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34–786 PDF 2007

UNITED STATES COAST GUARD FISCAL

YEAR 2008 BUDGET REQUESTS AND

AUTHORIZATION

(110–15)

HEARING

BEFORE THE

SUBCOMMITTEE ON 

COAST GUARD AND MARITIME TRANSPORTATION

OF THE

COMMITTEE ON 

TRANSPORTATION AND 

INFRASTRUCTURE 

HOUSE OF REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

March 8, 2007

Printed for the use of the 

Committee on Transportation and Infrastructure

(

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE 

JAMES L. OBERSTAR, Minnesota, Chairman 

NICK J. RAHALL, II, West Virginia 

PETER A. DEFAZIO, Oregon 

JERRY F. COSTELLO, Illinois 

ELEANOR HOLMES NORTON, District of 

Columbia 

JERROLD NADLER, New York 

CORRINE BROWN, Florida 

BOB FILNER, California 

EDDIE BERNICE JOHNSON, Texas 

GENE TAYLOR, Mississippi 

JUANITA MILLENDER-MCDONALD, 

California 

ELIJAH E. CUMMINGS, Maryland 

ELLEN O. TAUSCHER, California 

LEONARD L. BOSWELL, Iowa 

TIM HOLDEN, Pennsylvania 

BRIAN BAIRD, Washington 

RICK LARSEN, Washington 

MICHAEL E. CAPUANO, Massachusetts 

JULIA CARSON, Indiana 

TIMOTHY H. BISHOP, New York 

MICHAEL H. MICHAUD, Maine 

BRIAN HIGGINS, New York 

RUSS CARNAHAN, Missouri 

JOHN T. SALAZAR, Colorado 

GRACE F. NAPOLITANO, California 

DANIEL LIPINSKI, Illinois 

DORIS O. MATSUI, California 

NICK LAMPSON, Texas 

ZACHARY T. SPACE, Ohio 

MAZIE K. HIRONO, Hawaii 

BRUCE L. BRALEY, Iowa 

JASON ALTMIRE, Pennsylvania 

TIMOTHY J. WALZ, Minnesota 

HEATH SHULER, North Carolina 

MICHAEL A. ACURI, New York 

HARRY E. MITCHELL, Arizona 

CHRISTOPHER P. CARNEY, Pennsylvania 

JOHN J. HALL, New York 

STEVE KAGEN, Wisconsin 

STEVE COHEN, Tennessee 

JERRY MCNERNEY, California 

JOHN L. MICA, Florida 

DON YOUNG, Alaska 

THOMAS E. PETRI, Wisconsin 

HOWARD COBLE, North Carolina 

JOHN J. DUNCAN, JR., Tennessee 

WAYNE T. GILCHREST, Maryland 

VERNON J. EHLERS, Michigan 

STEVEN C. LATOURETTE, Ohio 

RICHARD H. BAKER, Louisiana 

FRANK A. LOBIONDO, New Jersey 

JERRY MORAN, Kansas 

GARY G. MILLER, California 

ROBIN HAYES, North Carolina 

HENRY E. BROWN, JR., South Carolina 

TIMOTHY V. JOHNSON, Illinois 

TODD RUSSELL PLATTS, Pennsylvania 

SAM GRAVES, Missouri 

BILL SHUSTER, Pennsylvania 

JOHN BOOZMAN, Arkansas 

SHELLEY MOORE CAPITO, West Virginia 

JIM GERLACH, Pennsylvania 

MARIO DIAZ-BALART, Florida 

CHARLES W. DENT, Pennsylvania 

TED POE, Texas 

DAVID G. REICHERT, Washington 

CONNIE MACK, Florida 

JOHN R. ‘RANDY’ KUHL, JR., New York 

LYNN A WESTMORELAND, Georgia 

CHARLES W. BOUSTANY, JR., Louisiana 

JEAN SCHMIDT, Ohio 

CANDICE S. MILLER, Michigan 

THELMA D. DRAKE, Virginia 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida 

(II)

SUBCOMMITTEE ON COAST GUARD AND MARITIME TRANSPORTATION 

ELIJAH E. CUMMINGS, Maryland, Chairman 

GENE TAYLOR, Mississippi 

RICK LARSEN, Washington 

CORRINE BROWN, Florida 

JUANITA MILLENDER-MCDONALD, 

California 

BRIAN HIGGINS, New York 

BRIAN BAIRD, Washington 

TIMOTHY H. BISHOP, New York 

JAMES L. OBERSTAR, Minnesota 

(Ex Officio) 

STEVEN C. LATOURETTE, Ohio 

DON YOUNG, Alaska 

HOWARD COBLE, North Carolina 

WAYNE T. GILCHREST, Maryland 

FRANK A. LOBIONDO, New Jersey 

TED POE, Texas 

JOHN L. MICA, Florida 

(Ex Officio) 

(III)

(V)

CONTENTS Page

Summary of Subject Matter .................................................................................... vi 

TESTIMONY 

Allen, Admiral Thad W., Commandant, United States Coast Guard ................. 5

Bowen, Charles W., Master Chief Petty Officer, United States Coast Guard .... 5

Skinner, Richard L., Inspector General, Department of Homeland Security ..... 40

Caldwell, Stephen, Director, Homeland Security and Justice Issues, Government Accountability Office .................................................................................. 40

PREPARED STATEMENT SUBMITTED BY MEMBERS OF CONGRESS 

Cummings, Hon. Elijah E., of Maryland ............................................................... 58

Mica, Hon. John L., of Florida ................................................................................ 65

PREPARED STATEMENTS SUBMITTED BY WITNESSES 

Allen, Admiral Thad W. .......................................................................................... 68

Bowen, Charles W. .................................................................................................. 82

Caldwell, Stephen L. ............................................................................................... 88

Skinner, Richard L. ................................................................................................. 119

SUBMISSIONS FOR THE RECORD 

Allen, Admiral Thad W., Commandant, United States Coast Guard:

Coast Guard Mission Support Organization Chart ........................................... 10

Response to Naval Surface Warfare Service Finite Element Analysis ............ 16

Response to question from Rep. Coble ............................................................... 20

Response to request from Rep. Cummings ........................................................ 23

Status Report on Cape Wind at Nantucket Sound, as requested by Rep. 

Oberstar ............................................................................................................ 33

Response to question from Rep. Cummings ....................................................... 39

ADDITIONS TO THE RECORD 

Reserve Officers Association of the United States, statement ............................. 130

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(1)

HEARING ON BUDGET AND AUTHORIZATION 

FOR FISCAL YEAR 2008

Thursday, March 8, 2007, 

HOUSE OF REPRESENTATIVES

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE, SUBCOMMITTEE ON COAST GUARD AND MARITIME

TRANSPORTATION, Washington, DC. 

The Subcommittee met, pursuant to call, at 10:00 a.m., in Room 

2167, Rayburn House Office Building, the Honorable Elijah E. 

Cummings [Chairman of the Subcommittee] presiding. 

Mr. CUMMINGS. The Committee will come to order. 

Today, the Subcommittee on Coast Guard and Maritime Transportation convenes to examine the Coast Guard’s fiscal year 2008 

budget. The President has requested nearly $5.9 billion to fund the coast Guard’s operations, an increase of $416 million over fiscal year 

2007 enacted level of just under $5.5 billion. 

The President’s total request for the Coast Guard capital budget 

is nearly $998 million, of which $837 million is for Deepwater. This 

represents a decrease of approximately $250 million below the 

amount appropriated for Deepwater in fiscal year 2007. 

We will hear today from Admiral Thad Allen, the Commandant 

of the Coast Guard, and Master Chief Petty Officer Charles W. 

Bowen, regarding the President’s budget request and how it aligns 

to the Coast Guard’s needs as the service continues an ambitious 

transformation effort to balance its many missions and to respond 

to the emerging threats that confront our homeland. 

I look forward to hearing from all of the witnesses today and 

hearing their thoughts on the question of whether the Coast Guard 

has adequate resources to perform each of its missions. 

As I have stated since the beginning of my tenure as Chairman 

of this Subcommittee, our Subcommittee will be an advocate for the 

Coast Guard, but we will balance our advocacy with a demand for 

accountability. Further, as we review the budget request, our Subcommittee will continually seek new opportunities to strengthen 

the systems and processes that can ensure accountability in all aspects of the Coast Guard’s operating and capital budgets. While I am concerned that $837 million may not be adequate 

funding for Deepwater, we have just begun our oversight of this 

program and, before I advocate for an increase in funding, I want 

to know in detail the steps that the Coast Guard is taking to correct Deepwater and I want evidence that the steps are producing 

the results that we expect. As I have said over and over and over 

2

again, I do not expect for the American people to continuously pay 

for errors that are made by others. 

At the same time, the Committee on Transportation and Infrastructure is concerned that insufficient capital funding is being directed towards the maintenance of on-shore facilities. The President’s budget of $35 million for this purpose, which appears to be 

far below the amount required to meet the maintenance needs of 

existing infrastructure. Our Committee supports the appropriation 

of $360 million for non-Deepwater capital expenditures, which is 

the level of funding that was appropriated in fiscal year 2005. 

I am also very concerned about the funding levels for some of the 

Coast Guard’s historical programs. Proposed funding levels for 

search and rescue, marine safety, aids-to-navigation, icebreaking, 

and the protection of living resources are all lower than the 

amounts that were appropriated for these purposes in fiscal year 

2007. 

I have hear concerns from throughout the maritime industry and 

labor organizations about the Coast Guard’s lack of support for traditional maritime safety programs. Some have even advocated 

transferring this mission back to the Department of Transportation, where they believe it will receive better support. 

Today, we also welcome to the Subcommittee Mr. Richard Skinner, the Inspector General of the Department of Homeland Security, and Mr. Stephen Caldwell, who represents the Government 

Accountability Office. 

These two experts will discuss the Coast Guard’s budget needs 

and the Deepwater procurement, which they both have examined 

in detail. 

Since our last hearing on the Deepwater program, the DHS IG 

has issued a new report on the 123-foot patrol boats. Of course, 

these boats have been pulled from service due to problems with 

their hulls. However, the DHS IG has found that aside from the 

hull problems, the contractors failed to meet the requirements of 

the Deepwater contract by failing to install low-smoke cabling and 

failing to install topside equipment that would have been operable 

in all of the weather conditions the patrol boats were expected to 

face. 

I must tell you that this particular issue is one that concerns me 

greatly. We have just seen, over the past week, what happens 

when our military come back from Iraq and the disregard, it seems, 

in many instances, for their health and safety. And here we are in 

the Coast Guard, a requirement having been put in by the Coast 

Guard and then seeming to have been waived that goes to the very 

safety and health of our personnel. 

These findings are particularly disturbing because they identify 

specific instances in which the contractor failed to meet the requirements of the Deepwater contract and they identify failures 

that were apparently not immediately recognized by the Coast 

Guard. Further, the use of non-low-smoke cabling could have needless exposed the crews on these boats to safety risks, including excessive toxic smoke in the event of an on-board fire. 

I think that it would be almost criminal if this Committee—if 

something were to happen in the future where members of the 

Coast Guard were harmed because we did not make sure these 

3

specifications were met. And if we did not address them, I think 

that that falls square on our shoulders, and I, for one, will not be 

a part of that. So, therefore, we are going to look at that very carefully. 

Such instances of shoddy performance that could endanger the 

safety of the Coast Guard crews are completely unacceptable. And 

let me say to everyone here I hope these are the last instances we 

hear about the Deepwater contract. 

I look forward to the testimony of all our witnesses, and now I 

turn it over to my able and good friend and Ranking Member of 

this Committee, Mr. LaTourette. 

Mr. LATOURETTE. Thank you very much, Mr. Chairman, and 

thank you very much for this hearing. 

The Subcommittee is meeting this morning to review the President’s request for Coast Guard activities and personnel for fiscal 

year 2008. With the problems that have recently come to light with 

the vessels that will be acquired under the Deepwater program, 

2008 is shaping up to be a critical year for the future of the Coast 

Guard. 

The Administration has requested approximately $8.2 billion for 

fiscal year 2008, which is an increase of 2.4 percent over last year. 

While I am pleased that the President has proposed this increase 

for the Coast Guard, I am also concerned by several other proposals included in the budget. The President has proposed a funding level of approximately $1 billion for the Coast Guard’s Acquisition and Capital Programs, including $837 million for the Deepwater program. The proposed amount for the Deepwater program 

is more than $229 million less than the Congress appropriated for 

the program last year. 

I am concerned about the effects that any reductions in funding 

would have on the cost and the expected delivery of assets under 

Deepwater. I hope that the witnesses will speak on how the proposed funding level will affect the overall costs and schedule for the 

Deepwater program, as well as the effects on individual acquisitions under the project. The Coast Guard is in the process of successfully acquiring new aircraft, small boats, and command and 

communication systems as a part of Deepwater, and I believe we 

must take care that any adjustment to the funding levels do not 

endanger those acquisitions. 

I am also concerned that the President’s budget does not include 

funding to support several of the Coast Guard’s missions. Once 

again, the President has proposed a transfer of funds for operations 

and personnel of the Coast Guard’s three polar icebreakers to the 

National Science Foundation. Last year, this Subcommittee received a statutorily mandated report from the National Academy of 

Sciences that recommended that the Federal Government and the 

Coast Guard maintain icebreaking capabilities to support economic 

and national security interests in the polar region. I hope that the 

witnesses will also advise the Subcommittee how the Administration plans to address these recommendations and how the Coast 

Guard plans to support its current polar icebreakers and related 

personnel without direct budgetary authority over funds for these 

assets. 

4

The President has also proposed a transfer of funding and statutory responsibilities over the bridge alteration program from the 

Coast Guard to the Department of Transportation. The Subcommittee will review this proposal to examine whether these functions can be better performed by another Federal agency; however, 

I am extremely concerned by the justification that was included for 

this proposed transfer: that the removal of these responsibilities 

would better focus the Coast Guard on its growing homeland security responsibilities. 

If the Coast Guard is unable to carry out all of its traditional and 

homeland security missions with its current legal authority, assets, 

and personnel levels, this Subcommittee needs to know and I believe we need to take action. 

This hearing is very important because it lays the groundwork 

for the authorization bill that the Subcommittee will develop and 

hopefully enact into law later this year under the direction of our 

Chairman. 

I thank the witnesses for their testimony. And, lastly, I want to 

welcome Master Chief Charles Bowen on his first appearance before the Subcommittee in his capacity as the Master Chief Petty 

Officer of the Coast Guard and, Master Chief, congratulations on 

this accomplishment, and we look forward to working with you. 

And thank you, Mr. Chairman. I yield back my time. 

Mr. CUMMINGS. Thank you very much, Mr. LaTourette. 

Mr. Coble? 

Mr. COBLE. Thank you, Mr. Chairman. I will not take the full 

five minutes. 

I want to welcome our panel here and would like to note for the 

record, Mr. Chairman, that the Administration’s fiscal year 2008 

budget includes $13.3 million for construction of a state-of-the-art 

pool and training facility for the Rescue Swimmer Program located 

in Elizabeth City, North Carolina. While Elizabeth City is not in 

my district, I do want to acknowledge the Coast Guard presence in 

North Carolina and the contribution it makes not only there, but 

across the Nation. 

And for those who have seen the movie The Guardian, Mr. 

Chairman, which portrays the training and efforts of rescue swimmers, you no doubt understand the need for adequate training and 

facilities for rescue swimmers, and all Coast Guard programs, for 

that matter. 

I commend men and women of the Coast Guard, including Admiral Allen and Master Chief Bowen, for the good job they do each 

day to protect our Nation, and it is good to have you all with us 

today. 

And I yield back, Mr. Chairman. 

Mr. CUMMINGS. Thank you very much, Mr. Coble. 

Mr. Taylor, you had no opening statement. Thank you very 

much. 

We now will bring forward Admiral Thad Allen and Master Chief 

Bowen. 

Good morning, gentlemen, and thank you for being with us. 

5

TESTIMONY OF ADMIRAL THAD W. ALLEN, COMMANDANT, 

UNITED STATES COAST GUARD; CHARLES W. BOWEN, MASTER CHIEF PETTY OFFICER, UNITED STATES COAST GUARD 

Admiral ALLEN. Good morning, Mr. Chairman, Ranking Member 

LaTourette, and Members of the Committee. It is a pleasure to be 

here this morning. I have a statement for the record that I would 

like to submit and a brief oral statement, subject to your approval, 

sir. 

Mr. CUMMINGS. Without objection. 

Admiral ALLEN. Sir, the previous hearing we had focused a good 

deal on Deepwater, and I am prepared to answer any questions you 

may have for that topic today. I would tell you up front that we 

are proceeding on task per my previous testimony. We are in the 

process of restructuring the contract for the next award time, 

which we will have the opportunity to award in June of this year. 

