```

[Senate Hearing 115-877]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 115-877

  THE FUTURE OF THE FLEETS: COAST GUARD AND NOAA SHIP RECAPITALIZATION

=======================================================================

                                HEARING

                               BEFORE THE

     SUBCOMMITTEE ON OCEANS, ATMOSPHERE, FISHERIES, AND COAST GUARD

                                 OF THE

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                     ONE HUNDRED FIFTEENTH CONGRESS

                             SECOND SESSION
                               __________

                            OCTOBER 11, 2018
                               __________

    Printed for the use of the Committee on Commerce, Science, and 
                             Transportation
                             
                             
                  [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]                             

                Available online: http://www.govinfo.gov
                
                               __________

                    U.S. GOVERNMENT PUBLISHING OFFICE
                    
57-575 PDF                 WASHINGTON : 2024                   

       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                     ONE HUNDRED FIFTEENTH CONGRESS

                             SECOND SESSION

                   JOHN THUNE, South Dakota, Chairman
ROGER F. WICKER, Mississippi         BILL NELSON, Florida, Ranking
ROY BLUNT, Missouri                  MARIA CANTWELL, Washington
TED CRUZ, Texas                      AMY KLOBUCHAR, Minnesota
DEB FISCHER, Nebraska                RICHARD BLUMENTHAL, Connecticut
JERRY MORAN, Kansas                  BRIAN SCHATZ, Hawaii
DAN SULLIVAN, Alaska                 EDWARD MARKEY, Massachusetts
DEAN HELLER, Nevada                  TOM UDALL, New Mexico
JAMES INHOFE, Oklahoma               GARY PETERS, Michigan
MIKE LEE, Utah                       TAMMY BALDWIN, Wisconsin
RON JOHNSON, Wisconsin               TAMMY DUCKWORTH, Illinois
SHELLEY MOORE CAPITO, West Virginia  MAGGIE HASSAN, New Hampshire
CORY GARDNER, Colorado               CATHERINE CORTEZ MASTO, Nevada
TODD YOUNG, Indiana                  JON TESTER, Montana
                       Nick Rossi, Staff Director
                 Adrian Arnakis, Deputy Staff Director
                    Jason Van Beek, General Counsel
                 Kim Lipsky, Democratic Staff Director
              Chris Day, Democratic Deputy Staff Director
                      Renae Black, Senior Counsel
                                 ------                                

            SUBCOMMITTEE ON OCEANS, ATMOSPHERE, FISHERIES, 
                            AND COAST GUARD

DAN SULLIVAN, Alaska, Chairman       TAMMY BALDWIN, Wisconsin, Ranking
ROGER F. WICKER, Mississippi         MARIA CANTWELL, Washington
DEB FISCHER, Nebraska                RICHARD BLUMENTHAL, Connecticut
JAMES INHOFE, Oklahoma               BRIAN SCHATZ, Hawaii
MIKE LEE, Utah                       EDWARD MARKEY, Massachusetts
RON JOHNSON, Wisconsin               GARY PETERS, Michigan
CORY GARDNER, Colorado
TODD YOUNG, Indiana

                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on October 11, 2018.................................     1
Statement of Senator Sullivan....................................     1
Statement of Senator Baldwin.....................................     2
    Prepared statement from Deepak Navnith, President, Fairbanks 
      Morse, LLC.................................................     4
    Prepared statement from Laura R. Haas, CEO, American 
      Shipbuilding Suppliers Association.........................     5
Statement of Senator Wicker......................................    49
Statement of Senator Blumenthal..................................    50

                               Witnesses

Rear Admiral Michael J. Haycock, Assistant Commandant for 
  Acquisition and Chief Acquisition Officer, U.S. Coast Guard....     7
    Prepared statement...........................................     9
Marie A. Mak, Director, Contracting and National Security 
  Acquisitions, Government Accountability Office.................    12
    Prepared statement...........................................    14
Ronald O'Rourke, Specialist in Naval Affairs, Congressional 
  Research Service...............................................    22
    Prepared statement...........................................    24

                                Appendix

Rear Admiral Michael J. Silah, NOAA Director, Office of Marine 
  and Aviation Operations and Director, NOAA Commissioned Officer 
  Corps, National Oceanic and Atmospheric Administration, U.S. 
  Department of Commerce, prepared statement.....................    55
Letter dated October 10, 2018 to Hon. Thune, Hon. Nelson, Hon. 
  Sullivan and Hon. Baldwin from Jacqueline Savitz, Chief Policy 
  Officer, North America, Oceana.................................    58
Letter dated October 11, 2018 to Hon. Dan Sullivan and Hon. Tammy 
  Baldwin from Janis Searles Jones, Chief Executive Officer, 
  Ocean Conservancy..............................................    59
Letter dated October 24, 2018 to Hon. John Thune and Hon. Bill 
  Nelson from Matt Tinning, Associate Vice President, Oceans, 
  Environmental Defense Fund.....................................    60
Response to written questions submitted to RADM Michael J. Silah 
  by:
    Hon. Tammy Baldwin...........................................    61
    Hon. Edward Markey...........................................    62

 
  THE FUTURE OF THE FLEETS: COAST GUARD AND NOAA SHIP RECAPITALIZATION

                              ----------                              

                       THURSDAY, OCTOBER 11, 2018

                               U.S. Senate,
Subcommittee on Oceans, Atmosphere, Fisheries, and 
                                   the Coast Guard,
        Committee on Commerce, Science, and Transportation,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 9:36 a.m. in 
room SR-253, Russell Senate Office Building, Hon. Dan Sullivan, 
Chairman of the Subcommittee, presiding.
    Present: Senators Sullivan [presiding], Baldwin, Wicker, 
and Blumenthal.

            OPENING STATEMENT OF HON. DAN SULLIVAN, 
                    U.S. SENATOR FROM ALASKA

    Senator Sullivan. The Subcommittee on Oceans, Atmosphere, 
Fisheries, and Coast Guard will now come to order.
    The Subcommittee meeting today is to review the needs and 
current state of the fleet capitalization efforts of both the 
United States Coast Guard and the National Oceanic and 
Atmospheric Administration, NOAA.
    The very missions of each agency contribute to the safety, 
national security, and economic growth of our nation.
    Congress has given the Coast Guard an incredibly wide range 
of missions, from search and rescue, ice-breaking, marine 
environmental protection, to port security, drug interdiction, 
international crisis response, and readiness to support the 
Department of Defense operations, which the Coast Guard also 
does.
    Increasing human activity in the Arctic, violence, 
terrorism, and drug trafficking in the Caribbean Basin, Central 
America, and Mexico, overseas contingency operations demand an 
increased Coast Guard presence at home and increasingly around 
the globe. These pressures are pushing the limits of the older 
generation cutters in the fleet.
    Annually, NOAA, Office of Marine and Aviation Operations, 
manages to conduct more than a hundred missions, utilizing a 
small fleet of vessels to support the safety, security, and 
economic interests of our Nation.
    The data and intelligence provided by NOAA safeguards the 
flow of cargo through our U.S. ports, monitors our fish stocks, 
and helps communities and fishermen plan around severe weather. 
However, half of the NOAA fleet that provides these services 
are due to retire in the not-too-distant future of 2028.
    NOAA estimates that the loss of vessel capability without 
recapitalization would directly impact the nation's $4.6 
trillion economic activity generated in U.S. seaports; which 
rely on accurate nautical charts, the $200 billion-a-year 
seafood industry of our nation, and nearly half of the nation's 
population that lives in coastal areas, the economic engine of 
which often relies on things like tourism, agriculture, and 
other important drivers of the U.S. economy.
    My state, Alaska, has more than 44,000 miles of shoreline, 
which is more than the entire shoreline of the Lower 48 states. 
The missions of these agencies are not only vital in Alaska but 
throughout the country.
    The area of responsibility assigned to the Coast Guard 
units within Alaskan waters is the largest in the nation and 
encompasses an area over three and a half million square miles.
    While far from Alaska, I'd be remiss if I did not mention 
the courageous and important work conducted by the men and 
women in the Coast Guard and NOAA with responding to hurricanes 
this season. In fact, duty has called one of our witnesses 
today, Rear Admiral Silah, Director of NOAA's Office of Marine 
and Aviation Operations, who will not be participating today as 
he is responding to Hurricane Michael.
    Each agency's recapitalization efforts is in a much 
different stage of the process. NOAA is in the opening stages 
of its efforts to produce eight new ships to replace half its 
fleet while the Coast Guard is 10 years into a much larger and 
very important recapitalization effort that has bipartisan 
support in the Congress.
    I should also note that we are likely hopeful to take up 
the Coast Guard bill next week on the Senate Floor.
    This Subcommittee is committed to working to ensure the 
success of the missions of these agencies and adequate 
resources are needed to ensure that this occurs.
    Today, we will be hearing from the Coast Guard on the need 
for new ships, recapitalization strategies, and the status of 
current acquisition efforts. CRS and GAO experts can also 
provide additional viewpoints of best practices and acquisition 
strategies for both agencies.
    With that, I want to thank our witnesses for being here. I 
apologize for us running a little bit late, and I now want to 
recognize the Ranking Member, Senator Baldwin, for any opening 
statements she may have.
    Senator Baldwin.

               STATEMENT OF HON. TAMMY BALDWIN, 
                  U.S. SENATOR FROM WISCONSIN

    Senator Baldwin. Thank you, Mr. Chairman.
    Well, first, I would like to join the Chairman in 
recognizing those still experiencing or just starting their 
recovery from Hurricane Michael and thank our responders for 
all of the hard and brave work that they're doing to assist 
those that are affected, and the efforts by the Coast Guard and 
NOAA in response to Hurricane Michael once again highlight how 
important these agencies are to ensuring the life and safety of 
U.S. citizens and the continuation of commerce in our waterways 
and ports. So we need to ensure that they have the right assets 
to do that.
    That's why I'm pleased that we've convened this hearing 
today on the Coast Guard and NOAA's plans to recapitalize their 
critically important fleets.
    The Coast Guard saves about 4,000 lives each year. It 
interdicts hundreds of millions of dollars worth of drugs 
before they reach the U.S. and it helps ensure our nation's 
security by patrolling our waters and high seas.
    The Coast Guard also ensures the safety of mariners in the 
Great Lakes. During the winter months, it plays a critical role 
in ensuring commerce by conducting ice-breaking operations. The 
polar icebreakers, cutters, and patrol boats that make up the 
Coast Guard's fleet have all reached or will soon reach the end 
of their service lives.
    NOAA has the largest Federal research fleet in the nation 
and its approximately 100 at-sea missions each year contribute 
significantly to the U.S. economy, both directly and 
indirectly.
    The fleet collects data that's critical for making nautical 
charts to ensure safe and efficient commerce at our seaports 
and waterways. It's responsible for conducting fish stock 
assessments that support our nation's $200 billion fisheries.
    The fleet collects data for storm surge modeling that aid 
in hurricane and other disaster responses, and it collects data 
that goes into producing NOAA's weather warnings and forecasts, 
but NOAA's ships are aging with ages ranging between five and 
50 years old.
    I'm proud to say that the newest ship in NOAA's fleet, the 
Reuben Lasker, named after a famed fisheries biologist, was 
built in Wisconsin by Fincantieri Marinette Marine. That 
shipyard, which also built the Coast Guard's Great Lakes 
Icebreaker, the Mackinaw, and builds the Littoral combat ship 
for the U.S. Navy, is one pillar of Wisconsin's proud 
shipbuilding industry.
    Another is Fairbanks-Morse, which has supplied the U.S. 
Coast Guard and Navy with high-performance engines for over 70 
years.
    In short, Wisconsin knows how to build ships and knows how 
to manufacture the critical components that make those ships 
the best in the world, but more needs to be done to support our 
domestic shipbuilding industry and to ensure that when it comes 
to government procurement, U.S. taxpayer dollars are used to 
purchase U.S.-manufactured ships and shipboard components, and 
that's why I introduced a bill in April, the Made in America 
Shipbuilding Act, or MASA.
    MASA would require Federal agencies to purchase vessels 
constructed only in the United States using U.S. raw materials 
and American-made onboard components, like valves, pumps, 
cranes, winches, and engines.
    To protect against contract disruption or unintended 
consequences, there are waivers for legitimate reasons of cost, 
schedule, competition, and national security.
    I'd like to hear from our witnesses, especially Admiral 
Haycock, about their views on Buy America requirements and the 
need to have strong domestic industrial-based partners to 
execute their missions.
    Finally, I was really hoping we could get some of our 
Wisconsin shipbuilding companies here today for this hearing, 
but, Mr. Chairman, can we submit a few of their written 
statements for the record?
    Senator Sullivan. Without objection.
    Senator Baldwin. All right. Thank you, Mr. Chairman.
    [The information referred to follows:]

 Prepared Statement of Deepak Navnith, President, Fairbanks Morse, LLC
    Mr. Chairman, thank you for this opportunity to submit a statement 
on behalf of Fairbanks Morse, LLC regarding the important topic of 
recapitalizing the NOAA and Coast Guard fleets.
    Fairbanks Morse has been a key supplier of propulsion engine 
systems to the U.S. Government since 1938, when Fairbanks Morse sold 
its first engine to the U.S. Navy. As the government ramped up the 
industrial base for World War II, the Navy invested $5 million ($100 
million in today's dollars) in a new manufacturing site for diesel 
engines, enabling Fairbanks Morse to deliver 1,650 engines during the 
course of the War at the rate of one engine per day. For this effort, 
Fairbanks Morse was honored by the Department of War with two Army-Navy 
``E'' awards--an extremely rare distinction honoring the company's 
excellence in supporting the war effort.
    Fairbanks Morse is very proud of the fact that we currently have 
more than 500 US-made engines installed on current ships of the U.S. 
Government. We continue to manufacture, assemble and test these 
critical products for Navy and Coast Guard ships today, supplying 
hundreds of employees with well-paying jobs. Most recently, we were 
honored to have been chosen by Eastern Shipbuilding Corporation to 
supply main propulsion diesel engines for the Coast Guard's Offshore 
Patrol Cutter.
    Fairbanks Morse is also currently producing engines for several 
Navy combatant, amphibious and auxiliary ships, as well as aircraft 
carriers. We additionally have a commercial contract to provide high-
quality emergency power generators for the French nuclear power 
company, EDF. This level of manufacturing has allowed us to also make 
significant investments in our facilities, training programs for our 
highly skilled employees, and expanded field services programs for our 
customers.
    Fairbanks Morse is currently the only U.S. manufacturer of large, 
medium-speed diesel engines. While we are confident that our people, 
products, and after-market services are state-of-the-art and second to 
none, I want to emphasize that a key contributor toward our ability to 
do so has been the U.S. government's policies requiring domestic 
manufacturing for critical ship components. These policies are clearly 
spelled out in the statutes establishing the National Defense Sealift 
Fund (NDSF) in Fiscal Year 1991 and clarified in subsequent National 
Defense Authorization Acts and annual Defense Appropriations Acts. 
Because of this requirement, Fairbanks Morse has been able to maintain 
its position as a critical U.S. supplier and sustainer of main 
propulsion engines for the Navy fleet--a particularly important U.S. 
defense capability for nuclear Navy NoForn programs.
    There have been longstanding requirements that ships for the U.S. 
armed forces and for the coastwise commercial shipping trade must be 
built in the US. The reasons for this are very clear--we must ensure 
the ability of our defense industrial base to manufacture and support 
our armed forces, and we must ensure that our fleet of US-owned, US-
built, and US-manned ships are available for supplying us in times of 
national emergencies.
    However, there is currently no similar requirement that critical 
components on these ships must be manufactured in the U.S. When the 
funding for auxiliary and sealift ships was moved from the NDSF to the 
Navy's SCN (Shipbuilding and Conversion, Navy) account in FY 2015, the 
domestic manufacture requirements for critical components no longer 
applied. Additionally, there is no requirement for domestic manufacture 
of critical components for ships procured by the U.S. Coast Guard, 
NOAA, or any other government agency.
    I also want to be clear on another critical point: Fairbanks Morse 
does not shy away from competition, nor do we simply rely on being 
given work by the government. We firmly believe that we have been 
competitive in every recent Coast Guard and Navy shipbuilding program. 
Where we have lost out, we are confident that it was either a minor 
difference on the initial acquisition cost, or that the propulsion 
system components were awarded based on a separate business 
relationship between the U.S. shipbuilder and the foreign supplier. 
Furthermore, we are confident that, had total life-cycle support for 
these engines been considered in the initial acquisition, our superior 
performance in training and after-market services would eclipse any 
difference in initial acquisition cost.
    It is also important to understand that our ability to compete is 
often driven by differences in overall requirements under which our 
foreign competitors operate: important labor and environmental 
requirements; cost accounting and transparency; and especially the 
rigorous performance specifications demanded by our government 
customers that we are driven to meet on a daily basis. Most of our 
foreign competitors are global corporations that do not operate in such 
a specification-driven business environment, since the vast majority of 
their business is the world-wide commercial shipbuilding and power 
generation market.
    Both the Navy and Coast Guard have experienced challenges in 
shipbuilding programs where foreign component suppliers were not 
prepared to meet the same qualifications that Fairbanks Morse considers 
an essential hallmark of its products. I will emphasize again that we 
do not shy away from such competition--we simply request that the 
playing field be level.
    Given the Coast Guard's ongoing OPC program, the critical heavy 
icebreaker program, the anticipated modernization of the NOAA fleet, 
along with the Navy's planned ramp-up in ship and submarine 
construction, Fairbanks Morse firmly believes that foreign competitors 
for main propulsion engines and other critical shipbuilding components 
will see this as an opportunity to invest in U.S. manufacturing 
capability: ``If you require it, they will come.''
    But they will only do so if it is clear that this is a requirement 
in order to compete. There are already several U.S. manufacturers 
capable of supplying smaller main propulsion engines. We would welcome 
US-based competition for manufacturing large, medium-speed diesel 
engines, but it is essential to put in place statutory requirements for 
domestic manufacture of critical components for ships procured by the 
U.S. government so that the competition is fair and that we can count 
on a secure and stable manufacturing industrial base.
    That point was emphasized in the recently released report: 
``Assessing and Strengthening the Manufacturing and Defense Industrial 
Base and Supply Chain Resiliency of the United States'', as directed by 
Presidential Executive Order #13806. The shipbuilding industrial base 
was identified as being one of the most fragile and threatened:

        ``Industries involved in the manufacturing of shipbuilding 
        components were among the hardest hit by the global shift in 
        the industrial base over the last 20 years. Of the top ten 
        highest grossing industries in Navy shipbuilding, six are in 
        the manufacturing sector. Since 2000, these industries 
        experienced a combined decline of over 20,500 establishments in 
        the U.S.

        ``Contraction of the shipbuilding sector limits competition 
        among U.S. suppliers of Navy components. In many cases, 
        competition has altogether vanished, forcing the Navy to rely 
        on single and sole source suppliers for critical components. 
        These companies struggle to survive and lack the resources 
        needed to invest in innovative technology. Expanding the number 
        of companies involved in Navy shipbuilding is important to 
        maintaining a healthy industrial base that can fulfill the 355-
        ship fleet and support the Navy's long-range shipbuilding 
        plan.''

    Among challenges highlighted across the entire defense industrial 
base were procurement complexity, lengthy acquisition timelines, unique 
accounting standards, and burdensome security clearance requirements. 
In addition, the report highlighted cybersecurity gaps across the 
supply chain, in part due to the reliance on foreign-supplied 
components and materials. While improvements can and should be made in 
each of these areas, all of these issues are ones that Fairbanks Morse 
and other trusted U.S. manufacturers are accustomed to. We firmly 
believe that domestic manufacture requirements for critical components 
is an essential part of securing our Nation.
    In conclusion, I want to thank the Committee for having this 
hearing and for this opportunity to provide our thoughts based on 80 
years of partnering with the shipbuilding industry and the U.S. 
government. We look forward to working with Congress to develop 
policies that will ensure our Nation's ability to meet any national 
security challenges we encounter. Thank you, Mr. Chairman.
                                 ______
                                 
               Prepared Statement of Laura R. Haas, CEO, 
              American Shipbuilding Suppliers Association
    The American Shipbuilding Suppliers Association (ASSA) represents 
unique companies which manufacture military grade components and 
systems relied upon by the Department of Defense's blue and brown 
water, subsea, air, and aerospace fleets. Our members supply, among 
other things: navigation systems; engines; generators; reduction gears; 
air compressors; specialty solenoids; hardened manifolds; valves; 
switchboards; power converters; circuit breakers and power cables. When 
United States Navy or Coast Guard encounter hostilities while defending 
American interests, whether by sea, undersea, air, or space, they do so 
on the strength and reliability of mission critical components 
designed, developed and produced in America by ASSA members.
    The Department of Defense (DOD) has always relied on us because of 
our ongoing commitment to reinvest our own assets in the development of 
new facilities, technologies and systems, primarily for the benefit of 
the military. We employ the best professionals and skilled labor in the 
country and produce American products that continue to guarantee the 
continuity of the fleet and the availability of good, well-paying jobs. 
Of course, our interests are best served by receiving orders from the 
DOD sufficient in volume and with adequate frequency and lead-time to 
ensure our abilities to maintain continuity in our ongoing product 
lines.
    The President and Congress are ever engaged in the effort to 
balance the costs of constructing and maintaining fleets while ensuring 
the quality and continuity requisite to maintaining American security. 
As a result, President Trump's Executive Order (EO) 13806 recently 
directed the office of the Secretary of Defense (SECDEF) to study the 
overall costs of long and short-term DOD procurement and maintenance, 
along with positing the economic dynamics affecting those costs, and 
suggesting solutions. The SECDEF issued the report, ``Assessing and 
Strengthening the Manufacturing and Defense Industrial Base and Supply 
Chain Resiliency of the United States.'' The report provides a 
comprehensive overview of domestic and international economic and 
political forces that have resulted in the degradation of the U.S. 
heavy commercial manufacturing base, and corresponding escalation of 
the general costs of production. It suggests that the state of that 
base is untenable view of, for instance, the Navy and Coast Guard's 
current fleet expansion, which is heavily dependent on a healthy, 
competitive commercial market. The report provides a comprehensive set 
of recommendations across executive departments, including legislation 
further stabilizing the U.S. Navy's traditional and necessary, American 
production requirements.
    As a general matter, the DOD commercial supplier market itself is 
divided in two unequal parts: first, and largest, are those facilities 
who produce both military and non-military products, such as shipyards. 
Second, there are those industries which produce highly specialized, 
military grade, mission critical component parts. ASSA represents 
companies that fall into the latter category.
    The referenced report focuses on forces that are generally adverse 
to all DOD contractors: inconsistent funding, loss of manufacturing 
facilities, pernicious regulation and procurement issues, unfair 
competition and lack of labor force training. These are indeed issues 
that should be addressed in a macro analysis. However, ASSA's member 
companies provide specialized research, design, manufacturing and 
support services that simply can not be accurately measured by mere 
market dynamics.
    Congress is now considering myriad proposals included in the report 
for the funding and stabilization of the market to facilitate fleet 
expansion. ASSA represents the American industrial base that supports 
the U.S. Navy and U.S. Coast Guard shipbuilding community, we strongly 
and heartily endorse the recommendations proposed in this report. In 
particular, ASSA urges:

   Expanded direct investment in the lower-tier of the 
        industrial base through the DOD's Defense Product Act Title 
        III, Manufacturing Technology and Industrial Base Analysis and 
        Sustainment programs

   Modernize the organic industrial base to ensure its 
        readiness to sustain fleets and meet contingency surge 
        requirements

   Further enhance efforts exploring next generation technology 
        for future threats

    Further of interest to ASSA is Senator Baldwin's bill, ``Made in 
America Shipbuilding Act of 2018'' which is strongly supported by ASSA. 
The current Buy American rules are insufficient and Senator Baldwin's 
bill is needed. ASSA members provide services that simply can not be 
replaced in times of crisis. The end result of the economic failure of 
any American industry, whether DOD related or not, is damaging to the 
country's vital interests. However, the end result of failure by 
economic debasement of the DOD suppliers like ASSA members, even if by 
misplaced reliance on otherwise deferential market forces, could be 
fatal to the country itself, it is truly a matter of national security.

    Senator Sullivan. Well, again, I want to thank the 
distinguished panel of witnesses today.
    Today, we have Rear Admiral Michael Haycock, who is the 
Assistant Commandant of the U.S. Coast Guard for Acquisition; 
Ms. Marie Mak, who is the Director, Contracting and National 
Security Acquisitions from the GAO; and Mr. Ronald O'Rourke, 
who is a Specialist in Naval Affairs from the Congressional 
Research Service.
    Each of you will have 5 minutes to deliver an oral 
statement and a longer written statement will be included for 
the record.
    Admiral Haycock, we'll begin with you, sir.

         STATEMENT OF REAR ADMIRAL MICHAEL J. HAYCOCK,

         ASSISTANT COMMANDANT FOR ACQUISITION AND CHIEF

             ACQUISITION OFFICER, U.S. COAST GUARD

    Admiral Haycock. Good morning, Chairman Sullivan, Ranking 
Member Baldwin, and Distinguished Members of the Subcommittee.
    Thank you for the opportunity to testify today. I 
respectfully request that my written testimony be entered in 
the record.
    Senator Sullivan. Without objection.
    Admiral Haycock. As you know, the Coast Guard is 
simultaneously a Federal law enforcement agency, a maritime 
first responder, a regulatory body, a member of the 
intelligence community, a critical part of border security, and 
a military police.
    To maintain our commitment to executing these statutory 
missions, the Coast Guard has made recapitalizing the services 
of surface, aviation, and command and control capabilities a 
top priority. These investments not only enhance our ability to 
execute the mission demands of today but also ensure that we 
can meet the mission demands of tomorrow.
    The steadfast support of Congress and of this subcommittee 
in particular has positioned the Coast Guard for success in 
remaining ready, relevant, and responsive to present and future 
needs of the United States and on behalf of the service, I 
thank you.
