12-918.
Page 3 GAO-14-450 Coast Guard Acquisitions

We conducted this performance audit from June 2013 to June 2014 in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe the 

evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

The Coast Guard is a multi-mission, maritime military service within DHS. 

The Coast Guard’s range of responsibilities includes maintaining the 

United States’ maritime borders, facilitating the global movement of 

commerce, safeguarding marine resources, and protecting those at sea. 

To meet its statutory missions, the Coast Guard operates a number of 

vessels, aircraft, and information technology systems. Many of the assets 

that the Coast Guard operates were delivered between 1960 and 1992

and are approaching the end of or have exceeded the period for which 

they were expected to perform—known as the assets’ service lives.

The Coast Guard began a recapitalization effort in the late 1990s to 

modernize a significant portion of its entire surface and aviation fleet by 

rebuilding or replacing assets. The Coast Guard awarded a contract to 

Integrated Coast Guard Systems (ICGS) in June 2002 to be the systems 

integrator for the portfolio. The Coast Guard generally provided ICGS with 

broad, overall performance specifications—such as the ability to interdict 

illegal immigrants—and ICGS determined the assets needed and their 

specifications. A central aspect of this effort was to use information 

technology to connect its major assets through a single command and 

control architecture—C4ISR—to improve the accuracy and speed of 

conducting Coast Guard missions. This system of systems approach was 

the effort formerly known as Deepwater. In 2002, the Coast Guard 

conducted an analysis that determined the fleet, as designed by ICGS, 

would have significant capability gaps in meeting mission requirements 

that emerged after the September 11, 2001, terrorist attacks. The Coast 

Guard decided, due to fiscal constraints, not to make significant changes 

to the ICGS planned fleet, but did approve changes to several assets’

capabilities. In 2012, we reported on the Coast Guard’s progress in 

Background

A Brief History of the 

Deepwater Program
Page 4 GAO-14-450 Coast Guard Acquisitions

achieving these capabilities, such as adding chemical, biological, and 

other decontamination capability.4

In 2006, the Coast Guard acknowledged that it had relied too heavily on 

contractors and, citing cost increases, took over the role of lead systems 

integrator. DHS approved a new baseline in May 2007 that established 

the total acquisition cost of the Deepwater program at $24.2 billion and 

projected the Coast Guard would complete the acquisition in 2027. The 

Coast Guard also reconsidered the planned fleet mix, required to meet 

the established mission needs, through a series of analyses. We 

reviewed these analyses in May 2012 and found that the Coast Guard did 

not consider any assets with less capability than the Deepwater assets 

and that the Coast Guard used optimistic cost constraints to conclude that 

it could afford the portfolio.5 As of the approval of the fiscal year 2012 

budget, DHS and the Coast Guard no longer use the term “Deepwater”

for the program aimed at recapitalizing its surface, air, and information 

technology capacity. This effort is now called Coast Guard recapitalization 

and it includes many of the assets that made up the former Deepwater 

effort as well as other major acquisitions. 

The Coast Guard has 11 major acquisition programs in its current 

portfolio, based on the Fiscal Years 2014 through 2018 Capital 

Investment Plan. Of these 11 programs, 8 were also a part of the 2007 

recapitalization portfolio.6

 4

Over time, the composition of the portfolio has 

changed. For example, since our last review in 2012, the Coast Guard 

has added 3 programs to its acquisition portfolio and another 7 programs 

are ending and, therefore, will no longer need additional acquisition 

funding. Table 1 provides information regarding each major acquisition 

program in the portfolio as well as the programs that do not need 

additional funding. Shaded assets were a part of the 2007 recapitalization 

GAO-12-918.

5 GAO, Observations on the Coast Guard’s and the Department of Homeland Security’s 

Fleet Studies, GAO-12-751R (Washington, D.C.: May 31, 2012).

6 A major acquisition is equipment, service, and/or intellectual property acquired by the 

Coast Guard with a lifecycle cost greater than $300 million.

Overview of the Current 

Coast Guard Acquisition 

Portfolio
Page 5 GAO-14-450 Coast Guard Acquisitions

portfolio, formerly known as Deepwater. Appendix III shows the estimated 

cost of programs in the current portfolio.7

Table 1: Coast Guard Major Acquisition Portfolio as of March 2014 

Name

Quantity 

delivered

Quantity 

planned Description

Surface

National Security Cutter 3 8 The 418-foot National Security Cutter is the flagship of the Coast Guard’s fleet, 

with an extended on-scene presence, long transits, and forward deployment. 

The cutter, with its aircraft and small-boat assets, operates worldwide.

Offshore Patrol Cutter 0 25 The Offshore Patrol Cutter is intended to conduct patrols for homeland security 

functions, law enforcement, and search-and-rescue operations. It will be 

designed for long-distance transit, extended on-scene presence, and operations 

with deployable aircraft and small boats. The first ship is expected to be 

delivered in 2021.

Fast Response Cutter 9 58 The Fast Response Cutter, also referred to as the Sentinel class, is a 154-foot 

patrol boat that operates with a small boat and is designed to have high 

readiness, speed, adaptability, and endurance to perform a wide range of 

missions.

Icebreaker (new) 0 TBD The heavy polar icebreaker is intended to replace the aging Polar Star and is 

intended to operate in both Arctic and Antarctic waters. This program is in the 

initial acquisition stages.

In-Service Vessel 

Sustainment (new)

N/A N/A New program for major operational fleet maintenance events, such as midlife 

maintenance and service life extensions. The Coast Guard intends for this to be 

a continuously funded line item in its acquisition budget.

Aviation

HC-130H/J – Long 

Range Surveillance 

Aircraft

6 22 The HC-130H and HC-130J are four engine turbo-prop aircraft that the Coast 

Guard has combined into one project called Long Range Surveillance (LRS) 

that will increase its capabilities. The Coast Guard intends to update the HC130H in multiple segments, but has paused further sustainment efforts while 

evaluating the recent addition of the C-27J to the Coast Guard’s aviation fleet. 

The HC-130J is a new variant that the Coast Guard has deployed with 

improved interoperability, C4ISR, and sensors.

 7 The 2007 baseline includes $3.6 billion in “other costs including project management” 

that we exclude from our analysis of the cost of the Coast Guard’s assets in appendix III.
Page 6 GAO-14-450 Coast Guard Acquisitions

Name

Quantity 

delivered

Quantity 

planned Description

Maritime Patrol Aircraft 

(HC-144)

17 36 The HC-144 is a transport and surveillance, fixed-wing aircraft for search and 

rescue, enforcement of laws and treaties, and transportation of cargo and 

personnel. Congress recommended funding to the Coast Guard in fiscal year 

2014 to pursue a new mission system that is currently in use by the U.S. Navy 

and DHS’s Customs and Border Protection. Mission system refers to the 

hardware and software needed to operate equipment, such as radars and 

communications gear. This gear does not need to be replaced to operate with 

the new mission system. The recent receipt of C-27Js will likely reduce the 

number of HC-144s that the Coast Guard plans to purchase.

C-27Ja (new) 0 14 In 2014, the Coast Guard was authorized to receive 14 C-27Js from the Air 

Force, which had purchased this two engine turbo-prop aircraft for transporting 

payloads to forward-deployed forces. According to program officials, these 

aircraft need C4ISR systems (i.e. a mission system pallet) before they can be 

used for all intended missions.

MH-65 (quantities 

reflect progress 

implementing segment 

IV)

66 102 The MH-65 Dolphin is the Coast Guard’s short range recovery helicopter. It is 

being upgraded to improve its engines, sensors, navigation equipment, 

avionics, and other capabilities in multiple segments.

Unmanned Aircraft 

System

0 TBD The Coast Guard is exploring the use of Unmanned Aircraft Systems to 

augment cutter and land-based aviation capabilities.

C4ISR

Command, Control, 

Communications, 

Computers, 

Intelligence, 

Surveillance, and 

Reconnaissance 

(C4ISR)

N/A N/A The Coast Guard is incrementally acquiring C4ISR capabilities, including 

upgrades to existing cutters and shore installations, acquisitions of new 

capabilities, and development of a common operating picture to provide 

operationally relevant information and knowledge across the full range of Coast 

Guard operations.

Assets no longer needing acquisition funding 

Response BoatMedium153 174 The Response Boat-Medium replaces the Coast Guard’s fleet of 41-foot utility 

boats as well as other nonstandard boats. The last of 174 boats are planned to 

be delivered by the end of fiscal year 2015.

Medium Endurance 

Cutter Sustainment

25 27 This project replaces obsolete and unsupportable parts on aging cutters. The 

last of the 27 ships are planned to be completed by the end of fiscal year 2014.

Patrol Boat 

Sustainment

17 17 This project replaces obsolete and unsupportable parts on aging cutters. It has 

been completed.

MH-60 42 42 The MH-60 is a medium-range recovery helicopter designed to perform search 

and rescue missions in all weather conditions. The Coast Guard is not planning 

to fund the final two segments of the project, which include a surface search 

radar and information technology systems.

Nationwide Automatic 

Identification System

8 58 This data collection, processing and distribution system provides information to 

enhance safety of navigation and improve awareness. The project is scheduled 

to complete deployment to 58 ports by the end of fiscal year 2014.

Interagency Operations 

Centers 

22 35 The Interagency Operations Centers are intended to improve joint coordinated 

emergency responses among other coordinated activities. The project is 

scheduled to complete deployment to 35 locations by the end of fiscal year 

2017. This project was downgraded to a non-major acquisition in March 2013. 
Page 7 GAO-14-450 Coast Guard Acquisitions

Name

Quantity 

delivered

Quantity 

planned Description

Rescue 21 32 37 Rescue 21 is intended to improve legacy search and rescue capability by 

increasing system coverage and operational availability, and by providing and 

integrating additional communications, interoperability, position location, and 

recording/archiving/retrieving capabilities. The Rescue 21 project is planned to 

provide the full capability to all planned areas by the end of fiscal year 2017.

Source: GAO presentation of Coast Guard data.

a

We added the C-27J to the Coast Guard’s acquisition portfolio since this asset is planned to be 

transferred to the Coast Guard pursuant to the National Defense Authorization Act for Fiscal Year 

2014, Pub. L. No 113-66, § 1098(e) (2013).

The Coast Guard has continued to strengthen its acquisition management 

capabilities when purchasing individual assets. For example, in response 

to one of our prior recommendations, the Coast Guard released a 

January 2013 update to its Major Systems Acquisition Manual to, among 

other things, better reflect cost and schedule estimation best practices 

and to clarify the roles and responsibilities of the Executive Oversight 

Council. The Executive Oversight Council is comprised of admirals and 

senior executives who regularly conduct oversight meetings to govern the 

acquisition process. As part of the budget process, the Executive 

Oversight Council provides recommendations to the Investment Board, 

which are presented to the Investment Review Board—a higher level 

group—and ultimately the Commandant for final investment decisions.