We are looking at the feedback from the Inspector General, Government Accounting Office, this Committee and other Committees 

about establishing performance metrics, proper criteria for award 

fee, off-ramps where we need to do that, and more effective ways 

to hold the contractor accountable. We are on time line to return 

to this Committee within 120 days from the hearing on the 30th 

of January. I look forward to testifying at that time and reporting 

out to you, sir. 

In the meantime, yesterday and today the chief of my acquisition 

shop, Admiral Gary Blore and Admiral Dale Gable, who is our new, 

who is our newly designated technical authority for Deepwater, are 

personally down on the National Security Cutter looking at the fatigue life issues, modifications that need to be made for the purpose 

of closing the issues on the first and second hull, and then being 

able to make the proper design changes for the third hull, so we 

may proceed this year and be in construction on the third hull. 

Prior to any movement forward on any task order related to 

Deepwater or the National Security Cutter, we will full consult and 

advise the Committees and the oversight bodies of our intentions 

to that regard and how we resolve those issues, sir. 

I would like to focus on the budget and the authorization bill, the 

purpose of the hearing this morning, sir. I was pleased that you 

were able to join us at the State of the Coast Guard speech several 

weeks ago. At that point, I made the case to the public that was 

in attendance and the Coast Guard that we are in a changing 

world and that the Coast Guard needs to change with it, and we 

actually started that change last May when I assumed command 

of the Coast Guard. 

We are doing several things simultaneously. We are assessing 

the external environment and what we need to do in the future. I 

believe we need to pay attention—and we are—to the current 

issues that have been raised, and I have said repeatedly that Deepwater is my responsibility as the Commandant and I will get it 

right. However, I don’t think that we should let the tyranny of the 

present release us from the responsibility to focus on the future, 

and we need to do that and we need to think about what the Coast 

Guard needs to be in the 21st century. 

I stated at the State of the Coast Guard speech that we released 

a new Coast Guard strategy for maritime safety, security, and 

6

stewardship. This document is intended to lay out the capstone objectives for my tenure as Commandant and it crosses all mission 

and achieves a balance between safety, security, and stewardship, 

including new emphasis on security and our legacy missions, and 

I would be glad to answer any questions about mission balance as 

we move forward. 

To be able to be effective in the current operating environment, 

we need to be effective as an organization. There are three things 

we are looking at, and they are reflected in both the authorization 

bill and the budget that is before you. The first is our forestructure, 

our people and our platforms, to make them as effective as we can. 

The budget before you today includes a base reprogramming that 

will assist us in establishing an employable operations group that 

will take the Coast Guard’s deployable specialized forces, place 

them under a single command, and allow us to do adaptive force 

package against problem sets like Katrina, a terrorist attack, or a 

manmade disaster. 

Additionally, we are looking at the command and control system 

in the Coast Guard to make sure it effectively supports mission 

execution. 

Finally, we are looking at mission support. The whole process of 

acquisition reform and our blueprint for acquisition reform, together with financial reforms and a new look at our logistics and 

maintenance system are intended to bring the Coast Guard into 

the 21st century on how we conduct business practices. As I stated 

at my State of the Coast Guard speech, there are portions of the 

Coast Guard that have been run like a small business, and we 

need to start acting like a Fortune 500 company. 

Finally, the end goal is to achieve balance between the resources 

we have and the mission demands placed upon us. Our operational 

commanders continually participate in a risk-based decision-making process. We allocate the resources to them on scene and empower them to apply them to the highest need. The principle of onscene initiative is what allowed us to respond during Hurricane 

Katrina and save 34,000 lives. That same operational guideline and 

that risk management decision plays itself out every day through 

the decisions of our field commanders, and I would be glad to answer any questions you may have about how they make those decisions, how that relates to mission balance, and how that translates 

into the budget numbers that you spoke about earlier, sir. 

Again, I am delighted to be here today, and I would be glad to 

answer any questions you may have for me, sir. 

Mr. CUMMINGS. Thank you very much, Admiral. 

Master Chief Petty Officer Charles W. Bowen, welcome. 

Chief BOWEN. Good morning, Mr. Chairman and distinguished 

Members of the Subcommittee. I have submitted a statement for 

the record and have a brief oral statement this morning. 

It is a privilege to speak to you today about a subject that I care 

very deeply about: the U.S. Coast Guard, our missions, and our 

people. First, I would like to report to you that the service that I 

represent is in very good shape overall and well capable of executing our missions. During the past nine months, I have visited 

every Coast Guard district with the exception of District 14 in Hawaii, and spoken to or in front of at least 9,000 Coast Guardsmen. 

7

On the West Coast I met a Petty Officer on the Coast Guard Cutter Monsoon who led a boarding party and a boarding that resulted 

in the arrest of Javier Arellano-Felix, the violent Mexican drug lord 

and the leader of the Tijuana Cartel. 

Petty Officer Steven Ruh from Station Oswego swam over 100 

years in eight to ten foot seas to rescue a woman who would have 

surely died. 

I saw CWO Jim Mullinax underway on the Coast Guard Cutter 

Baronoff while on patrol near the oil platforms near Um Kassar, 

Iraq. He and his shipmates are working incredible hours in extreme conditions, and they are not only keeping the waters off 

Iraq’s only port secure, but they are also helping to train Iraqi security forces in boarding techniques. 

Whenever I talk to Coast Guard crews about the future of our 

service, I talk in terms of opportunities and challenges. Opportunities include expanded roles, new equipment, and reorganization efforts that will make us better. Challenges include an aging infrastructure, including old owned housing, child care, and our health 

care. 

A very bright spot is recruiting and retention. 2006 was a very 

successful active duty recruiting year. We recruited the highest 

percentage of minorities and the third highest percentage of women 

in history of the Coast Guard. For the Coast Guard, diversity is an 

operational necessity. Our retention rates are historic, and 93 percent and 88.5 percent respectively for the officer and enlisted workforce. 

Just a quick note about Deepwater. The past several weeks there 

have been several hearings devoted to this subject. I won’t even try 

to repeat what has already been said, but I will give you my perspective from a deck plate standpoint. I know firsthand the importance of being able to project our Coast Guard presence. I have 

been on small cutters that could not reach offshore and we needed 

that aging medium endurance or high endurance cutter to reach 

that person in distress, interdict drugs, or protect our natural resources. 

Deepwater is also a quality of life issue. Our crews live aboard 

those cutters over six months of every year. A current 378-foot cutter built in the 1960s has some berthing areas that house 20 to 30 

persons at once. In comparison, the largest berthing area on the 

NSC will house six personnel at the most. As stated, the art dining 

facility and an onboard gym will also improve livability. 

To correct my written statement, we removed nearly 287,000 

pounds, or 130 metric tons, of cocaine from the transit zone in fiscal year 2006, and over 338,000 pounds, or 153 metric tons, of cocaine in fiscal year 2005. In comparison, from 1993 to 2003, the 

interagency seized an average of 109,474 pounds, or about 50 metric tons, per year. To put it more powerfully, in the last two years 

alone, we removed twice as much cocaine as we cumulatively seized 

in all of the years from 1994 to 1998. 

Thank you for the opportunity to appear before you and thank 

you for all that you do for the men and women of the U.S. Coast 

Guard. 

Mr. CUMMINGS. Thank you very much. We appreciate both of 

your testimonies. 

8

Admiral Allen, I want to also compliment you on your State of 

the Coast Guard speech. I was very glad to be there. I thought it 

was very enlightening and I thought it very practical, and you 

showed a tremendous amount of vision, and we want to make sure 

you help—want to help you get there. 

Over the past seven years, the Coast Guard’s operating budget has grown substantially, from $2.7 billion to a figure that is now 

approximately $5.5 billion. At the same time, by the Coast Guard’s 

count, the total number of full-time equivalent positions has grown 

just 18 percent. 

Admiral, do you believe that you have the right number of people 

to manage the growth in your operations? And do you believe you 

have the expertise? 

Admiral ALLEN. I believe with the increments that are provided 

each year, as long as the FTE matches the increased funding, we 

are going to be fine, and I am good to go with the numbers that 

are presented in the budget this year. That is not to say we don’t 

have challenges moving forward, and I will be working with the 

Department of Homeland Security and OMB to fashion a fiscal 

year 2009 budget that is line with the State of the Coast Guard 

speech that I gave. 

One of the reasons the budget that is presented to you this year 

may seem flat-lined compared to previous years, I believe we need 

a source-to-strategy. I believe you have to have an in-state of mind 

when you go up and ask for resources, and in the last eight 

months, in putting together the Coast Guard’s strategy and focusing on base realignment of the Coast Guard, I have tried to position ourselves to move forward to have a higher level of credibility 

and a linkage between what we are trying to accomplish out there 

and buying down risk and the resources that I am coming to you 

and requesting. 

One of the perennial problems in the Coast Guard is we are a 

multi-mission organization. The good news is you can put one cutter out there and do five missions, you don’t have to have five cutters. The downside is you can only do one or two missions at a 

time. So if anybody asks me could I use more people, the answer 

is always yes, because if you give me more, I will more effectively 

apply those than probably any organization in Government. But 

there has to be a balance of the infrastructure and the competency 

and how we apply those resources. We know when we grow too fast 

we have juniority problems, where we will have people in grade 

and time in service at a much junior level than we had in the past. 

So I think there is a balance we need to achieve there. 

As we move forward, I will be willing to work with the Committee and pass on any recommendations I may have for where 

growth needs to take place in the Coast Guard. But, as I said, for 

fiscal year 2008, coming in as the Commandant, my goal was to 

take, as we would call, a round turn on our base. And if you will 

notice, there is an on-budget base reprogramming forestall of $80 

million to centralize the personnel account and then $132 million 

to align the funding and the personnel we need to establish the 

deployable operations group. 

So I would categorize this year’s budget as a base management 

budget, and I fully expect that, as we go forward, I will make my 

9

needs known to the Department and the Administration as we 

move forward, sir. 

Mr. CUMMINGS. On that note, on that note, one of your requests 

I think is that you have four vice admirals. Is that accurate? Is 

that right? 

Admiral ALLEN. Yes, sir. This is the authorization bill that we 

put up, sir. What I am requesting is to establish parity with how 

vice admirals are assigned with DOD. It would also allow me the 

flexibility to achieve some of the reorganization goals that I laid 

forward in the State of the Coast Guard speech. Right now, vice admirals in the Coast Guard are assigned and confirmed to a position. I would like the flexibility, subject to the confirmation of the 

Senate—which they will still have the authority to review—to have 

more flexibility on how we assign vice admirals, and I would like 

to increase the number by one, sir. 

Mr. CUMMINGS. Okay. And so the difference would be between 

now—if you get what you want and what is going on now, what 

is the difference? 

Admiral ALLEN. The major difference is I am proposing to create 

a mission support organization in the Coast Guard. Included in 

that is the new acquisition organization and the new chief 

sustainment officer and the ability to manage our platforms more 

effectively and efficiently. This will allow me to establish a senior 

technical position at the three star level. It will do two things: it 

will provide higher level oversight of mission support in things like 

the Deepwater acquisition; it will also allow a path to promotion 

for our technical people to the three star level, sir. 

Mr. CUMMINGS. Will you provide us with a proposed organizational chart showing this, showing what you just———

Admiral ALLEN. Would be happy to, sir. Yes, sir. 

[Insert follows:]

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Mr. CUMMINGS. First of all, I don’t want something you said to 

go unnoticed, when you talk about how you are presenting your 

budget and basically trying to not ask for things that you don’t 

need at this moment. I must tell you that that is refreshing and 

we appreciate that, because we want to make sure, as you have 

heard me say 50 million times, we want to make sure that the 

public’s money is spent effectively and efficiently. So I really appreciate that. 

Talking about personnel, do you believe that the head of the acquisitions functions should be a member of the Coast Guard or a 

civilian? 

Admiral ALLEN. Actually, I think you would need a mix of both 

skills, sir. 

Mr. CUMMINGS. Say that again? 

Admiral ALLEN. You need a mix of both skills. 

Mr. CUMMINGS. Okay. 

Admiral ALLEN. You need the operational experience and the 

technical competency that we embed in our officers as they grow 

up through the Coast Guard, and somebody rising to that level has 

about 30 years experience and would be able to apply that to great 

advantage to the Coast Guard. On the other hand, there are issues 

of continuity, longstanding procurement expertise, and so forth. 

That is the reason what we have tried to do in the acquisition organization is have both a military member and a deputy as sort of 

the senior executive service. And, in fact, two or three of the last 

hires that we have made into our technical community have been 

folks that have come from places like the Naval Sea System Command, where we are trying to acquire civilian competency that provides continuity, and then overlay that with military experience, 

sir. 

Mr. CUMMINGS. And so do you believe that the chief financial officer should be a member of the Coast Guard? 

Admiral ALLEN. Yes, I do, sir, because ultimate accountability, 

chain of command, and the accountability of the senior officers to 

me, the way it is currently constructed is the chief of our CG-8 organization is designated as a chief financial officer. We are in the 

process of hiring a deputy CFO who will be a civilian senior executive, sir. 

Mr. CUMMINGS. With regard to Deepwater, are we going to be 

able to stay within that $24 billion budget, do you think? 

Admiral ALLEN. Sir, I am not sure we are going to be able to answer that question completely until we get some of these first articles out and tested, and then we are going to have to make some 

tradeoffs. If for some reason there is cost growth and we intend to 

stay within that cap, then we may be looking at less units or another way to acquire those units. I am ever mindful of that. That 

is the target and I think I need about a year under the new regimes we are putting in place and looking at the options we have 

to acquire things, especially after we have demonstrated first article performance, whether or not we should go bilateral with the 

contract rather than work through ICGS, and use that as a basis 

for revising our cost estimates and whether or not the $24 billion 

is accurate. But I would like to tell you that we need took at difVerDate 0ct 09 2002 11:25 Feb 26, 2008 Jkt 000000 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 P:\DOCS\34786 HTRANS1 PsN: JASON
12

ferent mechanisms by which we can drive cost out of the procurement overall, sir. 

Mr. CUMMINGS. All right, now, let’s go back for a moment. If we 

were to—you just said something that just kind of rang some bells 

in my head. You said something to the effect that we might have 

to reduce what we want basically. Is that what you just said? 

Admiral ALLEN. Well, sir, if you keep the baseline where it is at, at $24 billion, and you have cost growth and you don’t change the 

baseline, you are going to buy less. 

Mr. CUMMINGS. Right. I understand that. 

Admiral ALLEN. Or you have to extend the baseline cost. What 

I am saying is that under the changes we are looking at in the contract structure and our options as far as competition and all that 

sort of thing, I think in the next six to twelve months I can give 

you a more accurate assessment of whether or not the changes we 

are making now can actually drive cost out of the total top line of 

the procurement. 

Mr. CUMMINGS. I have got that. 

Admiral ALLEN. Yes, sir. 

Mr. CUMMINGS. This is where I am going with this. One of the 

things—one of the reasons why we even came up with the Deepwater program was so that we could make sure—I know it started 

pre-9/11, but particularly post-9/11 we wanted to make sure that 

our military had the best equipment to do the job that they have 

to do. And this is a theme that is, by the way, not only running 

through the Coast Guard, but all of our services. I mean, that is 

a major concern I think of probably every single Member of Congress. 

And so when—if we have to reduce our acquisitions, then the 

question becomes are we—it is logical, I think, that we are then reducing our capability of doing the missions that you have been 

mandated to do. So I guess what I am looking at—and I understand you need more time to figure out where this is going, but I 

am interested to know how the negotiations are going. We are interested to know what is happening without—I don’t want to interfere with the negotiations, but I am interested in knowing how 

Northrop Grumman and Lockheed Martin, are they working with 

you, trying to deal with the issues that we have been talking about 

for the last few months. 

And I am wondering whether or not there are any concessions 

with regard—I mean, we noted their bonuses have been paid—were 

paid a while back. We want to know where all of that is because, 

again, what we are trying to do is take the American people’s 

money and protect them with their own money. That is what we 

are trying to do, trying to spend that money effectively and efficiently. We simply want what basically is standard contract law to 

happen. We want to make sure that when we give money, that we 

get a product back that works. 

So where are we with your negotiations? Because I think that is 

critical, where those negotiations are, because we cannot just keep 

throwing money and throwing money. The American people are not 

going to stand for it, nor will this Congress. 

Admiral ALLEN. Yes, sir. The process was intended to come up 

with a range of suggestions to both myself and the two CEOs, and 

13

the culmination of the work that has been going on was the trip 

yesterday to Pascagoula with the chief of Deepwater and our technical authority. The specific purpose of that trip was to come to closure on the technical solutions for the fatigue life issue as part of 

settling all issues relating to the first and the second hull, as a 

prelude to being able to issue a task order for the third NSC hull, 

sir. So we are almost at closure on that. I would be glad to provide 

you a complete technical briefing and where we are at in the negotiations, sir. 