    As the Coast Guard's chief acquisition officer, I'm excited 
to be here today and to testify on vessel acquisitions. One of 
the most critical assets of our nation's maritime security is 
the offshore patrol cutter, and I'm thrilled to indicate that 
last month, the Coast Guard exercised a contract option to 
begin the construction of the lead offshore patrol cutter and 
to order the long lead materials for the second.
    This contract action maintains the schedule to deliver the 
first offshore patrol cutter in 2021 and commence the 
replacement of our medium endurance cutters, some of which are 
over 50 years old, which is twice their planned service life in 
some cases.
    Until we deliver the offshore patrol cutters, the Coast 
Guard needs to keep our aging medium endurance cutter fleet in 
fighting shape. To do so, the Coast Guard is in the advance 
planning stage to extend their service lives until the offshore 
patrol cutters enter operational service.
    On the same day that we did the contract and optioned the 
OPC, we also executed a contract to bid the long lead time 
materials for the 11th national security cutter and early this 
summer, we took delivery of our 30th fast response cutter and 
exercised an option for production of six more fast response 
cutters, bringing our current number of fast response cutters 
under contract to 50.
    As our recapitalized white hull fleet of national security 
cutters and fast response cutters and offshore patrol cutters 
continues to come online and take the watch, the Coast Guard is 
also making significant strides toward rebuilding or building 
our polar security cutter and recapitalizing our fleet of aged 
river, construction, and inland buoy tenders with the waterways 
commerce cutter.
    The United States has not built a heavy polar icebreaker in 
40 years and the need for that capability as a strategic 
national asset, both in today's maritime environment and in the 
future, is more critical today than ever.
    To prudently accelerate our polar security cutter 
acquisition timeline, the Coast Guard and the Navy formed an 
integrated program office. This arrangement enables us to 
utilize Navy expertise and their support while leveraging best 
practice for both services to maintain an accelerated 
acquisition schedule. It's a partnership that's paying 
significant dividends for one of the Coast Guard's highest 
acquisition priorities.
    After significant industry engagement, a request for 
proposals was issued in March, nearly a month ahead of 
schedule, and we're on track to award a detailed design and 
construction contract in Fiscal Year 2019.
    We've already received technical proposals from industry 
and we're looking forward to receiving cost proposals later on 
this fall.
    The Coast Guard is also accelerating efforts to acquire a 
waterways commerce cutter fleet, another critically needed 
asset. Our nation's maritime transportation system contributes 
$4.6 trillion annually to the United States gross domestic 
product and these cutters play an important role in sustaining 
the safety and security of this vital economic resource.
    However, the average age of our river construction inland 
buoy tenders is over 53 years old and the readiness and 
maintainability is continually becoming more challenging.
    The Coast Guard is working with the Navy to examine the 
past with the best potential to effectively refresh this 
important capability.
    All this progress toward recapitalization would not be 
possible without the hard work of the men and women supporting 
these acquisitions. We've got a deep and talented pool of 
program management, contracting and support professionals that 
keep our 20 major and non-major acquisition programs on 
schedule and on budget while ensuring the Coast Guard operators 
have the tools and the capabilities that they need to maintain 
safety and security of our maritime environment.
    Once again, thank you very much for the opportunity to 
testify today, and I look forward to your questions.
    [The prepared statement of Admiral Haycock follows:]

         Prepared Statement of Rear Admiral Michael J. Haycock,
  Assistant Commandant for Acquisition and Chief Acquisition Officer, 
                            U.S. Coast Guard
    Good morning Chairman Sullivan, Ranking Member Baldwin, and 
distinguished members of the subcommittee. I appreciate the opportunity 
to testify today and thank you for your enduring support of the United 
States Coast Guard.
    The Coast Guard offers unique and enduring value to the Nation. A 
branch of the Armed Forces at all times, our combination of broad 
authorities and complementary capabilities squarely align with the 
President's national security and economic prosperity priorities. The 
Coast Guard is also a Federal law enforcement agency, a regulatory 
body, a first responder, and a member of the U.S. Intelligence 
Community, which uniquely position the Service to help secure the 
maritime border, combat transnational criminal organizations (TCOs), 
facilitate and safeguard commerce on America's waterways, and protect 
our national interests in the Polar Regions.
    Coast Guard assets and capabilities serve as a force multiplier for 
the Department of Defense (DoD) and deploy worldwide to execute 
statutory defense operations in support of national security 
priorities. On any given day, 11 cutters, two maritime patrol aircraft, 
five helicopters, two specialized boarding teams, and an entire Port 
Security Unit are supporting DoD Combatant Commanders, as well as U.S. 
Cyber Command, on all seven continents. A squadron of six Coast Guard 
patrol boats and crews continue to patrol the waters of the Northern 
Arabian Gulf in close cooperation with the U.S. Navy, promoting 
regional peace and stability. Likewise, as one of the principal Federal 
agencies performing detection and monitoring in the southern maritime 
transit zone, the Coast Guard provides more than 4,000 hours of 
maritime patrol aircraft support and 2,000 major cutter days to U.S. 
Southern Command each year.
    The Coast Guard is also the Nation's ``maritime first responder.'' 
Our bias for action and ability to rapidly surge resources in response 
to emerging threats, as most recently demonstrated during this year's 
devastating hurricane season, are hallmark traits of our Service. Since 
the landfall of Hurricane Florence, Coast Guard men and women in 
helicopters, boats, cutters, vehicles and on foot have rescued over 
1,100 people. This follows on the heels of last year's historic 
hurricane season.
    Coast Guard mission readiness requires an ability to execute our 
full suite of missions in the present while simultaneously making the 
investments necessary to meet mission demands in the future.
    Prudence demands we continue investing in a modernized Coast Guard. 
Recapitalization remains a top priority for the Commandant, and your 
support has helped us make tremendous progress.
    The Coast Guard is in the midst of recapitalizing the service's 
surface, aviation and command and control capabilities through more 
than 20 major and non-major acquisition programs. These efforts are 
supported by a framework of governance and policies developed by the 
Department of Homeland Security and the Coast Guard, are in line with 
best practices identified by our Federal partners, including the 
Department of Defense and the U.S. Navy, and are constantly evolving 
based upon lessons learned.
    With the support of the Administration and Congress, we are making 
significant progress toward building new Polar Security Cutters. This 
past March, we released a request for proposal (RFP) as a full and open 
competition, setting the stage for award of a Detail Design and 
Construction (DD&C) contract in FY 2019 for the construction of up to 
three heavy Polar Security Cutters. We are as close as we have ever 
been to recapitalizing our Polar icebreaking fleet; continued 
investment now is vital to solidifying our standing as an Arctic nation 
and affirms the Coast Guard's role in providing assured access to the 
Polar Regions for decades to come.
    Last month, the Coast Guard exercised a contract option to begin 
production of the lead Offshore Patrol Cutter (OPC) and order long lead 
time materials for the second OPC. This marked a critical milestone for 
the program and keeps us on schedule to deliver the first OPC in 2021. 
The OPC will provide the tools to effectively enforce Federal laws, 
secure our maritime borders, disrupt TCOs, and respond to 21st century 
threats. Continued progress on this acquisition is absolutely vital to 
recapitalizing our aging fleet of Medium Endurance Cutters (MECs), some 
of which have already been in service for over a half century.

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    We are in advanced planning to extend the service life of a portion 
of our MEC fleet as a bridging strategy until OPCs are delivered. In 
concert with the extended range and capability of the National Security 
Cutter (NSC) and the enhanced coastal patrol capability of the Fast 
Response Cutter (FRC), OPCs will be the backbone of the Coast Guard's 
strategy to project and maintain offshore presence.
    The Service continues efforts to accelerate recapitalization of our 
fleet of 35 river, construction, and inland buoy tenders, with an 
average age of over 52 years. Replacing this aging fleet with Waterways 
Commerce Cutters (WCC), for a modest investment, is critical to 
sustaining the overall safety of our Nation's Marine Transportation 
System, which contributes $4.6 trillion annually to our Gross Domestic 
Product.
    While the aforementioned programs are in the relatively early 
stages of the acquisition life cycle, the Coast Guard continues to 
acquire critical cutters and boats at full rate production levels. The 
service recently accepted delivery of the service's seventh NSC (U.S. 
Coast Guard Cutter KIMBALL) and issued a contract for long lead time 
materials for the eleventh NSC. The NSC is capable of operating 
independently in the most challenging environments including the vast 
expanses of the Eastern Pacific Ocean where NSCs have led the Coast 
Guard's efforts to interdict dangerous narcotics before they can make 
it to U.S. shores.

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    We continue to deliver the fleet of new FRCs on budget and on 
schedule. In August, the Coast Guard exercised the second option under 
the Phase II contract to begin production of six more FRCs. With this 
action, the Coast Guard has ordered 50 FRCs to date, including two FRCs 
to initiate the recapitalization of our six patrol boats supporting 
enduring U.S. Central Command missions in southwest Asia.

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    In concert with efforts to acquire new assets, we are focused on 
maintaining the existing fleet of cutters and aircraft through 
sustainment programs. The current work being conducted at the Coast 
Guard Yard in Curtis Bay, Maryland, includes a Service Life Extension 
Project (SLEP) to enhance mission readiness and extend the service life 
of icebreaking tugs by approximately 15 years. We are also continuing 
the Midlife Maintenance Availability (MMA) on sea-going buoy tenders to 
address obsolescence of critical ship components and engineering 
systems. The work on these two platforms is vital to sustaining current 
mission performance and essential to maritime commerce.

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    Recently, the Coast Guard Yard's experience and expertise was put 
to use to complete a dockside renovation of the NOAA ship Ferdinand R. 
Hassler on time and under budget. This work was the latest project 
conducted under a five-year memorandum of understanding between the 
Coast Guard and NOAA that was signed in 2014.

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    In addition to vessel acquisition and sustainment projects, work 
continues to sustain the mission performance of our rotary and fixed-
wing aviation assets and to address the condition of our aging shore 
infrastructure. These efforts are key to the Coast Guard's continued 
readiness across all mission areas.
    While readiness and modernization investments improve current 
mission performance, our Service's greatest strength is undoubtedly our 
people. We are incredibly proud of our 48,000 Active Duty and Reserve 
members, 8,500 civilians, and over 27,000 volunteer members of the 
Coast Guard Auxiliary. Coast Guard operations require a resilient, 
capable workforce that draws upon the broad range of skills, talents, 
and experiences found in the American population. Together with modern 
platforms, our proficient, diverse, and adaptable workforce maximizes 
the Coast Guard's capacity to respond effectively to an increasingly 
complex operating environment.
    History has proven that a ready, relevant, and responsive Coast 
Guard is an indispensable instrument of national security. With the 
continued support of the Administration and Congress, we will preserve 
momentum for our existing acquisition programs and employ risk-based 
decisions to balance readiness, modernization, and force structure with 
the evolving demands of the 21st century. Thank you for the opportunity 
to testify before you today and for all that you do for the men and 
women of the Coast Guard. I look forward to your questions.

    Senator Sullivan. Thank you, Admiral.
    Ms. Mak.

              STATEMENT OF MARIE A. MAK, DIRECTOR,

        CONTRACTING AND NATIONAL SECURITY ACQUISITIONS,

                GOVERNMENT ACCOUNTABILITY OFFICE

    Ms. Mak. Good morning, Chairman Sullivan, Ranking Member 
Baldwin, and Members of the Subcommittee.
    Thank you for inviting me here today to discuss the 
critical efforts underway to recapitalize the Coast Guard's and 
NOAA's aging legacy assets, vital for protecting national and 
economic security.
    Although our shipbuilding work has focused on the Coast 
Guard and Navy, the key acquisition principles I'll discuss 
today apply to any agency's vessel recapitalization effort.
    The two areas that I would like to highlight today are, 
first, the need to develop a business case for ship programs 
that strike an appropriate balance between requirements and 
resources, and, second, the importance of having a long-term 
strategic plan that lays out acquisition needs and tradeoffs.
    Much of our prior shipbuilding work has found that ship 
programs routinely exceed cost and schedule targets and do not 
meet performance goals. This is because shipbuilding programs 
typically start with a weak business case and do not fully 
assess risk and have optimistic and at times unrealistic cost 
schedule and performance goals.
    We have found that a sound business case requires balance 
between the concepts selected to satisfy the operator 
requirements and the resources, design and technology maturity, 
funding, and time needed to build a ship.
    At the heart of a business case is a knowledge-based 
approach, obtaining critical levels of knowledge at key points 
in the shipbuilding process before significant investments are 
made.
    For instance, in our review this summer, we noted that the 
Coast Guard has some weaknesses in its business case for its 
new icebreaker. Addressing these concerns is important to 
ensure continuity between the legacy asset, the Polar Star, and 
the new ones so that any capability gap is minimized.
    Having visited the Polar Star this summer, I give much 
credit to the Coast Guard crew for doing everything possible to 
keep that cutter operational. However, given this effort and 
the already existing capability gaps, the Coast Guard must get 
the acquisition of this new icebreaker right.
    Second, to fully ensure that a business case is strong, a 
multiyear strategic look at all anticipated acquisition needs 
and resources are important since building ships requires 
stable funding over a long period of time to be fully 
successful.
    A multiyear strategic look documented in a long-term plan 
is critical for achieving a balanced mix of executable programs 
that meet cost, schedule, and performance expectations.
    We have previously reviewed the long-term planning 
practices of successful businesses and found that they assess 
product investments collectively from an enterprise level 
rather than as an independent and unrelated initiative.
    In doing so, these companies help ensure that individual 
product business cases are affordable, within projected 
budgets, and meet the enterprise strategic vision.
    An example of this type of strategic plan in government 
shipbuilding is the 30-year Naval Vessel Construction Plan, 
also known as the Navy's Long-Range Shipbuilding Plan. It 
reflects the quantity and categories of assets that the Navy 
needs to buy as well as the Navy's budget needs to execute the 
plan.
    While we have previously noted challenges associated with 
the Navy's plan, we have also observed that such a plan is 
beneficial in that it lays out the strategic approach for 
decisionmaking.
    As the Coast Guard is pursuing multiple ship acquisitions, 
this type of long-term plan is particularly important to help 
ensure that the agency has the assets that it needs to deliver 
services when and where needed.
    In summary, when it comes to key shipbuilding best 
practices, it is important that each ship program has a sound 
business case with realistic cost, schedule, and performance 
targets, and that the agency's programs collectively be planned 
and accomplished within available resources.
    By not doing so, gaps may emerge that could result in 
agencies being ill-prepared to counter future threats and fall 
short in meeting critical missions.
    Chairman Sullivan, Ranking Member Baldwin, Members of the 
Subcommittee, this completes my prepared statement.
    I would be pleased to answer any questions you may have.
    Thank you.
    [The prepared statement of Ms. Mak follows:]

Prepared Statement of Marie A. Mak, Director, Contracting and National 
 Security Acquisitions, United States Government Accountability Office

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    Chairman Sullivan, Ranking Member Baldwin, and Members of the 
Subcommittee:
    I am pleased to be here today to discuss key lessons and insights 
we have identified from our prior work in Coast Guard and Navy 
acquisitions that may be useful in informing the Coast Guard's and the 
National Oceanic and Atmospheric Administration's (NOAA) current 
efforts to recapitalize their aging fleets of ships. The Coast Guard's 
multi-billion dollar ship acquisition portfolio includes the National 
Security Cutters, Offshore Patrol Cutters, Fast Response Cutters, and 
heavy polar icebreakers, which collectively perform critical missions 
such as search and rescue, law enforcement, and icebreaking. NOAA's 
research and survey ships comprise the largest fleet of Federal 
research ships in the United States. Ensuring that the Coast Guard and 
NOAA maintain their ship fleets and address potential capability gaps 
is vital for protecting national security and scientific interests.
    My statement today provides information on: (1) long-term strategic 
planning for acquisitions (2) the need for a sound business case when 
acquiring new ships (3) leveraging of the Navy's acquisition expertise 
and resources and (4) considerations when selecting contracting 
mechanisms. This statement is based on our extensive body of work 
examining the Coast Guard's and Navy's acquisition efforts, including 
our September 2018 report on the Coast Guard's polar icebreaker 
acquisition and July 2018 report on Coast Guard recapitalization.\1\ 
For the reports cited in this statement, among other methodologies, we 
analyzed Coast Guard and Navy guidance, data, and documentation, and 
interviewed Coast Guard and Navy officials. Detailed information on our 
scope and methodology can be found in the reports cited in this 
statement. In addition to our prior work, for this statement we 
obtained publicly available information from NOAA regarding its ship 
acquisition and recapitalization efforts; we did not assess its 
efforts.\2\
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    \1\ GAO, Coast Guard Acquisitions: Polar Icebreaker Program Needs 
to Address Risks before Committing Resources, GAO-18-600 (Washington, 
D.C.: Sept. 4, 2018), Coast Guard Acquisitions: Actions Needed to 
Address Longstanding Portfolio Management Challenges, GAO-18-454 
(Washington, D.C.: July 24, 2018); Best Practices: High Levels of 
Knowledge at Key Points Differentiate Commercial Shipbuilding from Navy 
Shipbuilding, GAO-09-322 (Washington, D.C.: May 13, 2009); and Defense 
Acquisitions: Realistic Business Cases Needed to Execute Navy 
Shipbuilding Programs, GAO-07-943T (Washington, D.C.: July 24, 2007).
    \2\ We have prior work on NOAA's efforts to collect hydrographic 
data, which includes information on hydrographic survey vessels. See 
GAO, Hydrographic Surveying: NOAA Needs Better Cost Data and a Strategy 
for Expanding Private Sector Involvement in Data Collection, GAO-17-510 
(Washington, D.C.: June 15, 2017).
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    We conducted the work on which this statement is based in 
accordance with generally accepted government auditing standards. Those 
standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe the 
evidence obtained provides a reasonable basis for our findings and 
conclusions based on our audit objectives.
Long-Term Strategic Planning in Acquisitions Enables Better Tradeoff 
        Decisions
    Key elements of strategic planning include establishing long-term 
goals and strategies for how those goals are to be achieved.\3\ 
Specifically for managing Coast Guard acquisitions, we have noted that 
a long-term plan that includes acquisition implications would enable 
tradeoffs to be addressed in advance, which leads to better informed 
choices and makes debate possible before irreversible commitments are 
made to individual programs.\4\ Without this type of plan, decision 
makers do not have the information they need to better understand and 
address an agency's long-term outlook. Similarly, according to the 
Office of Management and Budget's capital planning guidance referenced 
by the Coast Guard's Major Systems Acquisition Manual, each agency is 
encouraged to have a plan that justifies its long-term capital asset 
decisions. This plan should include, among other things, (1) an 
analysis of the portfolio of assets already owned by the agency and in 
procurement, (2) the performance gap and capability necessary to bridge 
the old and new assets, and (3) justification for new acquisitions 
proposed for funding.
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    \3\ See GAO, Managing for Results: Critical Issues for Improving 
Federal Agencies' Strategic Plans, GAO/GGD-97-180 (Washington, D.C.: 
Sept. 16, 1997).
    \4\ GAO, Coast Guard Acquisitions: Limited Strategic Planning 
Efforts Pose Risk for Future Acquisitions, GAO-17-747T (Washington, 
D.C.: July 25, 2017); and Coast Guard Acquisitions: Better Information 
on Performance and Funding Needed to Address Shortfalls, GAO-14-450 
(Washington, D.C.: June 5, 2014).
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    In June 2014, we found that the Coast Guard--a component within the 
Department of Homeland Security (DHS)--did not have a long-term fleet 
modernization plan that identified all acquisitions needed to meet 
mission needs over the next two decades within available resources.\5\ 
Without such a plan, the Coast Guard repeatedly delayed and reduced its 
capabilities through its annual budget process and did not know the 
extent to which it could meet mission needs and achieve desired 
results. We recommended that the Coast Guard develop a 20-year fleet 
modernization plan that identifies all acquisitions needed to maintain 
the current level of service and the fiscal resources necessary to 
build the identified assets. DHS agreed with our recommendation but it 
has not yet approved a 20-year plan.
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    \5\ GAO-14-450.
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    Further, in July 2018, we found the Coast Guard continues to manage 
its acquisitions through its annual budget process and the 5-year 
Capital Investment Plan, which is congressionally mandated and 
submitted to Congress annually.\6\ Coast Guard officials told us the 
Capital Investment Plan reflects the highest priorities of the 
department and that trade-off decisions are made as part of the annual 
budget process. However, the effects of these trade-off decisions, such 
as which acquisitions would take on more risk so others can be 
prioritized and adequately funded, are not communicated in the Capital 
Investment Plan to key decision makers. Over the years, this approach 
has left the Coast Guard with a bow wave of near-term unfunded 
acquisitions, negatively affecting recapitalization efforts, and 
limiting the effectiveness of long-term planning. As a result of this 
planning process, the Coast Guard has continued to defer planned 
acquisitions to future years and left a number of operational 
capability gaps unaddressed that could affect future operations. We 
recommended that the annual Capital Investment Plans reflect 
acquisition trade-off decisions and their effects. DHS concurred with 
this recommendation and plans to include additional information in 
future Capital Investment Plans to address how trade-off decisions 
could affect other major acquisition programs. According to Coast Guard 
officials, the Coast Guard plans to implement this recommendation by 
March 2020.
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    \6\ GAO-18-454.
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    Examples of other fleet modernization plans include the Navy's 
annual naval vessel construction plan (also known as the Navy's long 
range shipbuilding plan), which reflects the quantity and categories of 
assets that the Navy needs to buy as well as the total number of assets 
in operation for each year. While we found in March 2006 that the Navy 
faced challenges associated with its long range shipbuilding plan, we 
also observed that such a plan is beneficial in that it lays out a 
strategic approach for decision making.\7\ In October 2016, NOAA--which 
is within the Department of Commerce--approved a fleet plan that is 
intended to identify an integrated strategy for long-term 
recapitalization, including acquisition of up to eight new ships. In 
March 2017, NOAA indicated that long-term recapitalization of the NOAA 
fleet requires an annual, stable funding profile on the order of its 
Fiscal Year 2016 appropriations--about $80 million. NOAA noted that it 
will continue to proceed on schedule, as laid out in its fleet plan, or 
make adjustments based on available funding.
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    \7\ GAO, Defense Acquisitions: Challenges Associated with the 
Navy's Long-Range Shipbuilding Plan, GAO-06-587T (Washington, D.C.: 
Mar. 30, 2006).
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Successful Acquisition Programs Begin with Sound Business Cases
    Our prior work has repeatedly found that successful acquisition 
programs start with solid, executable business cases before setting 
program baselines and committing resources.\8\ A sound business case 
requires balance between the concept selected to satisfy operator 
requirements and the resources--design knowledge, technologies, 
funding, and time--needed to transform the concept into a product, such 
as a ship. At the heart of a business case is a knowledge-based 
approach--we have found that successful shipbuilding programs build on 
attaining critical levels of knowledge at key points in the 
shipbuilding process before significant investments are made (see 
figure 1).
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    \8\ GAO, Navy Shipbuilding: Past Performance Provides Valuable 
Lessons for Future Investments, GAO-18-238SP (Washington, D.C.: June 6, 
2018); Weapon System Requirements: Detailed Systems Engineering Prior 
to Product Development Positions Programs for Success, GAO-17-77 
(Washington, D.C.: Nov. 17, 2016); GAO-09-322; and GAO-07-943T.

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    Source: GAO depiction of notional shipbuilding process. / GAO-19-
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147T

    We have previously found that key enablers of a good business case 
include firm, feasible requirements; plans for a stable design; mature 
technologies; reliable cost estimates; and realistic schedule 
targets.\9\ Without a sound business case, acquisition programs are at 
risk of experiencing cost growth, schedule delays, and reduced 
capabilities.
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    \9\ GAO-17-77; GAO-07-943T; and Best Practices: Using A Knowledge-
Based Approach To Improve Weapon Acquisition, GAO-04-386SP (Washington, 
D.C.: Jan. 1, 2004).
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    In September 2018, we found the Coast Guard did not have this type 
of sound business case when it established the cost, schedule, and 
performance baselines for its polar icebreaker program in March 
2018.\10\ This was primarily due to risks in four key areas:
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    \10\ GAO-18-600.

   Technology. The Coast Guard intends to use proven 
        technologies for the program, but did not conduct a technology 
        readiness assessment to determine the maturity of key 
        technologies--which include the integrated power plant and 
        azimuthing propulsors--prior to setting baselines.\11\ As a 
        result, the Coast Guard does not have full insight into whether 
        these technologies, which we believe are critical technologies 
        and merit such an assessment, are mature. Without a technology 
        readiness assessment, the Coast Guard is potentially 
        underrepresenting technical risk and increasing design risk.
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    \11\ A technology readiness assessment is a systematic, evidence-
based process that evaluates the maturity of critical technologies--
hardware and software technologies critical to the fulfillment of the 
key objectives of an acquisition program. According to our best 
practices, a technology readiness assessment should be conducted prior 
to program initiation. For more information, see GAO Technology 
Readiness Assessment Guide: Best Practices for Evaluating the Readiness 
of Technology for Use in Acquisition Programs and Projects, GAO-16-410G 
(Washington, D.C.: Aug. 11, 2016).

   Cost. The cost estimate that informed the program's $9.8 
        billion cost baseline--which includes lifecycle costs for the 
        acquisition, operations, and maintenance of three polar 
        icebreakers--substantially met our best practices for being 
        comprehensive, well-documented, and accurate, but only 
        partially met best practices for being credible.\12\ The cost 
        estimate did not quantify the range of possible costs over the 
        entire life of the program, such as the period of operations 
        and support. As a result, the cost estimate was not fully 
        reliable and may underestimate the total funding needed for the 
        program.