In addition, the Coast Guard has sought to maximize competition in its 

acquisitions and to buy commercial products when available. For 

example, the Coast Guard purchased a “reprocurement data licensing 

package” from Bollinger Shipyards, Inc. that contains the technical 

specifications and licenses necessary to build the Fast Response Cutter. 

The Coast Guard is planning to use this information to conduct a full and 

open competition for the remaining vessels. Our previous work has 

shown that when the government owns technical data rights, it does not 

need to rely on only one contractor to meet requirements.8

 8 GAO, Defense Contracting: Actions Needed to Increase Competition, 

Further, the 

Coast Guard has developed a warranty provision under its contract with 

Bollinger Shipyards that has held the contractor responsible for 

production deficiencies. While the Coast Guard does not always have 

insight into how much it costs the contractor to fix these issues, after 

multiple deficiencies interrupted production, officials noted they are 

GAO-13-325 

(Washington, D.C.: Mar. 28, 2013).

Coast Guard Acquisition 

Management
Page 8 GAO-14-450 Coast Guard Acquisitions

confident that the Coast Guard has received value from this warranty. 

The Coast Guard plans to use these strategies when purchasing the 

Offshore Patrol Cutter.

DHS and Coast Guard acquisition guidelines provide that representative 

units of major acquisition assets should be operationally tested by an 

independent test agency before they are approved for full-rate production. 

The Coast Guard uses the Navy’s Commander Operational Test and 

Evaluation Force (COTF) to conduct operational tests and other 

evaluations for its major acquisition assets. COTF serves as an 

independent evaluator of an asset’s capabilities and has experience 

testing Navy assets. Operational testing characterizes the performance of 

an asset during a discrete period of time but testers may also use actual 

mission performance data when available. In conducting operational 

testing, COTF evaluates an asset’s operational effectiveness and 

suitability:

• For operational effectiveness, testers determine whether or not an 

asset can meet its missions.

• For operational suitability, testers determine whether or not the 

agency can logistically support the asset to an acceptable standard, 

such as having the asset available for operations 80 percent of the 

year.

According to DHS and Coast Guard acquisition guidance, results of 

operational tests are used to evaluate the degree to which the capability 

or system being acquired meets its requirements and is able to operate in 

its intended environment, both before and often after full-rate production 

commences.

In addition to verifying that an asset is operationally effective and suitable, 

operational testing also tests key performance parameters, which are the 

capabilities considered essential for mission success. For example, a key 

performance parameter for the Fast Response Cutter is being able to 

reach a top speed of at least 28 knots. According to DHS and Coast 

Guard acquisition guidance, when programs fail to meet key performance 

parameters, program managers are required to file breach memorandums 

stating that the program failed to demonstrate the required performance 

threshold. Program managers are also required to formally notify Coast 

Guard leadership, DHS, and certain congressional committees and file a 

remediation plan within 30 days that proposes corrective actions to 

mitigate the issues that resulted in the breach. Within 90 days of filing the 

Operational Testing
Page 9 GAO-14-450 Coast Guard Acquisitions

breach notification the program should have accomplished one of the 

following three actions: (1) re-validate the original baseline parameters, 

(2) have a new baseline approved that revises the parameters that were 

breached, or (3) conduct a program review that evaluates the proposed 

baseline revisions and makes recommendations to the acquisition 

decision authority.

The Coast Guard’s new asset classes that we reviewed—the National 

Security Cutter, Fast Response Cutter, HC-144, and the C4ISR 

information technology system—are generally demonstrating improved 

mission performance over the assets they are replacing, according to 

Coast Guard officials who operate these assets. For example, these new 

assets have greater fuel and food capacity, automation, and 

handling/sea-keeping, all of which increase endurance and 

effectiveness.9

 9 Seakeeping refers to a vessel’s ability to withstand harsh sea states to conduct 

operations or survive. Sea states refer to the height, period, and character of waves on the 

surface of a large body of water.

However, the Coast Guard has not been able to prove that 

assets meet key requirements through operational testing. Of these four 

newly fielded asset classes, the Fast Response Cutter and the HC-144 

completed initial operational testing, but did not successfully demonstrate 

many key requirements during these tests. For example, the Fast 

Response Cutter did not meet its operational availability requirement due 

to a key engine part that failed during testing. DHS and the Coast Guard 

approved both assets for full-rate production noting planned 

improvements, but DHS and Coast Guard acquisition guidance is not 

clear as to when a program needs to meet minimum performance 

standards. For example, the guidance does not specify whether the 

performance standards must be met before entering full-rate production. 

The National Security Cutter and C4ISR programs have not completed 

operational testing. The Coast Guard recently conducted testing on the 

National Security Cutter although seven of eight vessels are completed or 

currently under construction. Based on early assessments and mission 

performance of the first three National Security Cutters, the Coast Guard 

has determined that design changes costing at least $140 million are 

necessary to meet requirements. Lastly, due to performance, 

maintenance, and obsolescence issues, the Coast Guard is replacing its 

initial C4ISR software, which cost about $413 million to develop and field, 

on the National Security Cutter, HC-144, and HC-130J.

Operators Extol New 

Assets’ Performance 

Compared to Aging 

Counterparts, but 

These Assets Have 

Yet to Meet All Key 

Requirements
Page 10 GAO-14-450 Coast Guard Acquisitions

Coast Guard operators and commanding officers in several locations told 

us that the National Security Cutter, Fast Response Cutter, and HC-144 

are performing well during missions and are an improvement over the 

vessels and aircraft they are replacing. Operators primarily attribute the 

performance improvements to better endurance and communication 

capabilities, which help to position and keep these assets in high threat 

areas. Specifically, these new assets have greater fuel capacity and 

efficiency, engine room and boat launch automation, handling/seakeeping, and food capacity, all of which increase endurance and 

effectiveness. Operators stated that these new assets, using information 

technology systems, can also share pictures and locations of vessels, 

and communicate more frequently and accurately with shore-based 

operational commanders than the legacy vessels being replaced. For 

example, operators said they now use chat rooms on secure networks in 

addition to radios. These chat rooms improve communication because 

multiple parties can communicate at the same time and messages remain 

available on the screen for reference. Figure 1 below compares 

endurance-related capabilities of the National Security Cutter, Fast 

Response Cutter, and HC-144 with the assets they are replacing.

Operators Report That 

New Assets Have 

Improved the Coast 

Guard’s Capabilities 

Compared to Legacy 

Assets
Page 11 GAO-14-450 Coast Guard Acquisitions

Figure 1: Planned Endurance-Related Capabilities of New Coast Guard Assets Compared with Assets They Are Replacing

a

According to the Coast Guard, High Endurance Cutters have a range of 9,600 nautical miles under 

normal circumstances. The High Endurance Cutters can achieve a 14,000 nautical mile range if they 

ballast their fuel tanks once the tanks are depleted, a procedure that is rarely undertaken.
Page 12 GAO-14-450 Coast Guard Acquisitions

b

The seakeeping parameter for the National Security Cutter as well as the seakeeping and endurance 

values for the Fast Response Cutter are expressed in terms of threshold and objective values. The 

Coast Guard has yet to fully test the new assets.

According to operators of the National Security Cutter and the Fast 

Response Cutter, other new capabilities are also increasing operational 

effectiveness. For example, the Fast Response Cutter has a stern launch 

and recovery ramp—a space at the end of the vessel that stores and 

deploys the cutter’s small boat and is open to the water. Using this ramp, 

according to operators, they launch the cutter’s small boat in 10 to 15 

seconds while the ship is actively pursuing a target. By comparison, the 

legacy 110’ patrol boat requires a significant number of personnel to 

launch the cutter’s small boat using a crane attached to the center of the 

vessel—a complex process that takes significantly longer and has 

potential safety risks. The National Security Cutter also has a stern 

launch ramp, which, in addition to launching and recovering small boats, 

was used by the ship’s crew to hold a seized boat while they dismantled it 

to find drugs hidden in hard-to-reach compartments. In addition, operators 

told us that the larger flight deck on the National Security Cutter allows 

the Coast Guard to more safely operate the helicopter in rougher seas 

than the legacy vessel and, based upon early demonstrations, conduct 

unmanned aircraft system operations in conjunction with the helicopter.10

To date, the improved capabilities of the four newly fielded assets have 

led to mission-related successes, according to Coast Guard asset 

commanders. For example, officials from Air Station Miami reported that 

since they began regularly operating the HC-144 in fiscal year 2011, the 

aircraft has had a significant role in improving the effectiveness of the 

Coast Guard’s counterdrug and alien migrant interdiction operations in 

this area. In addition, one National Security Cutter completed a 160-day 

deployment in fiscal year 2013 during which it performed 6 drug 

interdictions totaling 570 kilograms of cocaine. Cutter officers stated that 

the ship’s intelligence capabilities and the small unmanned aircraft 

system, which are both new capabilities that are not on the 378’ High 

Endurance Cutter, were crucial to these drug interdictions. In addition, 

These and other capability improvements allow Coast Guard operators to 

more effectively accomplish their missions.

 10 The National Security Cutter does not currently deploy with an unmanned aircraft 

system. Officials said that a small unmanned aircraft system was being demonstrated on 

the National Security Cutter during this mission to determine if such a solution is possible. 
Page 13 GAO-14-450 Coast Guard Acquisitions

Coast Guard operators stated that the ability to interoperate with foreign 

navies during joint exercises was greatly enhanced by the communication 

features on the National Security Cutter.

DHS approved the Fast Response Cutter and HC-144 for full-rate 

production in September 2013 and October 2012, respectively. However, 

neither asset met all key requirements during initial operational testing. 

The Fast Response Cutter partially met one of six key requirements while 

the HC-144 met or partially met four of seven. The Fast Response Cutter 

was found to be operationally effective (with the exception of its cutter 

boat) though not operationally suitable, and the HC-144 was found to be 

operationally effective and suitable. As we have previously found for 

Department of Defense (DOD) programs, continuing with full-rate 

production before ensuring that assets meet key requirements risks 

replicating problems in each new asset until such problems are 

corrected.11

In addition, DHS and Coast Guard acquisition guidance do not clearly 

specify how agency officials determine when a breach occurs and what 

triggers the need for a program manager to submit a performance breach 

memo. According to DHS and Coast Guard acquisition guidance, when 

programs fail to meet key performance parameters, program managers 

are required to file breach memorandums stating that the program did not 

demonstrate the required capability. Even though threshold key 

DHS officials stated that they approved both assets for fullrate production because the programs had plans in place to address most 

major issues identified during testing, such as supplying the Fast 

Response Cutter with a small boat developed for the National Security 

Cutter. However, DHS and Coast Guard acquisition guidance are not 

clear regarding when the minimum performance standards should be 

met, such as prior to entering full-rate production. For example, DHS and 

Coast Guard guidance provide that the Coast Guard should determine if 

the capability meets the established minimum performance standards, but 

do not specify when this determination should be made. By comparison, 

DOD acquisition guidance requires that specific minimum performance 

standards, which are defined at the time assets are approved for system 

development, be met prior to entering full-rate production.