Mr. CUMMINGS. I am going to end my questions because I want 

the other Members to have opportunity, but let me tell you something. The Homeland Security IG has a major issue with this fatigue life situation. He is of the firm belief that we are not getting 

what we contracted for. He has heard your explanation; he has 

read all kinds of material; I guess he has talked to a number of 

people. 

But one of the most disturbing things that he found, he felt 

that—and he believes very strongly—and he will be here—he will 

be sitting where you are in a few minutes and I am sure he will 

say this—is that he does not believe, when it comes to fatigue life, 

that we have gotten—we are not getting what we bargained for. Of 

all the points that he was most upset about, it is that one, and he 

feels that, for some reason, we started off with a certain fatigue life 

and then some folks played with the words, and the next thing you 

are know we are not getting what we bargained for. 

Would you comment on that? Because I want to make sure that, 

when he comes up here, I can tell him what you said. 

Admiral ALLEN. Yes, sir. The only issue raised by the Inspector 

General regarding the National Security Cutter has been fatigue 

life. There has been no audit on the capability, the quality of life 

improvements that the Master Chief talked about. The single issue 

with the National Security Cutter and the Inspector General is the 

fatigue life, and I believe you are alluding to two issues, and I will 

take them separately. 

One of them is I think there is an issue on how underway days 

were defined, and I will talk about that. 

The other issue is Northrop Grumman constructed this ship 

through a traditional military combatant process using what they 

call data design sheets. Our engineers felt that that basis for construction introduced some risk in terms of hull fatigue. They 

sought a modeling system that had not been applied called finite 

element analysis that replicate the action of waves on the hull over 

the lifetime of the hull. That led our engineers to believe that it 

might not achieve the fatigue life expected of the ship. That wasn’t 

to say that you would launch it and something would happen immediately; it is almost like you ask for—you thought you were getting 80,000 mile Michelins and you got 60,000 Good Years, and 

how long would it last. And that is where the discussion has come 

in. 

Northrop Grumman believes that they have met the requirement 

in the ship they have offered us; we don’t think they have. That 

is why our chief of Deepwater and our technical authority are in 

Pascagoula. That is a seminal issue that has to be resolved, codified, either contract changes made, concessions made and comVerDate 0ct 09 2002 11:25 Feb 26, 2008 Jkt 000000 PO 00000 Frm 00023 Fmt 6633 Sfmt 6633 P:\DOCS\34786 HTRANS1 PsN: JASON
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pletely spelled out about how we are going to move forward. It involves strengthening certain parts of the ship to make sure that, 

as the forces are subjected to the hull over the lifetime of the ship, 

that we won’t see stress cracking and a loss of structural integrity 

on the ship, sir. 

The second issue was something that was not clear in the contract but understood by both the Coast Guard and the contractor 

and required clarification for the Inspector General, and it is the 

difference between what is a day away from home port and what 

is a day in the operating area. These vessels have been crewed to 

be able to operate 230 days a year away from home port. Our current cutters operate 185 days a year away from home port. With 

transit times, dry dock time, port calls for logistics, you do not yield 

230 days on station from 230 days away from home port, it is closer to about 185 or 190. 

The contractor that was directed to do the finite element analysis 

was not given any guidance; he therefore took 230 days and applied that as if we were on station subject to all the wave action, 

which results in a far greater requirement for strengthening the 

hull over 30 years than you would for 185 days. Our technical authority—this is not Northrop Grumman or the Deepwater Program 

Office—our technical authority went back and corrected that that 

should be 185 days. We then went back and clarified, to the extent 

there was any misunderstanding by the IG or it was vague in the 

contract, we actually modified the contract to make sure everybody 

knew that we were talking about 185 days on station per year. 

Mr. CUMMINGS. Just to leave you with this. When we have the 

IG who says, United States Congress, the people of this Country, 

through the Coast Guard, are not getting what they bargained for, 

that is a problem. 

Admiral ALLEN. Yes, sir. 

Mr. CUMMINGS. That is a major, major problem. We rely on the 

IG; we trust the IG, I think most of us. They have nothing to gain; 

they are just trying to do their job. So I just—again, as I said—

and I think you———

Admiral ALLEN. Sir, we don’t argue with the issue of fatigue life. 

It has got to be resolved. 

Mr. CUMMINGS. Okay. All right, so we are trying to be consistent 

with the IG, is that what you are trying to say to me? 

Admiral ALLEN. There was inconsistent interpretation of whether 

the ship should be subjected to wave action for 230 days or 185 

days a year. It was commonly understood between the Coast Guard 

and the contractor that it was 185 days. The IG interpreted the 

contract as saying 230. There is a different—and it was stated different ways in different parts of the contract, and we have clarified 

that. 

Mr. CUMMINGS. Now, did you all ask the Navy to do the analysis 

on the basis of 230 days? 

Admiral ALLEN. We submitted a work order to the Naval Surface 

Warfare Service at Carderock and asked them to do a finite element analysis. The work order did not specify the number of days 

and they interpreted it to be 230. When we received the report, we 

adjusted it to 185, which this is a scaling of the results. And I 

15

would be glad to produce a detailed answer for the record on that 

that is certified by my technical authority, sir. 

Mr. CUMMINGS. I would like to have that only, like I said, because the IG—and I know that he is very, very, very upset about 

this and very concerned. 

[Insert follows:]

16


34786.007
17

Mr. CUMMINGS. Mr. LaTourette. 

Mr. LATOURETTE. Thank you, Chairman. 

And welcome again. I want to go over just some parts of the 

President’s budget that I think I highlighted in my opening remarks, and the first is on the shore-side facility funding. Although the request for this year is about $16 million higher 

than last year, in going back over previous periods, there was a six 

year period, from 1995 to fiscal year 2000, the Coast Guard requested an annual average of about $73.5 million for those facilities, together with navigation facilities. During the next six-year 

period, from 2001 to 2006, the Coast Guard sought an average of 

only $30 million for the same programs. 

My question—just three quick questions. What accounts for the 

reduction? Has the Coast Guard dramatically reduced its shoreside aid and aids to navigation holdings? And do the upgrades 

made during the more robust period still meet the operational 

needs of the Coast Guard today? 

Admiral ALLEN. Sir, we took a hit in the early 2000s in the shore 

account. A lot of that had to do with the negotiations that were 

going on regarding the awarding of the Deepwater contract against 

a constrained funding ceiling. In fact, there were a couple years 

there, because of the negotiations moving the budget forward, the 

funding was probably inadequate. We have raised that to $37 million this year. In future years—

I have already talked with the Secretary and the Deputy Secretary 

about this—we need to grow this account, sir. It is underfunded 

and we need to move it up in future years. 

Mr. LATOURETTE. Thank you. 

The other issue that I mentioned, one of the other issues was the 

polar icebreaking operations. The President’s budget does not include funding for personnel or operations aboard the service’s three 

polar icebreakers for 2007. The President’s budget also does not include any funding to address recommendations to maintain Federal 

polar icebreaking capabilities that were made to Congress in the 

statutory report. There was a report in January of this year to the 

Committee that states that the Coast Guard is working with the 

Administration to review that report. 

One, when will the review of the report be complete? Two, how 

does the transfer of this funding affect the Coast Guard’s capability 

to plan and budget for polar icebreaking missions aboard Coast 

Guard vessels? And then, lastly, is the National Science Foundation required to provide funding the Coast Guard for this service 

or can it choose to contract out with other parties or even foreign 

nations to engage in this activity? 

Admiral ALLEN. Yes, sir. First of all, several years ago the base 

funding for the operation of polar icebreakers was transferred to 

the National Science Foundation. That has required us, on an annual basis, to justify cost to them and negotiate a fund transfer to 

operate our icebreakers. In effect, we own the crews and the cutters, and they own the funding on an annual basis to do that. 

My own opinion is that is very dysfunctional, but that is what 

@. It proved itself this year; when appropriations were passed for 

the Department of Defense and Homeland Security, the rest of the 

Government was submitted to a continuing resolution, and that 

18

would include the National Science Foundation. Now, we have adjusted that for this year, but that is just one indication about this 

process and how it is very problematic in how to execute. 

Moving forward, I believe if the Coast Guard is going to operate 

polar icebreakers, we should have the funding in our base, whether 

it is adequate or not, and then we will operate. I would rather have 

the flexibility and the money, even if it is not enough, then to try 

and do a cross-agency transfer, because it is very problematic. 

In regard to the longer polar icebreaker issues, the National 

Academy of Sciences produced a report last September that validated the need for three polar icebreakers which the Coast Guard: 

the Healy, which is basically an Arctic research vessel; the Polar 

Sea; and the Polar Star. 

Moving forward, we believe there is a decision point coming down 

about the recapitalization or the refurbishment of the Polar Sea 

and the Polar Star. It is not a this year budget issue, but it is a 

this year policy issue in how we are going to proceed in the future. 

We have been partnering within the interagency, Department of 

State and other entities, to take a look at the current policy environment for polar icebreaking, both Arctic and Antarctic, especially 

in view of the shrinking Arctic ice cap, access to routes from Russia 

to Asia over the top of the Western Hemisphere rather than 

through the Panama Canal, and the likelihood of increased shipping. We think there are issues up there regarding search and rescue, environmental response, and even issues of national security. 

We think this is a policy issue that needs to be addressed right 

now, and we look forward to doing that over the next 12 to 18 

months, and then following a policy discussion with authorization 

and budget recommendations, sir. 

Mr. LATOURETTE. Okay, thank you. And just sticking with the 

icebreaking theme for a minute, I want to—I will thank you a little 

bit later, but publicly thank you and Admiral Crowley of the 9th 

District and the skipper and the crew of the Neah Bay for the relief 

that they gave my constituents last week, a really great effort. I 

mean, the Neah Bay had to come out three times because the ice 

in the lake was so tough, and it was helped by the Ridgely from 

Canada. So I thank you, and I thanked Admiral Crowley yesterday. 

My last question is in your testimony, figure 1 on page 5 of your 

testimony includes a list of statutes and acts under which the 

Coast Guard operates. The list is part of the explanation of the new 

Coast Guard strategy for maritime safety, security, and stewardship. It is of concern to me that none of the provisions in Title 6 

dealing with vessel safety and documentation or merchant mariner 

credentialing appears on the chart. As you know, the Subcommittee 

has been long concerned with that, and I think my question is, is 

the failure to mention this important provision of Title 46 an oversight or should the Subcommittee be concerned that maritime safety is suffering at the hands of increased attention to homeland security? 

Admiral ALLEN. Sir, I can guarantee you it was not an act of 

commission. That chart in the—I am assuming you are referring to 

the maritime strategy chart. That was a representative example of 

statutes, and whether you call it omission or oversight, there is no 

intention to walk away from those missions, sir. 

19

Mr. LATOURETTE. Okay. Thank you very much. 

Thank you, Chairman. 

Mr. CUMMINGS. Mr. Coble? 

Mr. COBLE. Thank you, Mr. Chairman. 

Thank you, Admiral and Master Chief. Admiral, let me first of 

all insert my oars into back home waters involving a program that 

was included in the previous authorization bill which created a 

pilot program in Camden County, North Carolina. Specifically, Section 401 authorized the creation of a Coast Guard junior reserve 

officer training corps at the Camden County High School. To date, 

that program has received no funding. Given inclusion in the authorization, Admiral, what level, if any, of involvement has the 

Coast Guard had with the Camden County Board of Education and 

the Camden County commissioners to reach an agreement on how 

to move the pilot program forward? And if an agreement was 

reached between the principals, would you be inclined to recommend funding to support the program? 

Admiral ALLEN. Sir, if it is okay, I will get the latest status on 

that and answer for the record, but I do have a couple thoughts to 

pass, if that is okay. 

[Insert follows:]

20


34786.008
21

Admiral ALLEN. We do have, as you know, a very successful Junior ROTC program down in Miami, Florida, the Mast Academy; it 

is a magnet school for marine science and technology, and that has 

become a great feeder school for Academy applicants. And, in fact, 

a year or so ago the regimental commander at the Academy actually came out of that JROTC program. We know the value of those 

programs. 

With my sabbatical down in New Orleans and Baton Rouge last 

year, I became disassociated from that particular initiative, and I 

would like to get back to you and give you a response to your question, sir. 

Mr. COBLE. I think the beauty of the Camden County locale is 

the proximity, as you know, of the support center at Elizabeth City 

and the various commanders there. 

Admiral, I think you have touched on this, but give us some examples of major decisions that were made regarding Deepwater 

where it has been reported that the Coast Guard did not follow Integrated Coast Guard Systems recommendation. First of all, is it 

your belief that you did follow them, that the Coast Guard did in 

fact follow the recommendations? 

Admiral ALLEN. Thank you for the question, sir. There is a lot 

of coverage in the press and a lot of perceptions out there that, 

generally, terms have been dictated to the Coast Guard in this contract. While the IG is correct in that we did not adequately document the decision related to the National Security Cutter and fatigue life, I can tell you that there are numerous instances where 

we have told the contractor that the proposed solution was not acceptable. 

The original helicopter that was offered to the Coast Guard was 

an AB139. We have decided to move forward with the re-engining 

of our H-65 helicopters to H-65 Charlies and stay with our H-60 

helicopters and upgrade them to H-60 Tango versions with the new 

cockpit and new avionics. 

Likewise, the small boat that was offered for both the 123 and 

the National Security Cutter, the short-range prosecutor, we didn’t 

feel brought us the same performance at value and we thought an 

independent purchase by the Coast Guard of these small boats 

would give us the same performance at a lower cost, and we would 

then provide that as Government-first equipment. That would also 

allow us to have Northrop Grumman design the stern launch system for the National Security Cutter, which is somewhat of an innovation in a large ship. They would be able to design that launch 

to the ship, the small boat that we were going to acquire so that 

system would work together, technically. 

But there are a number of issues where we have said no, that 

is not the right answer, we are going to go another direction. 

Another one would be the original fixed-wing maritime patrol 

aircraft that was offered by Integrated Coast Guard Systems was 

an extended range CASA 235 that we thought would not give us 

a technical performance, and we were concerned about the amount 

of power reserve on takeoff and whether or not it could accomplish 

the long-range patrol objections that we had. Then we ended up 

with a hybrid fleet. We moved the CASA 235 that did not have the 

22

modifications that introduced risk and we kept a certain portion of 

our C-130 fleet and the new C-130Js as part of the mix. 

But I can tell you unequivocally, across the board, terms have 

not been dictated to the Coast Guard. I know there is an issue with 

the National Security Cutter, but that has not been the standard 

practice. 

Mr. COBLE. I thank you, Admiral. 

No further questions, Mr. Chairman. 

Mr. CUMMINGS. I want to thank you. 

Before I go to Mr. Taylor, have we seen—first of all, Admiral, 

just following up on what Mr. Coble just asked and your response, 

I think it is great the things you just said, because those were the 

kind of things that we were hoping would happen. But have we 

seen any significant savings, Admiral, on those things? I mean, like 

say, for example, when you can buy something direct, as opposed 

to be going through the team or whatever. I mean, have you seen 

savings? 

Admiral ALLEN. These weren’t decisions that were based on savings, they were based on the performance enhancements, sir. 

Mr. CUMMINGS. I understand. But have we seen any? Are you following what I am saying? 

Admiral ALLEN. Yes, sir. There are savings associated with the 

Short Range Prosecutor. And we can give you the exact—there is 

a Delta for each hull, and I can give you that for the record, sir. 

Mr. CUMMINGS. Yes. Can you give us that information? 

Admiral ALLEN. Happy to do that, sir. 

[Insert follows:]

23


34786.009
24

Mr. CUMMINGS. Mr. Taylor? 

Mr. TAYLOR. Thank you, Mr. Chairman. 

And, Commandant, thank you very much for being here. I will 

start off with the good news. For years I have been concerned 

about the safety of the crew ships as they tied up at the Port of 

New Orleans, particularly around Mardi Gras time; thought it 

would be a great terrorist target. My observation was that you had 

some small boats out there protecting them from the waterside, 

and there is also a Naval vessel there. So we start off with the good 

news. I am glad that you all were doing that. It is one less likely 

target to have been hit. 

The bad news is, Commandant, that I continue to be dumbfounded by what happened to the 110s. And it just hit me. You are 

in the business of running marine safety inspections on every commercial ship in America. Every tugboat, every offshore supply boat 

has to be hauled periodically. Your crews run the safety inspection. 

Your crews do the calculations. So how in the heck do you stretch 

eight ships and render them useless, spend $100 million of the taxpayers’ money and nobody in your fine organization catches this? 