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    \12\ The GAO Cost Estimating and Assessment Guide was used as 
criteria in this analysis. A cost estimate is considered reliable if 
the overall assessment ratings for each of the four characteristics--
comprehensive, accurate, well documented, and credible--are 
substantially or fully met. For more information, see GAO Cost 
Estimating and Assessment Guide: Best Practices for Developing and 
Managing Capital Program Costs, GAO-09-3SP (Washington, D.C.: Mar. 2, 
2009).

   Schedule. The Coast Guard's planned delivery dates of 2023, 
        2025, and 2026 for the three ships were not informed by a 
        realistic assessment of shipbuilding activities, but rather 
        were primarily driven by the potential gap in icebreaking 
        capabilities once the Coast Guard's only operating heavy polar 
        icebreaker--the Polar Star--reaches the end of its service life 
        (see figure 2).

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    U.S. Coast Guard Cutter Polar Star
    Source: U.S. Coast Guard. / GAO-19-147T

    The Polar Star's service life is estimated to end between Fiscal 
Years 2020 and 2023. This creates a potential heavy polar icebreaker 
capability gap of about 3 years, if the Polar Star's service life were 
to end in 2020 and the lead polar icebreaker were to be delivered by 
the end of Fiscal Year 2023 as planned. If the lead ship is delivered 
later than planned in this scenario, the potential gap could be more 
than 3 years. The Coast Guard is planning to recapitalize the Polar 
Star's key systems starting in 2020 to extend the service life of the 
ship until the planned delivery of the second polar icebreaker (see 
figure 3).

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    Source: GAO analysis of U.S. Coast Guard documents. / GAO-19-147T

        Further, our analysis of selected lead ships for other 
        shipbuilding programs found the icebreaker program's estimated 
        construction time of 3 years is optimistic. An unrealistic 
        schedule puts the Coast Guard is at risk of not delivering the 
        icebreakers when promised and the potential gap in icebreaking 
        capabilities could widen.

   Design. The Coast Guard set program baselines before 
        conducting a preliminary design review--a systems engineering 
        event that is intended to verify that the contractor's design 
        meets the requirement of the ship specifications and is 
        producible--which puts the program at risk of having an 
        unstable design, thereby increasing the program's cost and 
        schedule risks. Although the Coast Guard set the program 
        baselines prior to gaining knowledge on the feasibility of the 
        selected shipbuilder's design, it has expressed a commitment to 
        having a stable design prior to the start of lead ship 
        construction. This is consistent with shipbuilding best 
        practices we identified in 2009.\13\
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    \13\ GAO-09-322.

    To address these four areas and other risks, we made six 
recommendations to DHS, Coast Guard, and the Navy in our September 2018 
report.\14\ DHS concurred with all six recommendations and identified 
actions it planned to take to address them.
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    \14\ GAO-18-600.
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    In its October 2016 fleet plan, NOAA indicated the need to 
construct up to eight new ships by 2028 to maintain its capabilities 
for at-sea requirements. Ensuring a sound business case for each 
acquisition will be important as NOAA moves forward.
Leveraging Navy's Shipbuilding Experience May Create Efficiencies
    Given the Navy's experience in shipbuilding, agencies have 
partnered with the Navy to take advantage of its expertise. For 
example, in April and September 2018, we found examples of how the 
Coast Guard had leveraged the Navy's resources and acquisition 
approaches when acquiring the polar icebreakers, including:\15\
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    \15\ GAO-18-600; GAO, Coast Guard Acquisitions: Status of Coast 
Guard's Heavy Polar Icebreaker Acquisition, GAO-18-385R (Washington, 
D.C.: Apr. 13, 2018).

   Establishing an integrated program office and potentially 
        using funding from both organizations. In 2016, in response to 
        a congressional report, the Navy and the Coast Guard 
        established an integrated program office to acquire the 
        icebreakers for Coast Guard operations. This relationship was 
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        officially memorialized through three memorandums in 2017.

        Given potential plans to fund the polar icebreaker program with 
        both Navy and Coast Guard appropriations, the Navy and the 
        Coast Guard had a memorandum of agreement with a budgeting and 
        financial management appendix. In September 2018, however, we 
        found that the Coast Guard and the Navy interpreted the meaning 
        of ``cost overruns'' differently in the context of their 
        agreement.\16\ We also found that the agreement itself did not 
        address how the Coast Guard and the Navy plan to handle any 
        cost growth stemming from changes to the scope, terms, and 
        conditions of the detail design and construction contract. We 
        recommended that the Coast Guard, in collaboration with the 
        Navy, revise the agreement to clarify and document how cost 
        growth in the polar icebreaker program, including changes in 
        scope, will be addressed between the two organizations. The 
        Coast Guard concurred with this recommendation and plans to 
        update the agreement by March 2019.
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    \16\ GAO-18-600.

   Establishing an integrated ship design team. The ship design 
        team includes Coast Guard and Navy technical experts who 
        develop ship specifications based on the polar icebreaker 
        program's operational requirements document. The ship design 
        team is under the supervision of a Coast Guard ship design 
        manager, who provides all technical oversight for development 
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        of the polar icebreaker's design.

   Leveraging Navy cost estimating and contracting functions. 
        With input from the integrated program office and ship design 
        team, Navy cost estimators developed the polar icebreaker 
        program's cost estimate, which informed the program's cost 
        baselines and affordability constraints. In addition, the Navy 
        plans to award the polar icebreaker's detail design and 
        construction contract under the Navy's contracting authority 
        and use a tailored DHS acquisition process.

   Supplementing the DHS acquisition process with the Navy's 
        gate review process. Coast Guard and Navy agreed to manage the 
        polar icebreaker program using a tailored acquisition approach 
        that supplements DHS acquisition decision event reviews with 
        additional ``gate'' reviews that were adopted from Navy's 
        acquisition processes.\17\ The gate reviews allow both Coast 
        Guard and Navy leadership to review and approve key documents 
        before proceeding to the acquisition decision events. Each 
        acquisition decision event is also overseen by acquisition 
        oversight board with members from both the Coast Guard and the 
        Navy (see figure 4).
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    \17\ Acquisition decision events are milestone reviews in which the 
Coast Guard and DHS assess and verify an acquisition program's 
successful satisfaction of established exit criteria, affordability, 
and a readiness to move forward to the next acquisition phase.

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    Source: GAO analysis of Coast Guard data. / GAO-19-147T

    By collaborating with the Navy, the Coast Guard is leveraging the 
Navy's experience in ship design, cost estimating, contracting, and 
other shipbuilding processes. This partnership may allow the Coast 
Guard to more efficiently manage the polar icebreaker program.
    In March 2017, NOAA indicated that it had partnered with the Navy 
through an interagency agreement to leverage the Navy's acquisition 
expertise for Auxiliary General Purpose Oceanographic Research Vessels, 
which will be the basis for a new class of NOAA ships. In April 2018, 
the Navy released the request for proposal for the preliminary contract 
design of this new class of ships.
Estimated Savings and Requirements Stability Should be Considered When 
        Selecting Contracting Mechanisms
    When acquiring multiple quantities of a product, agencies generally 
have several options for contracting mechanisms. Annual contracting, 
which can be considered the typical method, refers to awarding a 
contract for one year's worth of requirements. Annual contracting 
allows for the use of options for subsequent requirements. Options give 
the agency the unilateral right to purchase additional supplies or 
services called for by the contract, or to extend the term of the 
contract. Besides annual contracting with options, agencies may also be 
able to choose among other contracting mechanisms--multiyear 
contracting and ``block buy'' contracting, which are discussed in more 
detail below.
Multiyear Contracting Requirements and Considerations
    Multiyear contracting allows agencies to acquire known requirements 
for up to 5 years under a single contract award, even though the total 
funds ultimately to be obligated may not be available at the time of 
contract award. Before DOD and Coast Guard can enter into a multiyear 
contract, certain criteria must be met.\18\ Table 1 provides some of 
the multiyear contracting requirements for DOD and the Coast Guard.
---------------------------------------------------------------------------
    \18\ 10 U.S.C. Sec. 2306b, implemented by Federal Acquisition 
Regulation (FAR) 17.105-1(b). NOAA may enter into a multiyear contact 
if the head of the contracting activity determines that the need is 
reasonably firm and continuing over the life of the contract and the 
contract will serve the best interests of the United States by 
encouraging full and open competition or promoting economy in 
administration, performance, and operation of the agency's programs. 
See FAR 17.105-1(a).

 Table 1: Key Statutory Requirements for Department of Defense and Coast
                 Guard Multiyear Procurement Candidates
------------------------------------------------------------------------
        Criteria                           Description
------------------------------------------------------------------------
Substantial savings      The head of the agency must find that use of a
                          multiyear contract will result in significant
                          savings in the total estimated costs when
                          compared to the use of a series of annual
                          contracts for the same procurement.
------------------------------------------------------------------------
Stability of the         The head of the agency must find that the
 requirement              minimum need to be purchased in terms of total
                          quantity, production rate, and procurement
                          rate is expected to be substantially unchanged
                          during the multiyear contract period.
------------------------------------------------------------------------
Stability of funding     The head of the agency must find that there is
                          a reasonable expectation that sufficient
                          funding will be requested to carry out the
                          contract and avoid cancellation over the
                          proposed multiyear contract period.
------------------------------------------------------------------------
Stable design            The head of the agency must find that they have
                          technical risks that are not excessive over
                          the multiyear period and there is a stable
                          design.
------------------------------------------------------------------------
Realistic cost           The head of the agency must find that estimates
 estimates                of contract cost and projected multiyear
                          savings/cost avoidance through the use of a
                          multiyear contract strategy are realistic.
------------------------------------------------------------------------
National security        In the case of a purchase by the Department of
                          Defense, the head of the agency must find that
                          the use of a multiyear contracting strategy
                          will promote the national security interests
                          of the United States government.
------------------------------------------------------------------------
Source: GAO analysis and 10 U.S.C. Sec.  2306b. / GAO-19-147T

    Multiyear contracts are expected to achieve lower unit costs 
compared to annual contracts through one or more of the following 
sources: (1) purchase of parts and materials in economic order 
quantities, (2) improved production processes and efficiencies, (3) 
better utilized industrial facilities, (4) limited engineering changes 
due to design stability during the multiyear period, and (5) cost 
avoidance by reducing the burden of placing and administering annual 
contracts.\19\ Multiyear procurement also offers opportunities to 
enhance the industrial base by providing contractors a longer and more 
stable time horizon for planning and investing in production and by 
attracting subcontractors, vendors, and suppliers. However, multiyear 
procurement entails certain risks that must be balanced against the 
potential benefits, such as the increased costs to the government 
should the multiyear contract be changed or canceled and decreased 
annual budget flexibility for the program and across an agency's 
portfolio of acquisitions.
---------------------------------------------------------------------------
    \19\ Contracting for economic order quantities or bulk quantities 
generally refers to the purchase of parts in larger more economically 
efficient quantities to minimize the cost of these items.
---------------------------------------------------------------------------
    In February 2008, we found that it is difficult to precisely 
determine the impact of multiyear contracting on procurement costs.\20\ 
For example, for three multiyear procurements (Air Force's C-17A 
Globemaster transport, the Navy's F/A-18E/F Super Hornet fighter, and 
the Army's Apache Longbow helicopter), we identified unit cost growth 
ranging from 10 to 30 percent compared to original estimates, due to 
changes in labor and material costs, requirements and funding, and 
other factors. In some cases, actual costs for the multiyear 
procurement were higher than original estimates for annual contracts. 
We noted that we could not determine how cost growth affected the level 
of savings achieved, if any, because we did not know how an alternative 
series of annual contracts would have fared. Although programs using 
annual contracts also have unit cost growth, it is arguably more 
problematic when using multiyear contracting because of the up-front 
investments and the government's exposure to risk over multiple years.
---------------------------------------------------------------------------
    \20\ GAO, Defense Acquisitions: DOD's Practices and Processes for 
Multiyear Procurement Should Be Improved, GAO-08-298 (Washington, D.C.: 
Feb. 7, 2008).
---------------------------------------------------------------------------
Block Buy Contracting Considerations
    Block buy contracting generally refers to special legislative 
authority that agencies seek on an acquisition-by-acquisition basis to 
purchase more than one year's worth of requirements, such as purchasing 
supplies in economic order quantities. Unlike multiyear contracting, 
block buy contracting does not have permanent statutory criteria and, 
therefore, can be used in different ways.
    We have previously analyzed several cases where block buy contracts 
were considered or used and have not found evidence of savings. For 
example:

   In September 2018, we found that for the polar icebreaker 
        program, the Navy gave offerors an opportunity to provide the 
        estimated savings that the government could achieve if it were 
        to take a ``block buy'' approach in purchasing the ships or 
        purchasing supplies in economic order quantities.\21\ The Navy 
        told us that they did not receive any formal responses from 
        industry on potential savings from block buys or economic order 
        quantities.
---------------------------------------------------------------------------
    \21\ GAO-18-600.

   In April 2017, we found that the Navy's Littoral Combat Ship 
        contracts' block buy approach could affect Congress's funding 
        flexibility.\22\ Specifically, the block buy contracts provided 
        that a failure to fully fund a purchase in a given year would 
        make the contract subject to renegotiation, which provides a 
        disincentive to the Navy or Congress to take any action that 
        might disrupt the program because of the potential for the 
        government to have to pay more for ships.
---------------------------------------------------------------------------
    \22\ GAO, Littoral Combat Ship and Frigate: Delaying Planned 
Frigate Acquisition Would Enable Better-Informed Decisions, GAO-17-323 
(Washington, D.C.: Apr. 18, 2017).

   In February 2005, we found that the Navy believed that a 
        block-buy contract contributed to increased material costs for 
        the Virginia class submarine.\23\ Under this block-buy 
        contract, subcontracts for submarine materials were for single 
        ships spread over several years. According to the Navy, this 
        type of acquisition approach did not take advantage of bulk-buy 
        savings and incurred the risk that funding will not be 
        available in time to order the material when needed.
---------------------------------------------------------------------------
    \23\ GAO, Defense Acquisitions: Improved Management Practices Could 
Help Minimize Cost Growth in Navy Shipbuilding Programs, GAO-05-183 
(Washington, D.C.: Feb. 28, 2005).

    Based on our prior work, it is important for agencies to consider 
multiple factors such as estimated savings, the stability of the 
requirements, quantities required, and potential contract terms and 
conditions before committing to a contracting mechanism approach.
    In conclusion, as the Coast Guard and NOAA continue investing 
taxpayer dollars to modernize their fleets, they could benefit from the 
lessons learned from prior recapitalization and acquisition efforts. It 
is important for agencies to develop strategic and comprehensive 
approaches for managing their respective portfolios so that future 
requirements and capability gaps can be addressed in a timely manner. 
For each acquisition within their portfolios, agencies should ensure 
that they have established a sound business case before committing 
significant resources. Additionally, leveraging the Navy's resources 
and expertise in shipbuilding, such as by establishing integrated 
teams, could be beneficial by helping agencies be more efficient. 
Finally, when it comes to contracting mechanisms, factors such as 
estimated savings and program risks should be assessed before 
committing to a particular approach.
    Chairman Sullivan, Ranking Member Baldwin, and Members of the 
Subcommittee, this concludes my prepared statement. I would be pleased 
to respond to any questions.

    Senator Sullivan. Thank you, Ms. Mak, for that important 
testimony. We really appreciate it and look forward to some 
questions on it.
    Mr. O'Rourke.

  STATEMENT OF RONALD O'ROURKE, SPECIALIST IN NAVAL AFFAIRS, 
                 CONGRESSIONAL RESEARCH SERVICE

    Mr. O'Rourke: Chairman Sullivan, Ranking Member Baldwin, 
and Distinguished Members of the Subcommittee, thank you for 
the opportunity to appear before you today to testify on Coast 
Guard and NOAA Fleet Recapitalization.
    I've been covering military shipbuilding at CRS for 34 
years and as a part of that, I've been covering Coast Guard 
shipbuilding for 20 years now.
    Here are my main points. First, there has been some 
discussion recently of how certain Coast Guard programs would 
not be affordable if the Coast Guard procurement account in the 
coming years were limited to an average of about $1.1 billion a 
year.
    The notion that the account will be limited to about $1.1 
billion per year, however, is no longer strongly supported by 
recent data on funding requests, enacted funding levels, or 
projected future funding requests.
    More important, in relation to maintaining Congress's 
status as a co-equal branch of government, including the 
preservation and use of congressional powers and prerogatives, 
an analysis that assumes or predicts that future funding levels 
will resemble past funding levels can encourage an artificially 
narrow view of congressional options regarding future funding 
levels which could deprive Congress of agency in the exercise 
of its constitutional power to set funding levels and determine 
the composition of Federal spending.
    The Coast Guard is using a contract with options to build 
the first nine OPCs. A contract with options may look like a 
form of multiyear contracting but it's not multiyear 
contracting. A contract with options operates more like annual 
contracting and it cannot achieve the kinds of savings that are 
possible under multiyear contracting.
    Using true multiyear contracting across the 25 Ship OPC 
Program could reduce its costs by as much as $1 billion. That's 
enough to pay for an icebreaker or for the entire waterways 
commerce cutter program.
    This is a once-in-a-generation opportunity to save that 
much money on a Coast Guard acquisition program. Right now, 
however, because the Coast Guard is not using multiyear 
contracting for the OPC Program, we're on the cusp of not 
realizing a portion of that possible savings.
    There has been interest in the question of whether 
something can be done to shorten the gap between the end of the 
medium endurance cutter's nominal service lives and their 
replacement by new ships.
    There is something that could be done and that would be to 
increase the annual procurement rate of the replacement ships. 
That could be done by increasing the production rate at Eastern 
Shipbuilding if Eastern's capacity would permit that, by 
building OPCs at additional shipyards, such as Ballinger or 
Bath Iron Works, by building additional national security 
cutters at Ingalls, or by doing some combination of these 
things.
    One of the most notable changes in the Polar Icebreaker 
Program has been the reduction in their estimated procurement 
costs. The costs had earlier been estimated at roughly $1 
billion per ship but the Coast Guard and Navy informed CRS and 
CBO in March that they now believe the three heavy polar 
icebreakers could be acquired for an average of $700 million 
per ship. Other information identifies smaller reduction in 
procurement costs to something more than $900 million.
    Reductions in the estimated procurement cost strengthen the 
business case for the program. A reduction to $700 million 
would strengthen it substantially. The icebreaker's cost could 
be further reduced by procuring them under a block by contract 
and by procuring both heavy and medium polar icebreakers to a 
common design as recommended in the National Academy's report.
    There's a risk of the first icebreaker being delivered 
late. If a late delivery would extend the gap between the 
retirement of Polar Star and its replacement by the first new 
icebreaker, that could become an argument for starting 
construction of the new icebreaker as soon as its design is 
brought to a high level of completion and the ship is otherwise 
ready to begin construction.
    Finally, the NOAA Ship Recapitalization Plan presents some 
potential oversight issues for the Committee. One concerns the 
lack of visibility in NOAA's budget submission of the ship's 
unit procurement costs and the program's total procurement 
cost, which could affect the Committee's ability to conduct 
oversight of the program.
    Another concerns the plan to build the eight new ships to 
four designs rather than to a smaller number of designs which 
could reduce opportunities for achieving certain economies in 
the program.
    And the third concerns whether there are ways to use twin 
ship buys or multi-year contracting to reduce the cost of the 
ships without having to change very much the current plan to 
level fund the program at a figure of about $75 million a year.
    Mr. Chairman, this concludes my statement. Thank you again 
for the opportunity to testify, and I look forward to the 
Subcommittee's questions.
    [The prepared statement of Mr. O'Rourke follows:]

  Prepared Statement of Ronald O'Rourke, Specialist in Naval Affairs, 
                     Congressional Research Service
    Chairman Sullivan, Ranking Member Baldwin, distinguished members of 
the subcommittee, thank you for the opportunity to appear before you 
today to testify on Coast Guard and NOAA fleet recapitalization. Ship 
acquisition has been a major focus of my work as a CRS analyst on naval 
issues for the past 34 years. I have covered Coast Guard ship 
acquisition for Congress for 20 years\1\ and last testified before this 
committee on the issue in 2005.\2\ My biography is shown in Appendix A.
---------------------------------------------------------------------------
    \1\ See, for example:

       CRS Report 98-830 F, Coast Guard Integrated Deepwater 
System: Background and Issues for Congress, by Ronald O'Rourke, first 
version October 5, 1998, final (i.e., archived) version June 1, 2001;

       CRS Report RS21019, Coast Guard Deepwater Program: 
Background and Issues for Congress, by Ronald O'Rourke, first version 
September 25, 2001, final (i.e., archived) version December 8, 2006;

       CRS Report RL33753, Coast Guard Deepwater Acquisition 
Programs: Background, Oversight Issues, and Options for Congress, by 
Ronald O'Rourke, first version December 18, 2006, final (i.e., 
archived) version January 20, 2012;

       CRS Report R42567, Coast Guard Cutter Procurement: 
Background and Issues for Congress, by Ronald O'Rourke, first version 
June 13, 2012, current version August 3, 2018; and

       CRS Report RL34391, Coast Guard Polar Icebreaker 
Program: Background and Issues for Congress, by Ronald O'Rourke, first 
version February 26, 2008, current version August 3, 2018.
    \2\ See Statement of Ronald O'Rourke, Specialist in National 
Defense, Congressional Research Service, before the Senate Commerce, 
Science, and Transportation Committee, subcommittee on Fisheries and 
the Coast Guard, hearing on The Coast Guard's Revised Deepwater 
Implementation Plan, June 21, 2005, 15 pp.
---------------------------------------------------------------------------
    My CRS reports on Coast Guard cutter procurement and polar 
icebreaker procurement provide extensive discussions of the Coast 
Guard's National Security Cutter (NSC) program, Offshore Patrol Cutter 
(OPC) program, Fast Response Cutter (FRC) program and polar icebreaker 
program (recently renamed the Polar Security Cutter, or PSC, 
program).\3\ As requested by the subcommittee, this statement provides 
some focused observations regarding these programs as well as the Coast 
Guard's Waterways Commerce Cutter (WCC) program and NOAA's fleet 
recapitalization effort.
---------------------------------------------------------------------------
    \3\ See the final two reports cited above in footnote 1.
---------------------------------------------------------------------------
    Appendix B to this statement presents a general summary of some 
lessons learned in government shipbuilding. Appendix C presents some 
considerations relating to the use of warranties in government 
shipbuilding. Appendix D presents some considerations relating to 
avoiding procurement cost growth vs. minimizing procurement costs in 
government shipbuilding.
                   Coast Guard Fleet Recapitalization
Adequacy of Planned Quantities of NSCs, OPCs, and FRCs
    The Coast Guard's 91-ship program of record (POR) for general-
purpose cutters--which dates to 2004 and calls for a force of 8 NSCs, 
25 OPCs, and 58 FRCs--will provide substantially more capability than 
the force of older-generation cutters it will replace. At the same 
time, it can be useful to recall that Coast Guard studies have 
concluded that the planned total of 91 NSCs, OPCs, and FRCs would 
provide only 61 percent of the NSCs, OPCs, and FRCs that would be 
needed to fully perform the service's statutory missions in coming 
years, in part because Coast Guard mission demands are expected to be 
greater in coming years than they were in the past. As shown in Table 
1, the Coast Guard's 2011 Fleet Mix Analysis (FMA) Phase 2--the last 
general analysis of future Coast Guard ship force structure 
requirements to be publicly released by the Coast Guard--concluded that 
fully performing the Coast Guard's statutory missions in coming years 
would require a total of 149 NSCs, OPCs, and FRCs.\4\ This point may be 
particularly salient right now in connection with the NSC and FRC 
programs, procurement of which would end soon under the POR figures.
---------------------------------------------------------------------------
    \4\ For additional discussion, see Appendix A of CRS Report R42567, 
Coast Guard Cutter Procurement: Background and Issues for Congress, by 
Ronald O'Rourke.

                    Table 1. Program of Record Compared to Fleet Mix Analysis Phase 2 (2011)
----------------------------------------------------------------------------------------------------------------
                                                                              Refined Objective Mix  from Fleet
               Ship Type                         Program of Record              Mix Analysis,  Phase 2 (2011)
----------------------------------------------------------------------------------------------------------------
NSC                                                                      8                                    9
OPC                                                                     25                                   49
FRC                                                                     58                                   91
Total                                                                   91                                  149
----------------------------------------------------------------------------------------------------------------
Source: Coast Guard Fleet Mix Analysis, Phase 2, 2011, Table ES-2 on p. iv. For additional discussion, see
  Appendix A of CRS Report R42567, Coast Guard Cutter Procurement: Background and Issues for Congress, by Ronald
  O'Rourke.

PC&I Account Funding Levels
    There has been some discussion recently of how certain Coast Guard 
procurement programs would not be affordable if the Coast Guard's 
Procurement, Construction, and Improvements (PC&I) account in coming 
years were limited to an average of about $1.1 billion per year.\5\ An 
average PC&I funding level of about $1.1 billion per year would have 
that effect. In 2013, then-Coast Guard Commandant Robert Papp testified 
that an annual PC&I funding level of about $1 billion per year ``almost 
creates a death spiral for the Coast Guard.'' \6\ The notion that the 
PC&I funding level will be limited to an average of about $1.1 billion 
per year, however, is no longer strongly supported by recent data on 
Coast Guard annual funding requests,\7\ annual enacted funding 
levels,\8\ or projected future annual funding requests as shown in 
Coast Guard five-year Capital Investment Plans (CIPs).\9\
---------------------------------------------------------------------------
    \5\ See Government Accountability Office, Coast Guard 
Acquisitions[:] Actions Needed to Address Longstanding Portfolio 
Management Challenges, GAO-18-454, July 2018, Figure 4 on page 22, and 
GAO's spoken testimony during the question-and-answer portion of a July 
24, 2018, hearing on Coast Guard acquisition programs and mission 
balance and effectiveness before the Coast Guard and Maritime 
Transportation subcommittee of the House Transportation Committee, 
during which Figure 4, which depicts a funding funnel, was shown on the 
hearing room's display screens. (The funnel, which compares an annual 
PC&I account funding figure of $1.1 billion to a higher figure of $2 
billion consistent with the Coast Guard's preferred PC&I account annual 
funding level, is not drawn to scale: Although $1.1 billion is 55 
percent of $2 billion, the narrower $1.1-billion bottom of the funnel 
has an opening with a diameter than is no more than 22 percent as wide 
as that of the larger, $2-billion top of the funnel.) In report GAO-18-
454, see also Figure 3 on page 15, which indicates an average requested 
funding level of about $1.1 billion per year for the period FY 2014-FY 
2018, as well as the discussion on pages 13-14.
