`[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]



                BUILDING THE FLEET:  ASSESSING THE DEPART-
                  MENT  OF  HOMELAND  SECURITY'S  ROLE  IN
                  THE UNITED STATES COAST GUARD'S ACQUISI-
                  TIONS PROCESS

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



                                HEARING

                               before the

                            SUBCOMMITTEE ON
                      TRANSPORTATION AND MARITIME
                                SECURITY

                                 of the

                     COMMITTEE ON HOMELAND SECURITY
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 7, 2024
                               __________

                           Serial No. 118-61
                               __________

       Printed for the use of the Committee on Homeland Security

 
 

               [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


                                    

        Available via the World Wide Web: http://www.govinfo.gov
                               __________

                   U.S. GOVERNMENT PUBLISHING OFFICE

58-069 PDF                 WASHINGTON : 2025




























                     COMMITTEE ON HOMELAND SECURITY

                 Mark E. Green, MD, Tennessee, Chairman
Michael T. McCaul, Texas             Bennie G. Thompson, Mississippi, 
Clay Higgins, Louisiana                Ranking Member
Michael Guest, Mississippi           Sheila Jackson Lee, Texas
Dan Bishop, North Carolina           Eric Swalwell, California
Carlos A. Gimenez, Florida           J. Luis Correa, California
August Pfluger, Texas                Troy A. Carter, Louisiana
Andrew R. Garbarino, New York        Shri Thanedar, Michigan
Marjorie Taylor Greene, Georgia      Seth Magaziner, Rhode Island
Tony Gonzales, Texas                 Glenn Ivey, Maryland
Nick LaLota, New York                Daniel S. Goldman, New York
Mike Ezell, Mississippi              Robert Garcia, California
Anthony D'Esposito, New York         Delia C. Ramirez, Illinois
Laurel M. Lee, Florida               Robert Menendez, New Jersey
Morgan Luttrell, Texas               Thomas R. Suozzi, New York
Dale W. Strong, Alabama              Timothy M. Kennedy, New York
Josh Brecheen, Oklahoma              Yvette D. Clarke, New York
Elijah Crane, Arizona
                      Stephen Siao, Staff Director
                  Hope Goins, Minority Staff Director
                       Sean Corcoran, Chief Clerk
                                 ------                                

          SUBCOMMITTEE ON TRANSPORTATION AND MARITIME SECURITY

                  Carlos A. Gimenez, Florida, Chairman
Clay Higgins, Louisiana              Shri Thanedar, Michigan, Ranking 
Nick LaLota, New York                  Member
Laurel M. Lee, Florida               Robert Garcia, California
Mark E. Green, MD, Tennessee         Timothy M. Kennedy, New York
  (ex officio)                       Bennie G. Thompson, Mississippi 
                                       (ex officio)
                  Vacancy, Subcommittee Staff Director
           Alex Marston, Minority Subcommittee Staff Director
           
           
           
           
           
           
           


















           
                            C O N T E N T S

                              ----------                              
                                                                   Page

                               STATEMENTS

The Honorable Carlos A. Gimenez, a Representative in Congress 
  From the State of Florida, and Chairman, Subcommittee on 
  Transportation and Maritime Security:
  Oral Statement.................................................     1
  Prepared Statement.............................................     4
The Honorable Shri Thanedar, a Representative in Congress From 
  the State of Michigan, and Ranking Member, Subcommittee on 
  Transportation and Maritime Security:
  Oral Statement.................................................     2
  Prepared Statement.............................................     7
The Honorable Bennie G. Thompson, a Representative in Congress 
  From the State of Mississippi, and Ranking Member, Committee on 
  Homeland Security:
  Prepared Statement.............................................     7

                               WITNESSES
                               
                                Panel I

Ms. Shelby Oakley, Director, Contracting and National Security 
  Acquisitions, U.S. Government Accountability Office:
  Oral Statement.................................................     8
  Prepared Statement.............................................    11
Mr. Ronald O'Rourke, Specialist in Naval Affairs, Congressional 
  Research Service:
  Oral Statement.................................................    40
  Prepared Statement.............................................    42
Mr. Eric J. Labs, Senior Analyst, Naval Weapons and Forces, U.S. 
  Congressional Budget Office:
  Oral Statement.................................................    49
  Prepared Statement.............................................    51

                                Panel II

Vice Admiral Paul F. Thomas, Deputy Commandant for Mission 
  Support, United States Coast Guard:
  Oral Statement.................................................    66
  Prepared Statement.............................................    67
Mr. Randolph D. ``Tex'' Alles, Deputy Under Secretary, 
  Management, U.S. Department of Homeland Security:
  Oral Statement.................................................    70
  Prepared Statement.............................................    71

                                APPENDIX

Questions From Honorable Michael Waltz for Vice Admiral Paul 
  Thomas.........................................................    85
Question From Honorable Michael Waltz for Randolph D. ``Tex'' 
  Alles..........................................................    86

 
                 BUILDING THE FLEET: ASSESSING THE DE-
                  PARTMENT  OF   HOMELAND   SECURITY'S 
                  ROLE  IN  THE  UNITED  STATES  COAST
                  GUARD'S ACQUISITIONS PROCESS