 11 GAO, Missile Defense: Opportunity Exists to Strengthen Acquisitions by Reducing 

Concurrency, GAO-12-486 (Washington, D.C.: Apr. 20, 2012). 

Guidance Unclear As to 

When Minimum 

Performance

Requirements Must be 

Demonstrated
Page 14 GAO-14-450 Coast Guard Acquisitions

performance parameters on the HC-144 and Fast Response Cutter were 

not met during operational testing, the Coast Guard did not report that a 

breach had occurred. Acquisition guidance is unclear as to whether or not 

failing to meet key requirements during operational testing constitutes a 

breach. According to Coast Guard officials, if the Coast Guard plans to retest or re-design a deficiency in order to meet the threshold value, then a 

breach has not yet occurred. For example, the Fast Response Cutter 

small boat did not meet the threshold seakeeping requirement, but a new 

cutter small boat has since been tested on its own and fielded to all Fast 

Response Cutters. The Coast Guard plans to test this new cutter small 

boat with the Fast Response Cutter during follow on testing. Program 

officials are confident that the cutter’s new small boat meets this 

requirement and that—therefore—a breach has not occurred. DHS 

acquisition guidance specifies the performance criteria used to determine 

whether or not a breach has occurred, but does not identify a triggering

event for determining when a breach occurs. DHS’s Program 

Accountability and Risk Management officials stated that a program 

breach is not necessarily related to its performance during initial 

operational testing, which they state is a snapshot of a single asset’s 

performance during a defined test period. Without clear acquisition 

guidance, it is difficult to determine when or by what measure an asset 

has breached the threshold values of its key performance parameters 

and—therefore—when to notify DHS and certain congressional 

committees.

Specific information on testing outcomes for each asset follows.

COTF determined in July 2013 that the Fast Response Cutter, without the 

cutter’s small boat, is operationally effective—meaning that testers 

determined that the asset enables mission success. The cutter’s small 

boat was determined to not be seaworthy in minimally acceptable sea 

conditions and—therefore—could not support the cutter’s mission set. 

Further, COTF determined that the Fast Response Cutter is not 

operationally suitable because a key engine part failed, which lowered the 

amount of time the ship was available for missions to an unacceptable 

level. Despite the mixed test results, COTF and DHS testers as well as 

Coast Guard program officials all agree that the Fast Response Cutter is 

a capable vessel. Ultimately, COTF recommended that the Coast Guard 

proceed to field the vessel, but also recommended that the issues with 

the cutter’s small boat be remedied expeditiously and that follow-on 

operational testing be conducted once corrective actions have been 

implemented. Since the test, the Coast Guard has delivered a new small 

Fast Response Cutter
Page 15 GAO-14-450 Coast Guard Acquisitions

boat that meets the Fast Response Cutter’s needs and determined that 

the engine part failure was an isolated event.

The Navy also examined the extent to which the Fast Response Cutter 

meets key requirements. The test demonstrated that it partially met only 

one out of its six key requirements; the other five requirements did not 

meet minimum performance levels or were not tested. Table 2 displays 

each key performance parameter for the Fast Response Cutter, the test 

results, and a discussion of these results.

Table 2: Key Performance Parameter Test Results for the Fast Response Cutter 

Key performance 

parameter (threshold 

requirement)

Was KPP 

tested? KPP met? Test result Discussion

Top speed (28 knots) No N/A N/A Speed was not tested during initial operational testing 

due to a fuel oil leak. Speed has been assessed 

during preliminary acceptance trials and the vessel 

has reached top speed following the replacement of 

the original propeller. Since this change, all 9 FRCs 

have demonstrated at least 28 knots during other test 

events.

Fuel endurance (5 Days) No N/A N/A Not assessed due to inaccurate fuel level indicators.

Independent operations 

duration (5 days)

No N/A N/A The Coast Guard’s ability to independently operate 

the vessel was not tested. The cutter was still under 

warranty; thus, all maintenance was the responsibility 

of the shipbuilder at the time of the test.

Sea-keeping (conduct all 

operations in sea state 4) 

Yes No The cutter small 

boat could not 

conduct operations 

in sea state 4. 

Since the test, the Coast Guard has purchased new 

cutter small boats that are performing well according 

to crews. These boats have gone through their own 

testing and will be tested with the Fast Response 

Cutter during follow-on operational testing, which is 

scheduled to commence by the end of fiscal year 

2015.

Interoperability (share 

information with internal 

and external partners)

Partial Partial Radios and some 

data transfers were 

successfully tested.

Communication with operational headquarters, 

intelligence units, external DHS, DOD and local 

assets, as well as other shore installations, were not 

tested.

Operational availability 

(85 percent)

Yes No 47 percent A key engine part failed during testing and it took 11 

days to receive the part and conduct repairs, resulting 

in significant downtime during testing. Thus, the 

ship’s availability to conduct missions during the test 

period was limited. Since testing was completed the 

FRC has experienced additional engine issues, 

including at least two generations of faulty cylinder 

head gaskets.

Source: GAO analysis of Navy and Coast Guard data.
Page 16 GAO-14-450 Coast Guard Acquisitions

The Coast Guard proactively sought to test the Fast Response Cutter 

early in the acquisition process, but early testing limited the ability to fully 

examine the vessel. For example, the Coast Guard did not test the top 

speed of the vessel due to a fuel oil leak. As noted above, DHS approved 

the Fast Response Cutter for full-rate production, but directed the 

program to develop corrections for the issues identified during operational 

testing and to verify those corrections through follow-on operational 

testing by the end of fiscal year 2015.

In July 2012, COTF determined the HC-144 to be operationally effective 

and operationally suitable and recommended that the Coast Guard 

continue to field the aircraft. Even though testers expressed confidence in 

the aircraft to meet its missions, the test also showed that the HC-144 

achieved—or partially achieved— four out of seven key requirements. 

Table 3 contains each key performance parameter for the HC-144, the 

test results, and a discussion of these results.

Table 3: Key Performance Parameter Test Results for the HC-144 Maritime Patrol Aircraft

Maritime Patrol Aircraft (HC144)

Key performance 

parameter (threshold 

requirement)

Was KPP 

tested? KPP met? Test result Discussion

Search and rescue (arrive 

on scene 300 nautical miles 

away within 120 minutes of 

notification)

Yes No 133.8 minutes Coast Guard officials stated that they have amended 

operational tactics, such as prepositioning the plane 

for quicker launch. 

Availability (71 percent) Yes No 65.1 percent Due to a lack of spare parts, crews stated they have 

been forced to take parts from operational aircraft in 

order to keep other aircraft operating. The Coast 

Guard has recently taken steps to improve this 

problem, such as creating a parts catalog with the 

primary contractor, but the results are not yet known. 

Detection (main detection 

target is 75 percent of close 

targets)

Yes No 62.5 percent 

probability of 

detection

We have previously reported on the problems with the 

mission system.

a The Coast Guard is planning to 

replace the mission system with a system used on 

Navy and Customs and Border Protection aircraft. 

The Coast Guard has accepted this limitation based 

upon other available sensors.

On scene time (minimum 3

hours)

Yes Yes 3.95 hours The HC-144 met the requirement.

Transportation (load and 

unload a standard pallet with 

mission system on board)

Yes Partial The HC-144 met

range and 

passenger 

thresholds

The HC-144 met range and passenger thresholds. 

However, the maximum cargo and passenger loads 

were not tested because fully testing this parameter 

was not in the test plan.
Page 17 GAO-14-450 Coast Guard Acquisitions

Source: GAO analysis of Navy and Coast Guard data.

a

GAO, Coast Guard: Action Needed as Approved Deepwater Program Remains Unachievable, 

GAO-11-743 (Washington, D.C.: July 28, 2011).

The Coast Guard did not test all key performance parameters, but is

pursuing corrections following approval for production. The HC-144 did 

not meet the minimum performance level for detecting targets at sea with 

its radar and C4ISR mission system. While the mission system did not 

meet requirements, the aircraft was considered operationally effective 

because operators can supplement these systems by looking out of the 

windows of the aircraft. DHS approved the HC-144 for full-rate 

production, but directed the program to develop a plan to correct 

deficiencies. Coast Guard program officials told us that they are 

addressing the deficiencies discovered through the test as funding 

becomes available and through changes in operational tactics. According 

to the officials, the HC-144 program will likely be truncated because the 

Coast Guard is receiving similar assets (C-27 aircraft) from the Air Force 

at no cost, which would render the production decision of the HC-144 

inconsequential.

The Coast Guard has some knowledge about the performance of the 

National Security Cutter, gained through operational deployments and 

preliminary test events, and the field portion of operational testing was 

recently conducted. The Coast Guard has been operating the vessel 

since 2008, conducted a preliminary operational test in 2011, and has 

received certifications to fully operate and maintain helicopters as well as, 

according to officials, to use the cutter’s information technology systems 

on protected networks. In addition, Coast Guard program officials stated 

that the National Security Cutter has demonstrated most of its key 

performance parameters through a myriad of non-operational tests and 

assessments, but a few key performance parameters, such as those 

relating to the endurance of the vessel and its self-defense systems have 

yet to be assessed. Verification of an asset’s ability prior to operational 

testing may be beneficial, but, as we have previously found, only 

Clean wing low altitude 

patrol speed (maximum of 

180 knots when flying below 

1,000 feet)

Yes Yes 162.4 knots The HC-144 met the requirement.

Interoperability (share 

information with internal and 

external partners)

Partial Partial Radios and other 

tools were 

successful but the 

mission system 

was inconsistent. 

The HC-144 was able to regularly communicate with 

other aircraft, surface vessels, and shore installations 

using multiple frequencies. However, the ability to 

transmit data from the mission system to other Coast 

Guard assets and facilities was hindered by a satellite 

receiver that operated inconsistently.