    \6\ Admiral Papp's spoken testimony during a May 14, 2013, hearing 
on the Coast Guard's proposed FY 2014 budget before the Homeland 
Security subcommittee of the Senate Appropriations Committee, as 
reflected in the transcript for the hearing.
    \7\ While the Coast Guard's annual budget submissions for the five-
year period FY 2014 through FY 2018 requested an average of about 
$1,065 million per year for the PC&I account, the Coast Guard's most 
recent request for the account--the request in its proposed FY 2019 
budget--is for $1,886.8 million (a figure that reflects a late addition 
of $720 million to the request for the polar icebreaker program), and 
the Coast Guard's annual budget submissions for the five-year period FY 
2009-FY 2013 requested an average of about $1,322 million for the 
account.
    \8\ Over the last 10 Fiscal Years (FY 2009-FY 2018), enacted 
funding levels for the PC&I account (including rescissions of 
unobligated balances) have averaged about $1,560 million per year. Only 
once during this period, in FY 2015, was the enacted figure less than 
$1,200 million (it was $1,166.6 million that year). In the other nine 
years, it was more than $1,200 million, and sometimes substantially 
more. The figures for the three most recent Fiscal Years--FY 2016, FY 
2017, and FY 2018--were $1,928.4 million, $1,370.0 million, and 
$2,282.4 million, respectively.
    \9\ Although the projected funding requests in the FY 2014, FY 
2015, and FY 2016 CIPs (showing figures for FY 2014-FY 2018, FY 2015-FY 
2019, and FY 2016-FY 2020, respectively), averaged about $1,114.8 
million per year, the projected funding requests in the FY 2017 CIP 
(for the period FY 2017-FY 2021) averaged about $1,427.5 million, and 
those in the FY 2018 CIP (for the period FY 2018-FY 2022) averaged 
about $1,533.1 million.
---------------------------------------------------------------------------
    In assessing future funding levels for Executive Branch agencies, a 
common practice is to assume or predict that the figure in coming years 
will likely be close to where it has been in previous years. While this 
method can be of analytical and planning value, for an agency like the 
Coast Guard, which goes through periods with less acquisition of major 
platforms and periods with more acquisition of major platforms, this 
approach might not always be the best approach, at least for the PC&I 
account.
    More important, in relation to maintaining Congress's status as a 
co-equal branch of government, including the preservation and use of 
congressional powers and prerogatives, an analysis that assumes or 
predicts that future funding levels will resemble past funding levels 
can encourage an artificially narrow view of congressional options 
regarding future funding levels, which could deprive Congress of agency 
in the exercise of its constitutional power to set funding levels and 
determine the composition of Federal spending.
    As one example of how past funding levels were not the best guide 
to future funding levels, and of how Congress has exercised its 
constitutional power to set funding levels and determine the 
composition of Federal spending, during the period FY 2008-FY 2015, 
when the Navy's shipbuilding account averaged about $14.7 billion per 
year in then-year dollars, there was recurring discussion about the 
challenge of increasing the account to the substantially higher annual 
funding levels that would soon be needed to begin implementing the 
Navy's 30-year shipbuilding plan. Projections were prepared by CBO 
showing the decline in the size of the Navy that would occur over time 
if funding levels in the shipbuilding account did not increase 
substantially from the average level of about $14.7 billion per year. 
Congress, after assessing the situation, increased the shipbuilding 
account to $18.7 billion in FY 2016, $21.2 billion in FY 2017, $23.8 
billion in FY 2018, and $24.2 billion in FY 2019. These increasing 
funding levels occurred even though the Budget Control Act, as amended, 
remained in operation during those years. At the most recent figure of 
$24.2 billion, the Navy's shipbuilding account is now 74 percent 
greater in then-year dollars than it was as recently as FY 2010.
Coast Guard's Non-Use of Multiyear Contracting
    In connection with my work on ship acquisition, I maintain the CRS 
report on multiyear procurement (MYP) and block buy contracting.\10\ In 
both that report and in testimony I have given to other committees in 
recent years on Coast Guard ship acquisition,\11\ I have noted the 
stark contrast between the Navy--which uses multiyear contracting (in 
the form of MYP or block buy contracting) extensively to reduce its 
ship-and aircraft-procurement costs by billions of dollars--and the 
Coast Guard, which to date has never used multiyear contracting in one 
of its ship or aircraft acquisition programs.
---------------------------------------------------------------------------
    \10\ CRS Report R41909, Multiyear Procurement (MYP) and Block Buy 
Contracting in Defense Acquisition: Background and Issues for Congress, 
by Ronald O'Rourke and Moshe Schwartz.
    \11\ See, for example, CRS Testimony TE10020, Building a 21st 
Century Infrastructure for America: Coast Guard Sea, Air, and Land 
Capabilities: Part II, by Ronald O'Rourke, and CRS Testimony TE10004, 
The Status of Coast Guard Cutter Acquisition Programs, by Ronald 
O'Rourke.
---------------------------------------------------------------------------
    The Navy in recent years, with congressional approval, has used 
multiyear contracting for, among other things, all three of its year-
to-year shipbuilding programs--the Virginia-class attack submarine 
program, the DDG-51 destroyer program, and the Littoral Combat Ship 
(LCS) program.\12\ The Navy has been using multiyear contracting for 
the Virginia-class and DDG-51 programs more or less continuously since 
the 1990s. Savings from the use of MYP recently have, among other 
things, helped Congress and the Navy to convert a nine-ship buy of DDG-
51 class destroyers in FY 2013-FY 2017 into a 10-ship buy, and a nine-
ship buy of Virginia-class attack submarines in FY 2014-FY 2018 into a 
10-ship buy. The Navy is also now using block buy contracting in the 
John Lewis (TAO-205) class oiler program, and is considering or 
anticipating using them for procuring LPD-17 Flight II amphibious 
ships, FFG(X) frigates, and Columbia-class ballistic missile 
submarines. The Navy's use or prospective use of multiyear contracting 
for its year-to-year shipbuilding programs is arguably now almost more 
of a rule than an exception in Navy shipbuilding. For Congress, 
granting approval for using multiyear contracting involves certain 
tradeoffs, particularly in connection with retaining year-to-year 
control of funding.\13\ In the case of Navy shipbuilding, Congress has 
repeatedly accepted these tradeoffs.
---------------------------------------------------------------------------
    \12\ The term year-to-year shipbuilding program is used here to 
mean a shipbuilding program in which at least one ship of that kind is 
procured each year. The Coast Guard plans to execute the OPC program as 
a year-to-year shipbuilding program.
    \13\ From a congressional perspective, tradeoffs in making greater 
use of multiyear contracting include the following: reduced 
congressional control over year-to-year spending and tying the hands of 
future Congresses; reduced flexibility for making changes in 
acquisition programs in response to unforeseen changes in strategic or 
budgetary circumstances (which can cause any needed funding reductions 
to fall more heavily on acquisition programs not covered by multiyear 
contracts); a potential need to shift funding from later Fiscal Years 
to earlier Fiscal Years to fund EOQ purchases of components; the risk 
of having to make penalty payments to shipbuilders if multiyear 
contracts need to be terminated due to unavailability of funds needed 
for the continuation of the contracts; and the risk that materials and 
components purchased for ships to be procured in future years might go 
to waste if those ships are not eventually procured. Congress has 
considered these tradeoffs in deciding whether to grant the Navy 
authority for using multiyear contracting in the service's shipbuilding 
and other acquisition programs.
---------------------------------------------------------------------------
    In contrast with Navy practice, the Coast Guard often uses 
contracts with options in its ship-procurement programs. Contracts with 
options can be referred to as multiple-year contracts, but they are not 
multiyear contracts. Instead, contracts with options operate more like 
annual contracts, and they cannot achieve the kinds of savings that are 
possible with multiyear contracts.\14\ Like the other military 
services, the Coast Guard has statutory authority to use MYP 
contracting and can be granted authority by Congress to use block buy 
contracting.
---------------------------------------------------------------------------
    \14\ For additional discussion, see CRS Report R41909, Multiyear 
Procurement (MYP) and Block Buy Contracting in Defense Acquisition: 
Background and Issues for Congress, by Ronald O'Rourke and Moshe 
Schwartz, particularly the section entitled ``MYP and BBC vs. Contracts 
with Options.''
---------------------------------------------------------------------------
National Security Cutter (NSC) Program
    The NSCs were procured at irregular rather than regular intervals, 
and they were procured with annual rather than multiyear contracts. 
Both of these aspects of their acquisition made the ships more 
expensive. If NSCs had instead been procured at regular intervals under 
multiyear contracts that included authority for economic order quantity 
(EOQ) purchases (i.e., up-front batch orders of selected components for 
some or all of the ships covered under the contract), the reduction in 
their combined procurement cost could have been substantial--possibly 
enough (or even more than enough) to have paid for one of the 11 NSCs 
that have been fully funded through FY 2018.
    As discussed below in the section on the OPC program, building 
additional NSCs is one option for acquiring replacements for retiring 
medium-endurance cutters more quickly than currently planned, so as to 
close more quickly any gap in time between retirements of the medium-
endurance cutters and the entry into service of their replacements. The 
NSCs are bigger and in some respects more capable than OPCs, and they 
would individually be more expensive to procure and to operate and 
support than OPCs. The difference in size, capability, and cost between 
the NSC and OPC design is not insignificant, but neither is it a night-
and-day difference. With an estimated full-load displacement of 3,500 
to 3,730 tons,\15\ for example, OPCs are to be roughly 80 percent as 
large as NSCs, which have a full load displacement of about 4,500 
tons.\16\ In terms of size, capability, and cost, the OPC is a lot 
closer to the NSC than it is to the FRC, which is a large patrol craft 
with a full load displacement of 353 tons.
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    \15\ As of May 26, 2017, the OPC's light ship displacement (i.e., 
its ``empty'' displacement, without fuel, water, ballast, stores, and 
crew) was preliminarily estimated at about 2,640 to 2,800 tons, and its 
full load displacement was preliminarily estimated at about 3,500 to 
3,730 tons. (Source: Figures provided to CRS by Coast Guard liaison 
office, May 26, 2017.)
    \16\ Source for figure of 4,500 tons: Coast Guard NSC fact sheet, 
accessed October 3, 2018, at: https://www.dcms.uscg.mil/Portals/10/CG-
9/Acquisition%20PDFs/Factsheets/NSC.pdf?ver=2017-04-24-142526-023.
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    Procurement of NSCs for replacing retiring Hamilton-class high-
endurance cutters is approaching its end. If additional NSCs were 
procured in the near term in parallel with OPC procurement as part of a 
strategy for more quickly replacing retiring medium-endurance cutters, 
the additional NSCs could be built using the currently open NSC 
production line, avoiding a break in that production line and thereby 
maximizing production learning curve benefits. The procurement cost of 
any additional NSCs might be further reduced by procuring them at 
regular intervals and using an MYP contract.
OPC Program
    The Coast Guard is using a contract with options to procure the 
first nine OPCs. As stated earlier, although a contract with options 
might look like a multiyear contract, it is not a form of multiyear 
contracting. A contract with options operates more like annual 
contracting and cannot achieve the kinds of savings that are possible 
with multiyear contracting.\17\
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    \17\ For additional discussion, see CRS Report R41909, Multiyear 
Procurement (MYP) and Block Buy Contracting in Defense Acquisition: 
Background and Issues for Congress, by Ronald O'Rourke and Moshe 
Schwartz, particularly the section entitled ``MYP and BBC vs. Contracts 
with Options.''
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    Using multiyear contracting in the 25-ship OPC program--
specifically, block buy contracting with EOQ authority for the initial 
ships in the program, followed by either block buy contracting with EOQ 
authority or MYP contracting for later ships in the program--rather 
than annual contracting might reduce the total acquisition cost of the 
program by about $1 billion. This potential savings of $1 billion--a 
figure equal to or greater than the acquisition cost of either a polar 
icebreaker or a 35-ship Waterways Commerce Cutter program--represents a 
rare opportunity for using multiyear contracting to reduce the cost of 
an individual Coast Guard acquisition program by such an amount.
    Acquiring the first nine ships in the OPC program under the current 
contract with options could forego roughly $350 million of the $1 
billion in potential savings. Much of this $350 million in potential 
savings might be recaptured by renegotiating the current contract so as 
to convert it, with congressional approval, into a block buy contract 
with EOQ authority. If acquisition regulations prohibit such a 
renegotiation, the Coast Guard alternatively could choose to not 
exercise most of the options in the current contract and hold a new 
competition for building the current NSC design under a block buy 
contract. The current OPC builder--Eastern Shipbuilding of Panama City, 
FL--would be well positioned to win such a competition, since it would 
involve building Eastern's own design and Eastern would already have 
moved down the initial (i.e., the steepest) part of the learning curve 
for building the design.
    The current planned procurement profile for the OPC, which reaches 
a maximum projected rate of two ships per year, would deliver OPCs many 
years after the end of the originally planned service lives of the 
medium-endurance cutters that they are to replace. Coast Guard 
officials have testified that the service plans to extend the service 
lives of the medium-endurance cutters until they are replaced by OPCs. 
There will be maintenance and repair expenses associated with extending 
the service lives of medium-endurance cutters, and if the Coast Guard 
does not also make investments to increase the capabilities of these 
ships, the ships may have less capability in certain regards than OPCs.
    One possible option for addressing this situation would be to 
increase the maximum annual procurement rate of the replacement ships 
from the currently planned two ships per year to a higher figure. 
Increasing the rate to three or four ships per year, for example, could 
result in the 25th ship being delivered about four years or six years 
sooner, respectively, than under the currently planned maximum rate. 
Increasing the procurement rate would require a substantial increase to 
the Coast Guard's AC&I account, which gets back to the issue discussed 
earlier of future funding levels for that account and Congress's agency 
in setting funding levels and determining the composition of Federal 
spending.
    From a production point of view, there are at least three options 
for increasing the annual procurement rate of replacement ships from 
the currently planned two ships per year to a higher rate, so as to 
close any gap in time between the retirements of medium-endurance 
cutters and the entry into service of their replacements. These options 
are as follows:

   increasing the annual OPC production rate at Eastern 
        Shipbuilding, if Eastern's capacity would permit this;

   building additional OPCs at one or two additional shipyards, 
        such as Bollinger Shipyards of Lockport, LA and/or General 
        Dynamics' Bath Iron Works (GD/BIW) of Bath, ME--the two other 
        finalists in the OPC competition; and

   building additional NSCs at Huntington Ingalls Industries/
        Ingalls Shipbuilding (HII/Ingalls).

    These three options are not mutually exclusive--they could be 
pursued in combination. Additional OPCs built at Bollinger and/or GD/
BIW could be built to the OPC designs that those two shipbuilders 
submitted for the OPC competition. (Those designs are presumably 
optimized for the production facilities at Bollinger and GD/BIW. The 
Coast Guard, moreover, currently does not have data rights for the 
complete vessel design for Eastern's OPC design.\18\) Building 
additional OPCs at Bollinger and/or GD/BIW to the designs developed by 
those two shipbuilders would result in a fleet with two or three 
classes of OPCs, a situation that would increase OPC life-cycle 
operation and support costs and complicate the training and assignment 
of OPC crew members. These additional life-cycle costs and 
complications, however, might be deemed acceptable in return for 
avoiding the costs and risks of extending the service lives of medium-
endurance cutters and shortening any gap in time between the retirement 
of medium-endurance cutters and the entry into service of their 
replacements. The Navy decided in 2010 to fill its requirement for LCSs 
by building two different LCS designs at the same time, and did so 
knowing that this would result in some additional life-cycle operation 
and support costs and crewing-related complications compared to the 
option of building all LCSs to a single design.\19\ The option of 
building additional NSCs as replacements for retiring medium-endurance 
cutters was discussed above in the section on the NSC program.
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    \18\ Source regarding data rights: E-mail from Coast Guard liaison 
office to CRS, September 6, 2017.
    \19\ For additional discussion of the LCS program, see CRS Report 
RL33741, Navy Littoral Combat Ship (LCS) Program: Background and Issues 
for Congress, by Ronald O'Rourke. A total of 35 LCSs have been funded 
through FY 2019. Of these 35 ships, 17 will be built to one of the LCS 
designs, and 18 will be built to the other.
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FRC Program
    With 50 FRCs procured through FY 2018 and four more requested for 
FY 2019, the FRC is approaching the 58-ship figure called for in the 
Coast Guard's program of record. As shown earlier in Table 1, however, 
the Coast Guard's 2011 Fleet Mix Analysis Phase II concluded that a 
total of 91 FRCs would be needed as part of an overall force of 149 
general-purpose cutters to fully perform the service's statutory 
missions in coming years.
    Procuring additional FRCs beyond the 58th would require additional 
procurement funding, which gets back to the issue discussed earlier of 
future funding levels for the PC&I account and Congress's agency in 
setting funding levels and determining the composition of Federal 
spending. As with the option discussed earlier of procuring additional 
NSCs, procuring additional FRCs immediately following the procurement 
of the 58th FRC would permit them to be built using the currently open 
NSC production line, avoiding a break in that production line and 
thereby maximizing production learning curve benefits. And as with the 
NSC option discussed earlier, the cost of any such additional FRCs 
could be reduced by procuring them under an MYP or block buy contract. 
The resulting increase in Coast Guard force structure from 58 FRCs to 
some higher number would increase long-term Coast Guard operation and 
support costs above currently planned levels.
Polar Security Cutter (PSC) (aka Polar Icebreaker)
Reduction in Estimated Procurement Cost and Business Case
    One of the most notable changes in the PSC program over the last 
year or two has been the reduction in the estimated unit procurement 
cost of the ships. The procurement cost of a new heavy polar icebreaker 
had earlier been estimated informally at roughly $1 billion, but the 
Coast Guard and Navy informed CRS and CBO in March 2018 that they now 
believe that three polar icebreakers could be acquired for a total cost 
of about $2.1 billion, or an average of about $700 million per 
ship.\20\ (The first ship will cost more than the other two because it 
will incorporate design costs for the class and be at the start of the 
production learning curve for the class.) Other information identifies 
a smaller reduction in procurement cost, to something more than $900 
million per ship.\21\ Other things held equal, reductions in the 
estimated unit procurement cost of the polar icebreaker strengthen the 
business case for the program. A reduction in estimated unit 
procurement cost to an average of $700 million per ship would 
strengthen it substantially.
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    \20\ Source: March 16, 2018, Coast Guard-Navy briefing to CRS and 
CBO on the polar icebreaker program. For further discussion, see the 
section entitled ``Estimated Acquisition Cost Has Declined 
Substantially'' in CRS Report RL34391, Coast Guard Polar Icebreaker 
Program: Background and Issues for Congress, by Ronald O'Rourke.
    \21\ May 2018 GAO report states that the acquisition program 
baseline (APB) approved for the polar icebreaker program in January 
2018 estimated the program's acquisition cost at $3.207 million, and 
that the ``current estimate'' of the program's acquisition as of 
January 2018 was $2,789 million, or an average of about $930 million 
per ship. (Government Accountability Office, Homeland Security 
Acquisitions[:] Leveraging Programs' Results Could Further DHS's 
Progress to Improve Portfolio Management, GAO-18-339SP, May 2018, p. 
85.) See also Government Accountability Office, Coast Guard 
Acquisitions[:] Actions Needed to Address Longstanding Portfolio 
Management Challenges, GAO-18-454, July 2018, which states on page 18 
that ``The polar icebreaker program has an estimated total acquisition 
cost of more than $3 billion. . ..''
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Option for Block Buy Contract
    The baseline plan for the PSC program calls for acquiring the ships 
using a contract with options, but Coast Guard and Navy officials are 
open to the idea of instead using a block buy contract to acquire at 
least some of the ships, and requested information on this possibility 
as part of the request for proposals (RFP) for the PSC program that was 
released on March 2, 2018. Using the above $2.1 billion estimated cost 
for a three-ship procurement of PSCs, and based on savings estimates 
provided by the Navy in the past for Navy shipbuilding programs that 
were being proposed for multiyear contracting, using a block buy 
contract that included EOQ purchases rather than a contract with 
options might reduce the combined acquisition cost of three PSCs by 
upwards of 7 percent, which could equate to a savings of upwards of 
$150 million.
    A congressionally mandated July 2017 National Academies of 
Sciences, Engineering, and Medicine (NASEM) report on acquisition and 
operation of polar icebreakers states (emphasis as in original):

        3. Recommendation: USCG should follow an acquisition strategy 
        that includes block buy contracting with a fixed price 
        incentive fee contract and take other measures to ensure best 
        value for investment of public funds.

        Icebreaker design and construction costs can be clearly 
        defined, and a fixed price incentive fee construction contract 
        is the most reliable mechanism for controlling costs for a 
        program of this complexity. This technique is widely used by 
        the U.S. Navy. To help ensure best long-term value, the 
        criteria for evaluating shipyard proposals should incorporate 
        explicitly defined lifecycle cost metrics. . . .

        A block buy authority for this program will need to contain 
        specific language for economic order quantity purchases for 
        materials, advanced design, and construction activities. A 
        block buy contracting program with economic order quantity 
        purchases enables series construction, motivates competitive 
        bidding, and allows for volume purchase and for the timely 
        acquisition of material with long lead times. It would enable 
        continuous production, give the program the maximum benefit 
        from the learning curve, and thus reduce labor hours on 
        subsequent vessels. . ..

        If advantage is taken of learning and quantity discounts 
        available through the recommended block buy contracting 
        acquisition strategy, the average cost per heavy icebreaker is 
        approximately $791 million, on the basis of the acquisition of 
        four ships.\22\
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    \22\ National Academies of Sciences, Engineering, and Medicine, 
Division on Earth and Life Studies and Transportation Research Board, 
Acquisition and Operation of Polar Icebreakers: Fulfilling the Nation's 
Needs, Letter Report, with cover letter dated July 11, 2017, pp. 14, 
15.

    Although Coast Guard officials have expressed interest in using a 
block buy contract for procuring PSCs, they are considering the option 
of procuring the first PSC under a single-ship contract and then using 
a block buy contract to procure subsequent PSCs. In support of that 
option, Coast Guard officials have noted the risks involved in building 
a lead ship and the fact that the United States has not built a heavy 
polar icebreaker in more than 40 years. Opponents of including the 
first PSC in a block buy contract might argue, for example, that 
problems with the design of PSC components might be transmitted from 
the first PSC to later PSCs by up-front EOQ purchases of those 
components made under a block buy contract. They might additionally 
argue that excluding the first PSC from a block buy contract preserves 
more government flexibility on whether and when to procure a second 
PSC, which could be advantageous for responding to potential changes in 
operational needs or budgetary circumstances.
    Supporters of including the first PSC in a block buy contract could 
argue that block buy contracting was invented to a large degree 
expressly to permit a lead ship to be included in the contract, that 
the Navy has included lead ships in block buy contracts in the 
Virginia-class attack submarine program and the TAO-205 class oiler 
program, and that the Navy is considering using a block buy contract 
that includes the lead ship for procuring the initial ships in the 
Columbia-class ballistic missile submarine program. The comparison with 
the Navy's plans for the Columbia class, they could argue, is of 
particular note, because the United States has not procured the lead 
ship of a new class of ballistic missile submarines in more than 40 
years, the Columbia-class design is more complex in certain regards 
than the PSC design, and the Columbia-class design will incorporate a 
new-design electric-drive propulsion plant--something that the United 
States has never before done on a series-production nuclear-powered 
submarine.
    The lead ship in the PSC program will carry a risk of requiring 
design changes to fix problems in the design that are only discovered 
as a result of building the design. That risk, however, will exist 
regardless of whether the lead ship is built under a single-ship 
contract of a block buy contract, and it is not clear how much more 
chance there would be under a block buy contract of transmitting any 
such design problems to the second PSC, because the Coast Guard's 
notional schedule for the PSC program calls for procuring the second 
ship about 18 months after the first (i.e., while construction of the 
first PSC is still in progress). To the extent that there would be a 
greater chance of transmitting design problems to the second PSC under 
a block buy contract, the question would then become one of weighing 
the potential cost of fixing those design problems against the added 
economies of including the first PSC in a block buy contract. 
Supporters of including the lead ship in a block buy contract could 
argue that the risks of encountering a design problem in the first ship 
have been mitigated by the industry's shift since the last polar 
icebreakers were built from paper designs to computer-aided design, by 
the Navy's involvement in the PSC program, and by the PSC program's 
strategy of using a parent design (i.e., an existing polar-capable 
icebreaker design) as the basis for the PSC design. As shown in 
Appendix B, a key lesson-learned in government shipbuilding is to bring 
the design of the ship in question to a high level of completion before 
beginning construction of the ship, precisely so as to minimize the 
risk of design problems. Supporters of including the lead ship in a 
block buy contract could argue that if there is a significant risk of 
substantial design problems in the lead ship, that is not an argument 
against including the lead ship in a block buy contract--it is an 
argument against beginning construction of the ship under any form of 
contract.
Risk of Delayed Delivery of Lead Ship
    GAO has identified a risk of the first PSC being delivered 
late.\23\ I agree with that assessment. The Navy's experience in 
building lead ships suggests that there is a substantial risk of the 
lead PSC being delivered late--perhaps as much as a year or more later 
than scheduled. A late delivery could equate to an increase in the cost 
of building the ship, because it could reflect having to use more labor 
hours to build the ship than had been estimated, and because the ship 
will absorb more of the shipyard's overhead costs by remaining in the 
shipyard for a longer period of time. The government can insulate 
itself against the risk of such cost growth by using a fixed-price 
contract to build the ship (which the Coast Guard and Navy plan to do).