Now, if you think about it, if a guy shoots down five planes, he is 

an ace. Somebody took eight ships out of your inventory, and nobody is to blame. And, again, I am going to ask you this question 

every time. That is not fair to the taxpayers. Somebody wasted 

eight ships. So the question I want to ask in particular is who ran 

the hogging and sagging calculations? Were those numbers entered 

properly? And who is responsible for the loss of eight ships and 

$100 million of taxpayers’ money? Because—I am sorry it took so 

long for me to hit me—if you have got the expertise to inspect everybody else’s vessels, I have got to believe that you had the expertise in-house to have caught this. 

Admiral ALLEN. Yes, sir. I think we are in violent agreement on 

the amount of value that has been rendered to the Government 

and the Coast Guard by this acquisition, and I think failure to 

achieve adequate solution going forward is going to result in us 

having to make sure that the Government’s interests are protected, 

and I stated before we are going to do that. I have got a team doing 

basic forensics on the decision-making process, the reviews that 

were done on that. 

As we had talked earlier at one point, when they extended the 

ship by 13 feet, they moved the midship’s point of the ship to aft 

of the pilot house. When it was on the pilot house, the hogging and 

sagging of the ship subject to the forces of the waves was absorbed 

by what we would call a larger cross-section modulus. When they 

moved the midpoint back, there was a narrower part of the ship 

to absorb the hogging and sagging, as you have stated. 

One of the things we are looking at is whether or not the computer models that generated the solution on whether or not that 

would be adequate were adequately applied, and we are taking a 

look at that right now. We are going to produce a very detailed 

analysis of all this and we will make it available to the Committee, 

and we have somebody working on it right now. There is nobody 

more concerned about this than I am, sir, and it was with very, 

very careful deliberation that I went down to Key West and reVerDate 0ct 09 2002 11:25 Feb 26, 2008 Jkt 000000 PO 00000 Frm 00034 Fmt 6633 Sfmt 6633 P:\DOCS\34786 HTRANS1 PsN: JASON
25

moved those boats from service, because that is the last thing I 

wanted to do, sir. 

Mr. TAYLOR. Well, when do you anticipate a decision on this? Because, Commandant, every time I see you I am going to ask you 

the same question. 

Admiral ALLEN. Yes, sir. We———

Mr. TAYLOR. Because I don’t think the taxpayers ought to get 

stuck with this bill. 

Admiral ALLEN. Agreed, sir. 

Mr. TAYLOR. To what extent—I am pleased to hear that you have 

been talking with Admiral Mullen to the greatest extent possible, 

coordinating your acquisition efforts with theirs. And, again, you 

have expertise; they have expertise. Years ago—and it may still be 

going on—the Coast Guard would lend—I am sorry, the Navy 

would lend gunnery officers to the Coast Guard. I am sure there 

was some sort of exchange of Coast Guard officers to Navy vessels. 

I was just curious, have you now, or have you ever looked into the 

possibility of trading off some officers with NAVSEA? It doesn’t 

strike me that you need a huge acquisition shop, but to have some 

people who have got at least that in their background, and knowing 

the people who to call at NAVSEA I have got to believe would be 

of tremendous value to the Coast Guard so that something like this 

doesn’t happen in the future. Having someone whose experience 

David Taylor for the David Taylor Research Lab and at least 

knows who to call there I would think would be of some value. 

Admiral ALLEN. Yes, sir, you are absolutely right. In fact, we are 

using those resources right now. The finite element analysis that 

we talked about earlier that was conducted for the National Security Cutter was conducted at the Naval Surface Warfare Center at 

Carderock. We use the Navy for operational test and evaluation, 

and we consult with them regularly where they have expertise that 

we can use. And, in fact, I will shamelessly state that we have stolen I think either two or three senior executives right out of 

NAVSEA that are working in the Deepwater project right now. 

And Admiral Mullen and Secretary Winter have offered whatever 

resources we need moving ahead. 

I am traveling, as I told you earlier, on Friday down to the shipyards of the Gulf Coast with Secretary Winter. That will be followed by discussions with Admiral Mullen and Deputy Secretary 

Jackson about how we might move forward to take advantage of 

some of the issues you raise yourself, sir. 

Mr. TAYLOR. Mr. Chairman, my last question is I have forgotten 

the name of the deputy commandant who actually called into question the National Security Cutter, and particularly what he saw as 

the overly stress problems down in the bilges of the ship. I have 

been told I think by you that he is now retired and teaching at the 

Academy. My question is in your conversations with Northrop and 

others, has he been included in that? I would think—the reason I 

say this is I read what he had to say. I mentioned his concerns to 

the president of Northrop Grumman Shipbuilding; he says that is 

not the case. I would think there would be some value to getting 

that retired admiral and the engineers from Northrop in the same 

room at the same table and see if this can’t be resolved. 

26

Admiral ALLEN. Yes, sir. You are talking about Admiral Errol 

Brown. He is not teaching at the Academy. We recently brought 

him on for special duty with us to oversee the top-to-bottom review 

at the Coast Guard Academy, which has just been completed and 

we are reviewing that. And he has done great service and he is a 

terrific officer; I have known him for well over 35 years; highly respected for his integrity. 

I will tell you this. I am not sure we need to bring him back to 

have the discussion, because my current technical authority in the 

Coast Guard, Rear Admiral Dale Gable and Errol Brown, there is 

absolutely no daylight between them in how they see this issue, sir. 

I think we have got it covered. It is a matter of sitting down with 

Northrop Grumman and resolving how they view the fatigue life of 

the ship and how we review it, and what we think needs to be done 

to move forward; and that is exactly what we are doing, and I owe 

the Chairman and all of you a report, sir. 

Mr. TAYLOR. All right, thank you, Commandant. 

Thank you, Mr. Chairman. 

Mr. CUMMINGS. And you are saying, then, that we will figure out 

who is responsible for this problem and—I guess what I am trying 

to get to is we can—and I know this is not—I mean, I just—one 

of the things that the IG talked about was how—I am going to be 

right with you, Mr. LoBiondo, but I have got to get this straight—

he talks about how, in the military, in the Coast Guard, a lot of 

people like the certain folks like, say, the Northrop Grummans and 

the Lockheed Martins, they almost depend upon personnel to 

change, and they know that personnel is going to change and they 

just have to wait it out a little bit. So the problem here, going back 

to what Mr. Taylor was talking about, is that it seems like, in Congress, it seems like we are almost set not to get things done. In 

other words, it is hard to get the accountability. And what he is 

aiming at is what I am aiming at, the same thing———

Admiral ALLEN. Yes, sir. 

Mr. CUMMINGS.—we need times, dates. And if we have to have 

a hearing every other day, we are going to do it. That is why we 

asked you all to come back in 120 days. 

Admiral ALLEN. Yes, sir. 

Mr. CUMMINGS. And so when you ask a question like the one he 

asked, I would like to know when are we going to have that information. Somebody is responsible. Somebody made some major mistakes. 

Admiral ALLEN. Yes, sir. Let me———

Mr. CUMMINGS. Just pardon me just one more second. And everywhere else in this Country, probably in the world, if somebody 

messes up, they pay. So, some kind of way, we have got to get to 

that bottom line and figure out where we go from there. And I don’t 

think that that is asking something unreasonable, and I would just 

like to know when will we know. 

Admiral ALLEN. Yes, sir. Let me just elaborate a little bit more 

so I can make it clear. We are going to order modifications to the 

National Security Cutter to ensure it achieves its fatigue life. Now, 

the issue of whether or not the contractor provided adequate services under the specification provided to him or we ordered additional work will have to be adjudicated, but, one way or the other, 

27

we have to have the modifications because we can’t issue the task 

order for the third cutter unless that is done. 

Mr. CUMMINGS. Right. 

Admiral ALLEN. Then the second step is who is accountable. And 

I am more than happy to discuss that. We have got to quantify exactly what has to be done. There has to be agreement on the technical solution, and that is what we are coming to right now. And 

I want that as quickly as you do, sir, and as soon as I have got 

it, I will come to see you, sir. 

Mr. CUMMINGS. Thank you. 

Admiral ALLEN. We are talking weeks, we are not talking 

months, sir. 

Mr. CUMMINGS. Very well. So if we are talking weeks, that 

means we are talking about within a month. 

Admiral ALLEN. Yes, sir. And as I stated earlier———

Mr. CUMMINGS. Because I want to hold you to that. So we are 

talking about within a month? 

Admiral ALLEN. Yes, sir, I will brief you within a month. 

Mr. CUMMINGS. Very well. 

Mr. LoBiondo. 

Mr. OBERSTAR. Would the Chairman yield? 

Mr. CUMMINGS. Yes. 

Mr. OBERSTAR. I just want to reinforce what the Chairman has 

said just a moment ago about the seriousness of keeping the Coast 

Guard accountable. I have every confidence in your leadership, Admiral Allen, but the Coast Guard has, as the Deepwater program 

demonstrated, failed significantly, in a matter that I have seen previously with the FAA, when they were not able to manage large 

contracts and got in over their head. And we in the Congress didn’t 

stop them soon enough from making those mistakes, and I accepted 

that responsibility at the time, but we did get in and severed the 

relationship between IBM and the FAA. You could not tell where 

FAA left off and IBM began, nor vice versa. And we don’t want to 

let a situation like that develop between the Coast Guard and its 

contractors. You have a responsibility of oversight, and vigorous 

oversight, over the contractors, and you cannot allow them, in effect, to self-certify. And as the Chairman has said, we are going to 

stay close on top of this. 

Mr. CUMMINGS. Thank you very much, Mr. Chairman. 

Mr. LoBiondo? 

Mr. LOBIONDO. Thank you, Mr. Chairman. 

Admiral, you recently provided Congress with a report on the 

condition of the infrastructure with the boat station at Cape May, 

and in the report—by the way, that boat station was, I think, a 

laundromat in the 1940s—that it is obsolete and in need of replacement to ensure the mission, the success of the mission. I am very 

pleased that the survey and design funding for the facility is in the 

2008 budget, but can you give me some assurance or commitment 

that this project is going to continue to move forward and in the 

next couple years will be completed? 

Admiral ALLEN. We will seek funding in 2009 for construction, 

when the survey and design is done, sir. Just as a footnote to that, 

when I was the Fifth District Commander, we actually had to condemn the roof of that building for a while until we could make 

28

emergency repairs. I am personally familiar, as a former district 

commander, what needs to be done with, and we will take care of 

it, sir. 

Mr. LOBIONDO. Thank you. I also understand your housing authorities authorization expires at the end of this fiscal year, and I 

believe it is imperative that the Coast Guard authorization bill 

carry renewal of these authorities so that the service can enter into 

the public-private ventures to repair and replace some of the very, 

I think, just decrepit conditions for member housing. And some of 

that is at the Cape May Training Center. For my colleagues who 

may not remember, that is the only recruit training center in the 

Nation. 

I also understand now that you have an issue with OMB that is 

throwing up a roadblock for the use of this authority with the 

Coast Guard and other services. Can you explain to us the issue 

that OMB has raised and what impact it will have on the service’s 

ability to recapitalize their housing and how you intend to resolve 

the situation? 

Admiral ALLEN. Yes, sir, I can explain the situation. I am not 

sure I would attribute it to OMB; I think it is a matter of appropriations law, but I would seek certainly your counsel on this. The 

issue is, on a public-private venture, there is a certain amount of 

seed money that is provided and there is an anticipated revenue 

stream. Let’s say for a housing development that would come 

through the developer through the housing allowance that would 

normally pay to the members; that would be the income stream to 

the developer. The problem is this is very much like a capital lease, 

where, when you go in and request the money up front, you have 

to request the money for the entire project, as you would for a capital lease scored the first year. So it is a significant impact on our 

budget to be able to hold one of these projects together absent some 

other interpretation of the law, sir. That is the problem. 

Mr. LOBIONDO. Thank you. 

Mr. Chairman, I would like to echo what you have said to the 

Commandant, Mr. Oberstar, and Mr. Taylor and Commandant 

about this whole situation with Deepwater. As you know, we put 

a lot of time and energy over the last number of years into trying 

to keep this program up and running to try to run through this 

mine field that we were in, and this is a very serious situation that 

these answers are critical for. 

Many of us have been willing to take a step back to let your investigation go on to be able to come up with these answers, but 

somebody has to be held accountable. We can’t walk away from 

eight ships; we can’t walk away from miscalculations. There has to 

be something that we can definitively point to to bring this to conclusion so that we can move on. Unless we definitively bring it to 

conclusion with something that is reasonable, I think we have got 

a big problem on our hands. 

Thank you, Mr. Chairman. 

Mr. CUMMINGS. Thank you very much. 

Mr. Gilchrest? 

Mr. GILCHREST. Thank you, Mr. Chairman. 

Admiral Allen, do you get out on boats much? 

29

Admiral ALLEN. Whenever I can. Two weeks ago I was on our patrol boats in the Persian Gulf and in the Port of Um Kassar, sir. 

It was terrific. 

Mr. GILCHREST. That is good. I was just—I had some fear that 

you were stuck in the office a lot with all these issues. 

Admiral ALLEN. I am a movable beast, sir. 

Mr. GILCHREST. Good. Good. That is good. 

Because of the issues that have been raised here this morning, 

and everybody is under a budget crunch, a lot of people, certainly 

including the Coast Guard, your boats and Coastees are spread in 

a lot of different places around the world as things keep unfolding, 

so as a result of this, conditions in the world, the Persian Gulf, 

what is happening in the Caribbean and other places, it seems like 

there is a pretty good strain on the Coast Guard’s budget, so I 

wanted to ask you about four specific areas. The President’s request doesn’t include anything for icebreakers I believe in the Antarctic and the Arctic, so I was wondering how that program was 

going to be funded. Is that program being cut back? Is the National 

Science Foundation a part of appropriating funds? Is the international community going to be asked to appropriate funds to take 

advantage of some of the icebreaking activities down there? 

The second thing, I noticed that there is either a cut or an elimination of cold weather training for the Coast Guard, especially up 

in Alaska. What is the status of that? 

Number three, long-range vessel tracking issue. Apparently, the 

standards have been passed by the International Maritime Organization. This is, I think, a key component for a lot of different activities, certainly port security, even vessel monitoring with our fisheries and the international fishing community. 

And the last thing, about 10 years ago we really made an effort 

to interdict drugs in the Caribbean, a lot more money, different 

policies, and I wonder how that was going, especially in light of 

what is perceived to be a pretty significant trans-shipment point in 

Haiti. 

So where is the Coast Guard on those four areas? 

Admiral ALLEN. Thank you for the question, sir, and thank you 

for your continuing support over the years. 

In response to an earlier question, I will summarize. There are 

two issues with icebreakers: ongoing operations money and then 

the need to ultimately look at recapitalizing the Polar Sea and the 

Polar Star. We have got ourselves into a position over the last several years where the Coast Guard owns the people and the hulls, 

and the National Science Foundation owns the bulk of the money 

to operate them, and that requires a reimbursement negotiation 

every year. I have stated earlier that is not the optimal way to run 

this. I would rather have the money in our base, even if it is not 

adequate, and be able to manage it without trying to move it across 

two agencies. We had some dysfunctionality this year when NSF 

was forced to operate under a continuing resolution until emergency funding was provided because it capped them and then ultimately impacted us. So we need to get that straightened out going 

forward, sir. 

National Academy of Science produced a report last fall that validated the need for three polar icebreakers: the Healy, the Polar 

30

Star, and the Polar Sea. We are working with the interagency right 

now hopefully to get a policy determination that can be the basis 

for new authorizing and appropriating requests going forward in 

the future fiscal years. I would call this the policy development 

year, and in 2009 and 2010 to start looking a what we need to do 

to have a permanent solution, sir. 

Cold weather training, in the past years there were funds earmarked in our budget for cold weather training. We intend to go 

ahead and pursue that this year. One of the things we are going 

to try and do, though, is openly compete the contract. There is no 

intent to stop the training, but we would like to go to an openly 

competed source for that training, sir. 

Long-range tracking, we are in violent agreement there, sir. That 

was a great agreement that we negotiated at IMO. As you know, 

AIS is a line-of-sight collision avoidance system. Under long-range 

tracking agreement, if you are a coastal State, you are going to 

have visibility of vessels operating within 1,000 miles. And if you 

declare advanced notice of arrival, it will have to be out to 2,000 

miles. There is an issue of coming to technical standards and then 

having that actually go into force. But we are very buoyed by the 

fact that we were able to get this agreement made at IMO. We are 

fully supportive of moving forward on that, sir. 

