COAST GUARD 

ACQUISITIONS

Better Information on 

Performance and Funding 

Needed to Address 

Shortfalls

Statement of Michele Mackin, Director

Acquisition and Sourcing Management

Testimony 

Before the Subcommittee on Coast Guard 

and Maritime Transportation, Committee 

on Transportation and Infrastructure, 

House of Representatives

For Release on Delivery 

Expected at 9:30 a.m. ET

Wednesday, June 18, 2014

GAO-14-650T

United States Government Accountability Office
Page 1 GAO-14-650T 

Chairman Hunter, Ranking Member Garamendi, and Members of the 

Subcommittee:

I am pleased to be here today to discuss the Coast Guard’s plan to buy 

the assets it needs to meet current and future mission demands. We have 

been reviewing the Coast Guard’s efforts to purchase a new fleet since 

2001 and have repeatedly found that the Department of Homeland 

Security (DHS) and the Coast Guard recognize, but have yet to address, 

the continued unaffordability of the Coast Guard’s portfolio given the 

funds needed to complete the fleet and the funds available each year. 

While the Coast Guard has made progress in more closely following 

acquisition best practices, such as taking steps to increase competition, it 

does not have a long term plan that balances its estimated needs and 

resources as it continues its 30-year recapitalization effort. Instead, the 

Coast Guard continues to pursue a set of acquisitions that is not 

affordable, leading it to repeatedly delay and reduce capability on an 

annual basis to address budget constraints. Simply put, it is unlikely that 

these short-term budget decisions will amount to a good long-term 

investment strategy.

In our report to this subcommittee that we are releasing today, we found, 

among other things, that DHS and Coast Guard guidance is unclear 

regarding when minimum performance standards should be achieved, 

that the Coast Guard did not plan to operationally test its Command, 

Control, Communications, Computers, Intelligence, Surveillance, and 

Reconnaissance (C4ISR) system, and that the Coast Guard does not 

have a long-term fleet modernization plan.1

Today, I will (1) describe how selected assets are performing in the field 

as well as results from recent operational test events; (2) provide 

summary cost information on the Coast Guard’s portfolio of acquisitions; 

and (3) discuss the extent to which the Coast Guard is experiencing 

capability gaps given known affordability issues. My testimony will 

summarize the findings and recommendations from our report.

We made a number of 

recommendations to address these issues.

 1

GAO, Coast Guard Acquisitions: Better Information on Performance and Funding 

Needed to Address Shortfalls, GAO-14-450 (Washington, D.C.: June 5, 2014). 
Page 2 GAO-14-650T 

To assess the operational performance of the Coast Guard assets, we 

selected all four major acquisition programs that were fielded between 

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

Maritime Patrol Aircraft (HC-144), Fast Response Cutter, National 

Security Cutter, and the C4ISR system. For each asset, we reviewed 

post-deployment reports and test reports and interviewed officials 

responsible for the testing and operation of these assets. To assess the 

cost 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 relevant law that specifies the plan’s contents. 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 also reviewed the Coast Guard’s estimates 

of its overall fleet performance and current or potential performance gaps.

Our work was conducted in accordance with generally accepted 

government auditing standards. Our report provides further details on our 

scope and methodology.

Coast Guard operators and commanding officers 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 communications 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.2

 2

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.

To date, the 

improved capabilities of the four newly fielded assets have led to missionrelated successes, according to Coast Guard asset commanders.

Operators Extol New 

Assets’ Performance 

Compared to Aging 

Counterparts, but 

These Assets Have 

Yet to Meet Key 

Requirements
Page 3 GAO-14-650T 

In addition to performance in the field, each major acquisition is required 

to undergo operational testing by an independent test agency—in this 

case, the Navy’s Commander of Operational Test and Evaluation Force. 

Operational testing is important, as it characterizes the performance of 

the asset in realistic conditions. During operational testing, the test 

agency determines whether the asset is operationally effective (whether 

or not an asset can meet its missions) and operationally suitable (whether 

or not the agency can support the asset to an acceptable standard). The 

Fast Response Cutter and the HC-144 completed initial operational 

testing in September 2013 and October 2012, respectively. Based on the 

results, neither asset met all key requirements during this testing. The 

Fast Response Cutter partially met one of six key requirements, while the 

HC-144 met or partially met four of seven key requirements. The Fast 

Response Cutter was found to be operationally effective (with the 

exception of its cutter boat) though not operationally suitable, and the HC144 was found to be operationally effective and suitable.