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    \23\ See GAO's spoken testimony during the question-and-answer 
portion of a July 24, 2018, hearing on Coast Guard acquisition programs 
and mission balance and effectiveness before the Coast Guard and 
Maritime Transportation subcommittee of the House Transportation 
Committee, as reflected in the transcript of the hearing.
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    The possibility of a late delivery is something the Coast Guard and 
Congress may consider preparing for in terms of investments for 
maintaining Polar Star as an operational ship and/or seeking a short-
term bridging charter of a foreign polar icebreaker. To the extent that 
a delay in delivering the lead ship would extend a gap in time between 
the retirement of Polar Star and the entry into service of the first 
PSC, that could become an argument for starting construction of the 
lead PSC as soon as its design is brought to a high level of completion 
and the ship is otherwise ready to begin construction.
Option for Using a Common Design for Heavy and Medium PSCs
    The Coast Guard envisages procuring up to three new medium 
icebreakers after it procures three new heavy polar icebreakers--a plan 
known as 3+3. The July 2017 NASEM report concluded that notional 
operational requirements for new medium polar icebreakers would result 
in ships that would not be too different in size from new heavy polar 
icebreakers. (That is not be particularly surprising--the Coast Guard's 
current medium polar icebreaker, Healy, is actually somewhat larger 
than the Coast Guard's heavy polar icebreaker, Polar Star. Healy has 
less icebreaking capability than Polar Star, but more capacity for 
supporting onboard science operations.) Given this probable similarity 
in size, the NASEM report recommended building a single medium polar 
icebreaker to the same common design as the three new heavy polar 
icebreakers (i.e., 4+0), and operating these four new ships in 
conjunction with Healy to produce a five-ship polar icebreaker fleet. 
The 4+0 production strategy, the report concluded, would reduce the 
cost of the medium icebreaker by avoiding the cost of developing a 
second icebreaker design and making the medium polar icebreaker the 
fourth ship on an existing production learning curve rather than the 
first ship on a new production learning curve. An abstract from the 
NASEM report on this proposal is shown in Appendix E to this statement.
    If policymakers decide to procure a second or third new medium 
polar icebreaker, the same general approach recommended by the NASEM 
report could be followed, leading to a 5+0 or 6+0 acquisition. The 
potential percentage savings under a five-or six-ship block buy 
contract with EOQ authority could be greater than the figure of upwards 
of 7 percent mentioned earlier for a three-ship block buy--they could 
be closer to 10 percent. Building a single common icebreaker design 
rather than two designs to meet needs for heavy and medium polar 
icebreakers might also reduce life-cycle operation and support costs.
    An April 12, 2018, press report states:

        As the Coast Guard prepares to review industry bids for a new 
        heavy polar icebreaker, the service is keeping its options open 
        for the right number and mix of polar icebreakers it will need 
        in the future, Adm. Paul Zukunft, the [then-]commandant of the 
        Coast Guard, said on Wednesday [April 11].

        The Coast Guard's program of record is for three heavy and 
        three medium polar icebreakers but Zukunft said the ``jury is 
        still out'' whether that will remain so. Right now, the service 
        is aiming toward building three new heavy icebreakers, but it 
        might make sense just to keep building these ships, he told 
        reporters at a Defense Writers Group breakfast in Washington, 
        D.C.

        Zukunft said that ``when you start looking at the business case 
        after you build three, and then you need to look at what is the 
        economy of scale when you start building heavy icebreakers, and 
        would it be less expensive to continue to build heavies and not 
        mediums.'' He added that the heavy icebreakers provide more 
        capability, and if the price is ``affordable'' and in ``the 
        same range'' as building medium icebreakers, then ``maybe you 
        end up with one class of heavy icebreakers.''

        Building only one class of ships has a number of advantages in 
        terms of maintenance, crew familiarity, configuration 
        management, and more, he said. A decision on what the future 
        icebreaker fleet will consist of is ``still probably several 
        years out. . .. but that's one option that we want to keep open 
        going forward,'' Zukunft said.\24\
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    \24\ Calvin Biesecker, ``Coast Guard Leaving Options Open For 
Future Polar Icebreaker Fleet Type,'' Defense Daily, April 12, 2018. 
Ellipsis as in original.
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WCC Program
    The WCC program--the program to replace the Coast Guard's current 
35-ship inland waterways fleet--is a smaller program than those 
discussed above. With a notional procurement cost of roughly $25 
million per cutter, a 35-ship replacement program might have a total 
acquisition cost of roughly $900 million.\25\ Although the scale of the 
program is more modest than that of the NSC, OPC, and FRC programs, the 
WCC program is of importance in terms of its economic benefit to the 
Nation (by supporting waterborne commerce) and the bidding opportunity 
it will provide to U.S. shipyards that are not capable of building 
larger Coast Guard cutters.
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    \25\ Source for $25 million figure: Spoken testimony of Coast Guard 
Commandant Karl Schultz during the question-and-answer portion of a 
September 16, 2018, hearing on Coast Guard modernization and 
recapitalization before the Coast Guard and Maritime Transportation 
subcommittee of the House transportation and Infrastructure Committee, 
as reflected in the transcript of the hearing. The Commandant stated: 
``I'm loathed to put a number out, but I think you're talking a $25 
million, plus or minus, [cost per] ship.'' The planned number of new 
replacement WCCs has not yet been determined and could turn out to be 
something other than 35. GAO states that ``according to Coast Guard 
officials, the preliminary rough order of magnitude estimate for total 
acquisition cost is $1.1 billion.'' Government Accountability Office, 
Coast Guard Acquisitions[:] Actions Needed to Address Longstanding 
Portfolio Management Challenges, GAO-18-454, July 2018, p. 19.
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    As the Coast Guard begins to develop the details of this program, 
potential oversight issues for the subcommittee could include, among 
other things, the planned number of replacement cutters (which has not 
yet been determined and could turn out to be something other than 35), 
planned annual procurement quantities and the resulting schedule for 
replacing the existing ships, whether to develop a new design or 
instead use a parent design, the number of shipyards to be used to 
build the ships, and the contracting strategy, including whether to use 
multiyear contracting.
                      NOAA Fleet Recapitalization
    NOAA is now in the opening stages of its effort to procure eight 
new ships to replace eight aged ships within its 16-ship research 
fleet. Current plans call for the eight-ship recapitalization effort to 
be level-funded at $75 million per year. Building these ships could 
provide work to shipyards that are not capable of building larger Navy 
or Coast Guard ships. They could also help a shipyard involved in 
building larger Navy or Coast Guard ships to fill in temporary dips in 
their Navy or Coast Guard workloads, which might permit the Navy or 
Coast Guard ships in question to be built at lower cost. With 
procurement of the eight new NOAA ships now beginning, the effort 
presents some potential oversight issues for the subcommittee.
Unit Procurement Cost and Total Program Procurement Cost
    One of these concerns the visibility of the estimated unit 
procurement costs of the new ships and the estimated total procurement 
cost of the eight-ship effort. These figures--which are basic points of 
information for Congress for supporting potential consideration of 
budget tradeoffs and for use as baselines in monitoring program 
execution--are not clearly visible in NOAA's FY 2019 budget 
justification book. It is difficult, moreover, to calculate what the 
unit procurement cost might be using the information in the budget 
justification book, since the program is level-funded at $75 million 
per year, there is a different combination of activities to be funded 
each year under that funding figure, and the individual costs of these 
activities are not broken out. One option the subcommittee may wish to 
consider would be to request or direct NOAA to include the ships' 
estimated unit procurement costs and the program's estimated total 
procurement cost in its annual budget justification book.
Number of New Designs
    A second potential oversight issue for the subcommittee concerns 
the number of new designs that NOAA is planning to use for building for 
the eight new ships. NOAA is currently planning to build the new ships 
to four designs, meaning an average of two ships per design. Compared 
to a strategy of building the eight ships to fewer than four designs, 
NOAA's planned approach could increase total design costs, reduce 
opportunities for achieving shipyard production learning curve 
benefits, and reduce economies of scale in life-cycle operation and 
support costs.
    In a telephone consultation with CRS, NOAA officials stated that 
the option of building the eight ships to a smaller number of designs 
was considered for exactly these reasons, but that the decision was to 
instead plan for four different designs because of the differing 
operational requirements of the eight ships. Building a common design 
capable of handling these differing requirements, NOAA stated, would 
result in a design that would be bigger--and thus more expensive both 
to procure and to operate and support--than would be needed for some of 
the eight ships, and these additional procurement and life-cycle 
operation and support costs were greater than the potential savings of 
building the ships to a smaller number of designs.\26\ That explanation 
is quite plausible. One option the subcommittee may wish to consider 
would be to request or direct NOAA to provide the details of its 
analysis on the comparative design, procurement, and life-cycle 
operation and support costs of building four designs vs. a smaller 
number of designs, so that the subcommittee, as a matter of due 
diligence, can examine the Coast Guard's analysis of this issue.
---------------------------------------------------------------------------
    \26\ Source: Telephone conversation between CRS and NOAA September 
28, 2018.
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Multiple-Ship Buys or Block Buy Contracting
    NOAA's current plan is to use a series of contracts with options to 
procure the eight new ships.\27\ There could, for example, be four 
contracts (one for each design), with each contract being for the 
design and construction of one ship, with an option for building a 
second. This approach would preserve more government flexibility in 
deciding whether to procure a second ship to a given design, provide 
multiple bidding opportunities for shipyards interested in building the 
ships, and create a potential for building the ships in multiple 
shipyards, all of which policymakers may view as benefits. On the other 
hand, this approach would forego the potential savings that might be 
realized through multiple-ship buys (e.g., procuring two ships of a 
given design in a single year) or block buy contacting. One option the 
subcommittee may wish to consider would be to request or direct NOAA to 
devise and share with the subcommittee options (including estimates of 
potential savings) for making use of multiple-ship buys and block buy 
contracting while staying, as much as possible, within the level 
funding profile of $75 million per year.
---------------------------------------------------------------------------
    \27\ Source: Telephone conversation between CRS and NOAA September 
28, 2018.
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Life-Cycle Support
    NOAA has not yet begun to scope out in detail the life-cycle 
support plan for the eight new ships--that work, NOAA officials stated, 
may start a couple of years from now.\28\ One option the subcommittee 
may wish to consider would be to request that NOAA keep the 
subcommittee apprised of its efforts to develop a life-cycle support 
plan for the ships.
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    \28\ Source: Telephone conversation between CRS and NOAA September 
28, 2018.
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    Chairman Sullivan, this concludes my statement. Thank you again for 
the opportunity to testify, and I will be pleased to respond to any 
questions the subcommittee may have.
                 Appendix A. Biography--Ronald O'Rourke
    Mr. O'Rourke is a Phi Beta Kappa graduate of the Johns Hopkins 
University, from which he received his B.A. in international studies, 
and a valedictorian graduate of the University's Paul Nitze School of 
Advanced International Studies, where he received his M.A. in the same 
field.
    Since 1984, Mr. O'Rourke has worked as a naval analyst for CRS. He 
has written many reports for Congress on various issues relating to the 
Navy, the Coast Guard, defense acquisition, China's naval forces and 
maritime territorial disputes, the Arctic, the international security 
environment, and the U.S. role in the world. He regularly briefs 
Members of Congress and Congressional staffers, and has testified 
before Congressional committees on many occasions.
    In 1996, he received a Distinguished Service Award from the Library 
of Congress for his service to Congress on naval issues.
    In 2010, he was honored under the Great Federal Employees 
Initiative for his work on naval, strategic, and budgetary issues.
    In 2012, he received the CRS Director's Award for his outstanding 
contributions in support of the Congress and the mission of CRS.
    In 2017, he received the Superior Public Service Award from the 
Navy for service in a variety of roles at CRS while providing 
invaluable analysis of tremendous benefit to the Navy for a period 
spanning decades.
    Mr. O'Rourke is the author of several journal articles on naval 
issues, and is a past winner of the U.S. Naval Institute's Arleigh 
Burke essay contest. He has given presentations on naval, Coast Guard, 
and strategy issues to a variety of U.S. and international audiences in 
government, industry, and academia.
     Appendix B. A Summary of Some Acquisition Lessons Learned for 
                        Government Shipbuilding
    This appendix presents a general summary of lessons learned in 
government shipbuilding, reflecting comments made repeatedly by various 
sources over the years.\29\ These lessons learned include the 
following:
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    \29\ This appendix is adapted from Appendix J of CRS Report 
RL32665, Navy Force Structure and Shipbuilding Plans: Background and 
Issues for Congress, by Ronald O'Rourke. See also Government 
Accountability Office, Navy Shipbuilding[:] Past Performance Provides 
Valuable Lessons for Future Investments, GAO-18-238SP, June 2018, 36 
pp.

   At the outset, get the operational requirements for the 
        program right. Properly identify the program's operational 
        requirements at the outset. Manage risk by not trying to do too 
        much in terms of the program's operational requirements, and 
        perhaps seek a so-called 70 percent-to-80 percent solution 
        (i.e., a design that is intended to provide 70 percent-80 
        percent of desired or ideal capabilities). Achieve a realistic 
        balance up front between operational requirements, risks, and 
---------------------------------------------------------------------------
        estimated costs.

   Impose cost discipline up front. Use realistic price 
        estimates, and consider not only development and procurement 
        costs, but life-cycle operation and support (O&S) costs.

   Employ competition where possible in the awarding of design 
        and construction contracts.

   Use a contract type that is appropriate for the amount of 
        risk involved, and structure its terms to align incentives with 
        desired outcomes.

   Minimize design/construction concurrency by developing the 
        design to a high level of completion before starting 
        construction and by resisting changes in requirements (and 
        consequent design changes) during construction.

   Properly supervise construction work. Maintain an adequate 
        number of properly trained Supervisor of Shipbuilding (SUPSHIP) 
        personnel.

   Provide stability for industry, in part by using, where 
        possible, multiyear procurement (MYP) or block buy contracting.

   Maintain a capable government acquisition workforce that 
        understands what it is buying, as well as the above points.

    Identifying these lessons is arguably not the hard part--most if 
not all these points have been cited for years. The hard part, 
arguably, is living up to them without letting circumstances lead 
program-execution efforts away from these guidelines.
 Appendix C. Some Considerations Relating to Warranties in Government 
             Shipbuilding and Other Government Acquisition
    This appendix presents some considerations relating to warranties 
in shipbuilding and other defense acquisition.\30\
---------------------------------------------------------------------------
    \30\ This appendix is adapted from Appendix K of CRS Report 
RL32665, Navy Force Structure and Shipbuilding Plans: Background and 
Issues for Congress, by Ronald O'Rourke.
---------------------------------------------------------------------------
    In discussions of government shipbuilding, one question that 
sometimes arises is whether including a warranty in a shipbuilding 
contract is preferable to not including one. The question can arise, 
for example, in connection with a GAO finding that ``the Navy 
structures shipbuilding contracts so that it pays shipbuilders to build 
ships as part of the construction process and then pays the same 
shipbuilders a second time to repair the ship when construction defects 
are discovered.'' \31\
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    \31\ See Government Accountability Office, Navy Shipbuilding[:] 
Past Performance Provides Valuable Lessons for Future Investments, GAO-
18-238SP, June 2018, p. 21. A graphic on page 21 shows a GAO finding 
that the government was financially responsible for shipbuilder 
deficiencies in 96 percent of the cases examined by GAO, and that the 
shipbuilder was financially responsible for shipbuilder deficiencies in 
4 percent of the cases.
---------------------------------------------------------------------------
    Including a warranty in a shipbuilding contract (or a contract for 
building some other kind of end item), while potentially valuable, 
might not always be preferable to not including one--it depends on the 
circumstances of the acquisition, and it is not necessarily a valid 
criticism of an acquisition program to state that it is using a 
contract that does not include a warranty (or a weaker form of a 
warranty rather than a stronger one).
    Including a warranty generally shifts to the contractor the risk of 
having to pay for fixing problems with earlier work. Although that in 
itself could be deemed desirable from the government's standpoint, a 
contractor negotiating a contract that will have a warranty will 
incorporate that risk into its price, and depending on how much the 
contractor might charge for doing that, it is possible that the 
government could wind up paying more in total for acquiring the item 
(including fixing problems with earlier work on that item) than it 
would have under a contract without a warranty.
    When a warranty is not included in the contract and the government 
pays later on to fix problems with earlier work, those payments can be 
very visible, which can invite critical comments from observers. But 
that does not mean that including a warranty in the contract somehow 
frees the government from paying to fix problems with earlier work. In 
a contract that includes a warranty, the government will indeed pay 
something to fix problems with earlier work--but it will make the 
payment in the less-visible (but still very real) form of the up-front 
charge for including the warranty, and that charge might be more than 
what it would have cost the government, under a contract without a 
warranty, to pay later on for fixing those problems.
    From a cost standpoint, including a warranty in the contract might 
or might not be preferable, depending on the risk that there will be 
problems with earlier work that need fixing, the potential cost of 
fixing such problems, and the cost of including the warranty in the 
contract. The point is that the goal of avoiding highly visible 
payments for fixing problems with earlier work and the goal of 
minimizing the cost to the government of fixing problems with earlier 
work are separate and different goals, and that pursuing the first goal 
can sometimes work against achieving the second goal.\32\
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    \32\ It can also be noted that the country's two largest builders 
of Navy ships--General Dynamics (GD) and Huntington Ingalls Industries 
(HII)--derive about 60 percent and 96 percent, respectively, of their 
revenues from U.S. government work. (See General Dynamics, 2016 Annual 
Report, page 9 of Form 10-K [PDF page 15 of 88]) and Huntington Ingalls 
Industries, 2016 Annual Report, page 5 of Form 10-K [PDF page 19 of 
134]). Thus, even if a warranty in a shipbuilding contract with one of 
these firms were to somehow mean that the government did not have pay 
under the terms of that contract--either up front or later on--for 
fixing problems with earlier work done under that contract, there would 
still be a question as to whether the government would nevertheless 
wind up eventually paying much of that cost as part of the price of one 
or more future contracts the government may have that firm.
---------------------------------------------------------------------------
    The Department of Defense's guide on the use of warranties states 
the following:

        Federal Acquisition Regulation (FAR) 46.7 states that ``the use 
        of warranties is not mandatory.'' However, if the benefits to 
        be derived from the warranty are commensurate with the cost of 
        the warranty, the CO [contracting officer] should consider 
        placing it in the contract. In determining whether a warranty 
        is appropriate for a specific acquisition, FAR Subpart 46.703 
        requires the CO to consider the nature and use of the supplies 
        and services, the cost, the administration and enforcement, 
        trade practices, and reduced requirements. The rationale for 
        using a warranty should be documented in the contract file. . 
        ..

        In determining the value of a warranty, a CBA [cost-benefit 
        analysis] is used to measure the life cycle costs of the system 
        with and without the warranty. A CBA is required to determine 
        if the warranty will be cost beneficial. CBA is an economic 
        analysis, which basically compares the Life Cycle Costs (LCC) 
        of the system with and without the warranty to determine if 
        warranty coverage will improve the LCCs. In general, five key 
        factors will drive the results of the CBA: cost of the warranty 
        + cost of warranty administration + compatibility with total 
        program efforts + cost of overlap with Contractor support + 
        intangible savings. Effective warranties integrate reliability, 
        maintainability, supportability, availability, and life-cycle 
        costs. Decision factors that must be evaluated include the 
        state of the weapon system technology, the size of the 
        warranted population, the likelihood that field performance 
        requirements can be achieved, and the warranty period of 
        performance.\33\
---------------------------------------------------------------------------
    \33\ Department of Defense, Department of Defense Warranty Guide, 
Version 1.0, September 2009, accessed July 13, 2017, at https://
www.acq.osd.mil/dpap/pdi/uid/docs/departmentof
defensewarrantyguide[1].doc.
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 Appendix D. Some Considerations Relating to Avoiding Procurement Cost 
                Growth vs. Minimizing Procurement Costs
    This appendix presents some considerations relating to avoiding 
procurement cost growth vs. minimizing procurement costs in 
shipbuilding and other government acquisition.\34\
---------------------------------------------------------------------------
    \34\ This appendix is adapted from Appendix L of CRS Report 
RL32665, Navy Force Structure and Shipbuilding Plans: Background and 
Issues for Congress, by Ronald O'Rourke.
---------------------------------------------------------------------------
    The affordability challenge posed by the Navy's shipbuilding plans 
can reinforce the strong oversight focus on preventing or minimizing 
procurement cost growth in Navy shipbuilding programs, which is one 
expression of a strong oversight focus on preventing or minimizing cost 
growth in DOD acquisition programs in general. This oversight focus may 
reflect in part an assumption that avoiding or minimizing procurement 
cost growth is always synonymous with minimizing procurement cost. It 
is important to note, however, that as paradoxical as it may seem, 
avoiding or minimizing procurement cost growth is not always synonymous 
with minimizing procurement cost, and that a sustained, singular focus 
on avoiding or minimizing procurement cost growth might sometimes lead 
to higher procurement costs for the government.
    How could this be? Consider the example of a design for the lead 
ship of a new class of Navy ships. The construction cost of this new 
design is uncertain, but is estimated to be likely somewhere between 
Point A (a minimum possible figure) and Point D (a maximum possible 
figure). (Point D, in other words, would represent a cost estimate with 
a 100 percent confidence factor, meaning there is a 100 percent chance 
that the cost would come in at or below that level.) If the Navy wanted 
to avoid cost growth on this ship, it could simply set the ship's 
procurement cost at Point D. Industry would likely be happy with this 
arrangement, and there likely would be no cost growth on the ship.
    The alternative strategy open to the Navy is to set the ship's 
target procurement cost at some figure between Points A and D--call it 
Point B--and then use that more challenging target cost to place 
pressure on industry to sharpen its pencils so as to find ways to 
produce the ship at that lower cost. (Navy officials sometimes refer to 
this as ``pressurizing'' industry.) In this example, it might turn out 
that industry efforts to reduce production costs are not successful 
enough to build the ship at the Point B cost. As a result, the ship 
experiences one or more rounds of procurement cost growth, and the 
ship's procurement cost rises over time from Point B to some higher 
figure--call it Point C.
    Here is the rub: Point C, in spite of incorporating one or more 
rounds of cost growth, might nevertheless turn out to be lower than 
Point D, because Point C reflected efforts by the shipbuilder to find 
ways to reduce production costs that the shipbuilder might have put 
less energy into pursuing if the Navy had simply set the ship's 
procurement cost initially at Point D.
    Setting the ship's cost at Point D, in other words, may eliminate 
the risk of cost growth on the ship, but does so at the expense of 
creating a risk of the government paying more for the ship than was 
actually necessary. DOD could avoid cost growth on new procurement 
programs starting tomorrow by simply setting costs for those programs 
at each program's equivalent of Point D. But as a result of this 
strategy, DOD could well wind up leaving money on the table in some 
instances--of not, in other words, minimizing procurement costs.
    DOD does not have to set a cost precisely at Point D to create a 
potential risk in this regard. A risk of leaving money on the table, 
for example, is a possible downside of requiring DOD to budget for its 
acquisition programs at something like an 80 percent confidence 
factor--an approach that some observers have recommended--because a 
cost at the 80 percent confidence factor is a cost that is likely 
fairly close to Point D.
    Procurement cost growth is often embarrassing for DOD and industry, 
and can damage their credibility in connection with future procurement 
efforts. Procurement cost growth can also disrupt congressional 
budgeting by requiring additional appropriations to pay for something 
Congress thought it had fully funded in a prior year. For this reason, 
there is a legitimate public policy value to pursuing a goal of having 
less rather than more procurement cost growth.
    Procurement cost growth, however, can sometimes be in part the 
result of DOD efforts to use lower initial cost targets as a means of 
pressuring industry to reduce production costs--efforts that, 
notwithstanding the cost growth, might be partially successful. A 
sustained, singular focus on avoiding or minimizing cost growth, and of 
punishing DOD for all instances of cost growth, could discourage DOD 
from using lower initial cost targets as a means of pressurizing 
industry, which could deprive DOD of a tool for controlling procurement 
costs.
    The point here is not to excuse away cost growth, because cost 
growth can occur in a program for reasons other than DOD's attempt to 
pressurize industry. Nor is the point to abandon the goal of seeking 
lower rather than higher procurement cost growth, because, as noted 
above, there is a legitimate public policy value in pursuing this goal. 
The point, rather, is to recognize that this goal is not always 
synonymous with minimizing procurement cost, and that a possibility of 
some amount of cost growth might be expected as part of an optimal 
government strategy for minimizing procurement cost. Recognizing that 
the goals of seeking lower rather than higher cost growth and of 
minimizing procurement cost can sometimes be in tension with one 
another can lead to an approach that takes both goals into 
consideration. In contrast, an approach that is instead characterized 
by a sustained, singular focus on avoiding and minimizing cost growth 
may appear virtuous, but in the end may wind up costing the government 
more.
 Appendix E. NASEM Report Recommendation for Building Heavy and Medium 
                  Polar Icebreakers to a Common Design
    Regarding its proposal to build heavy and medium polar icebreakers 
to a common design, the July 2017 NASEM report stated (emphasis as in 
original):

        2. Recommendation: The United States Congress should fund the 
        construction of four polar icebreakers of common design that 
        would be owned and operated by the United States Coast Guard 
        (USCG).

        The current Department of Homeland Security (DHS) Mission Need 
        Statement. . . contemplates a combination of medium and heavy 
        icebreakers. The committee's recommendation is for a single 
        class of polar icebreaker with heavy icebreaking capability. 
        Proceeding with a single class means that only one design will 
        be needed, which will provide cost savings. The committee has 
        found that the fourth heavy icebreaker could be built for a 
        lower cost than the lead ship of a medium icebreaker class. . . 
        .