Regarding drugs, I am pleased to tell you that the first quarter 

of fiscal year 2007 was the record year for drug seizures in Coast 

Guard history: 97,000 pounds. Nearly 50 tons of cocaine was taken 

off the waters of the Caribbean in the first quarter of this fiscal 

year. It exceeded our previous record year two years ago, in 2005, 

in which we seized 150 tons. That is the result of several factors. 

Number one is better intelligence, taking the search out of search 

and seizure. But, number two, I cannot overstate the value of 

armed helicopters for warning shots and disabling fire. That reduces our end-game success down—up to almost 100 percent. I 

think the only time we haven’t been able to do an end-game where 

we have used warning shots and disabling fire is by the time our 

surface folks got on scene, they were able to repair the boat and 

get underway, and we had to leave scene with the fuel endurance 

of our helicopter. But this is nearly 100 percent and just a wonderful, wonderful tool for us, and we are in the process of converting 

every helicopter in the Coast Guard inventory to be capable of 

using warning shots and disabling fire, sir. 

Mr. GILCHREST. Thank you very much, Admiral. 

Thank you, Mr. Chairman. 

Mr. CUMMINGS. Thank you very much. 

Chairman Oberstar. 

Mr. OBERSTAR. Thank you, Chairman Cummings. You are doing 

a great job as our Chairman of the Coast Guard Subcommittee. 

You have learned the subject matter, mastered it well, and plunged 

into the challenge of working on this extraordinary service to the 

United States, the Coast Guard, whose origins go back to the very 

first Congress, very beginnings of our Nation as the Revenue Cutter Service, and from whose personnel I think this Nation gets the 

best value for its dollar. 

But, unfortunately, the Coast Guard is being asked to wear more 

hats than ever before, and a divided personality, so to speak, in the 

31

Department of Homeland Security. That is not a choice the Coast 

Guard made, it was one that was foisted upon it by this Administration and by the Congress, ultimately, in approving and creating 

the Department of Homeland Security. 

I will place a demurral on the record here: I did not vote for it, 

I said it was a bad idea. If we are going to create this thing, you 

should not put the Coast Guard in it, you should not put FEMA 

in it; resources will be diverted, and that is in fact what has happened. 

The Coast Guard has not had an increase in personnel to accomplish the new responsibilities that it is being asked to shoulder in 

the homeland security era. And over the years that I have served 

in Congress, my first term in 1975-1976, we have added, we, the 

Congress, has voted 27 new functions for the Coast Guard to carry 

out—and you are well aware of those, Admiral—but we have not 

given the Coast Guard the personnel nor the full funding it needs 

to carry out those responsibilities. Somehow, the Coast Guard does 

it, though. And we expect, I guess, my colleagues in the Congress 

expect the Coast Guard to salute, yes, sir, go forward and do the 

job, and work overtime at doing it. We need to increase the personnel and the funding for the personnel. We need to provide adequate funding for the equipment the Coast Guard needs for its variety of missions, and this authorization bill is a start on that. 

Chairman Cummings has moved out quickly, the Committee is 

moving out quickly; Mr. LaTourette is committed to this process, 

I know. It is a new responsibility for him; he has seized upon it. 

But I fear that, as I reviewed last night I went through the budget 

request and your statement, putting on a brave face, but I think 

that the funding is inadequate and the personnel numbers are inadequate, and we are going to make an effort to raise those sufficiently give the Coast Guard what it needs to carry out its responsibilities. 

I had a chance conversation yesterday morning at a meeting of 

the Great Lakes Commission with Admiral Crowley about live firing on the Great Lakes, and I won’t repeat because it was a private 

conversation, but it appears that the process of review of live firing 

is moving ahead and will soon come to a resolution of a decision 

to be made. Could you comment on that at this point? 

Admiral ALLEN. Yes, sir. And as you know, we have discussed 

this several times in the past. It is my intent to take a—and we 

are taking a top-to-bottom review, reassessing the potential environmental impacts, looking at alternatives for type of ammunition 

we may use out there where a projectile may be less hazardous. We 

have come up with alternative ways to train our people in other 

areas of the Country. 

Moving forward, when we finally decide what our options are, we 

made the commitment, and I will keep that commitment, to be 

completely open and transparent about what our options are and 

discuss moving ahead. We will do that in full sight of the public 

that uses the Great Lakes up there. And we have listened at the 

town hall meetings that were held, and we will forward an open 

collaboration, sir. 

Mr. OBERSTAR. It was certainly a very responsible and responsive 

move to direct Admiral Crowley to conduct these public forums 

32

and, as he said, he has learned a great deal not only about the 

Coast Guard, but about a lot of other things that were on citizens’ 

minds, and that is what Members of Congress do when they go 

home and have open forum meetings; we learn a lot about what we 

are doing and what we are not doing, and what else is on the 

public’s mind. So that is a good experience. But there surely should 

be some alternatives to live ammunition. And I fully concur that 

you can’t have the same experience on land as you get on a bobbing 

vessel in the unique waters of the Great Lakes, where the seas are 

shorter and choppier and where the weather can turn violent in a 

matter of hours or even minutes, and I hope you are considering 

alternatives. 

Learn also from the Air Force. When the active Air Force had a 

facility in Northern Minnesota, at Duluth, and the Air National 

Guard as well, and they were doing simulated warfare activities 

and they planned to run one of those strafing activities right over 

Luoma’s Chicken Ranch, and I called the commandant of the 

Guard and the commander of the active duty Air Force and said 

how many chickens are you prepared to buy? He didn’t know what 

I meant. I said, you are going to scare the hell out of those chickens; they are going to die by the hundreds. He didn’t know they 

were flying over Luoma’s Egg Ranch in Carlton County, so they 

went back and revised their plans and sent a copy of it, and I said 

are you prepared to file a proposal for exemption from the airspace 

limitation over the Boundary Waters Canoe Are Wilderness? Oh, 

they didn’t realize they were flying over the Wilderness and that 

it has a ceiling limitation and that, in any event, military jets 

shouldn’t be flying over a wilderness, nor do they need to. 

So this coordination with civilians and getting public input and 

local government input is vitally important so you don’t make some 

of those mistakes or repeat them in the future. 

Can you give me—give the Committee a status report on Cape 

Wind at Nantucket Sound? 

Admiral ALLEN. Yes, sir. The agreement that I made—and I can 

give you a more extended answer for the record—was that we 

would do a waterways assessment related to that. 

[Insert follows:]

33


34786.010
34

Admiral ALLEN. We are developing the criteria by which we will 

do that and do that analysis. The first thing you have to do is establish the standards and the criteria you are going to apply. And, 

ultimately, we are probably going to have these wind farm projects 

elsewhere around the Country, so we are really starting to create 

what I would call a national standard on where we want to go with 

that. So the first thing is to develop the standards—we are in the 

process of doing that right now—and then applying the standards 

to that specific proposal as it relates to safety and navigation, the 

movement of vessels around there. 

And I would be happy to give you an update for the record, but 

I think we are right about closure and finishing the standards, and 

I have had a recent brief on it and I can pass that on to you, sir. 

Mr. OBERSTAR. Well, you are right to approach this as a baseline 

critical evaluation that will apply, because there are many other 

wind projects that are in the planning stage and a good deal of 

pressure to move ahead with wind power generation. The defining 

issue, though, in this is the interference, electromagnetic interference that might be created by wind farms with radar. And as 

I recall, the FAA did a simulation and lost an aircraft from their 

radar screen because of the projected electromagnetic interference 

from the wind farm. That is—the view shed issues, those are other 

matters that best left to locals, to the State, but, for our purposes, 

interference with navigation is critical, and I assume that is very 

high on your evaluation list. 

Admiral ALLEN. Yes, sir. In establishing the criteria to figure out 

what is the—maritime domain—report on potential—as well. We 

may need, at some point, to seek some clarification about the who 

owns the mission space, but we are aware off that and we are looking at it, sir. 

Mr. OBERSTAR. Okay. You did give me a call about the Coast 

Guard investigation of the loss of live with the Healy in Alaska. 

Has any further action been taken to deal with the on-board situation with the personnel who were supposed to supervise the divers 

and assure that they had a weight belt, instead of putting weights 

in their pockets, and that other safety measures were appropriately 

reviewed before they made that dive. 

Admiral ALLEN. Yes, sir. Several things have happened, and I 

am not sure exactly what your last update was, but we completed 

an investigation. I took final action on that investigation. We made 

that public, posted it on our website. We held a news conference 

in Seattle to go over the findings of the investigation and later, 

after that point, at that point, Admiral Wooster, who is the Area 

Commander in Pacific Area, actually held admiral’s mast on the 

three senior officers on the ship. They were in the chain of accountability and they were awarded punishment at mast. The commanding officer is retiring and appropriate disciplinary action was 

taken. We have also gone out and done a recertification of all the 

dive programs in the Coast Guard, are in the process of making 

sure that any systemic problems that come out of it, there is a safety evaluation that is due to come out in the next couple of weeks 

that follows the investigation we did, very similar to like an internal NTSB type, looking at regulators’ equipment and everything 

that will give us some more detailed things that we might want to 

35

look at regarding safety. We would be glad to provide that to you 

when the report is released, sir. 

Mr. OBERSTAR. I would welcome such a briefing. And the recertification process, I think that is the most important result. 

Admiral ALLEN. Yes, sir. One of the problems———

Mr. OBERSTAR. Disciplinary action, that is a separate matter, 

but, for the future, lessons learned. 

Admiral ALLEN. Yes, sir. I have said on a couple of occasions I 

think we may have been the victim of juniority, and I mentioned 

it in one of the earlier questions. We had the dive program grow 

very rapidly. We have actually dive operations that are part of our 

maritime safety and security teams that look at piers and hulls of 

ships, and so forth. With a large number of people coming in, what 

that can result at the beginning, that our people, while they have 

been certified, sent to school and are qualified, they may have less 

time in-service or less time in that position than they otherwise 

would have been, and we are taking a look at that as we go 

through the certification program as well, sir. 

Mr. OBERSTAR. Thank you. In another Subcommittee, but maybe 

also as part of this authorization bill, we may deal with invasive 

species and setting up an enforcement program. I have had enough 

of research, of studies, of testing, of declaring that these invasive 

species, whether animals or plants, flora or fauna, are in the lakes. 

We know they are there; we know they are destroying the water 

column; we know they are displacing native species. We need an 

enforcement program, and it is going to be the Coast Guard that 

will have to carry it out. Perhaps some participation with EPA and 

Corps of Engineers, I don’t know, haven’t sorted that out yet, but 

that is going to take additional personnel and we will need to work 

with you to decide what that incremental increase will be so that 

we don’t load another responsibility onto the Coast Guard without 

providing personnel and the funding for personnel that will be required to carry that function out. 

Admiral ALLEN. Yes, sir. Just to give you a quick update, we are 

working with Environmental Protection Agency, the Naval Research Lab. We are also working with the Animal and Plant Health 

Inspection Service. There recently were some concerns up on the 

Great Lakes about viral hemorrhagic septicemia that attacked the 

fish and whether or not that was related to ballast water. We are 

not sure, from a technical standpoint, whether it is or not, but we 

need to exclude that as a possibility. We are also looking, as you 

know, whether or not we can establish a ballast water standard for 

discharge that would replace now the mandatory salt water exchange that they do in the ocean before they come in, and the question is how far do we want to drive that standard down to zero tolerance for any kind of microbe that might be in the ballast there. 

We have got about three different candidate technologies that 

could lead us to that and we look forward to, later on in the year, 

to be able to come to you and tell you that is what our recommendation is, sir. 

Mr. OBERSTAR. I am determined that we move ahead, and I 

thank you for those efforts and that report. I am determined to 

move ahead with an enforcement program. We cannot allow any 

further such species into the water column of the Great Lakes, and 

36

we need to proceed with an eradication program for those that are 

already there, and I am exploring that option with EPA, Corps of 

Engineers, and State Departments of Natural Resources to—we are 

seeing an extraordinary phenomenon in the Harbor of Duluth and 

Superior where, because of these biotic changes in the fauna of the 

water column, if you will, the steal pilings, for the first time, started to rust. Those columns have been in the water, some of them, 

for 50 or 60 years, and we have never seen this deterioration occur. 

And there is some evidence that it is microbes in the water—now, 

the study is not completed—that are causing this deterioration. 

Well, if that is happening, then there is something else happening 

that will be the next wave. We have to attack this issue now; we 

have had enough and I have had enough of studies of it. We need 

an action program. 

Admiral ALLEN. Yes, sir. 

Mr. OBERSTAR. Thank you. 

Mr. CUMMINGS. Let me just—thank you, Mr. Chairman. 

Let me go to you, Master Chief Bowen. Let me just ask you. I 

noted in your report you talked about housing. I want to go back 

to something that Chairman Oberstar was talking about when he 

was saying that he was wondering whether this budget is adequate. And you say, on page 3 of your written statement,—both of 

your statements were extremely well done and I thank you for 

that, and very detailed, but you say the average age of Coast 

Guard housing is over 40 years and requires significant improvement. The Coast Guard faces many challenges to address its shore 

infrastructure, maintenance, and recapitalization programs, and 

you go on to talk about the problems. 

One of the things that we are concerned about is, we are concerned about Deepwater, but we are also concerned about the life 

that—the lives that they experience, the members of your corps, 

and I know that is something that you both are very concerned 

about too. Do you have the resources that you need to address the 

problems when you are talking about the average housing being 

over 40 years old? And then I guess what I am trying to get to also 

is I don’t want us to be in a situation where something is going on 

with the Coast Guard and we don’t know about it. 

I sat the other day on another Committee, I am also on Armed 

Services, and sat in Walter Reed the other day and heard about all 

of these horrific stories, and, I tell you, it was chilling. Do we 

have—I know Walter Reed is more or less health care, but do we 

have any situations with regard to structures similar to the problems that we talked about at Walter Reed? Because, if so, we need 

to address them with the same kind of vigor that the Congress has 

now come together in a bipartisan fashion, by the way, which I am 

very glad to know we are doing it this way, to address those problems. And if it is not in this budget, we need to know what we can 

do to help you, because it is one thing if we don’t know; it is a 

whole other thing if we do know. So can you help me with that? 

Chief BOWEN. Yes, sir, Mr. Chairman. I appreciate the question. 

The first question, do we have resources we need to address the 

housing problems. Right now we probably don’t. I think that we are 

moving forward in our shore infrastructure needs. I mean, we have 

$37 million in the 2008 budget and Admiral Allen is asking for 

37

more money in successive years after that, and he has been raising 

that question with the—or that issue with the Administration. So 

shore infrastructure is definitely an issue, and right now we don’t 

have adequate resources to address it. 

Now, the question is how bad of an issue is it. As I have traveled 

around, some place things are in very good shape. Other places 

there is a UPH, for example, on Staten Island that was in extremely rough shape. In fact, I asked Admiral Allen to go up and 

visit it personally. He did that. Probably, it could have been compared to at least what I have seen in the news report with that 

one building on Walter Reed, and we have taken—he took immediately steps to find money within the base to deal with that. Significant money is being put towards that issue now to correct it, 

but it should have never really gotten to that point. Bottom line is 

we definitely need more money in our shore infrastructure, sir. 

Mr. CUMMINGS. Let me—Admiral, did you want to comment on 

that? 

Admiral ALLEN. I almost passed the Master Chief a note saying 

talk about New York. We had made several trips. New York is a 

very high tempo operation and we have a barracks for our enlisted 

people on Staten Island. They developed a mole problem there and, 

quite frankly, it got behind the building local command to deal 

with and required some senior management intervention. I was 

cued to the problem by the Master Chief’s visit. I visited myself. 

We are in the midst of a two-year, two-stage process to go in and 

completely make repairs inside the building, most notably, upgrade 

the HVAC system so we have got better air handling and to better 

address the problem. 

Where we find that, you are duty-bound by leadership to go in 

and fix it. 

Mr. CUMMINGS. But, Admiral, I want to go back to what you said 

a few minutes ago when you said you present your requests as you 

go, and I appreciate that. Remember a few minutes ago, hour ago? 

[Laughter.] 

Mr. CUMMINGS. Is this one of those situations where you are presenting your needs as you go or are you taking from somewhere 

else to try to remedy this problem? In other words, I am trying to 

figure out do we need more money to try to address the things that 

go to, as Chief Petty Officer Bowen said, he says that these kinds 

of things have a direct impact on the health, safety, and morale of 

our service members. So I just want to make sure that we are 

doing—I think you have heard on this side and I think on both 

sides that we are pretty much questioning whether or not this is 

enough money for you to do the things that you need to do. So I 

don’t want to see a situation where we are placing on the back 

burner, if not completely off the stove, the things that go to the morale of our folks. So I guess maybe that is not—maybe that is a 

hard question to address. I don’t know, the Administration may 

have one view, you may have enough, but we are just trying to do 

what is right for our military. 