                              ----------                              

                          Tuesday, May 7, 2024

                       U.S. House of Representatives,
                          Committee on Homeland Security,
                           Subcommittee on Transportation and 
                                            Maritime Security,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:03 a.m., at 
Room 310, Cannon House Office Building, Hon. Carlos Gimenez 
[Chairman of the subcommittee] presiding.
    Present: Representatives Gimenez, Higgins, and Thanedar.
    Also present: Representatives Moylan, and Radewagen.
    Chairman Gimenez. The Committee on Homeland Security 
Subcommittee on Transportation and Maritime Security will come 
to order. Without objection, the Chair may declare the 
subcommittee in recess at any point. I seek your indulgence in 
in my being late. I was held up on another matter.
    Today's hearing will examine the Department of Homeland 
Security's role in the United States Coast Guard's acquisitions 
process. Without objection, the gentleman from Florida, Mr. 
Walsh; the gentleman from Guam, Mr. Moylan; and the gentlewoman 
from American Samoa, Mrs. Radewagen; and the gentlewoman from 
Alaska, Ms. Peltola, are permitted to sit with the subcommittee 
and ask questions of the witnesses. So ordered.
    Today's hearings we will examine the Department of Homeland 
Security's role in the United States Coast Guard's acquisitions 
process. Without objection, the gentleman from Florida, Mr. 
Walsh, the gentleman from Guam--I think I have said that 
before. OK.
    As we begin today's hearing, it is with a heavy heart that 
I take a moment to remember our late colleague Congressman 
Donald Payne, Jr. A proud son of New Jersey, Congressman Payne 
was a steadfast advocate for his constituents during his time 
in Congress.
    On the Homeland Security Committee, Congressman Payne 
worked to bolster the Department of Homeland Security's ability 
to protect Americans, respond to emergencies, and safeguard our 
communities. He collaborated with his colleagues across the 
aisle to make necessary reforms to the Department's operations, 
including the Department of Homeland Security Interoperable 
Communications Act which helped the Department facilitate more 
reliable communications between personnel of different 
Department components during daily operations, planned events, 
and emergencies.
    Additionally, his leadership of the Homeland Security for 
Children Act, now, which was signed into law in 2022, ensured 
the Department is accounting for the unique vulnerabilities to 
children during natural disasters and acts of terrorism. 
Furthermore, he distinguished this subcommittee not only with 
his persistent advocacy, but also with his signature bowtie 
that elevated the sartorial character of the hearing room.
    We were saddened to hear of his tragic passing, and I think 
I speak for all the subcommittee Members by stating that we 
will miss his persistent advocacy and genteel presence on the 
dais. Our thoughts and prayers are with his families and 
friends, especially his wife Beatrice and their triplets Donald 
III, Jack, and Yvonne.
    I now recognize the Ranking Member, the gentleman from 
Michigan, Mr. Thanedar, for his remarks.
    Mr. Thanedar. Thank you, Chairman Gimenez for yielding, and 
thank you for your kind words about our late colleague. I would 
like to echo everything you said.
    Congressman Payne was a true public servant in the best 
sense. He was humble, hardworking, and kind. His work on 
emergency preparedness, infrastructure investments, health 
care, and the security of our Nation's children will have a 
lasting impact for many years to come.
    Congressman Payne sat on this subcommittee for most of his 
time in Congress. When it came to issues facing the TSA and the 
Coast Guard he always placed front-line workers front and 
center. He never missed an opportunity to thank Transportation 
Security officers, Federal air marshals, Coast Guard service 
members and other front-line workers and their service, and he 
backed up his words with action.
    His support was instrumental to securing pay raises and 
improved labor rights for TSA employees. He also sponsored the 
Securing Public Areas of Transportation Facilities Act of 2018, 
which was passed into law as part of the TSA Modernization Act 
later that year.
    His bill was helped guide the efforts of TSA and its 
security partners to protect public areas of airports, train 
stations, bus depots, and other transportation facilities. I 
was honored to work alongside Congressman Payne and get to know 
him. He will be sorely missed by his family, friends, 
colleagues, constituents, and staff.
    Mr. Chair, I yield back.
    Chairman Gimenez. Thank you, Mr. Ranking Member.
    To honor Congressman Payne, I ask all subcommittee Members, 
staff, witnesses, and the guests to rise and join me in a 
moment of silence.
    Thank you. Please be seated.
    I now recognize myself for an opening statement. Today our 
subcommittee is discussing the Department of Homeland 
Security's role in the Coast Guard's acquisition process. To 
carry out its 11 statutory missions, the Coast Guard depends on 
a variety of assets from small boats and unmanned aerial 
vehicles to 400-foot-long vessels and complex fixed- and 
rotary-wing aircraft. These assets must be able to operate in 
the most austere and challenging environments and carry out 
dangerous maneuvers to save lives, protect our coastline, and 
our waters, pursue and arrest criminal actors, and enforce U.S. 
laws.
    It is, therefore, critical that the Coast Guard be able to 
acquire the assets necessary to perform their duties and 
replace older assets with new, more capable assets as the 
surface and air fleet age.
    The Coast Guard is currently in the process of replacing 
several mission-critical assets and new cutters. When 
completed, the new national security cutters, offshore patrol 
cutters, the fast response cutters will replace 90 existing 
cutters and assume responsibility for 7 of the Coast Guard's 11 
statutory missions.
    Additionally, the polar security cutter will bolster the 
aging Coast Guard icebreaker fleet and 3 heavy icebreakers will 
replace the Coast Guard's sole heavy icebreaker, which is 
approaching almost 50 years in age.
    The Coast Guard works hand-in-hand with the domestic 
industrial base to meet the needs of the service. Among these 
critical acquisition programs there are certainly some success 
stories. The Coast Guard has so far commissioned 54 out of the 
71 planned fast response cutters and expanded the areas of 
operations for these new cutters to the Persian Gulf and the 
Indo-Pacific. Shipbuilders are delivering the new FRCs on 
schedule and at a rate of 2 per year.
    Additionally, the Coast Guard will soon commission its 10th 
out of 11 planned national security cutters and the 11th NSC is 
currently under construction. The NSCs are already fulfilling 
critical missions requirements in the Indo-Pacific and 
elsewhere around the world.
    However, Coast Guard has experienced major setbacks with 
both the polar security cutter and the offshore patrol cutter 
programs. The first polar security cutter was originally 
supposed to be operational this year, but the Coast Guard has 
not yet begun construction on the first cutter.
    Among the factors contributing to the significant delay has 
been the lack of experience the Coast Guard and the domestic 
industrial base have in building icebreaking ships. While 
several allied countries such as Canada, Finland, and South 
Korea have extensive experience building icebreakers and ice-
capable vessels, no heavy icebreaker has been constructed in 
the United States in almost 50 years. The Coast Guard has not 
commissioned an icebreaker of any kind since 2006.
    This lack of experience is demonstrated in the development 
of ship design for the PSC, which to date is still not at the 
level necessary to begin construction.
    The Coast Guard has experienced significant issues with the 
offshore patrol cutter program as well. Between 2017 and 2019, 
estimates for the ships weight increased by more than 20 
percent. Additionally, a 2023 Government Accountability Office 
report found that the OPC program, as well as the PSC program, 
did not follow standard practices in developing the ship's 
design and technology.
    These issues have caused delays to the construction 
schedule for the OPCs and have raised the overall cost of the 
program as well as the maintenance cost required to keep the 
cutters the OPC will replace on-line for longer.
    I am growing increasingly concerned that the Coast Guard 
cannot accurately estimate the cost of its shipbuilding 
programs. We have seen massive cost increases to the PSC 
program from the initial estimate the Coast Guard had provided 
Congress when standing up the program.
    That is why last fall Chairman Green and I requested to the 
Congressional Budget Office to conduct a cost estimate of the 
PSC program. According to the preliminary findings presented by 
Dr. Eric Labs, the PSC program cost will be almost 60 percent 
higher than the Coast Guard's current estimate.
    Furthermore, as I mentioned earlier, existing challenges 
indicate that the OPC program costs will increase substantially 
from initial estimates.
    I understand that the Coast Guard is operating on a 
significantly smaller budget than its Navy counterparts, 
despite being tasked by Congress to develop, deploy, and 
maintain cutters that are equivalent in size and complexity to 
all but the largest of Navy ships.
    The Coast Guard's entire budget request for fiscal year 
2025 was $13.8 billion with $1.5 billion dedicated for 
procurement, construction, and improvements. In comparison, the 
Navy's budget request for fiscal year 2025 includes $77 billion 
for procurement alone, roughly 51 times greater than the Coast 
Guard's procurement budget.
    That said, as the Coast Guard prioritizes the PSC and OPC 
programs which will require the service to administer larger 
procurement budgets than they are used to, it is imperative 
that Coast Guard manages these programs effectively and 
efficiently. During my time as Chairman of this subcommittee 
the message we receive from stakeholders is clear. The demand 
for Coast Guard services is increasing and will continue to 
increase in the future.
    Bringing these cutters on-line on time and on budget will 
determine whether Coast Guard will be able to meet the growing 
demands for their assets, manpower, and expertise.
    Therefore, if we want to stem the flow of narcotics into 
our country, stop illegal fishing by the Chinese distance water 
fishing fleet, or maintain a consistent, credible presence in 
the Arctic to deter our geopolitical adversaries, the Coast 
Guard acquisitions program must deliver what Congress has 
tasked the services to do.
    I thank our two panels of witnesses for appearing before 
our subcommittee today to discuss this critical topic, and I 
look forward to your testimony.
    [The statement of Chairman Gimenez follows:]
    