        The DHS Mission Need Statement contemplated a total fleet of 
        ``potentially'' up to six ships of two classes--three heavy and 
        three medium icebreakers. Details appear in the High Latitude 
        Mission Analysis Report. The Mission Need Statement indicated 
        that to fulfill its statutory missions, USCG required three 
        heavy and three medium icebreakers; each vessel would have a 
        single crew and would homeport in Seattle. The committee's 
        analysis indicated that four heavy icebreakers will meet the 
        statutory mission needs gap identified by DHS for the lowest 
        cost. . . .

        4. Finding: In developing its independent concept designs and 
        cost estimates, the committee determined that the costs 
        estimated by USCG for the heavy icebreaker are reasonable. 
        However, the committee believes that the costs of medium 
        icebreakers identified in the High Latitude Mission Analysis 
        Report are significantly underestimated. . . .

        Although USCG has not yet developed the operational 
        requirements document for a medium polar icebreaker, the 
        committee was able to apply the known principal characteristics 
        of the USCG Cutter Healy to estimate the scope of work and cost 
        of a similar medium icebreaker. The committee estimates that a 
        first-of-class medium icebreaker will cost approximately $786 
        million. The fourth ship of the heavy icebreaker series is 
        estimated to cost $692 million. Designing a medium-class polar 
        icebreaker in a second shipyard would incur the estimated 
        engineering, design, and planning costs of $126 million and 
        would forgo learning from the first three ships; the learning 
        curve would be restarted with the first medium design. Costs of 
        building the fourth heavy icebreaker would be less than the 
        costs of designing and building a first-of-class medium 
        icebreaker. . . .

        6. Recommendation: USCG should ensure that the common polar 
        icebreaker design is science-ready and that one of the ships 
        has full science capability.

        All four proposed ships would be designed as ``science-ready,'' 
        which will be more cost-effective when one of the four ships--
        most likely the fourth--is made fully science capable. 
        Including science readiness in the common polar icebreaker 
        design is the most cost-effective way of fulfilling both the 
        USCG's polar missions and the Nation's scientific research 
        polar icebreaker needs. . . . The incremental costs of a 
        science-ready design for each of the four ships ($10 million to 
        $20 million per ship) and of full science capability for one of 
        the ships at the initial build (an additional $20 million to 
        $30 million) are less than the independent design and build 
        cost of a dedicated research medium icebreaker. . . . In 
        briefings at its first meeting, the committee learned that the 
        National Science Foundation and other agencies do not have 
        budgets to support full-time heavy icebreaker access or the 
        incremental cost of design, even though their science programs 
        may require this capability. Given the small incremental cost, 
        the committee believes that the science capability cited above 
        should be included in the acquisition costs.

        Science-ready design includes critical elements that cannot be 
        retrofitted cost-effectively into an existing ship and that 
        should be incorporated in the initial design and build. Among 
        these elements are structural supports, appropriate interior 
        and exterior spaces, flexible accommodation spaces that can 
        embark up to 50 science personnel, a hull design that 
        accommodates multiple transducers and minimizes bubble sweep 
        while optimizing icebreaking capability, machinery arrangements 
        and noise dampening to mitigate interference with sonar 
        transducers, and weight and stability latitudes to allow 
        installation of scientific equipment. Such a design will enable 
        any of the ships to be retrofitted for full science capability 
        in the future, if necessary. . . .

        Within the time frame of the recommended build sequence, the 
        United States will require a science-capable polar icebreaker 
        to replace the science capabilities of the Healy upon her 
        retirement. To fulfill this need, one of the heavy polar 
        icebreakers would be procured at the initial build with full 
        science capability; the ability to fulfill other USCG missions 
        would be retained. The ship would be outfitted with 
        oceanographic overboarding equipment and instrumentation and 
        facilities comparable with those of modern oceanographic 
        research vessels. Some basic scientific capability, such as 
        hydrographic mapping sonar, should be acquired at the time of 
        the build of each ship so that environmental data that are 
        essential in fulfilling USCG polar missions can be 
        collected.\35\
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    \35\ National Academies of Sciences, Engineering, and Medicine, 
Division on Earth and Life Studies and Transportation Research Board, 
Acquisition and Operation of Polar Icebreakers: Fulfilling the Nation's 
Needs, Letter Report, with cover letter dated July 11, 2017, pp. 2, 4-
6.

    Senator Sullivan. Thank you, Mr. O'Rourke, and I appreciate 
you and CRS's serious work and detailed comments and your 
continuing involvement and oversight, helping us with 
oversight, very, very important. So thank you.
    Let me begin the questioning. Admiral, I wanted to talk a 
little bit about what seems to be a misalignment of demands and 
capabilities.
    I think it's pretty safe to say that Coast Guard cutters 
fleet, it's smaller, certainly smaller than it was 15 years 
ago, but the demands, as I kind of hinted at and so did Senator 
Baldwin, of the Coast Guard have only been increasing.
    How can the Coast Guard meet modern mission demands that 
are going up, I don't think anyone thinks that's not the case, 
despite having nearly 14,000 less major cutter operational 
hours available? Do you believe there's a gap between mission 
demands and what the new recapitalization program is focused 
on?
    Admiral Haycock. Thank you for the question. Our whole 
recapitalization program is all driven by the need to fill 
those gaps, the increasing demands in the Coast Guard with our 
11 statutory missions. There are lots of demands on our people 
and our assets.
    We find that the assets that we're procuring, you know, the 
national security cutters, fast response cutters and such, are 
typically more capable than what they're replacing and so we're 
finding that we're able to deploy for longer periods of time, 
that they have longer ranges, better speeds. The ships are more 
habitable for the crews, so it's less exhausting for the crews 
and such. The crews' operational tempo, they can maintain a 
higher operational tempo, things of that nature.
    In particular, you know, to put some numbers out there, as 
you know, in Alaska, we are going to be putting some fast 
response cutters up there, replacing the aging 110s. So there 
are seven 110s up there. We're going to replace them with six 
fast response cutters and it may on the surface look like 
there's a mismatch there. Six doesn't equal seven.
    As it turns out, the fast response cutters, we can actually 
deploy those for about 2,500 hours a year each. The 110-foot 
patrol boats can only do about 1,800 hours and so when you kind 
of look at just from a number of hours available, you know, six 
fast response cutters is about equal to about eight and a third 
110-foot patrol boats, right, and we're also putting some 87s 
up there, as well. So even the numbers are going to be better.
    Senator Sullivan. No, I'm very aware of that, and, you 
know, that was a letter from the former Commandant, Admiral 
Zukunft, to me on that capitalization program, which I think is 
a good beginning. I don't think it clearly answers the 
question.
    I know that number of 14,000 less cutter operational hours 
available was actually from GAO. So I think it's just an issue 
we need to continue to look at because, as I've talked to the 
leadership in the Coast Guard about it, it's one thing to say 
we have a more capable platform, which I don't disagree with, 
but you also do lose something with less platforms. There's 
just so much in terms of the mission that you can do.
    So we're going to continue to focus on that issue and, 
again, part of what we want to hear from you is if you think 
that gap needs to be filled with additional recapitalization 
assets, then let us know because that's the whole point.
    Right now, you have a very strong bipartisan approach to 
the recapitalization of the Coast Guard fleet. Very few people 
argue against that, given how old it is and given how important 
and increasing the mission of the Coast Guard is.
    So if you think the gap needs to be filled with the 
readjustment of the recapitalization program, then, by all 
means, let us know.
    Let me ask another question. It's really for you, Admiral, 
but also, Ms. Mak. You know, Senator Baldwin talked about 
shipbuilding in Wisconsin. There's actually, not to the extent 
of Wisconsin, but there's actually shipbuilding that goes on in 
Alaska in the Ketchikan Shipbuilding Yard and it's actually 
quite important.
    You know, we had the new Commandant, Admiral Schultz, up in 
Alaska a couple times this summer and the ability to do 
maintenance, serious maintenance on some of these larger ships 
is clearly something that exists in Ketchikan for home-based 
ships.
    I think the Coast Guard for reasons that relate to some of 
the rules around small shipbuilding or small business 
activities has looked at that shipyard in a way that doesn't 
make sense in terms of being able to utilize that.
    I know you were up there this summer, Admiral, and I think, 
Ms. Mak, you were, as well. Can you give me a sense of how 
you're looking at major overhaul repair work being done to 
actually limit costs and make it more efficient for the fleet 
in Alaska to utilize that shipyard in Ketchikan?
    Unfortunately, that shipyard just recently laid off a 
couple dozen people. So this is a really serious and immediate 
question that I know you were looking at this summer. I'd like 
to get your initial impressions.
    Admiral Haycock. We get this question fairly frequently, 
and the Federal Acquisition Regulations indicate that if there 
are two or more small businesses that can do the work, you have 
to set it aside, and I think there are some people who feel 
that that is optional, it's a guideline, but it's actually a 
regulation that we have to follow. So there are some things you 
can do.
    Senator Sullivan. Right. But the whole point of that, and 
I'm going over my time here, so I apologize to my colleagues, 
but the whole point of that is to give small businesses, small 
communities, the ability to do that work. Ketchikan, the 
shipyard there is for a small community and, you know, we've 
had this discussion for a long time. The intent of that 
regulation seems to be flipped on its head when you're looking 
at the exact point of that regulation is to help small 
communities with shipbuilding capacity and yet because that 
shipyard is somehow connected to a bigger company several 
thousand miles away, you're penalizing a community that just 
lost several jobs in that shipyard. It makes no sense.
    So I'll let you finish your answer, but I think the 
bureaucratic focus on these regs when we all know it's actually 
hurting the very people those regs are supposed to help is 
starting to become a real problem and I've had the Commandant 
give me his commitment to solving this and already we're losing 
jobs there, and it would be cost effective for the Coast Guard 
as opposed to sending ships all the way down to the Lower 48 to 
get retrofitted and maintenance when you can do it right there 
in Alaska for the ships that are based in Alaska.
    So please finish your answer but that's my view of it and I 
hope your answer aligns with my view.
    Admiral Haycock. And I understand your frustrations and 
concerns and we share those frustrations and concerns.
    Senator Sullivan. So how do we solve it?
    Admiral Haycock. Maybe the answer is to amend the 
regulations to give us the flexibility to do that. That would 
be helpful.
    We try to balance operational needs with costs and so as 
you pointed out, it costs money and it consumes time to take a 
cutter out of its general operating area near its home port and 
send it some place else for maintenance, but the regulations 
require us to set those things aside.
    The area commanders look at these things and when it 
becomes clear that we need to seek a waiver to get around that, 
you know, like an operational or geographic restriction, we go 
through that process and we generally do that if there's a 
maintenance issue on the ship that prevents it from getting 
where it needs to go. If it is consuming far too many 
operational hours to transit to and from and it limits what we 
can do in theater, those are all things that are considered 
when we make those decisions.
    Senator Sullivan. Well, I'm going to cut you off here, 
Admiral. I'm sorry.
    Ms. Mak, I'll come back to you on this question, if that's 
OK, but I do think the area commanders that I've talked to, all 
of them agree with me on this, the Coast Guard District 17 
commanders. But I'm sorry, I've gone way over my time.
    Senator Baldwin.
    Senator Baldwin. No worries, no worries.
    As I noted in my opening statement, Wisconsin is home to 
many experienced shipbuilders and suppliers. Some Wisconsin 
companies seem to be getting shut out of Coast Guard 
procurement.
    By way of example, the Coast Guard operates more than 700 
boats that have outboard motors. Only 91 of those 700 use U.S. 
motors, like those made in Wisconsin by Mercury Marine or 
Evinrude. In other words, 87 percent of Coast Guard's small 
watercraft use foreign-made outboard motors.
    I introduced my Made in America Shipbuilding Act to address 
these unacceptable situations by expanding current Buy American 
laws to cover all Federal agencies, all classes of ships, and 
substantially more shipboard components, including outboard 
motors.
    So, Admiral, do you believe that procuring more U.S.-
manufactured shipboard components would strengthen the domestic 
industrial base and support U.S. national security?
    Admiral Haycock. So I'm proud to say that we comply with 
Buy American requirements currently and if the regulations 
change, we would be onboard and support that, as well. The 
challenges we have with the industrial base is, if we're not 
careful, we create an artificial demand signal that's not 
sustainable. You know, we want to go with American products and 
end user items in our inventory, but we feel like if you want 
to keep the costs reasonable and be good stewards of our 
resources, competition is the best way to do that and so, you 
know, we try to maximize competition.
    The people that originally created the Buy American Act put 
in provisions to provide flexibility for ship designers and 
shipbuilders and other agencies, as well, you know, for other 
procurements and such, to give them such flexibility, because 
sometimes there are items that just aren't made in America. 
There's just not a demand signal for industry to respond to. In 
other cases, there are, but they're not competitive in pricing.
    We don't typically tell the contractors what items must be 
U.S.-built. We follow the Buy American Shipbuilding Act, which 
gives them a little flexibility, and that allows them to be 
competitive with one another and come up with competitive 
pricing in proposals and so one proposal might offer certain 
ship items to be domestic and some foreign. Another one might 
be a little bit different, trying to distinguish themselves 
from one another.
    And then we do an evaluation of that, based upon the 
evaluation criteria, like a best value or low cost sort of 
thing, and then the shipbuilder, the designer, goes through 
with the proposal as they've submitted it.
    So we make sure that we have all the shipbuilding Buy 
American clauses from the FAR are in our contracts to support 
that and our program managers monitor that carefully to make 
sure that the shipbuilders are complying with that, as well, 
but there are times when we end up with foreign components in 
like some of our engines, like you've indicated, on the 
outboard engines and such, and typically for like small boats 
and such, once we do have a component, it doesn't make sense to 
just go out and change the things, you know, unless there's 
something broken and needs to be fixed.
    So when we have to do wholesale changes, that's all done 
competitively, but until that happens, we typically, for 
keeping the costs for maintenance down because our maintenance 
dollars are precious and few, we typically stick with what we 
were provided until something forces us to go otherwise.
    Senator Baldwin. I'm going to dig a little deeper in this. 
So Coast Guard procurement contracts and subcontracts that are 
not bound by Buy American laws, such as acquisitions of 
outboard motors, diesel engines or auxiliary and deck 
equipment, can you give me or the Committee some examples of 
Coast Guard contracts with foreign companies?
    Admiral Haycock. For what I do in acquisitions, all of our 
ship designs and ship construction are done domestically. So 
our national security cutters built at Huntington-Ingalls, you 
know, the FRC's built down at Bollinger Shipyards, the OPC's 
are going to be done by Eastern Shipbuilding.
    Senator Baldwin. But I'm seeking--can you give me some 
examples of contracts that the Coast Guard has with foreign 
companies?
    Admiral Haycock. I don't have that. I didn't come prepared 
to provide that. I can get it for the record.
    Senator Baldwin. If you can do that and follow up, that 
would be great. This you may have to do also and follow up: How 
much taxpayer money does the Coast Guard spend on contracts 
with foreign companies annually, and if you want to just 
generally answer now and then follow up with specifics for the 
Committee, that would be great.
    Admiral Haycock. I would need to take that for the record, 
ma'am. I don't have that data with me.
    Senator Baldwin. OK. And then what proactive steps, if any, 
does the Coast Guard take to seek contracts with American 
manufacturers and small businesses in cases where the law does 
not require you to?
    Admiral Haycock. We are making a concerted effort over the 
last several years to communicate better with industry in 
general. So we try to do things like have industry days where 
we basically bring industry in and have conversations about 
what our current and future needs are to make it easier for 
them to identify opportunities to do business with the Coast 
Guard. So we've done a bunch of those as of late.
    We've done some reverse industry days, as well, where they 
actually have the floor and help us to better understand how to 
do that sort of thing. So we're actively going after increased 
communications to help with that.
    Senator Sullivan. Thank you. We're going to start with a 
second round of questioning here.
    I think some of our colleagues are going to be coming back, 
but, Ms. Mak, do you have any views on the issues the Admiral 
and I were discussing as it relates to the potential 
opportunity and cost savings to be honest of the shipbuilding 
yard in Ketchikan as it relates to maintenance?
    I don't know if you've looked at that issue, but it's an 
important one that can reduce costs and actually continue to 
create jobs in my state.
    Ms. Mak. I have not looked at that issue, so I really am 
limited to what I can say, but I do agree that if it's in the 
regulation and that's what Coast Guard has to follow. They have 
to follow the Federal Acquisition Regulations.
    Anything that defers from that would have to require an 
actual change in law and that would have to be----
    Senator Sullivan. Or a change in regulation, right.
    Ms. Mak. Right. Interpretation.
    Senator Sullivan. Correct. Or a waiver.
    Ms. Mak. Correct.
    Senator Sullivan. Right. OK. Let me turn to an issue that I 
know all three of you have focused on and is really important 
to the country and, Mr. O'Rourke, your point is really 
important. We need to get it right.
    So I'm just going to open this up. It deals with the polar 
security cutter and the acquisition timeline. You may have also 
seen, it's not just important for the Coast Guard but I think 
for the national security of the country with increasing 
strategic interests globally in the Arctic Region.
    Secretary Mattis has talked about this, all the co-COMs 
have, and so in this year's NDAA signed by the President just a 
few months ago, there was a significant provision that I 
authored that has the authorization for six additional 
icebreakers, three polar class, three mediums.
    So here's my question, and I'm just going to throw it out 
to all of you because I think a good discussion on this is 
important.
    The initial schedule, which I think was a little bit kind 
of, you know, spit balled, was one icebreaker will take 10 
years and a billion dollars to build, which, I mean, we put a 
man on the moon in less amount of time than that in terms of 
the time.
    Where are we right now and how can we do this correctly but 
accelerate the acquisition schedule?
    I'm going to throw something out that'll, you know, make 
the shipbuilders in America a little bit nervous, but, you 
know, if it's going to take seven to ten years, why shouldn't 
we just lease some icebreakers, polar class heavy icebreakers 
right now?
    The Fins build them for $250 million a year. So I'd just 
like to open it up to all of you. Maybe, Mr. O'Rourke, we could 
start with you, but I really would like to hear, and if you're 
in disagreement with each other, please go ahead and say that. 
It's always good when we have panelists who have a little bit 
of different views. It actually helps us.
    Mr. O'Rourke. In terms of accelerating the timeline, the 
Coast Guard has been able to do that relative to schedules we 
were looking at a few years ago in a couple of ways.
    One is by forming the Joint Integrated Program Office with 
the Navy and they are using----
    Senator Sullivan. We all think that was a good move, so 
that's a good initiative by the Coast Guard.
    Mr. O'Rourke. Right. And the Navy is sharing their best 
practices with the Coast Guard and that has helped to take some 
time out of the timeline.
    Second, the Coast Guard and the Navy have decided to use a 
parent design acquisition strategy. This is an icebreaker that 
will be derived from an existing icebreaker design and that 
shortens the design time. That ten-year schedule you mentioned 
earlier was roughly five years to design and roughly five years 
to then build the lead ship.
    Senator Sullivan. So no one's saying ten years and a 
billion dollars for one ship anymore, I hope?
    Mr. O'Rourke. Not to my knowledge and a big part of the 
reason is that the design portion of that ten-year timeline has 
now been compressed in part by adopting the parent design 
strategy.
    So these are two things that have brought the timeline 
shorter than what we were looking at earlier and, as I 
mentioned in my opening remarks, the estimated cost of this 
ship has come down, perhaps considerably, from that earlier $1 
billion figure and that may be due in part to the tank testing 
that has been done by the Coast Guard in conjunction with the 
Canadians up at the Canadian Tow Tank that has allowed us to 
examine hull designs for that ship that can more efficiently 
break ice than the older hull designs from 40 years ago that 
can allow the engine and the propulsion plant to be smaller and 
the ship therefore to be smaller and less expensive. That's one 
reason, not the only one, why the estimated cost of the ship 
has come down.
    Now that said, GAO has indicated that there's a risk of the 
lead ship being delivered late and I agree with that 
assessment.
    The Navy's experience in building lead ships is that they 
often come in late and so my sense is that there's a risk of 
the lead icebreaker coming in late, perhaps as much as a year 
or more late, and that has a couple of implications.
    One is that it could put some cost pressure on the ship. 
One of the reasons it might be late is that it's using more 
labor to build than what was originally projected.
    The Navy and the Coast Guard can insulate the government 
against that risk by using a fixed price contract, which the 
Navy and the Coast Guard plan to do.
    This can also have implications for what you do to bridge 
the time between the retirement of the Polar Star and that lead 
ship coming in and has implications for the amount of money you 
want to put into the Polar Star to extend its service life, for 
example, or to do a short-term bridging lease of a ship, which 
the Coast Guard has done in the past with some foreign 
icebreakers.
    Last, however,----
    Senator Sullivan. The Coast Guard has done that previously? 
I was unaware of that.
    Mr. O'Rourke. There have been three instances where the 
Coast Guard has done short-term leases of foreign icebreakers 
to bridge gaps in----
    Senator Sullivan. How long is short-term?
    Mr. O'Rourke. This would have been on the order of maybe a 
year or two and one of them involved the Swedish ship and one 
or two of them actually involved Russian icebreakers.
    Senator Sullivan. Well, we're not going with the Russian 
option.
    Mr. O'Rourke. Right.
    Senator Sullivan. I think it's a disgrace that we have men 
and women who serve in the uniform of the United States of 
America deploying on a ship that's that old and they do a great 
job keeping it up to speed, but, holy cow, that ship is very, 
very, very old and I think it's almost becoming unseaworthy.
    Mr. O'Rourke. The foreign icebreakers may not always be 
available for lease and they have some other potential 
downsides, as well, but we have done that in the past as a 
bridging option.
    But the one thing I will finish by saying is that if there 
is a chance of a late delivery on the lead ship, then that 
could become an argument for beginning construction of the lead 
ship as soon as you bring the design of that ship to a high 
level of completion and the ship is otherwise ready to begin 
construction.
    If you think there's going to be a gap, why delay the start 
of the ship as long as the ship is ready to begin? That's the 
least you can do to minimize that gap in time that might result 
if, in spite of your own best efforts, the ship does wind up 
being late compared to its original schedule.
    Senator Sullivan. Ms. Mak, you want to comment on the 
schedules and other issues related to the polar security?
    Ms. Mak. Thank you. Regarding the foreign icebreakers, 
regarding that question, I would say that foreign icebreakers 
from friendly nations generally serve different functions, 
different missions, and they break ice that is different than 
the polar regions.
    The national security cutter here is multi-missioned, non-
nuclear, and has to traverse the globe on different climates 
year-round, both poles. We don't have--even foreign nations 
don't have a cutter of that type.
    But it is also important to know with regards to schedule 
that the U.S. shipbuilding industry has not built an icebreaker 
of this magnitude in decades. So there's going to be a lot of 
significant requirements that are going to be needed and to be 
addressed.
    When it comes to schedule, overall from an acquisition 
perspective, we've repeatedly found that compressed optimistic 
schedules is one of the main reasons why programs don't take 
this knowledge-based acquisition approach and they end up 
causing the program to cost more in the long run and that 
because you're doing a lot of concurrency and rework.
    So in our report this past summer, we are encouraging the 
Coast Guard to take the time to do it right and to really focus 
on getting the knowledge base needed for design stability, 
technology, maturity, and address the schedule issues and put 
in reasonable times for schedules.
    At this point, the current acquisition only has a buffer 
which is of 6 months between the target date of when they're 
supposed to deliver in September 2023 and then the baseline 
date of March 2024.
    There are no schedule--there are other schedule risks that 
aren't involved which may or may not be within the Coast 
Guard's control. They have not planned time, you know, basic 
layout of piping, machinery, cabling, testing, bid protests, 
some of the things that are out of their control, delays on the 
contractor's side. All those need to be considered in their 
schedule as they build it.
    Senator Sullivan. Thank you.
    Admiral, and again, I apologize to my Ranking Member here. 
I think this is an important discussion that also relates to 
the Great Lakes, as well, the polar region.
    Admiral Haycock. I don't want to disappoint, but I don't 
have any major disagreements with my colleagues.
    Senator Sullivan. What about short-term leasing?
    Admiral Haycock. So for short-term leasing, we have looked 
at this, I would say exhaustively. We did an analysis of 
alternatives which took quite a bit of time, it was pretty 
thorough, and looked across the globe at what sort of 
icebreakers were available to do the sort of missions that we 
need them to do, and we quickly netted it down to only two 
designs that would meet our needs.
    One was a Soviet and the other one was a Canadian design 
that hasn't yet been built. For obvious reasons, we weren't 
going to go with the parent craft design from the Soviet Union 
or from Russia and so some of the designs that have been 
proffered, you know, likely will be using some of the Canadian 
design as kind of the basis of the design.
    We've looked at Scandinavian designs and such and our 
mission is so different from theirs that their designs just 
simply won't work. There are some very unique things that we 
do, you know, here in the United States and in the Coast Guard 
in particular. You know, we need a polar security cutter that 
can transit from its home port in the United States all the way 
down to Antarctica to do a mission and come back. It has to be 
able to go all the way up into the Arctic and back.
    You know, the Scandinavian countries don't go those 
distances typically, and not routinely like we do. So that 
requires some design tradeoffs in terms of, you know--a ship 
that breaks ice well is not one that handles well in heavy seas 
and so there's tradeoffs and things that need to be done, but 
we confirmed pretty quickly that there's nothing we can lease 
out there that will do the job.
    Now the National Science Foundation has leased some foreign 
icebreakers for the McMurdo Breakout in the past and I think 
they've had mixed results with that. Sometimes they're 
available, sometimes they're not, but to do Coast Guard 
missions, to be able to be present in the Arctic to do a 
massive search and rescue mission for the cruise liners and 
along those lines, the polar security cutter is our best bet, 
sir, and that's why we're putting such an emphasis on it and 
it's why we're moving, you know, hard and fast on that.
    I concur with Ms. Mak. There are risks there. The schedule 
is tight, without a doubt, but we need this now and so we have 
to move fast to make it happen.
    You know, we concur with the recommendations that GAO made 
and we're thankful that they looked at the program and made 
their recommendations. We're moving out to address those 
things, but the need for the polar security cutter is now, and 
I think the Commandant has indicated we need six polar cutters. 