It is important to recognize that this was the initial operational testing and 

that the Coast Guard has plans in place to address most of the major 

issues identified. For example, in order to address issues with the 

seaworthiness of the Fast Response Cutter’s small boat, the Coast Guard 

will supply the Fast Response Cutter with a small boat developed for the 

National Security Cutter. However, DHS officials approved both assets to 

move into full rate production, and we found that guidance is not clear 

regarding when the minimum performance standards should be met—or 

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

breach memorandum indicating that certain performance parameters 

were not demonstrated. The Coast Guard did not report that a breach had 

occurred for the HC-144 or the Fast Response Cutter, even though 

neither of these programs met certain key performance parameters 

during operational testing. Without clear acquisition guidance, it is difficult 

to determine when or by what measure an asset has breached its key 

performance parameters and, therefore, when DHS and certain 

congressional committees are to be notified. We recommended that DHS 

and the Coast Guard revise their acquisition guidance to specify when 

minimum performance standards should be met and clarify the 

performance data that should be used to determine whether a 

performance breach has occurred. DHS concurred with these 

recommendations and stated that it plans to make changes to its 

acquisition guidance by June 30, 2015.

By not fully validating the capabilities of the National Security Cutter until 

late in production, the Coast Guard may have to spend more to ensure 
Page 4 GAO-14-650T 

the ship meets requirements and is logistically supportable. The Coast 

Guard recently evaluated the National Security Cutter through operational 

testing, even though 7 of 8 National Security Cutters are under contract, 

but results are not expected until early fiscal year 2015.3

The Coast Guard has not yet evaluated the C4ISR system through 

operational testing even though the system has been fielded on nearly all 

new assets. Instead of evaluating that system’s key performance 

parameters, Coast Guard officials decided to test the system in 

conjunction with other assets—such as the HC-144 and the Fast 

Response Cutter—to save money and avoid duplication. However, the 

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

Response Cutter tests because those assets’ test plans did not fully 

incorporate testing the effectiveness and suitability of the C4ISR system. 

The Coast Guard now plans to test the key performance parameters for 

the next generation C4ISR system when follow on testing is conducted on 

the National Security Cutter; this testing has yet to be scheduled. By not 

testing the system, the Coast Guard has no assurance that it is 

purchasing a system that meets its operational needs. To address this 

issue, we recommended that the Coast Guard assess the C4ISR system 

by fully integrating this assessment into other assets’ operational test 

plans or by testing the C4ISR program on its own. In response, the Coast 

Guard stated that it now plans to test the C4ISR system’s key 

Coast Guard 

program officials stated that, prior to the operational test, the National 

Security Cutter had demonstrated most of its key performance 

parameters through non-operational tests and assessments, but we found 

that a few performance requirements, such as those relating to the 

endurance of the vessel and its self-defense systems, have yet to be 

assessed. Further, several issues occurred prior to the start of operational 

testing that required retrofits or design changes to meet mission needs. 

The total cost to conduct some of these retrofits and design changes has 

not yet been determined, but the cost of major changes for all eight hulls 

identified to date has totaled approximately $140 million, which is about 

one-third of the production cost of a single National Security Cutter. The 

Coast Guard continues to carry significant risk by not fully validating the 

capabilities of the National Security Cutter until late in production, which 

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

future, beyond the changes that have already been identified.

 3 We plan to assess the results of the testing at the request of this subcommittee.
Page 5 GAO-14-650T 

performance parameters during follow on testing for the National Security 

Cutter.

As the Coast Guard continues to refine cost estimates for its major 

acquisitions, the expected cost of its acquisition portfolio has grown.4

There has been $11.3 billion in cost increases since 2007 across the 

eight programs that have consistently been part of the portfolio—the 

National Security Cutter, the Offshore Patrol Cutter, the Fast Response 

Cutter, the HC-144, the HC-130H/J, HH-65, C4ISR, and Unmanned 

Aircraft System.5

 4 The Coast Guard has 11 major acquisition programs in its current portfolio, based on the 

Fiscal Years 2014-2018 Capital Investment Plan. Of these 11 major acquisition programs, 

8 were also a part of the 2007 recapitalization portfolio (formerly known as the Deepwater 

program). 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. 