Admiral ALLEN. Sir, it is not a hard question to answer at all. 

We need more money in the shore account, and I am going to move 

it up as we go forward. And we may have to make tradeoffs on 

38

what is more important, but right now this is pretty important to 

us, sir. 

Mr. CUMMINGS. All right. 

One other question, Chief Officer Bowen. You also talked about 

health care, and I am just wondering, you mentioned TRICARE, 

you talked about so many of your folks being in rural areas and 

you talked about a number of issues under health care. What 

would you like to see us do under health care? I mean, anything? 

Chief BOWEN. I think for the Coast Guard———

Mr. CUMMINGS. Yes. 

Chief BOWEN.—we have unique issues that stem from our personnel being in high-cost, remote areas, and they don’t have access 

to DoD. I appreciate what has been done with the TRICARE Prime 

Remote system, and that has helped immeasurably. Yet, it hasn’t 

really solved all of the problem. There is tremendous out-of-pocket 

expense for our people when they have to leave their place of duty 

and travel a long way to obtain care. I am not sure what the answer is, but I do know that the Coast Guard, this type of problem, 

it affects us a lot more than the other services. 

Mr. CUMMINGS. Yes, sir. 

Admiral ALLEN. Thank you, Mr. Chairman, for that question. I 

would invite your attention to Section 303 of the authorization act 

that we put forward to you this year. We are seeking an amendment to Title 10, U.S.C. 1074, which is the base for reimbursement 

when our families have to travel for health care, and it basically 

says if you have to travel over 100 miles to get health care, what 

you can reasonably do in a day, that you should be reimbursed for 

travel expenses. We have a unique situation in the Coast Guard 

where we have some families that are within 100 miles of health 

care, but they are on an island. So, technically, they are within the 

geographical boundaries that wouldn’t allow reimbursement, but 

for them to get that care requires them to actually travel. We are 

asking you, through the Coast Guard authorization bill this year, 

to give us that benefit, sir. 

Mr. CUMMINGS. Let me just ask you this last thing, Admiral. The 

Coast Guard Academy, the cheating scandal, how often does the 

board meet, the board of the Coast Guard Academy, do you know? 

The Board of Visitors. Do you know? 

Admiral ALLEN. Recently, not often enough, sir. That is something we are looking at, whether or not we need to reinvigorate 

that. I can give you the details when the last visits were made. 

There are two, I am not sure I would call them governing bodies 

because it is not a traditional university. We have an internal flag 

and NSC Board of Trustees and there is a Board of Visitors. 

[Insert follows:]

39


34786.011
40

Admiral ALLEN. My understanding is that has not been as active 

in the past as it had been a few years ago. One of the things we 

are looking at in our top-to-bottom review of the Coast Guard Academy is how we might use the Board of Visitors, moving forward, 

to help illuminate some of the issues there and create more transparency on what is going on there. 

Mr. CUMMINGS. I am sure you are aware I sit on the Board of 

Visitors for the United States Naval Academy, and we meet at 

least four times a year, and it is extremely helpful, I think, because 

it just keeps things—the Board is informed; the Board is able to 

have input; and I just think it is a good thing. And I would suggest 

very strongly that the Board meet at least those four times a year. 

And would you keep me abreast of your progress with regard to 

those issues? 

Admiral ALLEN. Yes, sir. Your question is timely; we have been 

talking about it, and I will definitely get back to you, sir. 

Mr. CUMMINGS. Thank you very much. 

We really appreciated your testimony. 

To the other panelists, we have two votes, so it is going to be 

probably about, I guess, at least a half an hour, somewhere in the 

area of a half an hour. We will resume the hearing in a half an 

hour from now. 

Admiral, Chief Petty Officer, thank you very much. We really appreciate it. We will have some follow-up questions, because there 

are a lot of things I did not get to, the whole issue of folks trying 

to enter this Country and the changes that you want with regard 

to people coming, the criminal action—the standard for criminal activity. I want to get into that. We have some specific questions I 

want to ask about that, okay? 

Have you said everything you needed to say? 

Admiral ALLEN. Well, sir, I would only reiterate my offer. I 

would really like you and any Committee Members that would like 

to travel with me to Pascagoula, it would serve two purposes. We 

could have in-depth discussions on the plane going down and we 

could actually go down and kick the tires on the National Security 

Cutter, and I think we need to do that, sir. 

Mr. CUMMINGS. I am going to strongly—I am going to do that, 

and I am going to strongly suggest that other Members of the Committee come with us. We just have to come up with a date. But 

that is a part of our accountability mission, so we look forward to 

doing that. 

Admiral ALLEN. Thank you, sir. 

Mr. CUMMINGS. Thank you very much. 

We will see you all in a half an hour. 

[Recess.] 

TESTIMONY OF RICHARD L. SKINNER, INSPECTOR GENERAL, 

DEPARTMENT OF HOMELAND SECURITY; STEPHEN 

CALDWELL, DIRECTOR, HOMELAND SECURITY AND JUSTICE 

ISSUES, GOVERNMENT ACCOUNTABILITY OFFICE 

Mr. SKINNER. Today, I intend to discuss the challenges facing the 

U.S. Coast Guard, in particular its Deepwater Program, and the efforts underway to improve the management and oversight of this 

very important and complex acquisition initiative. Over the past 

41

two and a half years, my office has completed four audits involving 

Deepwater. They involve the 110/123 Cutter conversion, the National Security Cutter, the Command and Control and Information 

Technology Systems of Deepwater, and the re-engineering of the 

HH-65 helicopter. 

Four common themes have emerged from those audits. First, the 

dominant influence of expediency. That is, scheduled concerns 

trumped performance concerns. This is best illustrated by the National Security Cutter procurement. The Coast Guard proceeded 

with the construction of the NSC, knowing well in advance that its 

technical experts and others had engineering design and future 

performance concerns. The design and performance concerns still 

remain outstanding today, as you know, and as you heard from the 

Commandant, and the cost to mitigate those concerns has yet to be 

determined. 

Second, the terms and condition of the contract are flawed. The 

Coast Guard essentially agreed to ride shotgun, turning the reins 

over to the systems integrator, ICGS. Consequently, the Coast 

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

Third, our reviews have raised concerns with the definition and 

clarity of operational and performance requirements. This has compromised the Coast Guard’s ability to hold the contractor accountable. For example, we just recently issued a report dealing with the 

110/123 Cutter conversion. The performance specifications associated with upgrading the information systems on the 123 Cutter did 

not have a clearly defined expected level of performance, causing 

the Coast Guard to accept delivery of assets that did not meet its 

anticipated requirements or specifications. 

And, finally, simply put, the Coast Guard does not have the right 

number and the right mix of expertise to manage an acquisition as 

large and as complex as Deepwater. Many of the staff who have 

been assigned to Deepwater have little experience or training in 

performance-based contracting and little experience in a systems 

integrated contract initiative. These issues are not new; they were 

known as early as February 2003, only eight months after the 

award of the Deepwater contract to ICGS. This lack of a proper 

foundation remains a challenge to this day and, as a result, the 

Coast Guard has encountered a number of implementation problems, which have resulted in cost increases, schedule delays, and 

reduced operational performance. 

I believe that it is important to point out that the Coast Guard 

recognizes these challenges, and we heard that from the Commandant this morning, and, in fact, is taking some very drastic 

steps to take back the reins and turn this thing around. For example, it plans to use independent third-party assessments of contractor performance, that is very important. It is consolidating its 

acquisition activities under one directorate. Again, that is very important. And it is redefining the terms and conditions of the Deepwater contract as we speak. 

Furthermore, and most importantly, the Coast Guard is increasing the staffing for Deepwater and reinvigorating its acquisition 

training and certification processes to ensure that staff have the 

skills and education needed to manage the program. The Coast 

42

Guard has also advised us that it is taking steps to improve the 

documentation of key Deepwater decisions. This is particularly important to ensure transparency and accountability as the program 

moves forward. These steps should significantly improve the level 

and oversight exercised over the program. 

However, many of these corrective measures will take time. It 

will require changing the culture, and it will take considerable 

amount of time to train and obtain the experience that is needed 

to manage a contract of this nature. Until this is accomplished, the 

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

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

I will conclude by saying that my office is highly committed to 

the oversight of this and other major acquisitions within the Department. This year, in addition to a series of sector-specific audits 

dealing with Deepwater, we plan to issue a first in a series of report cards on the Coast Guard’s management of its procurement responsibilities under the Deepwater program. Specifically, we will 

be grading the Coast Guard’s organizational alignment and leadership, policies and procedures, acquisition workforce, information 

management and technology, and financial management. This will 

enable us to measure the progress of the Coast Guard in years to 

come and to improve the management and oversight of the Deepwater program. 

Mr. Chairman, that concludes my remarks. I would be happy to 

answer any questions. 

Mr. CUMMINGS. Thank you very much. 

Mr. Caldwell? 

Mr. CALDWELL. Chairman Cummings, Mr. LaTourette, thank you 

for inviting GAO here today. And, Mr. Cummings, congratulations 

on becoming Chairman. 

Mr. CUMMINGS. Thank you very much. 

Mr. CALDWELL. GAO has provided this Committee with a number of reports and testimonies over the years, and we appreciate 

the opportunity to help you with your oversight. Both the scope of 

this hearing as well as my portfolio at GAO covers a wide gamut 

of activities covered in this 2008 budget. My statement today focuses primarily on Deepwater. 

As you know, Deepwater is a major part of the budget, representing about 88 percent of the AC&I budget and almost 10 percent of the Coast Guard’s budget as a whole. 

From a budgetary perspective, two interesting things stand out 

about the Deepwater program from an overall perspective. First, 

the amount of funding for Deepwater, as you know, has gone down 

27 percent from the 2007 to 2008 budget. This is a substantial decline at a point in the program where plans had originally called 

for ramping up production and delivery. 

Second, and perhaps partly an explanation of the first, is that 

the unobligated balances for Deepwater have become very large; 

they are currently at $1.6 billion. In some cases, these unobligated 

balances are for assets that are behind schedule, such as the FRC 

and the VUAV. And in these two cases the Coast Guard is basically 

taking a ‘‘strategic pause’’ to re-evaluate its approach to those assets. But in other cases the unobligated balances are for assets 

43

that, at least according to the latest data, are on schedule, such as 

the NSC. 

In terms of Coast Guard management of the Deepwater program, 

since about 2001 GAO has issued a number of reports talking 

about the risks of the program given the Coast Guard’s overall approach—which was relying on a single lead integrator, developing 

a system-of-systems, and using a performance-based contract. All 

three parts of this approach, if not done correctly and with the appropriate oversight, can have substantial risk, and we have seen a 

lot of that risk played out recently. 

My statement also refers to our 2004 report in which we made 

a number of recommendations to the Coast Guard. The Coast 

Guard is acting to follow up on some of these recommendations 

that are still open. We have ongoing work to look at those recommendations and we will report back to you once that work is 

done. 

In terms of asset delivery, there actually is some good news out 

there. As noted in Figure 1 of our report, page 20, seven of ten key 

new assets are actually ahead of or on schedule for delivery, at 

least that is true of the first-in-class assets. However, one of the 

assets that is on schedule, the NSC, as well as two of the assets 

that are behind schedule, the FRC and the VUAV, still face significant structural design or developmental problems. 

As some of the earlier assets are actually reaching the delivery 

phase, GAO’s work has shifted beyond just reviews of the overall 

contract management to reviews of the individual assets. Unfortunately, we found additional problems with those areas as well. Our 

report last spring on the FRC noted problems that had ultimately 

led the Coast Guard to suspend the design of the program. And, 

similarly, the recent reports by the IG on the NSC as well as the 

123 boats have shown similar problems. 

These asset-specific difficulties have shown that the problem has 

really expanded well beyond the abstract area of contract management and acquisition reform to one of operational effectiveness. 

This is best illustrated with the current situation of the patrol 

boats, where you have the FRC further delayed by the design problems and you have the eight 123 boats that are now out of service. 

This, of course, has a key impact on the Coast Guard achieving its 

missions that we know are so important to the Members here on 

the Committee, such as search and rescue, interdiction of migrants, 

protection of fisheries, national defense, and obviously port security 

issues. 

Admiral Allen, in his testimony today before this Committee, as 

well as in some of the other testimonies that he has done, has outlined a number of steps that he plans to take, and he clearly places 

a priority on giving the men and women of the Coast Guard the 

best ships and aircraft they can get as soon as possible. He has referred to this as the ‘‘Promise of Deepwater.’’ GAO stands ready to 

assist Congress, working with the Coast Guard, and, of course, applying our due diligence as auditors, to try to make that same 

promise happen. 

Thank you very much. I would be happy to answer any questions 

at this time about Deepwater or any other Coast Guard issues 

where GAO has done work. Thank you. 

44

Mr. CUMMINGS. Thank you all very much. 

Mr. Skinner, were you in the room when the Admiral testified? 

Mr. SKINNER. Yes, I was. 

Mr. CUMMINGS. Were you, Mr. Caldwell, were you here? 

Mr. CALDWELL. Yes, I was. 

Mr. CUMMINGS. Oh, good. Why don’t I start off by asking you all 

what was your—was there anything in particular that concerned 

you about what the—anything that the Admiral said? I mean, it is 

fortunate that you all were here to hear it. I wish he could have 

been here, and I know he—I didn’t expect him to be here to hear 

your testimony, but, I mean, is there anything that really concerned you? I know that there was great concern, and I expressed 

it, about the fatigue life, and we on this side have heard that explanation at least three or four times, I guess. But I think it was you, 

Mr. Skinner, who had much concern about that, and I am assuming that I asked the question properly when I said that it was your 

contention that we were not getting what we originally bargained 

to get, no matter—and what the confusion may have been. You apparently have a very, very clear understanding of what, based 

upon, I guess, the written documents, I guess, and the interviews, 

I guess———

Mr. SKINNER. Yes. 

Mr. CUMMINGS.—of what we were supposed to be getting. Now, 

what was your reaction to what he had to say? 

Mr. SKINNER. This is one area where the Admiral and I have 

agreed to disagree. When we initiated this audit, we actually started in 2004, we had to close it down because of cooperation issues, 

which we have since resolved and restarted in———

Mr. CUMMINGS. By the way, let me, on a separate note, before 

we even move on, have you been getting the cooperation, overall, 

that you need to do what you are responsible for accomplishing 

here? 

Mr. SKINNER. Yes. Now we are, yes, we are, especially since we 

have issued our report. 

Mr. CUMMINGS. Good. All right, go ahead. 

Mr. SKINNER. The Commandant, Admiral Allen, has been cooperating 110 percent and we are getting everything we need right 

now—access to documents and people—to do our job. 

Mr. CUMMINGS. Good. I just wanted to make sure. Sorry to interrupt you. 

Mr. SKINNER. When we did start this job, we started with the 

contract itself. According to the contract, the Coast Guard would 

build a Cutter that could be 230 days underway. The contracting 

officer, at that point in time, agreed that this meant the specs were 

230 days underway. The project manager also agreed that, yes, the 

intention was to build a ship that could be underway for 230 days. 

The chief systems engineer also advised us, yes, the specs were 

written to suggest that the Coast Guard would build a Cutter that 

would be underway for 230 days. We have talked to the two contractors who were brought in by Coast Guard to evaluate the design. They both agreed that their evaluation was based on a cutter 

that should be underway for 230 days. We talked to Carderock, 

who also did an evaluation of the design, and they too agreed that 

the contract and the specs and the request to re-evaluate the deVerDate 0ct 09 2002 11:25 Feb 26, 2008 Jkt 000000 PO 00000 Frm 00054 Fmt 6633 Sfmt 6633 P:\DOCS\34786 HTRANS1 PsN: JASON
45

sign was based on the premise that this Cutter should be underway for 230 days. 

It was not until the summer of 2006 that we first saw correspondence that would suggest that the Cutter was only going to 

be built to meet a spec of 185 days. That correspondence was generated by the contractor, ICGS, to the Coast Guard, requesting the 

Coast Guard to change the contract language to ensure that there 

was no misunderstanding that the contractor was building a Cutter 

to be underway for 185 days, not 230. 

A new management team has now arrived at the Coast Guard. 

They collectively, and the contractor, ICGS, have agreed that the 

original intent was 185 days, not 230, and that is where we are 

today. 

Mr. CUMMINGS. Let me ask you this. Why is that so disturbing 

to you? First of all, I am assuming it is disturbing. 

Mr. SKINNER. Yes, it is, or else we would not have reported it. 

Mr. CUMMINGS. Okay. 

Mr. SKINNER. For several reasons: one deals with operational 

issues. We are building—right now we have 12 Cutters. We are replacing those Cutters with 8 Cutters. Why? Because we are building a Cutter now that has a greater operational capability. Secondly,———

Mr. CUMMINGS. And was that—to your knowledge, was that part 

of a calculation from the beginning? 