National Security Cutter
Page 18 GAO-14-450 Coast Guard Acquisitions

operational testing can ensure that an asset is ready to meet its 

missions.12

Prior to testing, the Coast Guard encountered several issues that require 

retrofits or design changes to meet mission needs based upon 

operations, certifications, and non-operational testing. The total cost of 

these changes is not yet known, but changes identified to date have 

totaled approximately $140 million, about one-third of the production cost 

of a single National Security Cutter. The Coast Guard must pay for all of 

these and future changes due to the contract terms under which the first 

three ships were constructed and because the warranty on the remaining 

ships does not protect the Coast Guard against defects costing more than 

$1 million. Table 4 lists the retrofits and design changes costing more 

than $1 million. The table does not include all changes because the Coast 

Guard did not have data for some of the modifications. In addition to the 

$140 million in identified changes, the Coast Guard has established a 

program to supply the National Security Cutter with cutter small boats for 

an additional $52.1 million because the small boats originally planned to 

be delivered with the vessel did not meet requirements.

Table 4: Retrofits and Design Changes on the National Security Cutter Class 

Costing over $1 Million as of December 2013

Retrofits and design changes Cost (in millions)

Primary information system replacement $88.5 

Structural enhancements to be determineda

Remove Aircraft Ship Integrated Secure and Traverse tracks in 

flight deckb to be determined

Gantry crane that aids in launching small boats from stern ramp $31

Side davit crane for small boat operations $12.5

Two ammunition hoists $6.3

Breathing apparatus replacement $1.6

Total cost $140c

Source: GAO presentation of Coast Guard data.

Notes: The Coast Guard reported these numbers for all eight hulls. However, for some items, such as 

the information system replacement, the costs primarily cover retrofitting some or all of the first four 

hulls.

 12 GAO, Navy Shipbuilding: Significant Investments in the Littoral Combat Ship Continue 

Amid Substantial Unknowns about Capabilities, Use, and Cost, GAO-13-530 (Washington, 

D.C.: July 22, 2013).
Page 19 GAO-14-450 Coast Guard Acquisitions

a

The work package is being developed and, according to program officials, initial estimates are about 

$19 million per vessel.

b

In January 2011, Coast Guard officials canceled the Aircraft Ship Integrated Secure and Traverse—a 

system intended to automate the procedure to land, lock down, and move the HH-65 helicopter from 

the deck to the hangar on the National Security Cutter—after significant deficiencies were identified 

during testing conducted by the U.S. Naval Air Warfare Center. The Coast Guard invested 

approximately $27 million to install the system on three National Security Cutters, including putting 

tracks in the flight deck that must now be removed.

c

Several funding accounts, including acquisition funding and operations and maintenance funding, 

are being used for these corrections.

Additional changes may be needed because the Coast Guard has not 

fully validated the capabilities of the National Security Cutter, though 

seven vessels have been delivered or are in production. This situation 

could result in the Coast Guard having to spend even more money in the 

future, beyond the current changes, to ensure the National Security 

Cutter fleet meets requirements and is logistically supportable. For 

example, the cutter is experiencing problems operating in all intended 

environments. The National Security Cutter requirements document 

states that the cutter will conduct assigned missions in a full spectrum of 

climate and maritime weather conditions, to include tropical, dry, 

temperate, and arctic climates. This document adds that although the 

National Security Cutter will operate in regions in which ice is frequently 

encountered, it will not have an ice-breaking mission. However, Coast 

Guard engineering reports from December 2012 discuss problems 

operating in both warm and cold climates. These reports discuss several 

warm weather problems, including cooling system failures, excessive 

condensation forming “considerable” puddles on the deck of the ship, and 

limited redundancy in its air conditioning system—which, among other 

things, prevents the use of information technology systems when the air 

conditioning system needs to be serviced or repaired. In addition, 

according to operational reports, during a recent deployment, the 

Commanding Officer of a National Security Cutter had to impose speed 

restrictions on the vessel because of engine overheating when the 

seawater temperature was greater than 77 degrees. Cold climate issues 

include the National Security Cutter not having heaters to keep oil and 

other fluids warm during operations in cold climates, such as the arctic. 

Further, Coast Guard operators state that operating near ice must be 

done with extreme caution since the ice can move quickly and can “spell 

disaster” if the National Security Cutter comes in contact with it. Senior 

Coast Guard officials acknowledged that there are issues to address and 

stated that the Coast Guard has not yet determined what, if any, fixes are 

necessary and that it depends on where the cutter ultimately operates.
Page 20 GAO-14-450 Coast Guard Acquisitions

The Coast Guard does not plan to operationally test the C4ISR system’s 

key performance parameters. The Coast Guard initially planned to test 

the C4ISR system separately from the operational testing of its planes 

and vessels, such as the HC-144 and Fast Response Cutter. Coast 

Guard officials then decided to test the C4ISR system in conjunction with 

the planes and vessels to save money and avoid duplication. However, 

the C4ISR system was not specifically evaluated during the HC-144 and 

Fast Response Cutter tests because testing the effectiveness and 

suitability of the C4ISR system was not fully integrated into the assets’

test plans. For example, the HC-144 was unable to meet its key 

requirement for detection, which uses the C4ISR software in conjunction 

with the HC-144’s radar and other sensors. In addition, COTF found that 

the HC-144’s ability to detect and share target data was cumbersome and 

time-consuming.13

The Coast Guard has also encountered several issues with the C4ISR 

system that have required significant and costly changes, including 

replacing the original system. The original C4ISR system, which cost 

$413 million to develop and field, was designed and built as a tightly 

integrated system bundling large commercial and government software 

programs with contractor-proprietary software, which made it difficult and 

costly to maintain—primarily due to its unique characteristics and large 

size. For example, according to program officials, the Coast Guard relied 

on the contractor to conduct even basic system updates, which required 

new software code because of how the system was integrated.

These results were not evaluated against the C4ISR 

system’s requirements. While testing the C4ISR system at the same time 

as the assets can work, this strategy is not consistent with Coast Guard 

acquisition guidance if the C4ISR system’s key performance parameters 

are not tested. Acquisition guidance states that the Coast Guard should 

test the C4ISR system, as it does with all major acquisitions, to ensure it 

is operationally effective, operationally suitable, and meets its basic 

requirements. By not testing the system, the Coast Guard has no 

assurance that it is purchasing a system that meets its operational needs. 

In responding to a draft of this report, the Coast Guard stated that it now 

plans on testing the C4ISR system’s key performance parameters during 

follow on testing for the National Security Cutter.

 13 For more information on the common operational picture, see GAO, Clarifying the 

Application of Guidance for Common Operational Picture Development Would Strengthen 

Program, GAO-13-321 (Washington, D.C.: Apr. 25, 2013). 

C4ISR Information Technology 

Systems
Page 21 GAO-14-450 Coast Guard Acquisitions

As a result, in 2010, the Coast Guard began replacing the C4ISR 

software in two steps. First, to address immediate issues, the Coast 

Guard separated the weapons and command and control/navigation 

portions of the software but maintained the ability to share data between 

these portions of the system. Second, the Coast Guard has developed 

and is now installing a new software package that shares data between 

proven systems, which makes the system easier to maintain. For 

example, the communication/navigation system is largely based upon the 

Navy’s Global Command and Control System, a long-standing system 

maintained by DOD. In addition, the combat system is adapted from the 

Navy’s Aegis system. While the previous version of the C4ISR system 

also contained this software, the Coast Guard’s new configuration keeps 

these systems independent to improve performance and maintenance, 

while still allowing data to be passed back and forth between the software 

packages within the system.

The Coast Guard has spent nearly $2 million to develop this new system, 

called Seawatch, which will have to be further developed for each asset 

on which it is fielded. For example, it will cost an additional $88.5 million 

in acquisition funds to purchase the software and hardware needed to 

field the system on the National Security Cutters. In addition, the Coast 

Guard is replacing the mission systems on the HC-144 and HC-130J 

airframes with a proven Navy system to address obsolescence, 

maintenance, and performance issues. Initial cost estimates are being 

developed for this project.

As acquisition program costs increase across the portfolio, consuming 

significant amounts of funding, the Coast Guard is farther from fielding its 

planned fleet today than it was in 2009, in terms of the money needed to 

finish these programs. In 2009, we found that the Coast Guard needed 

$18.2 billion to field its original baseline,14

 14 GAO, Coast Guard: As Deepwater Systems Integrator, Coast Guard Is Reassessing 

Costs and Capabilities but Lags in Applying Its Disciplined Acquisition Approach, 

but it now needs $20.7 billion to 

finish fielding these same assets. For example, the estimated funding 

needed to complete the National Security Cutter increased by $2.2 billion 

since original estimates. Given these cost increases and funding 

constraints, the Coast Guard and key stakeholders have acknowledged 

that the Coast Guard’s acquisition portfolio is not affordable but, thus far, 

efforts to address this issue have not led to the significant trade-off 

GAO-09-682 (Washington, D.C.: July 14, 2009).

Cost Increases Are 

Consuming Funding

and Affordability 

Issues Have Not 

Been Addressed or 

Accurately 

Represented
Page 22 GAO-14-450 Coast Guard Acquisitions

decisions needed to improve its affordability. To balance its portfolio, 

Coast Guard budget officials stated that they use the 5-year Capital 

Investment Plan. However, this plan presents data in a manner that 

makes the portfolio appear more affordable than it really is. For example, 

in the Fiscal Years 2014 through 2018 Capital Investment Plan, the Coast 

Guard proposed purchasing two Fast Response Cutters per year, instead 

of four or six per year, but did not capture the up to $800 million in total 

cost increases associated with this reduced quantity.

As program cost increases consume significant amounts of funding, the 

Coast Guard is farther from fielding its planned fleet today than it was in 

2009, in terms of the money needed to finish these programs. Figure 2 

shows the total cost of and cost to complete the Coast Guard’s original 

2007 baseline in 2009 and 2014.

Figure 2: The Total Cost of and Cost to Complete the Coast Guard’s Original 2007 

Baseline in 2009 and 2014

Note: In current/then-year dollars. This means that numbers have not been normalized for inflation.

This is the result of $11.3 billion in cost increases realized since 2007 for 

these programs, according to the most recent program baselines. For 

example, the Coast Guard experienced a $2.2 billion cost increase to the 

National Security Cutter project since the 2007 estimate. In addition, the 

anticipated cost to complete the Offshore Patrol Cutter has increased by 

$4 billion since 2007 and, therefore, will also consume a significant 

portion of future funding. Since our last review, the Coast Guard, in 

Cost Increases Are 

Consuming Funding
Page 23 GAO-14-450 Coast Guard Acquisitions

conjunction with DHS, has updated many of its cost estimates.15 Senior 

Coast Guard acquisition officials told us that many of the cost increases 

are due to changes from preliminary initial estimates and that they expect 

to meet their current cost estimates. However, the Coast Guard has yet to 

construct the largest asset in the portfolio—the Offshore Patrol Cutter—

and if the planned costs for this program increase, difficulties in executing 

the portfolio as planned will be further exacerbated.