These cost increases are consuming a large portion of 

funding. Consequently, the Coast Guard is farther from fielding its 

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

finish these programs. Senior Coast Guard acquisition officials told us 

that many of the cost increases are due to changes from preliminary 

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. Figure 1 shows the total cost of the portfolio and cost 

to complete the major programs included in the Coast Guard’s 2007 

baseline in 2009 and 2014.

5 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.

Program Cost 

Increases across 

the Portfolio Are 

Consuming Funding, 

While Affordability

Issues Have Not

Been Addressed

or Accurately 

Represented
Page 6 GAO-14-650T 

Figure 1: The Total Cost of the Portfolio and Cost to Complete Programs in 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.

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. To date, efforts to address this 

affordability imbalance have yet to result in the significant trade-off 

decisions that would be needed to do so. We have previously 

recommended that DHS and the Coast Guard establish a process to 

make the trade-off decisions needed to balance the Coast Guard’s 

resources and needs. While they agreed with the recommendation, they 

have yet to implement it.6

In the meantime, the extent of expected costs—and how the Coast Guard 

plans to address them through budget trade-off decisions—is not being 

 6 GAO, Coast Guard: Action Needed As Approved Deepwater Program Remains 

Unachievable, GAO-11-743 (Washington, D.C.: July 28, 2011); and Coast Guard: Portfolio 

Management Approach Needed to Improve Major Acquisition Outcomes, GAO-12-918

(Washington, D.C.: Sept. 20, 2012). 
Page 7 GAO-14-650T 

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 do not have the 

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

complete the Coast Guard’s planned acquisition programs. For example, 

in the Fiscal Years 2014 through 2018 Capital Investment Plan, cost and 

schedule totals did not match the funding levels presented for many 

programs. 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 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 to 800 million in 

cost and 5 years to the cutter’s final delivery date, but this was absent 

from the plan. Reporting total cost and delivery dates that do not reflect 

funding levels could lead to improper conclusions about the effect of 

these decisions on the program’s total cost and schedule and the overall 

affordability of the Coast Guard’s acquisition portfolio. In our report, we 

suggest that Congress 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 President’s 

annual budget request on each acquisition across the portfolio.

To address budget constraints, the Coast Guard is repeatedly delaying 

and reducing its capability through its annual budget process. However, 

the Coast Guard does not know the extent to which its mission needs can 

be tailored through the annual budget process and still achieve desired 

results. In addition, this approach puts pressure on future budgets and 

delays fielding capability, which is reducing performance. Thus, the Coast 

Guard’s ability to meet future needs is uncertain and gaps are 

materializing in its current fleet. In fact, the Coast Guard has already 

experienced a gap in heavy icebreaking capability and is falling short of 

meeting operational hour goals for its major cutter fleet—comprised of the 

National Security Cutter and the in-service high and medium endurance 

cutters. These capability gaps may persist, as funding replacement 

assets will remain difficult at current funding levels.

Without a long-term plan that considers service levels in relation to 

expected acquisition funding, the Coast Guard does not have a 

Long Term Plan 

Needed to Address 

Gaps That Are 

Materializing as 

Coast Guard Shapes 

Its Capability through 

the Budget Process
Page 8 GAO-14-650T 

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. 

According to the current program of record, acquisition of the Offshore 

Patrol Cutter will conclude in about 20 years and will account for about 

two-thirds of the Coast Guard’s overall acquisition budget during this time 

frame. 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 the 

requirement for additional funds. The Coast Guard has no method in 

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

acquisition portfolio.

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. However, 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.

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. 

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, 

we believe 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. Consequently, we recommended that the Coast Guard 
Page 9 GAO-14-650T 

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. While DHS concurred with our 

recommendation, the response does not fully address our concerns or set 

forth an estimated date for completion, as the response did for the other 

recommendations. We continue to believe that a properly constructed 20-

year fleet modernization 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.

Chairman Hunter, Ranking Member Garamendi, and Members of the 

Subcommittee, this concludes my prepared statement. I would be 

pleased to respond to any questions that you may have at this time.

If you or your staff have any questions about this statement, please 

contact Michele Mackin at (202) 512-4841 or mackinm@gao.gov. In 

addition, contact points for our Offices of Congressional Relations and 

Public Affairs may be found on the last page of this statement. Individuals 

who made key contributions to this testimony are Katherine Trimble, 

Assistant Director; Laurier R. Fish; Peter W. Anderson; William Carrigg; 

John Crawford; Sylvia Schatz; and Lindsay Taylor.

GAO Contact and 

Staff 

Acknowledgments

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