Mr. SKINNER. Yes. 

Mr. CUMMINGS. Okay, fine. Is that written anywhere? 

Mr. SKINNER. That was our understanding. 

Mr. CUMMINGS. That was your understanding? 

Mr. SKINNER. Yes. 

Mr. CUMMINGS. From the—is that written anywhere? 

Mr. SKINNER. I believe that is, and I could validate that through 

a review of our work papers. It is—I believe Admiral Allen has also 

testified to that effect, the reason we are building 8 versus 12, because of the operational efficiencies of the new Cutters. 

Mr. CUMMINGS. Okay. 

Mr. SKINNER. The second thing that bothers me about this is 

that we are building a Cutter that will be underway for 185 days, 

and the operational profile for that Cutter is to have the capability 

to be underway for 185 days, not the 230 days as specified in the 

contract. The Coast Guard’s historical analysis of how long you can 

expect these Cutters to be underway on any given year is 185 days. 

The question that we are asking is, for example, if you want to 

build a bridge that can maintain a capacity of 500 million tons at 

any point in time, you would not build a bridge that could only 

maintain a capacity of 500 million tons. You have no surge capacity. The Cutter does not have the ability to surge, for example, and 

that, again, puts the ship at risk. 

Mr. CUMMINGS. And you are basing that also on the 8 to 12, 

right? In other words, moving from 12 to 8. 

Mr. SKINNER. Yes. 

Mr. CUMMINGS. Okay. All right. I get the analogy. 

Mr. SKINNER. And the third thing is simply that when your contracting officer, who signed the legal document on behalf of the 

Government, when your project manager, systems engineer, and 

46

those that are reviewing the design, all collectively agree that this 

contract said 230 days, yet they are only delivering a product that 

could only be underway at 185 days, that simply raises a red flag 

to us. Of course, the new contract that is being negotiated will say 

185 days. That is my understanding. 

Mr. CUMMINGS. Did you want to comment, Mr. Caldwell? 

Mr. CALDWELL. We didn’t do the work on the NSC, so obviously 

I will defer to Mr. Skinner on that issue. But getting to your bigger 

question about whether there are any areas of concern about things 

that the Commandant said, there are a couple of areas. First, let 

me start with the good parts, which is he clearly recognizes the 

problem, he is clearly upset about it, and he is taking accountability for what the Coast Guard has done so far. He is laying out 

plans to try and get the program well. 

But the two areas where there might be a little concern is the 

hope that he can renegotiate with the contractors about some of the 

problems we have had in the past—in some cases the contract as 

it was signed may dictate accountability. So it may be fairly hard 

to pin down accountability in a way that you would like, Mr. Chairman. There may have been vague terms in the contract because of 

the way the contract was written, because the criteria was loose; 

which is another thing that Mr. Skinner has talked about. Just to 

reiterate that first point, it is not clear to me how much the Coast 

Guard can renegotiate accountability for some of these past problems that have happened. Going forward, of course, you have negotiation leverage, but on some of the past problems, probably not. 

The second thing———

Mr. CUMMINGS. Could you hold that note? Hold that one right 

there. 

How do we—I mean, basically you are saying that we are bleeding money. And I am trying to figure out—I mean, you are right, 

there are some things that has got to be within the four corners 

of the contract. But then I am wondering is there anything that we 

can do now to make sure that we at least stop the bleeding that 

we can stop, assuming that there is some bleeding? Are you following my———

Mr. CALDWELL. Yes. 

Mr. CUMMINGS. Some things we may not be able to do anything 

about. 

Mr. CALDWELL. Yes. I think that the biggest problem is not with 

the NSC; though that has problems and the IG here has noted 

those. But there will be a solution, and I think the solution will 

cost money, but there will be a solution to the NSC problem. The 

biggest concern of mine, as it was obviously to Rep. Taylor here, 

is the 123 conversions. That is going to be the hardest one for the 

Coast Guard, with its forensic team, to actually show that there 

was some kind of accountability that the contractor has to take. 

The contractor could successfully say the Coast Guard also has to 

take some accountability. There may be some issues where the 

Coast Guard, either because of its criteria that was loose or some 

other things that were going on, would allow the contractor to escape financial accountability. 

Mr. CUMMINGS. Do you know whether the contractor has acknowledged the problem? 

47

Mr. CALDWELL. I have been to a couple of hearings where the 

contractor has testified and I have not heard that. 

Mr. SKINNER. To our knowledge, the contractor has not acknowledged the problem. 

Mr. CUMMINGS. I am sorry, I didn’t hear you. 

Mr. SKINNER. To my knowledge, the contractor has not acknowledged the problem. 

Mr. CUMMINGS. That is incredible. 

Mr. CALDWELL. Just on the 123 boats. The one observation I 

made is that one of the contractors testified that the hulls on the 

110s were in worse shape than expected when they got them. They 

thought that was part of the problem, as opposed to them having 

done something wrong. 

Mr. CUMMINGS. And you had two points. 

Mr. CALDWELL. Yes. And my other point on the Commandants’ 

testimony has to do, with the time frames for fixing the problem. 

The Commandant is obviously very committed to taking steps to fix 

the problems; he has given you a promise that 120 days after your 

first hearing, he wants to clearly lay out the plans he can put into 

place. But I think both the work of the IG and GAO has shown 

that the Coast Guard just don’t have that acquisition oversight 

structure in place yet. It does not happen overnight and it does not 

happen within a period of weeks or months. They need to get more 

people there, they need to get the right skills; they need to catch 

up just on the backlog of things. There are still a lot of undefined 

tasking orders and things like that that need to be clarified, 

so———

Mr. CUMMINGS. Well, one of the things I am going to do———

Mr. CALDWELL. While I appreciate the Commandant’s optimism, 

this is a situation where his own people will try his patience, because there is a lot to do. 

Mr. CUMMINGS. His own people will what? 

Mr. CALDWELL. His own people will try his patience. The Commandant wants things to happen very quickly here, and I am sure 

his people will try to do that. But it will take time to get this new 

acquisition structure in place, and to get the additional people 

there. 

Mr. CUMMINGS. So I guess you all can kind of understand Mr. 

Taylor’s frustration and other Members’ frustration, because you 

are basically stating exactly why we are frustrated. This $24 billion, do you see any way that we can stay within the boundaries of the $24 billion at the rate we are going, Mr. Skinner? 

Mr. SKINNER. No, I don’t. And when you asked me are there 

statements that the Commandant made that would give me pause, 

first, I would like to reiterate that there were a lot of things that 

Admiral Allen is doing. He is doing the right thing through the reorganization, redefining the contract, giving technical authority to 

his chief engineers, and re-energizing his staff, trying to get the 

right people in there, but that is going to take time. 

But what concerns me right now is—this June we will be redefining, rewriting,and renewing the contract, and this will be a great 

opportunity to sit back and to redefine what the budget and program baseline is going to be now and for the out-years, because 

there has been a lot of setbacks. They were costly setbacks, and 

48

that, in effect, has to have a major impact on the original estimate 

of what the total costs were going to be. So, if we are rewriting the 

contract, then we need to also step back and rewrite the budget 

and program baseline. 

And this is also a great opportunity to rewrite our performance 

requirements, that is, what we expect at the end of 2007 and how 

much is it going to cost; what do we expect at the end of 2008 and 

what it is going to cost, and through the out-years so that each 

year the Coast Guard and the Congress can manage or provide 

oversight of where it is going. Any time you have a cost overrun, 

something else is going to suffer. We issued a report last year dealing with command, control, communications, computers, and intelligence, reconnaissance, and surveillance. One of the things that is 

being shortchanged is that particular aspect of the Deepwater program. As they have cost overruns in one area, other areas are 

going to suffer. As a result, total costs are going to go up. This is 

a great opportunity now, this summer, to define exactly what it is 

going to cost under this new contract. 

Mr. CUMMINGS. Let me just ask Mr. LaTourette to go forward 

with just one question and then I am going to come back. 

At the rate we are going, if we don’t do something like what you 

just said, I guess this contract could go on forever, we not get what 

we bargained for, and we are paying. And we can be paying big 

bucks for a long time, probably beyond our lifetimes. 

Mr. SKINNER. That is correct. And this is Acquisitions 101. It is 

impossible to be transparent if you don’t know what you are buying 

and what your estimates are and what your plans are. This is a 

long-term project, and we need to sit down and really think it 

through. We can’t do it all in one year, five year, ten years, fifteen 

years; this is a 20, 25 year effort. But we need to, to the best of 

our ability, define our goals, and each year we need to be making 

adjustments as we learn more and as we move forward. 

Mr. CUMMINGS. Well, one of the things that we are going to do, 

since the Admiral isn’t here, if there are things that you all are recommending, we are going to get a letter to him. I mean, I know 

a lot of this is in your testimony and whatever, but other things 

we want to get that to him, because—and by the way, Mr. 

Caldwell, it was our suggestion, not the Admiral’s, that he come 

back in 120 days. We just felt that he needed to come back and 

give us—but, one of the things that I wanted to do is ask him to 

give us like a 60-day between the—in other words, before the 120 

days, 60 days before that give me something in writing telling me 

where you are, what you are doing, and we are going to make that, 

some of the suggestions that you are making, a part of that letter. 

But understand all we are trying to do up here is get efficiency and 

effectiveness, and this seems—I am telling you, I have never seen 

a contract like this. It seems like it is indefinite and it certainly, 

it seems a bit ambiguous and it is indefinite with regard to quality, 

quantity and cost. Boy, that is a hell of a contract. 

Mr. SKINNER. As written, Mr. Chairman, I think this is one of 

a kind, so I would be surprised if you said you saw something like 

this before, because I don’t think there is anything like this. 

Mr. CUMMINGS. Is that right? 

Mr. SKINNER. Not to my knowledge. 

49

Mr. CUMMINGS. How about you, Mr. Caldwell? 

Mr. SKINNER. We have system-of-systems contracts, we have performance-based contracts. That is fine, and I think this is the way 

to go, and I do support the Coast Guard’s decision to go this way, 

to partner with the private sector, because you need to bring that 

innovation to the table. We in the Government do not have that. 

But we need to be a little bit more definitive—not a little bit, we 

need to be definitive in how we write what our roles are and what 

the contractor’s role is. There has to be a balance. Right now there 

is an imbalance and it is leaning toward the contractor. 

Mr. CUMMINGS. Mr. Caldwell? 

Mr. CALDWELL. Three comments, one to follow up on your comment on the 120 days. I think it is a great idea to have that hearing in 120 days because I think that Admiral Allen is still in the 

process of getting his structure in place and his policies in place, 

and he will have done so in 120 days. I guess what I was trying 

to say is that the implementation is what takes a while. 

The other issue you raised, in terms of the $24 billion, I think 

there are maybe three areas of uncertainty that could lead to higher costs overall. One is the uncertainty about the cost of the individual assets. There has been cost growth in some of the assets as 

they come closer to delivery. The NSC is one example of that. 

There is also some uncertainty as to exactly how the integrated logistics and maintenance package is going to work. You haven’t had 

a lot of assets delivered, actually turned over to the Coast Guard 

where they have had to maintain them. And so I think there is 

some uncertainty of the role the contractor will have versus what 

role the Coast Guard will have. And you don’t want to have a situation where they are duplicating each other’s capabilities just to 

make sure that these things are operating. 

I think the third area of uncertainty is perhaps one of the vaguest parts of the whole contract—the ultimate goal is a systemof-systems. Each asset is interdependent on the others to get to 

that ultimate goal. One of the issues you have now is the NSC will 

be deploying without the VUAV. One of the issues with going from 

12 legacy Cutters down to 8 National Security Cutters is that you 

have the VUAV, which would provide much greater coverage to the 

NSC in terms of area. Now I think there is a six-year delay in the 

VUAV. So you get to the point where you have got some of your 

assets and you realize you still don’t have your system-of-systems 

yet in terms of capability. There are maybe two things to do, first 

there may be quick fixes to C4ISR or something like that to expand 

the capabilities relatively cheaply, or you may need to buy more of 

the assets in the end. 

Mr. CUMMINGS. All right, thank you. 

Mr. CALDWELL. And just one last thing. There are some other 

contracts that look something like Deepwater in the Government. 

One is the SBInet program, which is also managed by the Department of Homeland Security. GAO is doing some work on that one. 

That one has some similarities to Deepwater. I think that with appropriate oversight they will make sure that doesn’t turn into 

where we are with Deepwater now. And the other contract is one 

that I am not that familiar with, but it is the Army’s Future Combat System contract. 

50

Mr. CUMMINGS. All right. 

Mr. LaTourette. 

Mr. LATOURETTE. Thank you, Mr. Chairman. 

And thank both of you for your testimony today. I want to focus 

on the contract for a minute because we did have a hearing and 

the contractor was here, and I don’t know if it is a disagreement 

or not, but they did acknowledge the problem; they just didn’t acknowledge the responsibility. And I think that anybody that works 

for the contractor that would come before a panel of Congress and 

admit that they owe us $100 million probably wouldn’t be working 

for the contractor very long, so that doesn’t surprise me that that 

happened. 

But on the contract, I mean, I guess I would like to know, when 

you are doing your reviews and making recommendations and writing reports, is there sort of a time when everybody sits down and 

there is an instruction on how to write a contract that we don’t find 

ourselves in this situation? I mean, it does—let’s focus on the 110-

foot boats, for instance. I mean, talking to the Commandant and 

talking to the contractor, you are right, we have now gotten this 

he said-she said, the hulls were bad and we didn’t do it and we 

shouldn’t have done this, and so forth and so on. And just from the 

little bit I know about it, I think somebody owes the Government 

some money for those conversions. 

Is it your evaluation as a result of reviewing the contracts that 

we may not have recourse? 

Mr. SKINNER. That is currently being reviewed by the Coast 

Guard and the General Counsel, and we are also going to be—although we may not be at the table, we are going to be providing 

oversight of how those negotiations turn out. But, yes, there is a 

possibility that the Government may not have to—or has no recourse against the contractor because of the way the contract was 

written, because the specifications were so vague—it allowed a lot 

of discretion for the contractor to provide what he thought was the 

right thing. There is that possibility, but I wouldn’t want to jump 

to a conclusion that there is no recourse. 

Mr. LATOURETTE. But when these contracts are written, I mean, 

somebody sits down and actually writes the contract or agrees to 

the contract on behalf of the Government. How do we get such a 

lousy contract? I mean, isn’t there sort of a Government-wide contract where we protect ourselves? 

Mr. SKINNER. I wish there was, but, because everything we buy 

in the Government is going to have a different requirement. this 

is not feasible in this particular case, the best that we can determine—and we are going back pre-DHS. We are going back to the 

late 1990s now, and 2000, 2001, 2002 time frame, building up to 

that contract, and one of the things that become evident when we 

look at the history and reconstruct what happened, is that the 

Coast Guard has never ever entered into an arrangement like this 

in their history, and they did not have the expertise to be negotiating a contract like this unilaterally. And I think they did receive 

some technical advise from the Navy and maybe from others who 

cautioned them to proceed with caution; however, because of the 

lack of expertise, that is how they found themselves in this situation we are in today. 

51

There are other contracts, for example, like SBInet, that the Department has entered into, and they have used lessons learned 

from Deepwater to tighten up the controls over that contract. For 

example, instead of a 25-year contract, it is a three-year contract. 

There are exit ramps or exit clauses if we don’t like what you are 

giving us. We can get out without penalty. We are more heavily involved in SBInet in the subcontracting. We can make the decisions 

of make or buy; whereas, under the Deepwater contract, the integrator made those decisions. So there are lessons learned in SBInet 

that you won’t see in Deepwater. 

Mr. LATOURETTE. Let me ask you this just from a good government standpoint. I mean, it amazes me that we could enter into a 

$24 billion contract with somebody and not be protected, and if it 

is a lack of expertise, what would you think if, here, the Congress 

said, you know what, pick a number, anything, anybody that is 

going to buy anything over a billion bucks, we have to have Joe, 

the contract guy, look at it; I mean, it doesn’t matter whether you 

are from the Coast Guard or the DoD or the Interior Department. 

I mean, do we have to do something like that or do you think that 

everybody is competent and this one just got screwed up? 

Mr. SKINNER. I think it is the latter. And one of the things that 

I am seeing right now with Deepwater is that the Department’s 

procurement office, and the Chief Procurement Officer, Elaine 

Duke, with Department of Homeland Security, is now more actively 

engaged in providing technical assistance, advice, and oversight as 

they proceed through this negotiation process. 