                Statement of Chairman Carlos A. Gimenez
                
    Today, our subcommittee is discussing the Department of Homeland 
Security's role in the Coast Guard's acquisitions process.
    To carry out its 11 statutory missions, the Coast Guard depends on 
a variety of assets, from small boats and unmanned aerial vehicles to 
400-feet-long vessels and complex fixed- and rotary-wing aircraft.
    These assets must be able to operate in the most austere and 
challenging environments and carry out dangerous maneuvers to save 
lives, protect our coastline and our waters, pursue and arrest criminal 
actors, and enforce U.S. laws.
    It is therefore critical that the Coast Guard be able to acquire 
the assets necessary to perform their duties and replace older assets 
with new, more capable assets as the surface and air fleet age.
    The Coast Guard is currently in the process of replacing several 
mission-critical assets with new cutters.
    When completed, the new National Security Cutters, Offshore Patrol 
Cutters, and Fast Response Cutters will replace 90 existing cutters and 
assume responsibility for 7 of the Coast Guard's 11 statutory missions.
    Additionally, the Polar Security Cutters will bolster the aging 
Coast Guard icebreaker fleet, and 3 heavy icebreakers will replace the 
Coast Guard's sole heavy icebreaker, which is approaching 50 years of 
service.
    The Coast Guard works hand-in-hand with the domestic industrial 
base to meet the needs of the service.
    Among these critical acquisition programs, there are certainly some 
success stories.
    The Coast Guard has so far commissioned 54 out of the 71 planned 
Fast Response Cutters and expanded the areas of operation for these new 
cutters to the Persian Gulf and the Indo-Pacific.
    The shipbuilder is delivering the new FRCs on schedule at a rate of 
2 per year.
    Additionally, the Coast Guard will soon commission its 10th out of 
11 planned National Security Cutters, and the 11th NSC is currently 
under construction.
    The NSCs are already fulfilling critical mission requirements in 
the Indo-Pacific and elsewhere around the world.
    However, the Coast Guard has experienced major setbacks with both 
the Polar Security Cutter and Offshore Patrol Cutter programs.
    The first Polar Security Cutter was originally supposed to be 
operational this year, but the Coast Guard has not yet begun 
construction on the first cutter.
    Among the factors contributing to this significant delay has been 
the lack of experience the Coast Guard and the domestic industrial base 
have in building icebreaking ships.
    While several allied countries such as Canada, Finland, and South 
Korea have extensive experience building icebreakers and ice-capable 
vessels, no heavy icebreaker has been constructed in the United States 
in almost 50 years, and the Coast Guard has not commissioned an 
icebreaker of any kind since 2006.
    This lack of experience is demonstrated in the development of ship 
design for the PSC, which to date is still not at the level necessary 
to begin construction.
    The Coast Guard has experienced significant issues with the 
Offshore Patrol Cutter program as well.
    Between 2017 and 2019, estimates for the ship's weight increased by 
more than 20 percent.
    Additionally, a 2023 Government Accountability Office report found 
that the OPC program--as well as the PSC program--did not follow 
standard practices in developing the ship's design and technology.
    These issues have caused delays to the construction schedule for 
the OPCs and raised the overall cost of the program, as well as 
maintenance costs required to keep the cutters the OPCs will replace 
on-line for longer.
    I am growing increasingly concerned that the Coast Guard cannot 
accurately estimate the cost of its shipbuilding programs.
    We have seen massive cost increases to the PSC program from the 
initial estimate Coast Guard provided Congress when standing up the 
program.
    This is why, last fall, Chairman Green and I requested the 
Congressional Budget Office to conduct a cost estimate of the PSC 
program.
    According to the preliminary findings presented by Dr. Eric Labs, 
the PSC program's cost will be almost 60 percent higher than the Coast 
Guard's current estimate.
    Furthermore, as I mentioned earlier, existing challenges indicate 
that the OPC program's cost will increase substantially from initial 
estimates.
    I understand that the Coast Guard is operating on a significantly 
smaller budget than its Navy counterparts, despite being tasked by 
Congress to develop, deploy, and maintain cutters that are equivalent 
in size and complexity to all but the largest Navy ships.
    The Coast Guard's entire budget request for fiscal year 2025 was 
$13.8 billion, with $1.5 billion dedicated for procurement, 
construction, and improvements.
    In comparison, the Navy's budget request for fiscal year 2025 
includes $77 billion for procurement alone, roughly 51 times greater 
than the Coast Guard's procurement budget.
    That said, as the Coast Guard prioritizes the PSC and OPC programs, 
which will require the service to administer larger procurement budgets 
than they are used to, it is imperative that Coast Guard manages these 
programs effectively and efficiently.
    During my time as Chairman of this subcommittee, the message we 
have received from stakeholders is clear: the demand for Coast Guard 
services is increasing and will continue to increase in the future.
    Bringing these cutters on-line on time and on budget will determine 
whether Coast Guard will be able to meet the growing demand for their 
assets, manpower, and expertise.
    Therefore, if we want to stem the flow of narcotics into our 
country, stop illegal fishing by the Chinese distance water fishing 
fleet, or maintain a consistent, credible presence in the Arctic to 
deter our geopolitical adversaries, the Coast Guard acquisitions 
programs must deliver what Congress tasks the service to do.
    I thank our two panels of witnesses for appearing before our 
subcommittee today to discuss this critical topic, and I look forward 
to your testimonies.