Three of them need to be heavy and we need one now and we've 
enjoyed tremendous support from Congress on this and we're 
hoping that we'll continue to get that support, sir, because 
any stall will have schedule and cost implications.
    But, more importantly, any hesitancy on the part of 
resource in this sends a signal to industry, the industrial 
base, and sends mixed signals on whether we're serious about it 
or not. We need them engaged and we need them being innovative 
to come up with a solution that will work for us.
    Senator Sullivan. Thank you.
    Senator Baldwin.
    Senator Baldwin. I continue on the icebreaking theme for a 
moment here.
    Admiral, I've spoken in this Committee many times about the 
importance of icebreaking operations on the Great Lakes and my 
position that the economic data and operational reports from 
the field in recent winters show that the Coast Guard doesn't 
have enough assets to effectively meet its icebreaking mission.
    Most recently, I raised that at the Commandant's April 
Nomination Hearing.
    It's why I have fought to include $5 million in additional 
funding above the Coast Guard's budget requests in Fiscal Year 
2017 and 2018 for the survey and design of a Great Lakes 
icebreaker that is at least as capable as the Mackinaw.
    In the Senate version of the Fiscal Year 2019 Homeland 
Security Funding Bill, I've helped secure another $5 million.
    In April, the Coast Guard reported that it was using the 
funding to develop operational requirements, evaluate current 
icebreaking capability and to survey and analyze the Mackinaw 
to inform a future design.
    It's almost 6 months later and I still believe that the 
Coast Guard is moving too slowly on this important program.
    So I'm wondering if you can provide me with a brief update 
right now and then commit to briefing my staff in much more 
detail in the coming weeks?
    Admiral Haycock. So, first, let me thank you for your 
support and also, you know, concur if you would like us to come 
and brief you in detail, we'd be happy to do so.
    As an acquirer, I work based upon requirements and so I 
rely on the operation of the Commander to tell me what his 
needs are and then I find the best way of meeting those needs 
and so I believe our operation community is identifying what 
are the specific requirements that we need for the next 
generation of Great Lakes icebreaker.
    While we're doing that, we are putting money into 
revitalizing our current icebreaking fleet up there, a 140-foot 
fleet, and so nine of those cutters are going through a service 
life extension to make sure there are no gaps in service up 
there.
    So the Coast Guard is doing that work and we're about two-
thirds done with that program and we'll be wrapping that up in 
the next couple years. Those cutters will have new life 
breathed in them and they'll continue to do the mission and 
meet our needs up there.
    It's like anything. We have to balance. As stewards of the 
funds that you give us, we need disciplined approaches to these 
things and so the work we're doing on the requirements is part 
of that disciplined approach and if I don't take the 
disciplined approach, then GAO will note that, right, because 
their job is to hold us accountable and identify those things 
that we're doing that are overly risky and such.
    So we need to make sure we do the due diligence and 
understand what their requirements are. Otherwise, we'll end up 
possibly with the wrong asset and they'll be over-budget or 
costs, that sort of thing. So we want to make sure that we do 
the right thing up front to deliver what the capability is 
that's needed up there.
    Senator Baldwin. Back to the Made in America Shipbuilding 
Act, it would not only help strengthen our national security 
but I think it also makes a strong economic argument for 
government by lowering life cycle costs.
    When ships need repairs or new parts, American-made parts 
are easier and cheaper to acquire and the repairs tend to take 
less time.
    Admiral, have you experienced increased life cycle costs 
because of foreign-made components or had difficulty repairing 
or finding replacements for them?
    Admiral Haycock. I can give you some anecdotal information. 
I can tell you that on our inland fleet, some of the cutters 
that ply our inland waters, you know, the Ohio, the 
Mississippi, the Missouri, that sort of thing, some of those 
have some foreign-made engines that come from Italy, and we're 
finding that it is very difficult to support those. Again 
getting the parts, getting them in a reasonable time-frame, is 
challenging and so those challenge our ability to stretch our 
maintenance dollars to get all of our needs met and keep our 
fleets operational.
    So there are definitely consequences that come with having 
foreign-made components in user items.
    Senator Baldwin. And I want to just ask, Mr. O'Rourke and 
Ms. Mak, has GAO or CRS studied how using U.S.-made shipboard 
components impact the cost and feasibility of maintenance and 
sustainment of such equipment over the life cycle of the 
vessel?
    Mr. O'Rourke. The CRS has not looked at that.
    Senator Baldwin. OK.
    Ms. Mak. The GAO has also not looked at that.
    Senator Baldwin. All right. So, Ms. Mak, I would like to 
get the GAO to study this issue and I will certainly follow up 
with a formal request to do so.
    Ms. Mak. Sure. Absolutely.
    Senator Sullivan. Well, I'm pleased to have Senator Wicker 
here, who's the sea power subcommittee of the Armed Services 
Committee and being Mississippi's Senator knows also a little 
bit about shipbuilding.
    Senator Wicker.

              STATEMENT OF HON. ROGER F. WICKER, 
                 U.S. SENATOR FROM MISSISSIPPI

    Senator Wicker. I'm a proud member of this Subcommittee, 
too, Mr. Chairman.
    Admiral Haycock, let's talk a little. I've been over in a 
classified briefing with Defense Department people, so that's 
the reason I missed a bit of this hearing.
    Let's talk about national security cutters. We make them at 
Huntington-Ingalls in Pascagoula, Mississippi, and last 
Wednesday, we saw the Coast Guard Cutter Stratton offloading 
more than 22,000 pounds of cocaine seized in less than a month 
in the Eastern Pacific.
    Congress is faced with a decision to fully or partially 
fund the acquisition of a 12th national security cutter in 
Fiscal Year 2019. This 12th NSC would complete a one-for-one 
replacement of the 12 Hamilton Class cutters.
    Why is that important, and can you discuss the impact that 
these national security cutters have on the Coast Guard's 
efforts to carry out its core missions?
    Admiral Haycock. Thank you, sir. The national security 
cutter is a tremendous asset and I think we are finding that as 
each day goes by and we deploy these things, we're learning 
more and more things about what they can do.
    I was the commanding officer of a high-endurance cutter, 
one of the ones that was replaced by a national security 
cutter, and I'm shocked and proud to know that, you know, 
national security cutters are typically pulling in more drugs, 
you know, pulling drugs off the water in one deployment than I 
was able to do during two years onboard my high-endurance 
cutter. They're having a profound impact in curbing trans-
national crime in the way of counter-drug mission.
    Our goal, and I don't think this is a surprise, we're 
trying to push the borders as far as we can, you know, our 
enforcement borders as far as we can from our physical borders, 
right, and so, you know, getting those cutters on scene and 
trying to intercept that stuff well before it gets to our 
shores is a priority for us and those cutters have been doing a 
fantastic job with it.
    Senator Wicker. OK. Let's talk about the polar security 
cutter fleet.
    There's a difference in the Senate Homeland Security 
Appropriations Bill which funds $750 million for the polar 
security cutter recapitalization. The House does not have any 
money in there for that.
    So what are the stakes of the House prevailing and not 
having money in there versus the Senate figure of $750 million 
being approved?
    Admiral Haycock. Before you got here, I talked a little bit 
about the support we've gotten from Congress on the polar 
security cutter program. It has been phenomenal and it has 
allowed us to make much progress.
    We are closer to recapitalizing the icebreaker fleet than 
we have been in 40 years and so we are on the cusp of getting 
there.
    The funding that are in the bills is of vital importance 
for us to make progress in that area and I've got two concerns.
    One is if we don't get it, it's going to definitely have 
schedule impacts. We can get some stuff on contract, like the 
detail design, but things like long lead materials and stuff 
we'll be challenged to get which will impact our ability to 
deliver on time.
    The other piece of it is the support that we've gotten from 
Congress over the years has put excitement in industry in, you 
know, building the ship and learning more and getting lessons 
learned from it and applying to other shipbuilding programs.
    If we don't get the funding we need, that sends a signal to 
the industrial base that the nation isn't serious about the 
polar security cutter and the need for the polar security 
cutter is greater now than it has ever been.
    Senator Sullivan had talked a little bit earlier today 
about the shape the Polar Star is in and we're going to put 
some money into Polar Star to extend its service life so we can 
get a polar security cutter, you know, in theater, but if we 
want to have year-round access to the polar regions for 
national security, national sovereignty, and search and rescue, 
and the other missions the Coast Guard does, we need to keep 
making progress on that, sir, and the $750 million will send a 
clear signal to the industrial base and the Nation at large 
that we're serious about getting polar security cutters.
    Senator Wicker. Thank you very much. I move we adjourn.
    [Laughter.]
    Senator Sullivan. Well, I actually support Senator Wicker's 
focus on another national security cutter. Those are credible 
platforms and I had the honor of being at the commissioning of 
the Douglas Monroe out in Seattle and it was really impressive.
    Senator Blumenthal.

             STATEMENT OF HON. RICHARD BLUMENTHAL, 
                 U.S. SENATOR FROM CONNECTICUT

    Senator Blumenthal. Thank you very much, Mr. Chairman.
    I want to focus on the importation of opioids, synthetic 
opioids particularly, but drugs in general, and what kinds of 
additional resources the Coast Guard would need to combat the 
flow of opioids into this country?
    Admiral Haycock. So the operational aspect of the counter-
drug mission is a little outside of my lanes as an acquisition 
officer.
    I can tell you that we have a program of record that we've 
established for the polar security cutter, the national 
security cutter, the fast response cutter, and the offshore 
patrol cutter, which are all key elements of curbing 
transnational crime and the importation of narcotics and such 
into our country.
    We believe that the program of record that we've put out 
there is sufficient to do what we need to do. Now there are 
some areas where we could improve in ways of unmanned assets, 
in particular aerial assets, and so we've done some work in 
that regard.
    We've actually deployed an unmanned air vehicle on Coast 
Guard Cutter Stratton for several years now as an effort to 
kind of learn what sort of capabilities it can bring to the 
fight and better understand what sort of training and policy 
and procedure we would need to actually execute it and to run 
it efficiently and effectively and that, the SUAS, the small 
unmanned aerial vehicle we've been using, has contributed to 
countless drug interdictions in theater and the ships 
absolutely love it, and so we are making great progress on 
putting that capability on the national security cutters.
    I think it's something that we might want to think about 
for follow-on is, you know, do we deploy it on the offshore 
patrol cutters? Do we deploy it on FRCs?
    We're also working with CBP on land-based UAS. So we're 
part of a joint program office with that out in Southwest 
Border. So we have Coast Guard folks that are part of that 
team, some of them that are pilots and some of them are 
planners, that sort of thing. So we're getting great lessons 
learned from that effort with CBP to determine what our 
resources might need to be and what sort of requirements a 
land-based UAS can provide for the Coast Guard in the fight 
against drugs.
    Senator Blumenthal. Well, I realize that it may not be 
directly in your area of expertise, but it certainly should be 
involved in our recapitalization criteria because the Coast 
Guard is on the front line of our war against illicit drug 
trafficking and I've seen in my visits around the country the 
resources that are deployed.
    So I would somewhat take issue with the contention that the 
resources are adequate now because in this war, we're losing. 
We're losing the war against the illicit importation of drugs 
and it's not only across the borders, our southern borders, 
it's also by sea, and I think that area of combat is too often 
lost on the American public as well as on public officials.
    I want to ask you about the Coast Guard Museum in New 
London. I am assuming that you can state unequivocally that the 
Coast Guard maintains its unambiguous commitment and 100 
percent dedication to assuring that that Coast Guard Museum is 
built in New London.
    Admiral Haycock. I can, sir. We are excited about that. The 
Coast Guard has a great story to tell and it's unfortunate that 
not more people know it and so the museum will go a long way 
toward helping the general public understand our missions and 
our contributions to our nation and so we work closely with the 
National Coast Guard Museum Association and, you know, we're 
excited about that coming online.
    Senator Blumenthal. And, finally, in the minute I have 
left, I want to highlight another issue, which is admissions to 
the Coast Guard Academy.
    There have been very significant complaints, based on data, 
about potential discrimination in the admissions policies to 
the Coast Guard. I think it's an area that deserves attention 
at the highest levels. I've communicated my concern to the 
leadership of the Coast Guard and I hope that you can commit 
that there will be a thorough review and examination of the 
admissions policies so as to assure the public that there is no 
discriminatory practice whatsoever in admissions or in the 
policies and practices of the Coast Guard Academy generally?
    Admiral Haycock. I can say unequivocally, sir, that this 
has the attention of the highest levels of the Coast Guard 
without a doubt.
    Senator Blumenthal. Thank you. Thank you, Mr. Chairman.
    Senator Baldwin. Thank you, Senator Blumenthal.
    I want to, Admiral Haycock, talk about language that was 
inserted in the Fiscal Year 2018 Omnibus. They have an 
explanatory statement that says, ``The Coast Guard, to the 
maximum extent practicable, is directed to utilize components 
when contracting for new vessels, U.S.-manufactured components. 
Such components include auxiliary equipment, such as pumps for 
shipboard services, and propulsion equipment, including 
engines, reduction gears, and propellers.''
    While this language doesn't go as far as the legislation 
I've been describing, the Made in America Shipbuilding Act that 
I authored, I'd like to know how the Coast Guard is applying 
this congressional direction to the acquisitions of the heavy 
polar icebreakers and the inland waterways tenders, and I will 
preface this with saying, you know, I understand that the Coast 
Guard complies with all current laws and regulations, but this 
expression of congressional intent is calling for the 
application of Buy America provisions above the bare minimum of 
following the law.
    So can you tell me a little bit about how you're applying 
that language in the Fiscal Year 2018 Omnibus?
    Admiral Haycock. We appreciate your support on that and 
probably the best way to address this is if I were to come and 
brief you and we could come and give you the facts and figures 
and things you need.
    When we try to comply with the Buy American Act, we're not 
using it as a shield. We want to buy American and I think the 
question that I was raised earlier was, you know, what are the 
life cycle costs associated with that sort of thing.
    There has been no studies on that, as you've already found, 
and I think such a study would be very helpful because it will 
help us to make wiser decisions in the future. Oftentimes, when 
the shipbuilders or the designers or other companies doing 
other work, when they pick foreign components, sometimes, as I 
indicated earlier, it's because that sort of industrial base 
doesn't exist.
    For example, on the Polar Class and on the polar security 
cutter, I'm not aware of any manufacturers in the U.S. that 
make a propulsion pod of the size and strength necessary for a 
polar security cutter, but they are made over in the 
Scandinavian countries where they routinely use that sort of 
technology for their icebreakers and so if we try to force 
something like that to be a buy American, it can be done but it 
would add a considerable amount of time and probably cost to 
the vessel because the industrial base would have to spool up 
to do that sort of thing. It would be a lot of R&D. There will 
be a lot of initial entry costs into that market and then the 
question that we have to ask ourselves is, is that demand 
sustainable?
    Once all the polar security cutters are built, is there 
going to be a sustainable demand for pods, for example, in the 
United States, and I can't answer that question. I think a 
study might be helpful to do that.
    But those are the sorts of challenges that we run into, and 
then the other piece is the cost basis, and it would be helpful 
to have a study that would help us to kind of figure out if we 
decrease the acquisition cost up front but we increase the life 
cycle costs, is that a good trade because the life cycle costs 
are about 70 percent of the cost of an asset in its lifetime.
    So we are constantly looking for ways to reduce life cycle 
costs and we've done things like put some of our sustainers in 
key leadership positions to ensure that those sorts of issues 
are looked at as we go through the acquisition process.
    Senator Baldwin. One, I think, final question for me. 
Admiral, can you provide an update on the acquisition timeline 
for the inland waterways and Western River tenders? 
Specifically, when does the Coast Guard plan to issue an RFP, 
and will the Coast Guard consider using off-the-shelf designs 
from experienced shipbuilders in order to save time and money?
    Admiral Haycock. So we are open to using parent craft 
designs and such. We're just starting an analysis of 
alternatives and that's a disciplined part of the process. We 
have to go out and look and see what exists out in the world, 
you know, in terms of designs and ships that have already been 
built and the components and such and so we'll do this 
assessment and that'll kind of do market research and kind of 
survey what's available out there.
    One of the challenges we have right now is the Coast Guard 
missions are different than a lot of the commercial companies 
out there, right. So I think you'll find that a lot of the 
boats and the pushers and such that are plying the rivers have 
a very small crew, maybe a crew of five, right, and they're not 
required to travel incredibly long distances between stops for 
fuel and supplies and such.
    For our ships, to do our missions, because our folks 
typically will get off the ship and they'll be clearing brush 
from aids to navigation that prevent people from seeing them, 
they're repairing aids to navigation in some dangerous places 
with snakes and other vermin and stuff. So to do those sorts of 
missions, that are vastly different from the commercial world, 
requires a very diverse crew and--alongside the same lines--if 
we want to increase diversity in the literal term in our 
service, we need to make sure that those assets are capable of 
having women in the crew and the current assets don't have that 
capability.
    And so that's a little bit unique from what we see when you 
look at how many people we need to put on the ship and to be 
able to have mixed gender berthing. That offers some 
interesting design considerations.
    So that will all be looked at as part of the analysis of 
alternatives. It's going to be probably nine months or so 
before we can get all that work done and figure out exactly 
what that means, but we're definitely open to looking at 
commercially available designs and seeing if those can be 
modified inexpensively.
    We've already reached out to the Army Corps of Engineers to 
do some initial kind of concept work up in Philadelphia and 
they've provided a number of options to look at, which include 
monohulls, which means it's a single ship that does everything, 
or using maybe a pusher and a barge, kind of like the way we do 
the mission now.
    So those are all things we're looking at. It's going to be 
probably a year or so. I don't have it memorized, but it will 
probably be a year before we start, you know, looking at moving 
forward with the actual acquisition, formal acquisition of it.
    Our goal is to get something--get the ships into service in 
the early 2023 timeframe, I think, and the approach we're 
taking is actually fairly accelerated when you compare it to 
some of the other acquisitions we've done in the past.
    I know that the country recognized the need for those 
things and so we're moving as fast as we can to make that 
happen. Does that answer your question?
    Senator Baldwin. It does. Thank you.
    So seeing no other Senators at this moment, I will announce 
that the hearing record will remain open for two weeks. During 
this time, Senators may submit questions for the record. Upon 
receipt, the witnesses are requested to submit their written 
answers to the Committee as soon as possible.
    I want to thank the witnesses for appearing today.
    This hearing is now adjourned.
    [Whereupon, at 10:52 a.m., the hearing was adjourned.]

                            A P P E N D I X

  Prepared Statement of Rear Admiral Michael J. Silah, NOAA Director,
      Office of Marine and Aviation Operations and Director, NOAA 
                              Commissioned
    Officer Corps, National Oceanic and Atmospheric Administration,
                      U.S. Department of Commerce
Introduction
    Good morning Chairman Sullivan, Ranking Member Baldwin, and Members 
of the Subcommittee. My name is Rear Admiral Michael Silah, and I am 
the Director of the Office of Marine and Aviation Operations (OMAO) and 
Director of the NOAA Commissioned Corps at the National Oceanic and 
Atmospheric Administration (NOAA), within the Department of Commerce. 
Thank you for inviting me to testify today on our work providing 
environmental intelligence gathering platforms for the Nation. NOAA 
appreciates the opportunity to participate today along with our 
colleagues from the U.S. Coast Guard, Government Accountability Office, 
and Congressional Research Service.
    For over two hundred years, NOAA and its predecessor organizations 
have provided foundational data, products, and services to support 
safe, efficient maritime commerce. Each day, nearly every American 
relies on the data, products, and services NOAA provides. These 
products and services include daily weather forecasts, navigational 
tools to support the country's nearly $4.6 trillion in economic 
activity generated by U.S. seaports, and assessments of the health of 
the Nation's fisheries. Through our network of observations, models, 
forecasts, and assessments, we put environmental information into the 
hands of people who need it. Over the years, NOAA has made significant 
investments to ensure the agency can leverage new technologies to 
provide the best products and services possible. However, challenges to 
the agency's observational infrastructure still exist, especially for 
our aging research and survey ships.
Current Status
    Currently, NOAA's fleet includes 16 research and survey ships. 
Every year, NOAA's ships conduct more than 100 missions for collection 
of data critical for nautical charts, fishery quotas, exploration of 
America's 4.3 million square mile Exclusive Economic Zone, storm surge 
modeling, and weather forecasting. NOAA's line offices, other U.S. 
government agencies, communities, and businesses around the Nation rely 
on these data to keep U.S. ports open to maritime commerce, understand 
changes to the planet, monitor the health of fish stocks, and plan for 
severe storm events.
    The age of NOAA ships represents a continued and pressing concern. 
NOAA's aging vessels are increasingly unreliable and expensive to 
maintain. At the conclusion of Quarter 3 FY 2018, unscheduled 
maintenance on the NOAA fleet had cost $13.5 million and caused more 
than 425 lost operational days at sea. By the end of 2018, half of the 
NOAA ships in the NOAA fleet will have exceeded their design service 
life. Escalating unbudgeted costs and lost days at sea will undermine 
NOAA's ability to meet its missions, and could have the following 
impacts: significant degradation of mapping capabilities on the West 
Coast and in the United States Arctic, including the Pacific Ocean, 
Bering Sea, and Arctic Ocean; a substantial loss of hydrographic survey 
capability on the East Coast and the Caribbean; and a reduced ability 
to conduct fishery and marine mammal stock assessments, monument and 
sanctuary stewardship in the Central, Southern, and Western Pacific, 
and trawl-based stock assessments in the Gulf of Mexico.
The NOAA Fleet Plan
    The NOAA Fleet Plan assesses NOAA's current and projected at-sea 
observational infrastructure needs in carrying out its mission of 
protecting lives and property. It evaluates the status of the fleet and 
the current and future capabilities required to meet NOAA's public 
safety, economic, and stewardship missions, and sets a plan of action. 
NOAA treats the Fleet Plan as a living document whose execution 
incorporates new information that impacts acquisition strategies and/or 
priorities. At a minimum, NOAA plans to reevaluate and revise the plan 
every five years.
    To help formulate the plan, NOAA performed an internal assessment 
in 2012-2013 to refresh NOAA's mission requirements. The assessment 
determined that a different mix of ships and a push toward new 
observational technologies are needed to better fulfill NOAA's mission 
requirements.
    In January 2016, NOAA established an Independent Review Team (IRT) 
of senior-level scientific and industry experts to assess 
recapitalization planning for the NOAA fleet, recommend measures 
required to address identified deficiencies, and identify ways to 
overcome organizational impediments. The IRT is now a Standing Review 
Board for OMAO and continues to advise NOAA on its fleet 
recapitalization efforts.
    Towards this same objective, NOAA established an internal team of 
experts from across NOAA in May of 2016 to assess the NOAA fleet's 
current composition and capabilities, long-term recapitalization 
planning, utilization of alternatives to the NOAA fleet (commercial 
contracting, Academic Research fleet, other public-funded vessels), 
current operational systems (crewing, scheduling), current maintenance 
practices, technology readiness and infusion (instrumentation and 
mechanical), and risk identification and planning. The efforts of this 
team produced the NOAA Fleet Plan, which outlined a comprehensive 
solution for long-term recapitalization of the NOAA fleet. The NOAA 
Fleet Plan was approved and published for distribution on October 31, 
2016.
    The NOAA Fleet Plan calls for the acquisition of new ships and at-
sea data collection capabilities. NOAA's ships need to be adaptable and 
extensible to provide the infrastructure and capabilities necessary to 
meet mission requirements now and in the future. In contrast to the 
wide variety of vessel types that currently comprise the NOAA fleet, 
the future NOAA fleet will reduce the overall vessel types and focus on 
a core mission with secondary missions that make the best use of the 
vessels' capabilities. NOAA will leverage aspects of previous designs 
to the extent possible to meet multiple core mission requirements. 
Standardization is critical for efficient maintenance, sparing, 
upgrades and optimal crewing models. Each vessel type will incorporate 
the latest commercial technologies and will be able to accommodate new 
technologies as they become available. Across the fleet, core equipment 
types will be standardized as much as possible to reduce operation and 
maintenance costs as well as help to establish an effective reserve of 
spares to minimize ship down time. The final decision on ship 
retirements will be based on the material condition of the ships in 
concert with the alignment of mission capabilities of the ship and the 
fleet.
    There are distinct considerations to evaluate in order to execute 
the recapitalization strategy. Efforts will be made throughout the 
process to leverage proven and existing design features from previous 
ship classes. This will not only help to create mission system 
standardization to meet multiple core mission requirements but also 
will help improve sparing and logistic support across the fleet. A 
stable budget profile is required for the sequencing of ship 
acquisitions and is critical to effective planning. Congress has 
appropriated approximately $75 million annually since 2016, providing 
continuity and stability in fleet planning and acquisition.
    First, NOAA continues to proceed with the design and construction 
of two new NOAA general purpose oceanographic Class A vessels. These 
vessels will have primary capabilities to conduct oceanographic 
monitoring, research, and modeling activities and secondary 
capabilities for assessment and management of living marine resources 
and for charting and surveying activities. By utilizing the existing 
Navy Auxiliary General Oceanographic Research (AGOR) 27 specifications 
and adapting them to meet NOAA-specific requirements, NOAA will 
minimize the impact of lost fleet capacity and capability while 
leveraging government resources, saving years of time and millions of 
dollars. NOAA has entered into an agreement with the U.S. Navy to 
utilize their ship acquisition expertise in support of this effort.
    Second, NOAA continues to conduct a requirements analysis and will 
proceed with concept designs for at least two Class B vessels. This 
class will have a primary capability to perform charting and surveying 
activities, with secondary capabilities for assessment and management 
of living marine resources and oceanographic monitoring, research, and 
modeling activities. Based on the extensive timeline needed for new 
construction acquisitions, it is critical to initiate the ship design 
and acquisition process as soon as possible.