Coast Guard, DHS, and OMB officials have acknowledged that the Coast 

Guard cannot afford to recapitalize and modernize its assets in 

accordance with the current plan at current funding levels. According to 

budget documents, Coast Guard acquisition funding levels have been 

about $1.5 billion for each of the past 5 years and the President’s budget 

requests $1.1 billion for fiscal year 2015. At the same time, DHS is 

struggling to match acquisition needs with available resources across all 

of its component agencies, including the Coast Guard. Coast Guard 

acquisitions comprise about 16 percent of the total DHS acquisition 

budget. In a December 2012 memo signed by the Chief Financial Officer, 

DHS estimated that funding requirements for all of its major acquisitions 

exceed available resources by 30 percent.16

Efforts are underway to address this issue, but, so far, these efforts have 

not led to the significant trade-off decisions needed to improve the 

affordability of the Coast Guard’s portfolio. A senior Coast Guard official 

recently stated that external reviews of the Coast Guard’s planned 

acquisitions have been conducted by DHS and White House 

organizations, such as the President’s Policy Councils, and, often, 

additional demand for Coast Guard missions is identified, rather than 

deciding upon reductions. OMB officials stated that these reviews are not 

conducted in conjunction with budget policy and do not incorporate capital 

investment strategies. Examples of the steps OMB, DHS, and the Coast 

OMB officials have also told 

us that they recognize that the Coast Guard’s acquisition portfolio is not 

affordable at current funding levels given the fiscal constraints faced by all 

federal agencies.

 15 GAO-12-918.

16 GAO, Homeland Security Acquisitions: DHS Could Better Manage Its Portfolio to 

Address Funding Gaps and Improve Communications with Congress, GAO-14-332 

(Washington, D.C.: April 17, 2014).

Decision Makers Have Yet 

to Address Ongoing 

Affordability Concerns
Page 24 GAO-14-450 Coast Guard Acquisitions

Guard have taken to address the affordability of the Coast Guard’s 

acquisition portfolio are described below:

• OMB conducts annual performance and mission based reviews of the 

Coast Guard, in conjunction with other White House staff, as part of 

the annual budget process. OMB officials told us that there has been 

little progress in efforts to identify the trade-offs that would make the 

recapitalization portfolio more affordable, such as adjusting the 

quantities or capabilities of assets needed to meet mission needs. 

The officials stated that reviews regarding the fiscal year 2015 budget 

process were focused heavily on the sequestration funding caps and, 

therefore, did not focus on long term issues.

• DHS has conducted two annual Coast Guard acquisition portfolio

reviews, but according to DHS program reviewers, the most recent 

review—scheduled for September 2013—was cancelled as a result of 

the lapse in federal government appropriations. According to a DHS 

official who led the reviews, the earlier reviews provided updates to 

DHS leadership on the status of the Coast Guard’s acquisitions and 

efforts to address affordability, but no trade-off decisions were made 

to reduce planned quantity or capability. DHS officials told us that the 

Secretary recently directed a review of the Coast Guard’s acquisition 

portfolio over the next 20 years. We have previously reported that 

DHS has taken steps to address affordability issues at acquisition 

decision events, but it has rarely directed affordability trade-offs.17 In 

the case of the Fast Response Cutter, DHS approved the vessel for 

full-rate production in September 2013 even while acknowledging that 

the cutter faces affordability challenges and that the program did not 

meet DHS’s requirement to verify that sufficient funding is available. 

DHS has proposed two consecutive budgets, one before and one 

after the production decision, with a funding level for the Fast 

Response Cutter that supports purchasing two cutters per year rather 

than the four cutters per year that form the basis for the cost and 

schedule estimates in the asset’s acquisition program baseline.

• We have previously reported on the Coast Guard’s efforts to address 

affordability and recommended that the Coast Guard develop a plan 

to match needs and resources.18

 17

In response to our recommendation 

GAO-14-332.

18 GAO-11-743 and GAO-12-918. 
Page 25 GAO-14-450 Coast Guard Acquisitions

in September 2012, DHS stated that the Coast Guard is developing a 

process to make trade-off decisions that will result in a portfolio that 

contains a balanced mix of assets that meets mission needs within 

affordability constraints. However, the Coast Guard has yet to 

document how this new process will work and it is not clear who in the 

Coast Guard has the authority to make trade-off decisions. Officials 

who support the Executive Oversight Council stated that the goal is to 

better inform Council members so that they understand the full 

consequences of annual budget decisions. These officials told us that 

they are striving to establish this process in time to inform the fiscal 

year 2016 budget. While the Coast Guard continues to concur with 

our previous recommendation that the Executive Oversight Council 

should be closely involved in making trade-off decisions to balance 

the portfolio, the Coast Guard could not provide documentation that 

this group has made any decisions to balance needs and funding as 

of May 2013. In addition, Coast Guard budget officials told us that the 

Executive Oversight Council does not have full authority to make 

these decisions, as final decisions are made by the Commandant, in 

conjunction with the Investment Review Board.

The Coast Guard’s Fiscal Years 2014 through 2018 Capital Investment 

Plan complies with the law specifying its contents.19

The law does not require the Coast Guard to include total cost of its 

projects at planned funding levels. In the Fiscal Years 2014 through 2018 

Capital Investment Plan, cost and schedule totals did not match the 

funding levels presented for many programs. For example, the plan 

proposed lowering the Fast Response Cutter procurement to two per year 

but still showed the total cost and schedule estimates for purchasing 

three or six per year—suggesting that this reduced quantity would have 

Each year, the Coast 

Guard is required to submit a 5-year Capital Investment Plan to certain 

congressional committees when the President’s budget is submitted. This 

plan is required to include, among other things, the appropriations in the 

current budget, projected funding levels for each of the next five fiscal 

years, and estimated total cost and schedule in current program 

baselines. To date, the Coast Guard has not submitted the Fiscal Years 

2015 through 2019 plan, which was due in conjunction with the 

President’s Budget delivered in March 2014.

 19 14 U.S.C. § 663.

Capital Investment Plan 

Does Not Capture the Full 

Effect of Annual Budget 

Decisions
Page 26 GAO-14-450 Coast Guard Acquisitions

no effect on the program’s total cost and schedule. Given that decreasing 

the quantity purchased per year would increase the unit and total 

acquisition cost, the Coast Guard estimated that the decision to order 

fewer ships will likely add $600 million to $800 million in cost and 5 years 

to the cutter’s final delivery date, but this was absent from the plan. Coast 

Guard officials stated that they are required to report the assets’ cost and 

schedule per the acquisition program baseline. However, these officials 

also acknowledged that this plan does not consistently reflect current cost 

and schedule estimates or the effects of the trade-offs that are made as 

part of the annual budget cycle. Reporting total cost and delivery dates 

that do not reflect funding levels could lead to incorrect conclusions about 

the effect of these decisions on the program’s total cost and schedule. 

That is, Congress may conclude that the Coast Guard’s acquisition 

portfolio is more affordable than it actually is.

The Coast Guard is repeatedly delaying and reducing its capability 

through its annual budget process, but does not know the extent to which 

its mission needs can be tailored and still achieve desired results. Thus, 

its ability to meet future needs is uncertain. For example, the Coast Guard 

has already experienced a gap in heavy icebreaking capability and is 

falling short of meeting current and future major cutter operational hours. 

These capability gaps may persist as funding replacement assets will 

remain difficult at current funding levels. A key indication of this situation 

is that several current and additional acquisitions will have to compete for 

a small percentage of the Coast Guard’s acquisition funding between 

2018 and 2032 while the Offshore Patrol Cutter is being built. This asset 

will likely absorb about two-thirds of the Coast Guard’s acquisition funding 

during this timeframe. The Coast Guard does not have a long term plan 

that demonstrates how it will maintain today’s service level and meet 

identified needs. While making annual budget decisions, the Coast Guard 

is pursuing some cost effective means of providing specific capabilities, 

though it has yet to fully realize potential savings.

As the Coast Guard continues to make decisions through the budget 

process, it is experiencing capability gaps in the following areas:

• Icebreakers—According to program officials, due to funding 

constraints, the Coast Guard chose not to invest in either of its heavy 

icebreakers as they approached the end of their service lives. Thus, 

both heavy icebreakers were out of service from 2010 to 2013 and the 

Coast Guard could not complete missions, such as resupplying a 

Future Capabilities 

Uncertain as Coast 

Guard Makes Annual 

Budget Decisions; 

Alternatives Could 

Improve Outlook

Gaps Are Materializing as 

the Coast Guard Shapes 

Its Capability through the 

Budget Process
Page 27 GAO-14-450 Coast Guard Acquisitions

science laboratory in Antarctica. The Coast Guard has recently 

returned one of these heavy icebreakers back to service, but still has 

one fewer heavy icebreaker than it has historically operated and 

several fewer than it needs, according to the Coast Guard’s June 

2013 heavy icebreaker mission need statement.

• River Buoy Tenders—The Coast Guard is also facing a gap in its 

river buoy tender fleet and the Coast Guard has yet to formalize an 

acquisition project to replace this fleet, which is estimated to cost over 

$1.5 billion.

• Drug Interdiction Performance—The Coast Guard and DHS 

Inspector General recently reported that the Coast Guard was not 

able to meet the target for its drug interdiction mission performance 

measure for four of the last five years because of potential factors 

including the advancing age and deteriorating condition of the Coast 

Guard’s cutter fleet. 20 For more information, we will be issuing a 

report this spring that discusses the resources provided by the Coast 

Guard for drug interdiction operations.

• 2013 Major Cutter and Patrol Boat Hours—The Coast Guard is also 

currently experiencing a performance gap in its major cutter and patrol 

boat fleets. The Coast Guard’s major cutter fleet—comprised of the 

National Security Cutter and the in-service high and medium 

endurance cutters—must operate 136,620 hours per year to meet its 

missions. In fiscal year 2013, partly due to sequestration, the Coast 

Guard’s major cutter fleet operated 99,342 hours—falling 27 percent 

short of its goal. The Coast Guard estimates that it would have been 

6,078 hours short of its needs even if sequestration was not in effect. 

The Coast Guard’s patrol boat fleet operated for 178,000 hours last 

year, falling short of its 247,000 hour goal. The Coast Guard would 

have also fallen short of this goal even if sequestration were not in 

effect.

In addition, there is little room in its budget to deal with unexpected 

developments in operations. For example, in 2012, the Commandant 

wrote about the emerging need for established forces in the Arctic, but 

 20 DHS Inspector General, Independent Review of U.S. Coast Guard’s Reporting of FY 

2013 Drug Control Performance Summary Report, OIG-14-35 (Washington, D.C.: Feb.

2014). 
Page 28 GAO-14-450 Coast Guard Acquisitions

the Coast Guard’s major cutters may need additional equipment to 

operate in these areas.