    Chairman Gimenez. At this time I will yield to the Ranking 
Member for his opening statement.
    Mr. Thanedar. Thank you, Chairman Gimenez.
    Thank you to our witnesses on both panels for joining us 
today and sharing your expertise on this important topic.
    The Coast Guard's shipbuilding efforts and other 
acquisition programs play a critical role in protecting U.S. 
national security. The Coast Guard has an aging fleet of 
surface and aviation vessels.
    In the Arctic, the Coast Guard is challenged to maintain an 
adequate presence due to a lack of modern icebreakers. The 
Coast Guard's two existing icebreakers, the Polar Star and the 
Healy, are operating well past their service lives and are not 
sufficient on their own to meet the Coast Guard's needs.
    In the Indo-Pacific, the Red Sea, and elsewhere around the 
globe, the Coast Guard's aging assets are similarly stretched 
thin by increased demands.
    The Coast Guard is undergoing a historic recapitalization 
of its fleet, working to acquire modern vessels that will 
enhance capabilities and mission readiness. This large-scale, 
complex effort will take long-term investment and commitment 
from those of us in Congress, as well as the consistent support 
and oversight of the Department of Homeland Security.
    Already the Coast Guard has successfully acquired and 
deployed a large number of new cutters through the national 
security cutter and fast response cutter program. However, the 
service has faced significant challenges in developing, 
designing, and building new icebreakers through the polar 
security cutter program, as well as new multi-mission cutters 
through the offshore patrol cutter program.
    These programs have faced a host of challenges, including a 
global pandemic, supply chain disruptions, natural disasters, 
contractor inexperience, and a strong labor market which is 
driving increased labor cost. As a result, both programs have 
seen significant delays and cost increases. Some of these 
challenges could not have been predicted while others likely 
should have been better accounted for within calculated risk 
assumptions.
    Going forward, DHS and the Coast Guard must work together 
with partners in the U.S. Navy and the shipbuilding industry to 
build up an industrial base capable of regularly producing 
world-class cutters and other vessels according to predictable 
schedules and budgets.
    These efforts will be critical to not just the success of 
the polar security cutter and offshore patrol cutter programs 
but to building Great Lakes icebreakers, waterway commerce 
cutters, arctic security cutters, and other cutters not yet 
envisioned.
    I look forward to hearing from our witnesses today and 
about how we can learn lessons from the past few years to 
improve Coast Guard acquisition programs and ensure effective 
DHS oversight.
    I thank our witnesses, and I yield back, Mr. Chair.
    [The statement of Ranking Member Thanedar follows:]
    
               Statement of Ranking Member Shri Thanedar
               
                              May 7, 2024
                              
    The Coast Guard's shipbuilding efforts and other acquisition 
programs play a critical role in protecting U.S. national security. The 
Coast Guard has an aging fleet of surface and aviation vessels. In the 
Arctic, the Coast Guard is challenged to maintain an adequate presence 
due to a lack of modern icebreakers.
    The Coast Guard's two existing icebreakers, the Polar Star and the 
Healy, are operating well past their service lives and are not 
sufficient on their own to meet the Coast Guard's needs. In the Indo-
Pacific, the Red Sea, and elsewhere around the globe, the Coast Guard's 
aging assets are similarly stretched thin by increased demands.
    The Coast Guard is undergoing a historic recapitalization of its 
fleet, working to acquire modern vessels that will enhance capabilities 
and mission readiness. This large-scale, complex effort will take long-
term investment and commitment from those of us in Congress, as well as 
the consistent support and oversight of the Department of Homeland 
Security.
    Already, the Coast Guard has successfully acquired and deployed a 
large number of new cutters through the National Security Cutter and 
Fast Response Cutter programs. However, the service has faced 
significant challenges in developing, designing, and building new 
icebreakers through the Polar Security Cutter program, as well as new 
multi-mission cutters through the Offshore Patrol Cutter program.
    These programs have faced a host of challenges, including a global 
pandemic, supply chain disruptions, natural disasters, contractor 
inexperience, and a strong labor market which is driving increased 
labor costs. As a result, both programs have seen significant delays 
and cost increases. Some of these challenges could not have been 
predicted, while others likely should have been better accounted for 
within calculated risk assumptions.
    Going forward, DHS and the Coast Guard must work together with 
partners in the U.S. Navy and the shipbuilding industry to build up an 
industrial base capable of regularly producing world-class cutters and 
other vessels according to predictable schedules and budgets. These 
efforts will be critical to not just the success of the Polar Security 
Cutter and Offshore Patrol Cutter programs, but to building Great Lakes 
icebreakers, Waterways Commerce Cutters, Arctic Security Cutters, and 
other cutters not yet envisioned.
    I look forward to hearing from our witnesses today about how we can 
learn lessons from the past few years to improve Coast Guard 
acquisition programs and ensure effective DHS oversight.

    Chairman Gimenez. Thank you, Ranking Member Thanedar.
    Other Members of the committee are reminded that opening 
statements may be submitted for the record.
    [The statement of Ranking Member Thompson follows:]
    
             Statement of Ranking Member Bennie G. Thompson
             
                              May 7, 2024
                              
    The Department of Homeland Security plays an important role in 
overseeing component acquisition activities and driving program 
effectiveness and accountability. The Coast Guard's acquisition 
portfolio is particularly immense and complex, as the service seeks to 
recapitalize an aging fleet of surface and aviation assets. The Coast 
Guard has struggled to meet shipbuilding budgets and deadlines, as some 
of its largest acquisition programs have far exceeded initial cost 
estimates and delivery schedules.
    The Polar Security Cutter program, for example, is currently in 
breach status, as the program has fallen out of compliance with the 
schedule and cost basis set forth in its acquisition program baseline. 
In addition, the Offshore Patrol Cutter program--the Coast Guard's 
largest acquisition program and highest investment priority--is 
likewise off-schedule and over budget.
    In recent years, the Coast Guard has faced a variety of challenges. 
The COVID-19 pandemic interrupted business processes and global supply 
chains, increasing the costs of materials. Natural disasters have 
impacted shipyards, including when Hurricane Michael tore through the 
southeastern United States in 2018 and damaged the Offshore Patrol 
Cutter shipbuilder's facilities.
    The Coast Guard has grappled with an inexperienced U.S. industrial 
base, which has not produced a heavy icebreaker in nearly 50 years, 
leading to delays in producing complex ship designs. Most recently, a 
strong economy has increased wages for workers, leading to a rise in 
labor costs associated with shipbuilding. Though these challenges have 
been unpredictable to some degree, we can be certain that more 
challenges lie ahead.
    DHS and the Coast Guard must develop robust acquisition and 
shipbuilding practices that accurately account for the likelihood of 
unforeseen circumstances and setbacks. Accurate cost estimates and 
delivery schedules are critical to the Coast Guard's mission readiness, 
as ballooning costs and repeated delays have cascading impacts across 
the service. With top-line budget levels set in place, investing 
unplanned additional funds into acquisition programs means removing 
funds from other priorities.
    The Coast Guard has a wide variety of funding needs, from shore 
infrastructure to housing to recruiting and retention incentives. 
Developing acquisition programs that reliably stick to baseline 
schedules and cost estimates will allow DHS and the Coast Guard to 
prioritize and invest systematically, ultimately improving the safety 
and security of our Nation's maritime environment.