    Third, NOAA continues its requirements analysis and will proceed 
with concept designs of at least two multipurpose, low-endurance, 
shallow-draft, trawl-capable stock assessment Class C vessels. These 
specialized vessels will meet specific assessment and management of 
living marine resource requirements in coastal waters and the Gulf of 
Mexico.
    Fourth, NOAA will proceed with initial requirements analysis and 
concept designs for the Class D vessels. These vessels would support 
the primary mission of assessment and management of living marine 
resources (trawl capable) with capabilities for secondary missions of 
charting and surveying, and oceanographic monitoring, research, and 
modeling.
Future Fleet and Vessel Procurement Status
    The acquisition process is underway for the first two Class A 
ships. The NOAA AGOR Variant (NAV) is a 240-foot ship designed to 
commercial standards and capable of oceanographic science and data 
collection in coastal and deep ocean areas.
    The NAV A vessels are being procured through an Interagency 
Agreement with the U.S. Navy as an assisted acquisition. The Program is 
currently conducting the Source Selection activities to support 
contract execution.
    The vessels are expected to come on-line as existing assets are 
retired; minimizing or eliminating fleet capacity gaps is critical for 
data collection that feeds weather forecasts and fishery quotas, 
protects marine monuments, and maps our Nation's Exclusive Economic 
Zone.
    It is for these same reasons that NOAA has initiated early design 
and acquisition planning activities for Class B and C vessels. To the 
greatest extent practicable, we will seek to leverage common hull, 
machinery, and/or mission systems to gain economies during the 
acquisition process as well as to reduce life cycle and fleet 
management costs.
Partnerships
    NOAA has decommissioned more ships in the last ten years than it 
has introduced. Since 2008, the NOAA fleet has decreased from 21 to 16 
operational ships. There are capacity gaps and, therefore, requirements 
that could not be met by the NOAA fleet. To the extent possible, NOAA 
has implemented mitigation strategies to minimize the requirements 
gaps, including: increased maintenance, increased use of charters, 
changes to ships working grounds, ``piggyback projects'', and 
introduction of new technology. Mitigation strategies are limited 
regionally, by capability requirements and availability, and by project 
requirements. Thus, these mitigations are largely maximized in current 
fleet operations.
    NOAA continues to coordinate with its maritime partners to maximize 
days at sea productivity by assessing and incorporating government and 
commercially-driven technologies such as unmanned, autonomous, and 
remotely operated systems, as well as data analytics. These operational 
assessments have included unmanned operations from the Arctic to 
Antarctic as well as across NOAA's mission sets. Having a multi-
mission, inter-operable, and coordinated Federal oceanographic fleet 
with groundbreaking technologies will improve operational capacity at 
the Federal level. NOAA is currently assessing the efficiency and 
effectiveness of meeting requirements through unmanned systems. We will 
use the results of this analysis to develop a comprehensive NOAA-wide 
plan that ensures it is using unmanned systems in a way that supports 
NOAA requirements in the most cost-effective manner.
Other Opportunities
    The future NOAA fleet must be adaptable and extensible to provide 
the infrastructure and capabilities to evolve with future changes in 
technology and mission requirements. While it is impossible to predict 
all future advances in technology or changes in requirements, new ships 
must provide capabilities to allow for and support efficient 
operations, evolving requirements, and increasingly sophisticated 
technology.
    Unmanned airborne and marine vehicles are enhancing ocean science 
at NOAA and extending the data collection capacity of the NOAA fleet. 
This includes autonomous underwater vehicles, tethered remotely 
operated vehicles, unmanned surface vehicles powered by wind, sun, and 
waves, and portable aerial systems launched from NOAA ships. In Fiscal 
Year 2018, NOAA invested $2 million to accelerate autonomous 
hydrographic mapping and autonomous sampling of ocean conditions 
towards operational maturity. NOAA is also incorporating unmanned 
systems requirements into the new ship designs. Future vessels will be 
able to operate multiple unmanned systems in tandem with on-board 
technologies, significantly expanding mission capacity and potentially 
reducing the cost per unit effort of these observations.
    Every effort is being made to follow the process outlined in the 
NOAA Fleet Plan while taking advantage of arising opportunities that 
may facilitate the process. Based on the near term and pressing need to 
bring new ships online, NOAA is investigating the possibility of 
acquiring vessels from Federal partners. NOAA is committed to an open 
and competitive process to carry out conversions, repairs, and new 
builds. The Miller Act waiver provided in the recently enacted John S. 
McCain National Defense Authorization Act for 2019 will also provide 
much needed flexibility and open up more shipyards to work on the NOAA 
fleet.
Conclusion
    NOAA plays a unique and important role in providing critical 
informational infrastructure to support safe, reliable, and efficient 
marine navigation and environmental intelligence gathering across the 
planet. Partnerships are integral to achieving success in this ever-
evolving and challenging environment. There is more work to be done to 
facilitate ship acquisitions but NOAA is working to develop and apply 
new technologies and collect data in innovative ways to improve our 
products and services.
    NOAA will continue to properly, efficiently, and effectively 
acquire new vessels while mitigating the challenges of an aging fleet 
and maintaining an inherently governmental capability to conduct NOAA 
critical missions.
    Thank you again for the opportunity to testify today. I appreciate 
the Subcommittee's time and attention and look forward to answering 
your questions.
                                 ______
                                 
                                                     Oceana
                                                   October 10, 2018
Via e-mail

Hon. Senator Thune,
Chairman, Senate Committee on Commerce, Science, and Transportation,
Washington, DC.

Hon. Senator Sullivan,
Chairman, Senate Commerce Subcommittee on Oceans, Atmosphere, 
Fisheries, and Coast Guard,
Washington, DC.

Hon. Senator Nelson,
Ranking Member, Senate Committee on Commerce, Science, and 
Transportation,
Washington, DC.

Hon. Senator Baldwin,
Ranking Member, Senate Commerce Subcommittee on Oceans, Atmosphere, 
Fisheries, and Coast Guard,
Washington, DC.

Dear Chairman Thune, Ranking Member Nelson, Chairman Sullivan, and 
            Ranking Member Baldwin:

    Oceana, the largest international ocean conservation organization 
solely focused on protecting the world's oceans, strongly supports 
robust fleet recapitalization of the National Oceanic and Atmospheric 
Administration (NOAA) and the U.S. Coast Guard. Oceana and its more 
than 725,000 members and supporters in the United States are committed 
to supporting the mission and functions of NOAA and the Coast Guard, 
both of which provide critical ocean research, stewardship and 
enforcement functions in the United States.
    NOAA currently maintains and operates a fleet of 16 ships, which 
are used to perform key at-sea missions including charting and 
surveying, oceanographic research and monitoring, and living marine 
resource assessments. Within NOAA, the National Marine Fisheries 
Service (NMFS) uses many of these ships for its fisheries management 
efforts, including research and stock assessments, monitoring, and 
enforcement. Maintaining sufficient at-sea capacity is essential for 
NMFS' ability to sustainably manage U.S. fish stocks.
    NOAA's October 2016 Final Report of the Independent Review Team on 
NOAA Fleet Recapitalization reports that by 2028, eight of NOAA's 16 
ships will reach the end of their extended service life, rendering them 
inoperable. By 2030, two more ships will reach the end of their 
extended service life. NOAA has stated that all at-sea missions will be 
negatively impacted when these ships begin to come offline. The agency 
additionally acknowledges a six-to-eight-year timeline required for 
obtaining funding and for designing, building, and commissioning new 
ships. In other words, without concerted and immediate efforts to 
recapitalize the NOAA fleet, the agency will experience a crippling 
lapse in its ability to carry out mission-critical functions related to 
weather and climate predictions, fisheries research and management, and 
other key efforts within the next decade.
    The Coast Guard is similarly focused on recapitalization and has 
embarked on a multi-decade process to recapitalize aging ships and 
aircraft. While the Coast Guard is currently procuring several new 
fleet assets, the Government Accountability Office (GAO) has identified 
maintenance, equipment, and funding issues that could undermine the 
Coast Guard's key capabilities related to maritime safety, security, 
and environmental stewardship.\1\
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    For these reasons, Oceana applauds today's subcommittee hearing 
titled ``The Future of the Fleets: Coast Guard and NOAA Ship 
Recapitalization'' to examine the critical need for Coast Guard and 
NOAA fleet recapitalization.
    Thank you for your attention to these critical fleet infrastructure 
issues.
            Sincerely,
                                         Jacqueline Savitz,
                               Chief Policy Officer, North America.
                                 ______
                                 
                                          Ocean Conservancy
                                   Washington, DC, October 11, 2018

Hon. Dan Sullivan,
Chair,
Subcommittee on Oceans, Atmosphere, Fisheries, and the Coast Guard,
U.S. Senate,
Washington, DC.

Hon. Tammy Baldwin,
Ranking Member,
Subcommittee on Oceans, Atmosphere, Fisheries, and the Coast Guard,
U.S. Senate,
Washington, DC.

Dear Chairman Sullivan and Ranking Member Baldwin:

    We are writing to express our support for the recapitalization of 
the maritime fleets at our Nation's premier ocean agencies: the 
National Oceanic and Atmospheric Administration (NOAA) and the United 
States Coast Guard.
    People across the Nation rely on the vital services that are 
delivered by the fleet of ships and aircraft operated by both NOAA and 
the Coast Guard. NOAA's fleet of ships and aircraft are critical 
infrastructure for data collection in support of the U.S. economy in 
sectors including fisheries economics, emergency management, 
navigational support and more. The Coast Guard's fleet of vessels is 
essential for national security, marine domain awareness and patrolling 
our oceans and ensuring safety at sea.
NOAA fleet
    Since 2008, the NOAA fleet has decreased from 21 ships to 16 
currently operational ships. Without recapitalization, the NOAA fleet 
will be reduced to half its current size by 2028. Of the 16 ships that 
comprise the NOAA fleet, most are outdated. Three of the 16 vessels 
have been in service for more than 40 years and eight of the 16 vessels 
have exceeded their designed service life as of this year.
    By 2028, the projected loss of eight ships to the NOAA fleet would 
``significantly undermine NOAA's ability to meet its mission, resulting 
in the total absence of mapping capabilities on the West Coast and in 
the United States Arctic, specifically in the Pacific Ocean, Bering Sea 
and Arctic Ocean; a 75 percent loss of its hydrographic survey 
capability on the East Coast and in the Caribbean; and the inability to 
conduct fishery and marine mammal stock assessments, monument and 
sanctuary stewardship in the Central, Southern, and Western Pacific, 
and trawl-based stock assessments in the Gulf of Mexico.'' \1\
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    Unlike other Federal and academic agencies whose primary mission is 
research, the data NOAA collects feed directly into operational 
products like navigational charts, storm surge models, weather 
forecasts, or fishery models to support regional catch allocations. 
NOAA ships are vital to our commercial fisheries. Annual NOAA surveys 
form the basis for our fisheries management system and without an 
adequate number of operational ships, surveys cannot be conducted, 
negatively impacting commercial fisheries worth billions of dollars.
    In addition to maintaining current fleet levels to avoid these 
negative results, NOAA needs to expand beyond the current 16 vessels to 
properly address the changing world in which we live. Climate change, 
for example, exemplifies the need for NOAA to increase its fleet size:

   As climate change influences our shipping routes at 
        unprecedented rates in the Arctic, more charting is needed in 
        the region to ensure safe navigation and other safety needs for 
        the expanding industry.

   Climate change is also impacting both our commercial and 
        recreational fisheries. The NOAA fleets provide the best 
        available scientific information and data so that fishery 
        managers may make critical decisions to support fisheries, 
        ecosystems and local economies. A robust modern fleet is needed 
        to help managers and fishing communities be prepared for and 
        respond to changes in the ocean.

   As climate change continues to bring about more severe 
        coastal storms, we will increasingly need rapid response 
        efforts to chart the changing underwater landscape to ensure 
        safe shipping can resume at ports and coastal waters to support 
        local economic recovery.

    NOAA's fleet is also critical for modern ocean exploration. The 
Okeanos Explorer cost less than 1 percent of the estimated $2 billion 
NASA mission to Europa.\2\ And yet the Okeanos Explorer is reaching and 
exploring places in the ocean that are even more foreign and unknown to 
us than our solar system. We can explore new horizons here on earth for 
a tiny fraction of the cost of exploring space. But we cannot do it 
without NOAA ships.
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Coast Guard Fleet
    The Coast Guard fleet provides numerous beneficial services to the 
U.S. economy and national security. For example, the Coast Guard fleet 
patrols U.S. waters to enforce maritime and fisheries laws, like the 
Magnuson-Stevens Act and laws that forbid illegal fishing by foreign 
boats. It also provides a critical safety net when vessels--including 
fishing vessels--encounter trouble on the seas. The presence or absence 
of Coast Guard vessels can be a matter of life and death.
    In the Arctic, as sea ice diminishes and maritime activity in the 
region grows, the need for additional Coast Guard icebreaking capacity 
will only become more acute. At this time, the Coast Guard operational 
icebreaking fleet consists of one heavy icebreaker commissioned in 1976 
and one medium icebreaker commissioned in 2000. Investment in new Polar 
Security cutters is a critical first step toward increased icebreaking 
capacity that will enable the Coast Guard to better meet its national 
security, search and rescue, law enforcement, environmental protection, 
and other missions in Arctic waters.
    Without the proper fleets of ships, we cannot appropriately conduct 
science, monitor the health of our fisheries, respond to environmental 
disasters including oil spills, enforce environmental laws that protect 
the oceans, and establish a peaceful U.S. presence in frontier regions 
like the Arctic.
            Sincerely,
                                       Janis Searles Jones,
                                           Chief Executive Officer,
                                                     Ocean Conservancy.
                                 ______
                                 
                                 Environmental Defense Fund
                                   Washington, DC, October 24, 2018

Hon. John Thune, Chairman,
Hon. Bill Nelson, Ranking Member,
Committee on Commerce, Science, and Transportation,
United States Senate,
Washington, DC.

Dear Chairman Thune and Ranking Member Nelson:

    Thank you for convening a hearing on the important topic of the 
recapitalization of the National Oceanic and Atmospheric Administration 
(NOAA) and Coast Guard fleets. The Environmental Defense Fund (EDF) and 
its two million members and supporters advocate for solutions that both 
protect the environment and promote economic development. Our Oceans 
program focuses on sustainable fisheries management, including many 
issues brought before this Committee. EDF strongly supports 
revitalization of the NOAA and Coast Guard fleets.
    EDF is keenly aware of the vital role played by NOAA and Coast 
Guard vessels. NOAA vessels undertake critical research on the marine 
ecosystem, including tracking the abundance of fish and other marine 
animals. These data are included in stock assessments, which form the 
foundation for determining overfishing levels, species rebuilding 
schedules, and the appropriate amount of catch permissible in each 
fishery. Inadequate resources to maintain and update the fleet can 
result in vessels being abruptly removed from service, requiring delays 
in or even cancellation of scheduled scientific work. As a result, the 
fundamental underpinnings of our world-class fisheries management 
system may be undermined, resulting in environmental damage, lost 
economic opportunity, and mistrust by stakeholders in fisheries 
regulations. Similarly, the Coast Guard performs essential missions to 
protect life at sea and help enforce rules that ensure fairness and 
sustainability in our fisheries.
    Very simply, the environment and the economy both rely on the 
critically important work of the NOAA and Coast Guard fleets. For many 
years, resources have lagged behind data collection, enforcement and 
other needs. We strongly support the agencies' efforts to recapitalize 
their fleets so as to protect fisheries resources, the marine 
environment more generally, the lives of fishermen and other boaters, 
and the extensive economic activity that relies on the proper 
functioning of NOAA and Coast Guard vessels.
    Thank you for your consideration of our views on this important 
issue and for your support in providing adequate resources to support 
NOAA and Coast Guard fleet recapitalization.
            Very truly yours,
                                              Matt Tinning,
                                  Associate Vice President, Oceans.
                                 ______
                                 
   Response to Written Questions Submitted by Hon. Tammy Baldwin to 
                         RADM Michael J. Silah
    Question 1. For each of the last five fiscal years, how much 
taxpayer money has NOAA spent on fleet-related equipment and services 
provided by foreign companies? This amount should include all contracts 
and subcontracts with foreign companies.
    Answer. Over the last five fiscal years NOAA spent $2.7 million on 
foreign business contracts. The majority of the contracts were for 
parts and equipment that must be provided by the original vendor or 
manufacturer. Further, approximately $1 million was for contracts that 
foreign businesses received via competition. Of those competed 
contracts, the majority were for foreign port services while our 
vessels are sailing internationally.

    Question 2. Please provide detailed examples of NOAA contracts or 
subcontracts with foreign companies for fleet-related equipment and 
services.
    Answer. The majority of contracts with foreign companies are not 
competitive because the equipment being purchased is the only piece of 
equipment on the market that can meet NOAA's needs, such as transducers 
or other equipment where the company is the original equipment 
manufacturer. Another example of NOAA contracting with foreign 
companies is for port husbanding services at foreign ports while a ship 
is sailing internationally.

    Question 3. What proactive steps, if any, does NOAA take to seek 
contracts or subcontracts with American manufacturers and small 
businesses in cases where the law does not require you to do so?
    Answer. NOAA includes the Buy American Act in applicable 
solicitations and contracts. The Buy American Act applies to all 
acquisitions for the purchase of supplies, and requires that all 
supplies are domestic end products unless an exemption, such as public 
interest, non-availability, unreasonable cost, resale, and information 
technology that is a commercial item, applies. In addition, the Buy 
American Act requires, with some exceptions, the use of only domestic 
construction materials in contracts for construction in the United 
States. Thanks to efforts by the Senate Commerce Committee, a provision 
in the John S. McCain National Defense Authorization Act for Fiscal 
Year 2019 (P.L. 115-232), provides the Secretary of Commerce the same 
discretionary authority as the Secretaries of Transportation, the Army, 
the Navy, and the Air Force to waive bonding requirements for contracts 
for construction and major repair of NOAA vessels, which will increase 
the competitiveness of smaller U.S.-based shipyard and repair 
facilities that are most appropriately suited for NOAA vessel repair 
contracts.

    Question 4. Has NOAA experienced increased lifecycle costs 
resulting from the use of foreign-made components or had difficulty 
repairing or finding replacements for foreign-made components? If so, 
please provide specific, detailed examples.
    Answer. In some cases, NOAA has found it difficult to procure 
foreign-made components of our equipment, because they are not readily 
available in the United States. In those cases, NOAA is required to 
procure the part from the original equipment manufacturer and shipping 
times, customs and security clearances have delayed the arrival of 
parts. An example is motor repairs for the NOAA Ship Henry Bigelow: 
Nidec-Ansaldo (Italy). Motor windings were sourced in Italy to ensure 
compatibility and operation within specifications, per the original 
equipment manufacturer's recommendations. Component material, including 
coil wire with metric units, is most easily produced and sourced in 
Europe and could not be replaced with material available stateside.

    Question 5. For decades, NOAA has done great research in the Great 
Lakes, particularly at the Great Lakes Environmental Research 
Laboratory and also at the National Estuarine Research Reserve in 
Superior, Wisconsin. But to my knowledge, NOAA has never had a ship in 
the Great Lakes. Admiral Silah, I believe this has contributed to a 
lack of data that is required to address some of the most pressing 
challenges facing the Great Lakes, including: the need to map with 
hydrographic surveys most of Lake Superior; harmful algal blooms; 
invasive species; and climate change. From NOAA's perspective, what 
data gaps exist in the Great Lakes?
    Answer. The Great Lakes comprise the largest freshwater system on 
earth and are critical to the region's drinking water supplies, 
shipping, tourism, and recreational economies. NOAA has 13 vessels 
ranging in size from 13 to 80 feet supporting our Great Lakes data 
collection efforts, carrying out work related to harmful algal bloom 
monitoring, fisheries, and water quality testing, as well as buoys and 
the Great Lakes Observing System. NOAA appreciates the ecological and 
economic importance of the Great Lakes and works to ensure it collects 
critical data related to the region. NOAA is continually assessing data 
needs nationwide in its efforts to improve its forecasting, monitoring, 
and prediction capabilities to address challenges.

    Question 6. And does NOAA plan to use any of its current or future 
recapitalized fleet to address these challenges, including through 
homeporting a ship in the Great Lakes?
    Answer. NOAA has no plans to homeport any vessels in the Great 
Lakes. The requirements NOAA has in the Great Lakes are most cost-
effectively met using a fleet of smaller vessels, such as those that 
are located at the Great Lakes Environmental Research Laboratory in 
Michigan. NOAA is in the process of starting the development of a small 
boat recapitalization plan that will analyze NOAA's small boat fleet, 
similar to what was recently completed with the NOAA Fleet 
Recapitalization Plan. The plan is expected to assess NOAA's capacity 
for meeting its small boat requirements in the Great Lakes in the long 
term.
                                 ______
                                 
   Response to Written Questions Submitted by Hon. Edward Markey to 
                         RADM Michael J. Silah
    Question 1. In 2017, of 8,700 days at sea requested for NOAA ships, 
3,600, over 40 percent, were unmet. That's a lot of research left on 
the table. NOAA's 2016 Fleet Recapitalization Plan recommended 
increasing the use of charters and strengthening partnerships across 
both Federal and academic sectors to increase capacity. To what extent 
is NOAA currently partnering with the Navy and Coast Guard to increase 
capacity fulfill its research missions? How could these partnerships be 
further enhanced?
    Answer. NOAA enjoys a positive relationship with the U.S. Navy. A 
formal Memorandum of Agreement (MOA) is in place between NOAA and the 
Oceanographer of the Navy through 2023. This MOA highlights the 
important role the Oceanographer of the Navy serves as Naval Deputy to 
NOAA, and also prioritizes cooperative efforts regarding meteorology, 
oceanography, geospatial information and services, astronomy, precise 
time interval, remote sensing, navigation and environmental readiness. 
NOAA's Office of Marine and Aviation Operations has been partnering 
with the Navy since 2017 on the design and construction of new research 
vessels, and has longstanding ship moorage and facilities use 
agreements that greatly improve NOAA's maritime operational 
flexibility.
    NOAA and the U.S. Coast Guard have a robust partnership that 
continues to expand. NOAA and Coast Guard leadership work together to 
maximize efficiencies between the two agencies in providing services 
that support our Nation's economic success while safeguarding our 
natural resources. There are numerous Memorandums of Understanding 
(MOU) and interagency agreements between NOAA and Coast Guard. Two 
prominent agreements are the Fleet Plan (October 2014) and Cooperative 
Maritime Strategy (February 2013). Other agreements include an officer 
exchange with a NOAA officer assigned to the Coast Guard icebreaker 
Polar Star, a senior officer assigned to Coast Guard HQ as NOAA 
Liaison, and a Joint Officer Training Center where NOAA and Coast Guard 
Officer Candidates train together. NOAA conducts research missions 
aboard Coast Guard icebreaker Healy, most recently in August 2018. The 
agencies are working together with unmanned systems to maximize 
efficiencies gained by sharing knowledge and expertise. NOAA will be 
partnering with Coast Guard on several upcoming Unmanned Aircraft 
System operational exercises planned for 2019, incorporating NOAA 
Fisheries law enforcement missions into the Coast Guard training 
exercises.
    To enhance the already strong partnerships between NOAA and the 
Navy/Coast Guard, it is recommended that the agreements between the 
agencies are renewed and the organizations continue to engage to 
maximize efficiencies as opportunity and technological advancements 
present themselves.

    Question 2. In what condition are the smaller NOAA vessels based in 
Massachusetts, such as the Auk, based at the Gerry E. Studds--
Stellwagen Bank National Marine Sanctuary?
    Answer. NOAA has three vessels based at the Stellwagen Bank 
National Marine Sanctuary:

   The R/V Auk is a 50 ft. aluminum catamaran, capable of 
        supporting a larger science crew for critical offshore work, 
        including monitoring, site characterization, diving needs, and 
        education and outreach. The vessel, built in 2006, is currently 
        in very good condition and a service life extension is 
        currently planned for 2023.

   The T/T Auk (aka Auk-tender) is a 11 ft. inflatable that is 
        suitable for local sites and fair weather only. The Auk-tender 
        is stowed in a cradle on the Auk and deployed from its deck. It 
        was built in 2006 and will continue to perform adequately 
        through 2022.

   R1606 is a 16 ft. rigid hull inflatable, kept on a trailer. 
        It was built in 2009 and will continue to perform adequately 
        through 2022.

    A recent report issued by the Office of National Marine Sanctuaries 
(ONMS), the Small Boat Program Fleet Assessment Report, was published 
in April 2018 and has additional information on the condition and uses 
of the ONMS small boat fleet.

    Question 3. In what condition are the smaller research vessels used 
by NOAA facilities in Massachusetts such as the Greater Atlantic 
Regional Office and Science Center? What are the plans for their 
refurbishment and eventual replacement?
    Answer. The NOAA R/V Gloria Michelle is a 72 ft., 96 ton stern 
trawler built in 1974 and acquired by NOAA in 1980 through a drug 
seizure. Recent audiogage readings have shown that the 44 year old 
vessel has sound hull thickness with only minor deterioration. Thinning 
spots were cut out and replaced with new sheet metal. Engineering 
upgrades to the trawl winches, hydraulic system, generators, and main 
engine, over the last three years have extended the life of the vessel. 
We expect safe and reliable service into the near future to support a 
large number of new and long-term research objectives.
    The NOAA R/V Victor Loosanoff is 49,10" long and 38 gross tons, 
built in 1995 for the U.S. Coast Guard and transferred to NOAA in 2001. 
The vessel is in good condition and received long term maintenance 
(hull blasted and painted, shafts, rudders, keel coolers and propellers 
were reconditioned) over the last two years, which is expected to 
extend the vessel life by 10 years.
    There are currently no plans to replace the Gloria Michelle or the 
Victor Loosanoff. The Northeast Fisheries Science Center will continue 
to maintain and refurbish the two research vessels with revenue 
generated through their daily charter rate. Eventually, replacement of 
the Gloria Michelle will be required.

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