The Coast Guard may fall even further below its operational hour goal for 

major cutters as the Offshore Patrol Cutter is being built. The Coast 

Guard has stated that delays in the delivery of the Offshore Patrol Cutter 

will lead to greater operational capacity shortfalls due to increased 

downtime for maintenance and other issues that reduce the current 

medium endurance cutters’ operational availability.21

Even after the Coast Guard builds the Offshore Patrol Cutter, it may not 

achieve the 136,620 hour goal. To meet this goal, the Coast Guard needs 

the National Security Cutter and the Offshore Patrol Cutter to operate for 

a total of 4,140 hours each year. The National Security Cutter is currently 

operating 3,330 hours per year and the Coast Guard has a plan to 

increase this to 3,830 per year by fiscal year 2017. However, Coast 

Guard operators have significant concerns about maintaining the vessel 

at this high tempo, primarily due to logistics and personnel concerns. 

According to officials, the Coast Guard is still planning to operate the 

National Security Cutter and Offshore Patrol Cutter 4,140 hours per year 

by using a crew rotation concept. We are currently conducting a review of 

National Security Cutter operations, including the status of implementing 

rotational crewing.

For example, in 

2013, three 210’ medium endurance cutters had to be put in a dry dock 

for emergency hull repairs. Coast Guard engineers stated that repairs like 

these are likely to become more frequent as these assets age.

As the budget process takes the place of a knowledge-based acquisition 

process, the Coast Guard is repeatedly delaying and reducing its portfolio 

on an annual basis to address budget constraints, rather than pursuing an 

affordable set of long-term needs.22

 21 GAO, Coast Guard: Legacy Vessels’ Declining Conditions Reinforce Need for More 

Realistic Operational Targets,

This approach puts pressure on 

future budgets and delays fielding capability, which may reduce planned 

performance. Despite these delays, the Coast Guard continues to follow 

its current plan, but does not know the extent to which this plan can be 

GAO-12-741 (Washington, D.C.: July 31, 2012).

22 Our best practices work shows that there are three critical junctures at which firms must 

have knowledge to make large investment decisions. See GAO, Best Practices: Using a 

Knowledge-Based Approach to Improve Weapon Acquisition, GAO-04-386SP 

(Washington, D.C.: January 2004). 
Page 29 GAO-14-450 Coast Guard Acquisitions

tailored through the budget process and still achieve desired results. 

Thus, the Coast Guard does not know what capability it will be able to 

provide and whether or not this capability will meet mission needs. We 

have previously found that by continuing to pursue only a portion of 

planned capability without re-evaluating the portfolio as a whole, the 

Coast Guard further increases the risk that it may not accomplish its 

mission needs.23 According to best practices, agencies should implement 

a knowledge-based acquisition approach to pursue a long term set of 

affordable needs. We have previously found that acquisitions that 

continue without this knowledge frequently experience poor outcomes.24

Without such an approach, the Coast Guard does not have reasonable 

assurance that its assets are planned to meet established cost, schedule, 

and performance baselines, in turn leading to sound investment 

decisions.25

If funding levels remain constant, several current and additional 

acquisitions will have to compete for a small percentage of the Coast 

Guard’s acquisition funding between 2018 and 2032 while the Offshore 

Patrol Cutter is being built. According to current funding levels and cost 

and schedule estimates, the Offshore Patrol Cutter will absorb about twothirds of the Coast Guard’s acquisition funding during this timeframe. 

Primarily due to a 14 year delay to the Offshore Patrol Cutter and a 10 

year delay to the Fast Response Cutter realized since 2007, the Coast 

Guard is now in the position of having to continually rebuild its assets 

rather than rapidly modernize as was originally planned. Thus, the Coast 

Guard has a number of significant additional programs that will require 

funding while the Offshore Patrol Cutter, Fast Response Cutter, and other 

assets in the current portfolio are still being built. The Coast Guard is in 

the process of assessing its needs in many of these areas. These 

potential acquisitions fit into three categories:

 23 GAO-12-918.

24 GAO, Defense Acquisitions: Major Weapon Systems Continue to Experience Cost and 

Schedule Problems under DOD’s Revised Policy, GAO-06-368 (Washington, D.C.: Apr.

13, 2006).

25 GAO, Best Practices: Better Matching of Needs and Resources Will Lead to Better 

Weapon System Outcomes, GAO-01-288 (Washington, D.C.: Mar. 8, 2001).

The Coast Guard Has No 

Long-Term Plan as Cutter 

Delays Bring About an Era 

of Continuous Acquisition
Page 30 GAO-14-450 Coast Guard Acquisitions

• Surface Fleet Recapitalization—This project includes conducting a 

service life extension program for the 13 270’ medium endurance 

cutters, replacing or extending the Coast Guard’s 87’ coastal patrol 

boat fleet (73 cutters), and funding other sustainment projects for 

vessels that are in-service, such as the Coast Guard’s large fleet of 

river buoy tenders. As discussed earlier, the Coast Guard is also 

looking into additional icebreaker investments beyond the current 

single heavy icebreaker program, as the medium icebreaker will also 

need to be replaced or extended during this period.

• Aircraft Recapitalization—The primary aircraft need will be replacing 

or extending the MH-60 and MH-65 helicopter fleets, which approach 

a life-limiting milestone between 2022 and 2026. Regardless of the 

future path, significant acquisition dollars will be required to maintain 

annual flight hours for the next 20 years, according to Coast Guard 

program officials. Another significant project, these officials added, will 

be replacing the C4ISR system on the Coast Guard’s aircraft—some 

of which need new systems while other systems need to be replaced 

due to obsolescence. According to Coast Guard program officials, the 

prototypes are planned to be completed by the end of fiscal year 

2016, at which point the new mission systems will need funding for 

production.

• Additional Costs for New Assets—As with other cutter classes, the 

Fast Response Cutter and the National Security Cutter will need to 

undergo planned repair and maintenance work when the respective 

fleets reach their service life midpoints beginning in 2025 and 2028, 

respectively. The Coast Guard cannot skip these maintenance 

periods; they are needed to overhaul major components because 

older equipment is not supported over a cutter’s 30 year service life. 

In addition, the future operational bases from which the Offshore 

Patrol Cutter will operate need an estimated $431 million for upgrades 

to intended home ports.

The Coast Guard is not currently required to develop a long-term fleet 

modernization plan that considers its current service levels for the next 20 

years in relation to its expected acquisition funding. Without such a plan, 

the Coast Guard does not have a mechanism to aid in matching its 

requirements and resources. For example, the Coast Guard does not 

know if it can meet its other acquisition needs while the Offshore Patrol 

Cutter is being built, which according to current plans will conclude in 

about 20 years. In addition, as we have previously found, the Coast 

Guard is deferring costs—such as purchasing unmanned systems or 

replacing its Buoy Tender fleet—that could lead to an impending spike in 
Page 31 GAO-14-450 Coast Guard Acquisitions

the requirement for additional funds.26

The Coast Guard’s acquisition guidance supports using a long range

capital planning framework. According to OMB capital planning guidance 

referenced by the Coast Guard’s Major Systems Acquisition Manual, 

each agency is encouraged to have a plan that defines its long-term 

capital asset decisions. This plan should include, among other things, (1) 

an analysis of the portfolio of assets already owned by the agency and in 

procurement, (2) the performance gap and capability necessary to bridge 

the old and new assets, and (3) justification for new acquisitions proposed 

for funding. OMB officials stated that they support DHS and the Coast 

Guard conducting a long term review of the Coast Guard’s acquisitions to 

assess the capabilities it can afford.

The Coast Guard has no method in 

place to capture the effects of deferring such costs on the future of the 

acquisition portfolio.

Examples of other fleet modernization plans include the Navy’s annual 

naval vessel construction plan (also known as the Navy’s long range 

shipbuilding plan), which reflects the quantity and categories of assets 

that the Navy needs to buy as well as the total number of assets in 

operation for each year. While we have previously noted challenges 

associated with the Navy’s plan, we also observed that such a plan is 

beneficial in that it lays out a strategic approach for decision making. A 

long-term plan can enable trade-offs to be seen and addressed in 

advance, leading to better informed choices and making debate possible 

before irreversible commitments are made to individual programs. 

Without this type of plan, decision makers do not have the information 

they need to better understand the Coast Guard’s long term outlook.27 In 

its naval vessel construction plan, the Navy also assesses capability gaps 

and planned construction over the short term, middle term and long 

term—each 10-year periods in the plan. The Secretary of Defense 

transmits the plan to Congress to aid in decision making.28

 26

As a result, 

the Navy has some knowledge of its future funding challenges. For 

example, the Congressional Budget Office estimates that if the Navy 

GAO-12-918.

27 GAO, Defense Acquisitions: Challenges Associated with the Navy’s Long-Range 

Shipbuilding Plan, GAO-06-587T, (Washington, D.C.: Mar. 30, 2006). 

28 Department of Defense, Report to Congress on the Annual Long-Range Plan for 

Construction of Naval Vessels for FY2014 (Washington, D.C.: May 2013). 
Page 32 GAO-14-450 Coast Guard Acquisitions

continues to receive the same percentage of DOD funds for shipbuilding 

as it has in the past, the Navy can only fund 70 percent of the current long 

range plan. When we discussed such an approach with the Coast Guard, 

the response was mixed. Some Coast Guard budget officials stated that 

such a plan is not worthwhile because the Coast Guard cannot predict the 

level of funding it will receive in the future. However, other Coast Guard 

officials support the development of such a plan, noting that it would help 

to better understand the effects of funding decisions. Without such a plan, 

it will remain difficult for the Coast Guard to fully understand the extent to 

which future needs match the current level of resources and its expected 

performance levels—and capability gaps—if funding levels remain 

constant.

The Coast Guard is currently pursuing cost effective alternatives that 

could begin the process of building a viable long term modernization plan.

• Cutter-Based Unmanned Aircraft Systems—The Coast Guard is in 

the process of demonstrating a small unmanned aircraft system on 

the National Security Cutter and, to date, these demonstrations have 

shown that a smaller system is feasible. As opposed to the 2007 

estimate of $503 million, the Coast Guard preliminarily estimates that 

it can outfit each of the planned eight National Security Cutters with 

two unmanned aircraft and a control station on each vessel for $48 

million. However, according to Coast Guard officials, it is too early to 

fully understand the costs. Once this system is purchased, the Coast 

Guard still plans to pursue a bigger solution in conjunction with the 

Navy that meets all of the Coast Guard’s requirements.