    Again, I am pleased to have a distinguished panel of 
witnesses before us today on this critical topic. I ask that 
our witnesses please rise and raise their right hands.
    [Witnesses sworn.]
    Chairman Gimenez. Let the record reflect that the witnesses 
have answered in the affirmative. Thank you and please be 
seated.
    I would now like to formally introduce our witnesses. Ms. 
Shelby Oakley serves as the director of contracting and 
national security acquisitions with the Government 
Accountability Office, Mr. Ronald O'Rourke serves as the 
specialist in naval affairs for the Congressional Research 
Service, and Mr. Eric Labs serves as a senior analyst for naval 
forces and weapons for the Congressional Budget Office. I thank 
each of our distinguished witnesses for being here today.
    I now recognize Ms. Oakley for 5 minutes to summarize her 
opening statements.

       STATEMENT OF SHELBY OAKLEY, DIRECTOR, CONTRACTING
        AND NATIONAL SECURITY ACQUISITIONS, U.S. GOVERN-
        MENT ACCOUNTABILITY OFFICE

    Ms. Oakley. Good morning, Chairman Gimenez, Ranking Member 
Thanedar, and Members of the subcommittee. Thank you for the 
opportunity to talk about Coast Guard shipbuilding programs and 
their challenges. I am a relative newcomer to DHS and Coast 
Guard acquisitions. I have spent the majority of my GAO career 
assessing acquisitions at NASA and DOD, in particular Navy 
shipbuilding.
    Given my unique experience, I can say that some of the 
fundamental challenges and disappointing outcomes I see with 
Coast Guard acquisitions are not unique. However, I will also 
say that the Coast Guard and DHS are not doing themselves any 
favors or the taxpayers any favors when they point to factors 
outside of their control as the primary cause for these 
outcomes.
    Coast Guard should do more to address what it can control. 
For example, GAO's extensive body of work on DHS and Coast 
Guard has resulted in 40 recommendations aimed at improving how 
it manages its acquisitions. As of today, about half of these 
recommendations remain unaddressed or we have already closed 
them because the Coast Guard didn't take action in time for 
them to make a difference.
    Given that Coast Guard ships cost billions to acquire and 
they play a vital role in securing our homeland, my statement 
will focus on what the Coast Guard needs to do to improve 
outcomes for its existing and future shipbuilding programs.
    First, I will cover the main challenges that have plagued 
the Coast Guard's highest-priority programs, OPC and PSC, and 
missed opportunities for improvement.
    Second, I will discuss leading practices that GAO has 
recently identified to help provide DHS and Coast Guard with a 
new path forward for achieving better outcomes in its ship 
programs.
    Both the OPC and PSC have struggled with achieving a stable 
design to support construction. This is a key leading practice 
to achieve predictable outcomes.
    For OPC we found that DHS and Coast Guard allowed the 
program to repeatedly proceed through design points intended to 
prevent programs from moving forward when they are not ready. 
This happened despite significant risks and our recommendations 
to the contrary.
    For example, OPC was authorized to start construction on 
the first 4 ships without fully developing a critical 
technology or completing key portions of the design. For PSC, 
we found that the program continues to struggle with design 
even after 5 years. Several factors that should have been red 
flags from the start have contributed to this, including a lack 
of heavy polar icebreaker expertise in the industrial base and 
the complexity of the design.
    Additionally, the shipbuilder and Coast Guard 
underestimated how many design changes they would need to make 
to meet Coast Guard specifications and made costly design 
errors, such as designing the lowest deck of the ship at the 
wrong height. Both programs are not meeting their original cost 
and schedule goals and are now reevaluating the feasibility of 
their current estimates.
    Specifically, the OPC lead ship delivery is delayed almost 
4 years and costs have increased by $11 billion and the PSC 
lead ship is delayed by about 5 years and costs have increased 
by at least $2 billion and potentially more as my CBO colleague 
will testify.
    In the mean time, the current fleet is aging and crews are 
having to work harder to keep existing ships operational while 
they wait for the new ships.
    Our work on leading practices for acquisitions, which has 
spanned decades, presents opportunities for the Coast Guard to 
improve. For this work we gathered and vetted practices from 
successful commercial companies to identify how they deliver 
innovative products that meet cost and schedule expectations.
    The bottom line, when thoughtfully applied, the practices 
leading companies follow for designing and constructing ships 
improve outcomes, even when cultural and structural differences 
yield a different sets of incentives, priorities, or 
requirements.
    At a very high level, companies establish realistic, 
executable business cases. They use their processes, tools, and 
expertise to continually reevaluate their business cases to 
ensure that programs are on track and will take quick action 
when the business case deteriorates.
    These practices and the many open recommendations I 
discussed earlier provide a good starting point for the Coast 
Guard to consider new approaches to acquiring its capabilities 
to meet its important missions. It is safe to say no one is 
happy with the results the Coast Guard is seeing and change is 
needed.
    Chairman Gimenez, Ranking Member Thanedar, and Members of 
the subcommittee this completes my oral statement. I would be 
pleased to respond to any questions. I also want to take a 
moment to express my condolences about Mr. Payne.
    [The prepared statement of Ms. Oakley follows:]
    
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
  

    Chairman Gimenez. Thank you, Ms. Oakley.
    I now recognize Mr. O'Rourke for 5 minutes to summarize his 
opening statements.