Mr. LATOURETTE. And let me ask you this. You seem to express 

some hopeful optimism that when this contract is up in June or 

July, whenever it is, that things are going to get better. My understanding of the contract is that it is a five-year contract and then 

it has sort of a grade-out, and they have just completed that gradeout process, and based upon the grades that the integrator got, I 

guess it is a 43-month extension is what they have earned based 

upon their scores of 76 and 60 and things like that. 

But based upon both of your reviews of the contract, the existing 

contract, is there a lot, do you think, the Coast Guard can do to 

fix the things that you find problematic in the existing contract? 

Mr. SKINNER. Yes, and we have made recommendations to that 

effect. And you hit it up on the evaluation as a basis for the extension. Actually, I think the final score was somewhere between 83 

and 87, which gave us grave concern because you had the FRC, you 

had the 110/123 conversion problems, you had the NSC problems, 

you had the unmanned aircraft problems. How could you score a 

B and deserve 43-month extension? And that is because—the way 

the contract was written—again, it was flawed. The evaluation was 

based on final deliverables, so, therefore, the 123, the final deliverable had not been made; the NSC, the final, all eight, had not been 

made; the FRC, the finals had not been made. So, therefore, they 

weren’t evaluated on their failures, they were only evaluated on 

those final products. I understand that is going to be rewritten as 

well. 

Mr. LATOURETTE. Good. And let me ask both of you this. I heard 

you and Mr. Caldwell say that three components to this, one of the 

components being the integrated contractor. Just your thoughts 

52

on—I also heard you say, Mr. Skinner, that you think that it is 

nice that they partnered with the private sector. But I have to tell 

you, from the last hearing that the Chairman had where we had 

the integrator here, I am not so crazy about the way that it is set 

up, and I just want you to—if you could just give me your thoughts 

on the structure that has Northrop Grumman, Lockheed Martin 

being the integrator, and most of the business is going to them at 

the end of the day, too. 

Mr. SKINNER. It is—after reviewing it very closely, I mean, it is 

difficult for me to comment on whether the structure is adequate 

or not. They went through a very lengthy, I think a two-or threeyear process, to pick these two contractors to work in partnership 

and to work in partnership with the Coast Guard. That, in and of 

itself, I don’t think is the problem. I think the problem is, one, is 

clearly defining what your operational requirements are, holding 

them to those requirements, having someone—right now they are 

self-certifying—having someone independent———

Mr. LATOURETTE. Right. 

Mr. SKINNER.—validate what they are delivering to you. Also, we 

need to be more actively involved in the decision-making process. 

After all, it is a partnership. 

Mr. LATOURETTE. Right. 

Mr. SKINNER. We turned over the reins to them. That was a big 

mistake. We need to partner with them. When they give us design 

proposals, we should be making the final decision whether, one, 

that design meets our requirements; two, whether we want to buy 

that from you or we want to shop somewhere else to buy that requirement. 

So it is the design of the contract, I think, and the oversight expertise that needs to be addressed. 

Mr. LATOURETTE. And I think when I say I am not crazy about 

it, I mean, I think the problem that I have with it is the gatekeeper 

really doesn’t have any incentive to keep the gate is the problem. 

Mr. Caldwell, do you have a thought on the integrated contractor 

structure? 

Mr. CALDWELL. Yes. In some of our past work we found that the 

integrators perhaps weren’t integrating as well. Northrop Grumman was doing vessel side and Lockheed Martin was doing the aircraft side, and in some cases it resulted in separate proposals or 

parallel proposals going to the Coast Guard, as opposed to an integrated proposal. The reason the Coast Guard went with a system 

integrator like this is to do that kind of integration. So in some 

cases I think they have been disappointed that a higher level of integration hasn’t happened. We, of course, have found some evidence of that. 

In terms of moving forward, you had asked a question about how 

the Government can reduce risk as we move forward into the next 

cycle, and a couple of the things that we have discussed with the 

Coast Guard is the issues of going forward with a contract where 

there aren’t any minimum quantities of assets to buy and there 

aren’t any minimum dollar amounts. And then, of course, you are 

giving the contractor a much greater incentive to make sure they 

have a good product you are going to want at that price or you are 

going to shop elsewhere. 

53

Mr. LATOURETTE. Right. And then the last question I have is for 

you, Mr. Caldwell. You mentioned unobligated balances of, I think 

you said, $1.6 billion. Because this is a hearing about the budget, 

I am concerned that the President’s budget has come in, I think, 

about $823 million for Deepwater and the appropriated amounts 

over $1 billion. Based upon your observation and analysis, is the 

$1.6 billion of unobligated balances sufficient to move forward with 

the schedule of assets that are being produced? 

Mr. CALDWELL. Well, I think what the Coast Guard owes Congress, this Committee as well as others, is a plan of when they plan 

to spend that unobligated money. In one of the Committees the 

Commandant was asked when he could spend a certain amount of 

money, and it was beyond a 24-month window. So then why do you 

need it to carry over from the last budget if you are not going to 

be spending it in 24 months? Of course, we all know how the appropriations work, and there are risks at every level in terms of 

whether, if you don’t have money in this year, whether it will be 

in there next year. And I think it happened at a time where one 

of the risks we raised early on with the Deepwater program is 

whether the Coast Guard would actually have the money in any 

given year to carry on a program this ambitious. And I think the 

initial planning that went out for the initial contract had the contractors looking at a window of $500 million a month. 

(After the hearing, Mr. Caldwell edited the previous statement to 

read: ′′...had the contractors looking at a spending cap window of $500 million a year.′′) 

Just talking to Coast Guard folks, it sounded like the Coast 

Guard was just at a point they thought they were there, we were 

pretty close to $800 million to $1 billion a year of funding that Congress was willing to appropriate, but, of course, all these problems 

had not come up yet, and so, because of some of these problems, 

they haven’t been able to spend that money. But I am not sure that 

I have done a level of analysis that could say how much should or 

shouldn’t be given to the Coast Guard or taken away, or something 

like that, but I think the Coast Guard owes Congress that information in terms of here is how we plan to spend that money. It is just 

obviously not good financial management to have those kinds of 

unobligated balances. 

Mr. LATOURETTE. Right. Absolutely. Well, thank you. 

Thank you, Mr. Chairman. 

Mr. CUMMINGS. Thank you very much, Mr. LaTourette. 

Let’s go back to the performance assessments. You said, I think, 

there were 83 to 87. In the industry, is that medium, high, low? 

Mr. SKINNER. I think that would be a B. 

Mr. CUMMINGS. A B? 

Mr. SKINNER. If we did an A through F grading. 

Mr. CUMMINGS. You also went to the criteria for the 83 to 87, is 

that right? 

Mr. SKINNER. I beg your———

Mr. CUMMINGS. In other words, one of your concerns, I guess, 

was even when you come up with the 83 to 87, is the criteria how 

you got there? 

Mr. SKINNER. Yes. We didn’t grade everything. 

Mr. CUMMINGS. Yes. 

54

Mr. SKINNER. That was our criticism, and I think the Coast 

Guard and Admiral Allen agreed with that and is amending the 

contract to grade everything, whether it is in progress or whether 

it has already been delivered. 

Mr. CUMMINGS. And I take it that you all had—you may have 

stated this already—had an opinion about the award fees. I mean, 

one of the things that concerned me—and I had an opportunity to 

talk to at least one of the team members, I think it was Lockheed 

Martin folks, and I think what they were trying to tell me, that 

this was not a bonus, that this was an award, I guess, more or less 

for progress, sort of. But I saw it as a bonus, and their argument 

was that they were taking somewhat of a risk in doing this contract and so, therefore, they just could not see it as, in any way, 

shape, or form, anything that you could even put in the same dictionary as a bonus. I mean, do you have an opinion on that? 

Mr. SKINNER. We didn’t evaluate the basis for the award fee, but 

it does go back to the criteria which we used to evaluate their success or failure, their performance. And the award fee, I think, is 

tied into that evaluation. So the higher the score, the higher the 

award fee, which we also were questioning the score; we think that 

it was too high. Therefore, we are also suggesting, I guess, that the 

award bonus may have been too high as well. But we did not comment on that particular aspect. 

Mr. CUMMINGS. I understand. You also seem to have—I know at 

least you, Mr. Skinner, and, Mr. Caldwell, I am sure you have an 

opinion on this, about the role that civilians should play in acquisitions and what have you. I mean, the argument was made—I think 

it was by you, Mr. Skinner—that one of the things that folks depend upon, contractors, is that personnel will change, I mean, personnel will move from place to place in the military, in the Coast 

Guard, and so they don’t have to deal with the same folks. The 

folks that were there two years ago, some of them retired, some of 

them have gone overseas; they are not there anymore. Even Admiral Allen has, I think, a four-year term. And so this gives us great 

pause because I think that, and I have said it many times, I think 

every Member of this Committee has a tremendous amount of faith 

in Admiral Allen, but I guess what we have got to do is figure out 

how we put into place those things that will last beyond Admiral 

Allen and others that may have great intentions. 

So talk about the role of civilians and how significant that is. 

Yes, Mr. Caldwell, and then we will go to you, Mr. Skinner. 

Mr. CALDWELL. Let me just make a couple of comments. I would 

agree with Admiral Allen that you need some of the military folks 

in there who know the operational issues. There is no doubt you 

need their expertise involved in that. You even want to have maybe 

some overlaps among those people because, as military people, they 

will rotate out. But, in principle, I would agree that you need continuity here in terms of civilians to carry on some of these programs. 

I have one other kind of anecdotal observation I would like to 

make. I have been with the GAO for 23 years now. The people that 

we are hiring now, they are not going to stay for 23 years. I mean, 

it is a much more mobile workforce than it used to be, and I think 

that will affect the Coast Guard or any Government agency to a 

55

larger extent. So while the continuity is a very valuable thing, it 

is just a harder thing to get today, even in the civilian world. 

Mr. CUMMINGS. Mr. Skinner? 

Mr. SKINNER. If you look at best practices for performance-based 

contracting or best practices for a system-of-systems contract, there 

is a lot of literature out there. One of the most important elements 

they say to be successful is continuity. That is, the people that you 

put together on a project team, an integrated project team, have to 

be committed to the project from beginning to end. And like Mr. 

Caldwell said, even in the civilian sector you are going to have staff 

turnover, but in the military sector you are guaranteed turnover, 

and that creates a problem because you just cannot ensure that 

continuity. 

The second thing that concerns me when you talk about putting 

military in charge—it goes beyond acquisition management, it goes 

into financial management, it goes into human resources management, it goes into IT management. These are specialties where you 

need professionals in those fields to do this. If you look at the Coast 

Guard, particularly the Coast Guard, any cadet or anyone that is 

coming out of the Coast Guard Academy, I challenge anyone to say 

that they can look at the Coast Guard organizational chart and say 

I want to be the chief acquisition officer. There is no career path 

in the military for those people to aspire to be there and to work 

and train and receive the experience in the training that they need 

to be able to run any type of acquisition program, let alone a complex major acquisition program such as Deepwater. 

So it does create a problem when you start relying on your military people who do not have the experience, do not have the training, and they would rather be somewhere else. They are punching 

their ticket to get through Washington so they can go back out to 

sea. 

Mr. CUMMINGS. One of the things that you talked about, Mr. 

Skinner, in your opening statement, you talked about how Admiral 

Allen was building up his personnel. And you also said something 

that was very interesting, and that was that it is going to take a 

long time. So I guess, I mean, do you see—so you are saying that 

even if he built up his personnel, gave them the training that they 

probably wouldn’t be around but so long, but you even question 

whether they can build up that kind of training to do all the things 

that need to be done particularly with regard to acquisitions, 

whether they even—they are in a position to be able to accomplish 

that and still deal with this contract in a fairly timely fashion? 

Mr. SKINNER. In the short term, that is absolutely true. That is 

one of the things we are experiencing not just within the Department, but this is a Government-wide issue, is to get the right resources in the acquisition management field: program managers, 

acquisition managers, procurement managers. It is very difficult, in 

this day and age, to find those types of people out there. There is 

a lot of competition in the private sector right now. The private sector pays a lot more than the Government, and that is who we are 

competing with right now. So it is not something that we are going 

to be able to fix just in a few months; this is going to—it is going 

to be very difficult to find the right people and bring them in here. 

56

Mr. CUMMINGS. Of all the things that you heard—and I will end 

on this—what gave you the most hope that we are at least partially 

on the right track here? Assuming that you got that feeling. 

Mr. SKINNER. Yes, there is hope, and what gives me the most 

hope is the leadership that we now have in the Coast Guard, and 

that is Admiral Allen. He is firmly—he recognizes these problems, 

he admits to these problems. He is very, very focused on correcting 

these problems. He is very hands-on management, and he has 

taken some very drastic steps to turn this thing around with a 

major reorganization of his acquisition program, in other areas as 

well, but we are focusing on acquisition management, putting it 

under one directorate, where it is more streamlined and you can 

go to someone where there is accountability, which never existed 

before. And we learned that through the course of our audits, because we just couldn’t find that one person that we could go to who 

is accountable for this contract? It also has become very clear as 

to who has technical authority over Deepwater. That was not clear 

before. And when you talked about using the integrator project 

teams and when you do experience those problems, well, when you 

got to the end, the contractor was the chair of the team. The Coast 

Guard were technical advisors, they were not technical decisionmakers. That now has changed. He recognizes that the contract is 

flawed, going back to basics. Let’s go back to Acquisition 101 plus 

what we have learned over the last four and a half years from our 

mistakes, and to address those issues. 

There is a lot that is now being done to turn this around, but, 

again, we are still in the very early stages. Will we be successful? 

Time will tell. But it is going to require sustained leadership, it is 

going to require oversight, not only from GAO or OIG, but Congressional oversight. We are going to have to be transparent so we 

make sure that we are doing the right thing; and if we are not, we 

have got to hold people accountable. 

Mr. CUMMINGS. Mr. Caldwell? 

Mr. CALDWELL. Well, whether it is Admiral Allen or it is kind of 

the lowest person in the chain of the acquisition world, they are 

going to probably move or transition, or there will be some lack of 

continuity. So the kind of things that give us hope, looking forward, 

in terms of fixing the problem is really having structures and processes in place that work, and then people can come in and out of 

those. But if you have those in place and you have a mechanism 

to make sure they are working, from an auditor’s perspective, it is 

internal controls that are important, it is not the people that are 

in the positions. So that is what I would say is most important to 

us. 

Mr. CUMMINGS. Mr. LaTourette? 

Mr. LATOURETTE. Nothing further. 

Mr. CUMMINGS. Thank you all very much. We really appreciate 

your. I am sure we will be talking to you all again. What is next 

on you all’s agenda? Are you all continuing not follow this, is that 

right? 

Mr. SKINNER. Yes. We are embedded in the Coast Guard, into 

the Deepwater program. Our next———

Mr. CUMMINGS. Whether they like it or not, huh? 

57

Mr. SKINNER. Whether they like it or not. But Thad Allen has 

in fact opened his doors to us and has been very cooperative these 

last few months, and is welcoming our suggestions. The next thing 

you will probably see is a report card. This will be the first report 

card that we have done of the Deepwater program. We are going 

to do it throughout the Department and we are going to spread out 

to all the management challenges in the Department. But this will 

give you a baseline, and each year we can show you and the Secretary, and the head of the Coast Guard the progress they are 

making, if they are in fact making progress. We are also doing several sector reviews of Deepwater activities, the unmanned aircraft, 

for example, their infrastructure, which we talked about earlier 

today and the progress that is being made there and the problems 

that they are experiencing, and how that is going to be integrated 

into the Deepwater program. So there are going to be a whole series of audits for the next—Mr. Chairman, long after I am gone. 

Mr. CUMMINGS. Mr. Caldwell? 

Mr. CALDWELL. We have a couple of things. I guess in the long 

term we have a mandate, a legislative mandate from two appropriations Committees, Senate and House, to look at this every year, 

and we negotiate a little bit about what the terms of those audits 

are. But I assure you it is not an indefinite quantity, indefinite 

amount contract. 

Mr. CUMMINGS. Let me say this. I am sure you all don’t hear this 

too often, but we really do thank you for what you do. I think you 

all have—you and your staffs have—I am sure you are not always—people are not jumping up and down and having parties for 

you when you come in the door and everything, but the fact is that 

you help to keep Government strong and you help to make sure 

that trust, with regard to integrity and competence, both, you all 

are the ones that make sure that we keep that in some type of 

order. 

So I am sure you are well underpaid, but we really do thank you 

for what you do, and I really mean that, and I hope you will convey 

that to your staffs. And we want to thank you for the outstanding 

work that you all have done for us and, on behalf of the Congress, 

we thank you. 

Mr. SKINNER. You are welcome. Thank you. 

[Whereupon, at 1:15 p.m., the Subcommittee was adjourned.]

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