• Land-Based Unmanned Aircraft System—The Coast Guard has 

also begun a partnership with U.S. Customs and Border Protection to 

share and operate that component’s 10 land-based unmanned aircraft 

systems. In the past year, the Coast Guard has been able to use this 

asset to conduct over 500 hours of surveillance for Coast Guard 

missions and officials expect that this number may increase. While 

this program is growing, the Coast Guard continues to pursue its own 

land-based unmanned aircraft.

• Heavy Icebreaker—The Coast Guard is working closely with 

international and U.S. agency partners in gaining knowledge to 

support its heavy icebreaker acquisition. So far, while there are more 

than 10 U.S. agencies that have requirements for a heavy icebreaker, 

The Coast Guard Has 

Been Pursuing Less 

Expensive Means of Filling 

Some Capability Gaps
Page 33 GAO-14-450 Coast Guard Acquisitions

such as the Navy and National Science Foundation, no plans have 

emerged for funding this vessel.

As the Coast Guard’s newest assets move through operational testing 

they are demonstrating capability, but problems have been identified. This 

is not unexpected; identifying problems is the purpose of the testing. In 

general, project and acquisition oversight officials evaluate these test 

results, among other data, and make a business case as to whether the 

government is taking on undue risk by mass producing these assets. This 

approach can be reasonable, but the parameters for making this case—

including defining when an asset must meet a minimum level of 

acceptable performance prior to this decision and determining at what 

point a breach occurs—are not clearly set forth in Coast Guard or DHS 

guidance. Moreover, without a defined point in the acquisition process by 

which the Coast Guard must satisfy minimum requirements, the breach 

process, with regards to performance, loses meaning. Further, the Coast 

Guard no longer plans to operationally test the C4ISR system—always 

intended to be a linchpin of the recapitalization program—even though 

such testing is required of all major acquisitions. Without testing to ensure 

that these systems meet minimum performance standards, the Coast 

Guard cannot ensure that they meet mission needs and that the taxpayer 

receives a good value for the investment.

As the Coast Guard has continued to refine cost estimates for its major 

acquisitions, it is realizing that the cost of its acquisition portfolio has 

grown and is now much greater than initially planned. This increased cost 

is consuming a large portion of the Coast Guard’s acquisition budget. Our 

previous recommendations, regarding the need for a process to make the 

trade-off decisions needed to balance resources and needs, still stand.29

 29

In the meantime however, the extent of expected costs—and how the 

Coast Guard plans to address them through budget trade-off decisions—

is not being clearly communicated to Congress. The mechanism in place 

for reporting to certain congressional committees, the Capital Investment 

Plan, does not reflect the full effects of these trade-off decisions on the 

total cost and schedule of its acquisition programs. This information is not 

currently required by statute, but without it, decision makers are unable to 

understand the full extent of funding that will be required to complete the 

Coast Guard’s planned acquisition programs.

GAO-11-743 and GAO-12-918.

Conclusions
Page 34 GAO-14-450 Coast Guard Acquisitions

A pressing concern the Coast Guard faces is that the growing affordability 

gap for its major acquisitions will be exacerbated by impending 

requirements and capability needs. Annual budget decisions and the cost 

saving measures the Coast Guard is pursuing may be sufficient for the 

short term, but they do not position the Coast Guard to address future 

needs. In other words, short term budget decisions may not amount to a 

good long term investment strategy. Without a long term plan that sets 

forth needed capabilities and the funding it will take to meet them, the 

Coast Guard is not well positioned to identify how it will meet these 

mission needs. A long term plan of this nature is particularly critical in light 

of the looming Offshore Patrol Cutter procurement, which is currently 

estimated to account for about two-thirds of the acquisition budget.

To help ensure that it receives accurate information on the full effect of 

funding decisions on acquisition programs, Congress should consider 

amending the law that governs the 5-year Capital Investment Plan to 

require the Coast Guard to submit cost and schedule information that 

reflects the impact of the annual President’s budget request on each 

acquisition across the portfolio—in addition to the current practice of 

reporting the cost and schedule estimates in current program baselines.

To ensure that Congress and other decision makers are properly 

informed regarding the status of programs, we recommend that the 

Secretary of Homeland Security and the Commandant of the Coast 

Guard revise their acquisition guidance by taking the following two 

actions:

• Specify when minimum performance standards should be met, such

as prior to entering into full-rate production.

• Clarify the performance data that should be used to assess whether 

or not minimum performance criteria have been met, prior to full-rate 

production, to determine whether a performance breach has occurred.

To ensure that the Coast Guard’s C4ISR system meets mission needs, 

we recommend that the Commandant of the Coast Guard take the 

following action:

• Assess the operational effectiveness and suitability of the C4ISR 

system by fully integrating this assessment into other assets’

operational test plans or by testing the C4ISR program on its own.

Matter for 

Congressional 

Consideration

Recommendations for 

Executive Action
Page 35 GAO-14-450 Coast Guard Acquisitions

To help the Coast Guard improve the long-term outlook of its portfolio, we 

recommend that the Commandant of the Coast Guard take the following 

action:

• Develop a 20-year fleet modernization plan that identifies all 

acquisitions needed to maintain the current level of service and the 

fiscal resources necessary to build the identified assets. The plan 

should also consider trade-offs if the fiscal resources needed to 

execute the plan are not consistent with annual budgets.

We provided a draft of this report to DHS for review and comment. In its 

comments, DHS concurred with all of our recommendations. DHS’s 

written comments are reprinted in appendix II. We also provided draft 

sections of the report to OMB and COTF, which provided us with 

technical comments via email; we incorporated their comments as 

appropriate. 

Regarding the first two recommendations, on the timing of reporting and 

actions to be taken when assets do not meet performance standards in 

testing, DHS stated that it plans to make changes to its acquisition 

guidance by June 30, 2015. 

In concurring with the third recommendation, regarding the testing of the 

C4ISR system, DHS noted that it plans to provide clearer guidance in the 

next update of its acquisition policy, currently scheduled for June 30, 

2015. Additionally, DHS stated that it still plans to test the C4ISR system 

in conjunction with the vessels and aircraft on which the system is 

installed. This strategy would be acceptable as long as the Coast Guard 

incorporates the key performance parameters specifically related to the 

C4ISR system into the vessel and aircraft test plans. In its response, DHS 

disagreed in general with our description of the C4ISR system as not 

meeting goals, noting that, according to the Coast Guard, the original 

system was closed as a result of obsolescence and not due to 

performance and maintenance problems. While it is true that much of the 

original system—developed as part of Deepwater—is obsolete because it 

was inextricably linked to the commercial vendor’s proprietary software, 

performance problems were also an issue. We have previously reported 

on these problems, such as assets not having the capability to share data 

as envisioned and the system needing to be restarted during operations. 

In short, the system of systems capability that was the original intent has 

not been achieved. While DHS states that the C4ISR program is one 

example of where the Coast Guard made tough decisions to provide the 

Agency Comments 

and Our Evaluation
Page 36 GAO-14-450 Coast Guard Acquisitions

greatest capability of equipment while using the least amount of dollars, 

the Coast Guard invested $413 million to develop and field the original 

system that is now being replaced with Seawatch. 

While DHS concurred with our fourth recommendation to develop a 20-

year fleet modernization plan, the response does not fully address our 

concerns or set forth an estimated date for completion, as the response

did for the other recommendations. DHS stated that the Coast Guard 

values long term planning and can assemble a profile of the anticipated 

service lives of the various assets and project this information to the 

future. However, the response also reaffirmed the very reason we made 

this recommendation—that trade-off decisions considering the cost, 

schedule, and performance of acquisitions are made during the annual 

budget process. There is no evidence that these short-term budget 

decisions will amount to a good long-term strategy and, as we have 

previously noted, the Coast Guard’s annual, budget-driven approach 

creates continual churn as program baselines must continually re-align 

with budget realities instead of budgets being formulated to support 

program baselines. In the case of the Coast Guard, this budget-driven 

process is pushing tough trade-off decisions—between capability and 

cost—into the future. Without a long-term plan, as we have 

recommended, no one knows what taxpayers are ultimately going to get

for their approximately $1.5 billion annual investment in Coast Guard 

acquisitions. We continue to believe that a properly constructed 20-year 

plan is necessary to illuminate what is feasible in the long term and will 

also provide a basis for informed decisions that align the Coast Guard’s 

needs and resources. 

DHS and the Coast Guard also provided technical comments that we 

incorporated into the report as appropriate.

We are sending copies of this report to the Secretary of the Department 

of Homeland Security, Commandant of the Coast Guard, and Director of 

the Office of Management and Budget. In addition, the report is available 

on our website at http://www.gao.gov.

As agreed with your offices, unless you publicly announce the contents of 

this report earlier, we plan no further distribution until 13 days from the 

report date. At that time, we will send copies to your offices. In addition, 

the report will be available at no charge on the GAO Web site at 

http://www.gao.gov. 
Page 37 GAO-14-450 Coast Guard Acquisitions

If you or your staff have any questions about this report, please contact 

me at (202) 512-4841 or mackinm@gao.gov. Contact points for our 

Offices of Congressional Relations and Public Affairs may be found on 

the last page of this report. GAO staff who made key contributions to this 

report are listed in appendix IV.

Michele Mackin

Director, Acquisition and Sourcing Management
Appendix I: Scope and Methodology

Page 38 GAO-14-450 Coast Guard Acquisitions

In conducting this review, we relied in part on the information and analysis 

in our past work, including reports completed in 2008 through 2012. 

Additional scope and methodology information on each objective of this 

report follows. 

To assess how selected assets are performing operationally and to what 

extent they are achieving desired performance levels in testing, we 

selected key assets that are being used in operations that were a part of 

the original 2007 baseline—the Maritime Patrol Aircraft (HC-144), Fast 

Response Cutter, National Security Cutter, and the Command, Control, 

Communications, Computers, Intelligence, Surveillance, and 

Reconnaissance (C4ISR) systems—and reviewed test reports and 

operational data for these assets. We also reviewed the Coast Guard’s 

Major Systems Acquisition Manual and Department of Homeland Security 

(DHS) Acquisition Management Directive 102-01 to review regulations 

and directions for operational testing. We assessed operational test 

reports for the HC-144 and Fast Response Cutter to determine what 

issues were discovered during testing and interviewed officials from the 

DHS’s Science and Technology directorate and the Navy’s Commander, 

Operational Test and Evaluation Force (COTF) to discuss the results and 

limitations of these tests and plans for future testing. For the National 

Security Cutter and C4ISR programs, we reviewed preliminary tests and 

changes being made to the systems as a result of knowledge gained 

through early testing or operations that has led to retrofits or design 

changes. We compared the results of these tests and operational data 

with operational requirements documents for each program to determine 

if these assets are performing as planned. We interviewed Coast Guard 

officials with the capabilities and resource directorates, and officials and 

operators with the National Security Cutter, Fast Response Cutter, HC144, and C4ISR programs to gain a greater understanding of operational 

challenges and how they are being addressed. We met with National 

Security Cutter operators at U.S. Coast Guard Base Alameda in 

Alameda, California and we met with the District Commander for the 

Coast Guard’s Seventh District, Fast Response Cutter operators at Coast 

Guard Sector Miami, and HC-144 operators at U.S. Coast Guard Air 

Station Miami in Miami, Florida and discussed the C4ISR operations 

aboard each of these assets to discuss how these assets are performing 

operationally. We interviewed contractor representatives from Huntington 

Ingalls Industries for the National Security Cutter and Bollinger Shipyards 

for the Fast Response Cutter and toured their respective shipyards to 

discuss issues related to the production of these assets.