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

    Mr. O'Rourke. Thank you and my condolences also regarding 
Mr. Payne.
    Chairman Gimenez, Ranking Member Thanedar, distinguished 
Members of the subcommittee, thank you for the opportunity to 
appear before you today. With your permission I would like to 
submit my testimony for the record and summarize it here 
briefly.
    As requested, my testimony focuses on the polar security 
cutter or PSC program. Estimated PSC procurement costs have 
increased about 39 percent since the contract award 5 years 
ago, but still appear to be significantly underestimated.
    Three potential sources of cost growth, if fully realized, 
could increase PSC costs another 30 to 40 percent and 2 other 
sources of cost growth could increase them further toward the 
figures in CBO's testimony.
    The Coast Guard could respond to this potential cost growth 
by granting contract relief to the PSC shipbuilder through a 
request for equitable adjustment or using Pub. L. 85-804, as 
was done for the builder of the first 4 offshore patrol 
cutters.
    Mr. Chairman, as you mentioned, the Coast Guard originally 
aimed to have the first PSC delivered in 2024, but the ship's 
estimated delivery date has been delayed repeatedly and is now 
expected to occur no earlier than fiscal year 2029. A parent 
design strategy used for the PSC program was intended to reduce 
the PSC's design time, but 5 years after contract award the 
expected reduction in design time does not appear to have been 
realized, suggesting that the parent design might now more 
closely resemble what I refer to as a PDINO, meaning a parent 
design in name only.
    Limited numbers of available naval architects and design 
engineers also appear to have contributed to delays in maturing 
the PSC design.
    At this stage one option for substantially accelerating the 
construction of polar icebreakers would be to complete the 
maturation of the PSC design and begin building PSCs at the 
program's current shipbuilder Bollinger, and at some later 
point introduce a second shipbuilder to build additional PSCs 
in parallel to those being built by Bollinger. Given the Coast 
Guard's requirement for a total of 8 to 9 polar-capable 
icebreakers, including 4 to 5 PSCs and 4 to 5 medium polar 
icebreakers, one possible approach might be to introduce a 
second shipbuilder to build the fourth and fifth PSCs while 
Bollinger completes the first 3.
    Another possible approach would be to have Bollinger build 
all 4 or 5 PSCs while accelerating the start date of the time 
line for designing and building the medium polar icebreakers. 
These are not the only possible options.
    A 2017 National Academies' report recommended using a 
common basic design for both the PSCs and the medium polar 
icebreaker. Coast Guard, however, has testified that it wants 
the new medium polar icebreakers to have a shallower draft than 
the PSC. This could make it difficult to employ a common basic 
design for both types of icebreakers.
    Building PSCs in parallel at two shipyards or accelerating 
the start of the time line for designing and building the 
medium polar icebreakers or increasing annual OPC procurement 
quantities so as to replace the medium endurance cutters more 
quickly could require substantially increasing annual funding 
levels in the Coast Guard's procurement account.
    Substantially increasing that account might also make the 
use of block by contracting, which can reduce ship procurement 
costs, appear budgetarily less risky to Coast Guard officials.
    Since fiscal year 2010, funding for the Coast Guard's 
procurement account has remained relatively flat in nominal 
terms, while the Navy shipbuilding budget has more than 
doubled. The amount requested for the Coast Guard's procurement 
account for fiscal year 2025 equates to about $1.1 billion in 
constant fiscal year 2010 dollars. The Coast Guard testified in 
2013 that an annual procurement funding level of about $1 
billion would almost create a death spiral for the Coast Guard.
    The budget displays for the procurement account in the 
Coast Guard's annual budget book lack certain basic information 
about the Coast Guard's shipbuilding programs, including 
estimated per hull total procurement costs and scheduled 
delivery dates. These omissions can impede the ability of 
Members and their staff to identify and track year-to-year 
changes in per-hull procurement costs and delivery dates, which 
in turn can make it more difficult to conduct effective 
oversight of these programs.
    Congress may consider whether to direct the Coast Guard to 
include in its annual budget justification book budget displays 
for its shipbuilding and aircraft procurement accounts that are 
modeled after those in the Navy's annual budget justification 
books, which include this kind of information.
    Chairman Gimenez, Ranking Member Thanedar, thank you again 
for the opportunity to appear before you today, and I will be 
pleased to respond to any questions the subcommittee may have.
    [The prepared statement of Mr. O'Rourke follows:]
    