Appendix I: Scope and Methodology
Appendix I: Scope and Methodology

Page 39 GAO-14-450 Coast Guard Acquisitions

To determine the current cost of the Coast Guard’s acquisition portfolio as 

well as plans to fund its assets, we reviewed the Coast Guard’s budget 

and capital investment plan and identified the programs that are currently 

in its acquisition portfolio. Based upon our definition, the Coast Guard’s 

current acquisition portfolio consists of all major acquisitions that are 

planned to receive funding in the current budget year and/or within the 

next 5 years. We reviewed the approved acquisition program baselines 

for programs currently in the portfolio to determine their cost and 

schedule. We compared current baselines to previous baselines to 

evaluate whether there has been any cost or schedule growth in these 

programs. In comparing original costs to revised baseline costs, if a 

revised baseline presents both threshold costs and objective costs, 

threshold costs were used. In determining the cost to complete, we took 

the total estimated cost of the acquisition in its current baseline and 

subtracted the funding that the program has received as of and including 

fiscal year 2014. For some assets, such as the HC-130J which received 

funding not included in the Coast Guard budget, we derived the cost to 

complete by totaling the funds required to finish the program based upon 

the current cost estimate. We also reviewed the Coast Guard’s Major 

Systems Acquisition Manual for guidance on acquisition program 

baselines. We interviewed officials from the Office of Management and 

Budget and the Department of Homeland Security’s Program 

Accountability and Risk Management directorate and Program Analysis 

and Evaluation directorate to determine what, if anything, they are doing 

to balance the Coast Guard’s needs with anticipated funding.

To determine the extent to which the Coast Guard is experiencing 

capability gaps, if any, given known affordability issues, we assessed the 

Coast Guard’s performance targets and compared these targets with 

acquisition plans. In addition, we interviewed officials from the Coast 

Guard’s acquisitions and resource directorates to identify the challenges 

the Coast Guard faces reaching these targets using current funding levels 

and to understand actions taken by the Systems Integration Team and

Executive Oversight Council to address these challenges. We also 

reviewed actions the Coast Guard is taking to improve the affordability of 

recapitalizing its assets. We interviewed officials with the Coast Guard’s 

acquisition directorate and the program managers for all of the programs 

currently in the portfolio to discuss the cost of the portfolio and future 

funding plans. To determine the condition and expected service life of 

legacy assets, we reviewed Coast Guard analysis of these assets and 

prior GAO work on legacy assets.
Appendix I: Scope and Methodology

Page 40 GAO-14-450 Coast Guard Acquisitions

We conducted this performance audit from June 2013 to June 2014 in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe the 

evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.
Appendix II: Comments from the Department 

of Homeland Security

Page 41 GAO-14-450 Coast Guard Acquisitions

Appendix II: Comments from the Department 

of Homeland Security
Appendix II: Comments from the Department 

of Homeland Security

Page 42 GAO-14-450 Coast Guard Acquisitions
Appendix II: Comments from the Department 

of Homeland Security

Page 43 GAO-14-450 Coast Guard Acquisitions
Appendix III: Coast Guard Acquisition Portfolio 

Costs

Page 44 GAO-14-450 Coast Guard Acquisitions

The Coast Guard has 11 major acquisition programs in its current

portfolio, based on the Fiscal Years 2014 through 2018 Capital 

Investment Plan. Of these 11 major acquisition programs, 8 were also a 

part of the 2007 recapitalization portfolio.1

Table 5: Acquisition Cost Estimates, Including Cost to Complete, for Coast Guard 

Portfolio of Major Programs as of March 2014 (dollars in millions)

Over time, the composition of 

the portfolio has changed. For example, since our last review in 2012, 

the Coast Guard has added 3 programs to its acquisition portfolio and 

another 7 programs are ending and, therefore, will no longer need 

additional acquisition funding. We excluded $3.6 billion in “other costs 

including project management” from our analysis of the Coast Guard’s 

current portfolio of assets because these costs are not periodically rebaselined. Thus, the total cost of the original 2007 baseline excluding 

these costs is $20.563 billion. Table 5 lists the total acquisition cost for 

each of the programs in the Coast Guard’s current portfolio as well as the 

cost increases and cost to complete for the programs in the original 2007 

baseline.

Dollars in millions

Asset

Original 2007 

Baseline

Current 

Baseline 

(threshold 

costs)a

Cost 

Increases 

Since 2007 

Cost to 

Complete 

(as of the 

end of fiscal 

year 2015)b

National Security Cutter $3,450 $5,682 $2,232 $1,316

Offshore Patrol Cutter 8,098 12,101 4,003 11,939

Fast Response Cutter 3,206 4,243 1,037 2,547

HC-130H/Jc 621 3,038 2,417 1,829

HC-144 1,706 3,169 1,463 2,127d

HH-65 741 1,150 409 570

C4ISR 1,353 1,123 (230) 353

Unmanned Aircraft System 

(Cutter-Based Only)

503 N/A N/A N/A

Icebreaker N/A 831e N/A N/A

In-Service Vessel 

Sustainment

N/A 221f N/A N/A

 1 A major acquisition is equipment, service, and/or intellectual property acquired by the 

Coast Guard with a lifecycle cost greater than $300 million.

Appendix III: Coast Guard Acquisition 

Portfolio Costs
Appendix III: Coast Guard Acquisition Portfolio 

Costs

Page 45 GAO-14-450 Coast Guard Acquisitions

Dollars in millions

Asset

Original 2007 

Baseline

Current 

Baseline 

(threshold 

costs)a

Cost 

Increases 

Since 2007 

Cost to 

Complete 

(as of the 

end of fiscal 

year 2015)b

C-27J N/A TBD N/A TBD

Programs No Longer 

Planned to Receive 

Funding (Total)g

885 N/A N/A N/A

Total $20,563h $31,558 $11,331 $20,681

Source: GAO Analysis of Coast Guard data

Note: In current/then-year dollars in millions. This means that numbers have not been normalized for 

inflation. Numbers may not add due to rounding.

a

The revised baselines present both threshold costs (the maximum costs allowable before a breach 

occurs) and objective costs (the minimum cost expected), threshold costs are used. For those 

programs that comprised the former Deepwater program, this allows traceability to the original $20.6 

billion Deepwater baseline (the original baselines) while also showing how much programs could now 

cost based upon revised baselines.

b

Cost to complete is calculated as the current baseline minus the funding provided to the program to 

date. Thus, it represents the amount of funding needed from fiscal year 2015 until the end of each 

program based on current estimates.

c

The total cost of this program reflects a fleet of 22 HC-130Js.

d

The Coast Guard has yet to make an official decision on the future of the HC-144 program; however, 

Coast Guard officials told us that it is likely that they will end procurement of the HC-144 program as 

the C-27Js come on line. The HC-144 program is currently paused.

e

Estimate is preliminary and not based upon a full program life cycle cost estimate

f

Estimate only includes two projects. This funding line is intended to encompass all fleet maintenance 

as it is needed.

g

The programs no longer planned to receive additional funding as of 2013 are: HH-60, Medium 

Endurance Cutter Sustainment, and Patrol Boat Sustainment.

h

The original cost of the Deepwater baseline was $24.2 billion, but we have excluded program 

management costs.
Appendix IV: GAO Contact and Staff 

Acknowledgements

Page 46 GAO-14-450 Coast Guard Acquisitions

Michele Mackin, (202) 512-4841 or mackinm@gao.gov.

In addition to the contact above, Katherine Trimble, Assistant Director; 

Laurier R. Fish; Peter W. Anderson; William Carrigg; John Crawford; 

Sylvia Schatz; and Lindsay Taylor all made key contributions to this 

report. 

Appendix IV: GAO Contact and Staff 

Acknowledgements

GAO Contact

Staff 

Acknowledgments
Related GAO Products

Page 47 GAO-14-450 Coast Guard Acquisitions

Defense Contracting: Actions Needed to Increase Competition. 

GAO-13-325. Washington, D.C.: March 28, 2013.

Coast Guard: Clarifying the Application of Guidance for Common 

Operational Picture Development Would Strengthen Program. 

GAO-13-321. Washington, D.C.: April 25, 2013.

Coast Guard: Portfolio Management Approach Needed to Improve Major 

Acquisition Outcomes. GAO-12-918. Washington, D.C.: September 20, 

2012.

Observations on the Coast Guard’s and the Department of Homeland 

Security’s Fleet Studies. GAO-12-751R. Washington, D.C.: May 31, 2012.

Coast Guard: Legacy Vessels’ Declining Conditions Reinforce Need for 

More Realistic Operational Targets. GAO-12-741. Washington, D.C.: July 

31, 2012.

Missile Defense: Opportunity Exists to Strengthen Acquisitions by 

Reducing Concurrency. GAO-12-486. Washington, D.C.: April 20, 2012.

Coast Guard: Action Needed as Approved Deepwater Program Remains 

Unachievable. GAO-11-743. Washington, D.C.: July 28, 2011.

Coast Guard: Deepwater Requirements, Quantities, and Cost Require 

Revalidation to Reflect Knowledge Gained. GAO-10-790. Washington, 

D.C.: July 27, 2010.

Coast Guard: As Deepwater Systems Integrator, Coast Guard Is 

Reassessing Costs and Capabilities but Lags in Applying Its Disciplined 

Acquisition Approach. GAO-09-682. Washington D.C.: July 14, 2009.

Coast Guard: Better Logistics Planning Needed to Aid Operational 

Decisions Related to the Deployment of the National Security Cutter and 

Its Support Assets. GAO-09-497. Washington, D.C.: July 17, 2009.

Best Practices: High Levels of Knowledge at Key Points Differentiate 

Commercial Shipbuilding from Navy Shipbuilding. GAO-09-322. 

Washington, D.C.: May 13, 2009.

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