                 Prepared Statement of Ronald O'Rourke
                 
                              May 7, 2024
                              
                              introduction
                              
    Chairman Gimenez, Ranking Member Thanedar, thank you for the 
opportunity to appear before you today to testify on ``Building the 
Fleet: Assessing the Department of Homeland Security's Role in the 
United States Coast Guard's Acquisitions Process.'' As part of my work 
for Congress as the CRS specialist for naval issues, a position I have 
held since 1984, I have been tracking Coast Guard shipbuilding programs 
since 1998 (i.e., for the last 26 years).\1\ I currently maintain CRS 
reports on the Polar Security Cutter (PSC) program;\2\ the National 
Security Cutter (NSC), Offshore Patrol Cutter (OPC), and Fast Response 
Cutter (FRC) programs;\3\ as well as the Waterways Commerce Cutter 
(WCC) program.\4\ My biography is in the Appendix at the end of this 
statement.
---------------------------------------------------------------------------
    \1\ See CRS Report 98-830 F, Coast Guard Integrated Deepwater 
System: Background and Issues for Congress, by Ronald O'Rourke (first 
version October 5, 1998).
    \2\ CRS Report RL34391, Coast Guard Polar Security Cutter (Polar 
Icebreaker) Program: Background and Issues for Congress, by Ronald 
O'Rourke.
    \3\ CRS Report R42567, Coast Guard Cutter Procurement: Background 
and Issues for Congress, by Ronald O'Rourke.
    \4\ CRS In Focus IF11672, Coast Guard Waterways Commerce Cutter 
(WCC) Program: Background and Issues for Congress, by Ronald O'Rourke.
---------------------------------------------------------------------------
    As requested, my testimony focuses primarily on the PSC program. I 
initiated the CRS report on what is now referred to as the PSC program 
in 2008, and have since updated it periodically (usually multiple times 
each year). I last testified before this subcommittee on July 18, 2023, 
at a hearing on strategic competition in the Arctic.\5\ My work on the 
PSC program supports my efforts as the head of the CRS Arctic team and 
the coordinator of the CRS overview report on the Arctic, which CRS 
initiated in 2010.\6\ Parts of this testimony are adapted from the CRS 
report on the PSC program and the CRS report on the NSC, OPC, and FRC 
programs.
---------------------------------------------------------------------------
    \5\ CRS Testimony TE10084, Strategic Competition in the Arctic, by 
Ronald O'Rourke.
    \6\ CRS Report R41153, Changes in the Arctic: Background and Issues 
for Congress, coordinated by Ronald O'Rourke.
---------------------------------------------------------------------------
                  polar security cutter (psc) program
    Two key issues for the Polar Security Cutter (PSC) program are cost 
growth and schedule delay.
Cost Growth
    Coast Guard and Navy estimates of PSC procurement costs have 
increased about 39 percent since the April 2019 PSC program contract 
award:
   At a March 28, 2019, hearing on the Coast Guard's proposed 
        fiscal year 2020 budget, then-Coast Guard Commandant Admiral 
        Karl Schultz testified that as of that date, the cost of the 
        first PSC was estimated at $925 million to $940 million, and 
        that the cost of the second and third PSCs would be in the 
        range of $700 million each,\7\ producing an estimated three-
        ship total of about $2,325 million to $2,340 million (i.e., 
        about $2.3 billion).
---------------------------------------------------------------------------
    \7\ Source: CQ transcript of the hearing.
---------------------------------------------------------------------------
   As shown in the CRS report on the PSC program, the most 
        recent estimate provided by the Coast Guard to CRS is for the 
        first PSC to cost $1,297 million (i.e., about $1.3 billion), 
        the second PSC to cost $921 million, and the third PSC to cost 
        $1,017 million (i.e., about $1.0 billion), producing an 
        estimated three-ship total $3,235 million (i.e., about $3.2 
        billion),\8\ a total that is about 39 percent higher than the 
        total from the March 28, 2019, testimony.
---------------------------------------------------------------------------
    \8\ Source: U.S. Coast Guard email to CRS, March 26, 2024, which 
stated that costs shown are from the PSC 2021 LCCE v3 (Life Cycle Cost 
Estimate, version 3). The Coast Guard stated in the email that the 2021 
LCCE v3 is the Coast Guard's current model for estimated PSC 
procurement costs.
---------------------------------------------------------------------------
    Even with this 39 percent increase, PSC procurement costs still 
appear to still be significantly underestimated. At least 5 potential 
factors could increase estimated PSC procurement costs from the March 
2019 figures to figures that are significantly above the current 
estimate:
   The actual PSC design is larger than the Government's 
        indicative design.--The design chosen for the PSC is about 35 
        percent larger in terms of light-ship displacement than the 
        indicative design (i.e., the Government's in-house notional 
        design) that informed earlier Navy and Coast Guard cost 
        estimating for the program. Adjusting for this larger design 
        might incur an approximate 35 percent increase in estimated PSC 
        procurement costs over the costs estimated at the time of the 
        April 2019 PSC contract award.
   The Navy has frequently underestimated lead ship costs.--As 
        detailed by the Congressional Budget Office (CBO)\9\ and the 
        Government Accountability Office (GAO),\10\ the costs of lead 
        ships in Navy shipbuilding programs have exceeded the Navy's 
        estimates. Cost growth on Navy lead ships, CBO analysis shows, 
        has ranged from a few percent to about 150 percent, with the 
        weighted average figure for the 19 ship classes examined by CBO 
        being 25 percent, and the unweighted average being 40 
        percent.\11\ Many of these 19 cases involve lead ships whose 
        light-ship displacements were not underestimated, meaning that 
        the cost growth resulted from factors other than the one 
        described in the previous bullet point.
---------------------------------------------------------------------------
    \9\ See CBO, An Analysis of the Navy's Fiscal Year 2024 
Shipbuilding Plan, October 2023, p. 34 (Figure 10).
    \10\ See Government Accountability Office, Navy Shipbuilding[:] 
Past Performance Provides Valuable Lessons for Future Investments, GAO-
18-238SP, June 2018, p. 8.
    \11\ See CBO, An Analysis of the Navy's Fiscal Year 2024 
Shipbuilding Plan, October 2023, p. 34 (Figure 10).
---------------------------------------------------------------------------
   Recent inflation in shipbuilding.--Shipbuilding, like other 
        sectors of defense procurement and the U.S. economy in general, 
        has experienced significant inflation since the start of the 
        COVID-19 pandemic due to supply chain disruptions and other 
        impacts. The Navy states ``the residual effects of inflationary 
        pressures of the past few years, workforce challenges, plus 
        increased labor and supply costs across the defense enterprise, 
        all drove costs associated with our shipbuilding account up 
        roughly 20 percent over the last couple of years.''\12\ This 
        inflation has increased the estimated procurement costs of 
        multiple Navy shipbuilding programs. Within Coast Guard 
        shipbuilding, the estimated unit procurement cost of an FRC has 
        increased from $60 million in the Coast Guard's enacted fiscal 
        year 2021 appropriation to $100 million in the Coast Guard's 
        fiscal year 2024 unfunded requirements list and fiscal year 
        2025 budget submission, although not all of the increase is 
        necessarily due to the recent inflation in shipbuilding.
---------------------------------------------------------------------------
    \12\ Department of the Navy, Highlights of the Department of the 
Navy Fiscal Year Budget, 2024, page 1-12.
---------------------------------------------------------------------------
   Potential need for additional increases in worker wages and 
        benefits.--Shipyards and associated supplier firms face 
        challenges in recruiting and retaining new workers, in part 
        because wages and benefits in service and retail jobs have 
        grown more in recent years than have wages and benefits at 
        shipbuilders and supplier firms.\13\ As a result, workers are 
        now more likely to choose service and retail jobs, where the 
        work, while paying less than shipbuilding work, is more likely 
        to be done in air-conditioned indoor settings, involve less 
        heavy lifting or risk of serious injury, and take place in 
        locations offering easier daily commutes.\14\ Reestablishing a 
        larger differential in wages and benefits between shipbuilding 
        jobs and service and retail jobs could require substantially 
        increasing total wages and benefits for shipbuilding workers. 
        Such a change could, in turn, substantially increase 
        procurement costs for ships such as the PSC, since shipyard 
        labor can account for roughly 40 percent of a military ship's 
        total procurement cost. Increases in worker wages and benefits 
        could also result from shipyards along the Gulf Coast competing 
        against one another for available shipbuilding workers.\15\
---------------------------------------------------------------------------
    \13\ See, for example, Paul McLeary and Lee Hudson, ``Navy 
Shipyards Compete with Fast Food, and Are Losing,'' Politico Pro, April 
9, 2024.
    \14\ Ibid.
    \15\ A January 22, 2024, press report states:
    Rear Adm. Chad Jacoby, the assistant commandant of the Coast Guard 
for acquisition, said this month workforce challenges--specifically, 
needing more highly trained welders and design engineers--are 
contributing to delays on the Polar Security Cutter program at 
Bollinger Mississippi, formerly VT Halter Marine.
    ``If you look across all of our construction programs, every 
shipyard says they're going to hire 1,000 or 2,000 more people prior to 
executing the contracts that we have in place. They all happen to be on 
the Gulf Coast, so if you add up all those numbers, it's probably 
physically impossible for every one of those individual shipyards to 
hire 2,000 more people'' to support on-time ship deliveries, Jacoby 
said on a Jan. 11 panel at the Surface Navy Association annual 
conference.
    He told Defense News after the panel he is specifically concerned 
about Bollinger Mississippi in Pascagoula and its Polar Security 
Cutter; Eastern Shipbuilding Group in Panama City, Florida, which is 
building the first four Offshore Patrol Cutters; Austal USA in Mobile, 
Alabama, which will build the next 11 OPCs; and Birdon America, a 
Denver-based company that will build the Waterways Commerce Cutters 
with a number of Louisiana-and Alabama-based companies.
    ``It is one workforce across many States,'' the admiral said of the 
Gulf Coast region. ``As each shipyard says they're going to hire 
people, they're definitely competing against each other.''
    (Megan Eckstein, ``Coast Guard Ship Programs Facing Delays amid 
National Worker Shortage,'' Defense News, January 22, 2024.)
---------------------------------------------------------------------------
   Labor hours and absorption of fixed overhead costs.--
        Construction delays due to lower-than-anticipated shipyard 
        worker productivity, supply chain issues, or other causes could 
        increase the cost of the PSC because of the ship requiring a 
        larger-than-anticipated number of labor hours to build (if 
        worker productivity is an issue), and because the ship would 
        absorb a portion of the shipyard's monthly fixed overhead costs 
        for an increased number of months (an effect somewhat like the 
        meter in a taxi continuing to run even when the taxi is stuck 
        in traffic).
    A simple (not compounded) sum of the potential percentage cost 
increases described in the first 3 bullet points above (using the 25 
percent and 40 percent figures from the second bullet) comes to a 
potential percentage cost increase, if all 3 factors were to come fully 
into play, of 80 percent to 95 percent above the March 2019 figures.
    Increasing the March 2019 figures by 80 percent would result in an 
estimated cost of $1,665 million to $1,692 million (i.e., about $1.7 
billion) for the lead ship and $1,260 million (i.e., about $1.3 
billion) each for the second and third ships, producing an estimated 
three-ship total of $4,185 million to $4,212 million (i.e., about $4.2 
billion). This total is about 30 percent higher than the currently 
estimated total of $3,235 million.
    Increasing the March 2019 figures by 95 percent would result in an 
estimated cost of $1,804 million to $1,833 million (i.e., about $1.8 
billion) for the lead ship and $1,365 million (i.e., about $1.4 
billion) each for the second and third ships, producing an estimated 
three-ship total of $4,534 million to $4,563 million (i.e., about $4.5 
billion to $4.6 billion). This total is about 40 percent higher than 
the currently estimated total of $3,235 million.
    The cost figures in the 2 previous paragraphs do not include any 
increases cost resulting from the factors outlined in the fourth and 
fifth bullet points above.
    Percentage increases in estimated ship procurement costs comparable 
to the potential 80 percent-95 percent increase discussed above have 
recently occurred in certain Navy shipbuilding programs. The estimated 
procurement cost of the lead ship in the Navy's TAGOS-25 ocean 
surveillance ship program increased about 82 percent between the Navy's 
fiscal year 2023 and fiscal year 2024 budget submissions;\16\ the 
estimated procurement cost of the lead ship in the Navy's medium 
landing ship (LSM) program increased 43 percent between the Navy's 
fiscal year 2024 and fiscal year 2025 budget submissions;\17\ and the 
estimated procurement cost of the lead ship in the Navy's light 
replenishment oiler (TAOL) program increased 202 percent between the 
Navy's fiscal year 2024 and fiscal year 2025 budget submissions. An 
April 2024 CBO report on the procurement costs of LSMs estimates that 
LSMs will cost roughly 127 percent to 187 percent more than the Navy 
estimates.\18\
---------------------------------------------------------------------------
    \16\ For more on the TAGOS-25 program, see CRS In Focus IF11838, 
Navy TAGOS-25 Ocean Surveillance Shipbuilding Program: Background and 
Issues for Congress, by Ronald O'Rourke.
    \17\ For more on the LSM program, see CRS Report R46374, Navy 
Medium Landing Ship (LSM) (Previously Light Amphibious Warship [LAW]) 
Program: Background and Issues for Congress, by Ronald O'Rourke.
    \18\ Congressional Budget Office, Acquisition Costs of the Navy's 
Medium Landing Ship, April 2024, p. 1. For further discussion, see CRS 
Report R46374, Navy Medium Landing Ship (LSM) (Previously Light 
Amphibious Warship [LAW]) Program: Background and Issues for Congress, 
by Ronald O'Rourke.
---------------------------------------------------------------------------
    A procurement cost for the first PSC that is closer to $2 billion 
than to $1 billion would be comparable to the procurement cost of a 
Navy LPD-17 Flight II class amphibious ship, which is about $2.0 
billion. The LPD-17 Flight II design a little larger than the PSC 
design and has more expensive combat system equipment than the PSC.\19\
---------------------------------------------------------------------------
    \19\ Another consideration in comparing cost estimates for the 
first PSC and the LPD-17 Flight II design is that the first PSC is at 
the top of the learning curve for building the PSC design, while the 
cost of the LPD-17 Flight II design reflects learning curve benefits 
from producing earlier LPD-17 Flight I class ships. For more on the 
LPD-17 Flight II class program, see CRS Report R43543, Navy LPD-17 
Flight II and LHA Amphibious Ship Programs: Background and Issues for 
Congress, by Ronald O'Rourke.
---------------------------------------------------------------------------
    The Coast Guard could respond to potential PSC program cost growth 
by granting contract relief to the PSC shipbuilder, Bollinger 
Mississippi Shipbuilding, through a request for equitable adjustment 
(REA) or pursuant to Pub. L. 85-804 (as done for the builder of the 
first four OPCs, Eastern Shipbuilding Group).\20\
---------------------------------------------------------------------------
    \20\ For more on Pub. L. 85-804 and the contract relief granted in 
the OPC program to Eastern Shipbuilding Group under that law, see CRS 
Report R42567, Coast Guard Cutter Procurement: Background and Issues 
for Congress, by Ronald O'Rourke.
---------------------------------------------------------------------------
Schedule Delay
    The PSC program has fallen far behind its original schedule. The 
Coast Guard originally aimed to have the first PSC delivered in 2024, 
but the ship's estimated delivery date has been delayed repeatedly and 
is now expected to occur no earlier than fiscal year 2029.
    A principal cause of the delay has been the time needed to achieve 
design maturity (i.e., to complete the detail design of the ship). The 
parent design strategy used for the PSC program (i.e., the strategy of 
creating the PSC design by modifying the design of an existing polar-
capable ship) was intended by the Coast Guard and Navy to reduce the 
PSC's design time. Five years after contract award, the expected 
reduction in design time does not appear have been realized. The time 
needed to mature the PSC design suggests that the parent design used 
for the PSC program--the design for the new German polar icebreaker 
Polar Stern II--might now more closely resemble a parent design in name 
only (PDINO).\21\ In this regard, the PSC program appears somewhat 
similar to the Navy's Constellation (FFG-62) class frigate program, 
which the Navy initiated as a program that would use a parent design, 
but which observers might now characterize as having moved over time 
toward a PDINO situation.\22\ Limited numbers of available naval 
architects and design engineers within the United States also appear to 
have contributed to delays in maturing the PSC design.\23\
---------------------------------------------------------------------------
    \21\ The phrase parent design in name only (with the resulting 
acronym PDINO) is only one possible shorthand way of referring to the 
situation. One possible way to pronounce the acronym PDINO would be pa-
DEE-no.
    \22\ For more on the FFG-62 program, see CRS Report R44972, Navy 
Constellation (FFG-62) Class Frigate Program: Background and Issues for 
Congress, by Ronald O'Rourke. On the issue of the FFG-62's parent 
design strategy, the report states:
    An April 2, 2024, press report states: ``At one point the 
Constellation design shared about 85 percent commonality with the 
original [Italian-French] FREMM [Fregata Europea Multi-Missione parent] 
design, but the alterations [incorporated into the FFG-62 design] have 
brought that commonality down to under 15 percent, a person familiar 
with the changes told USNI News.'' If the FFG-62 design shares less 
than 15 percent commonality with the FREMM design, then some observers 
might characterize the FFG-62 program as having moved over time toward 
what might be termed a parent design in name only (PDINO) design 
approach.
    \23\ The January 22, 2024, press report quoted in footnote 15 
mentions states (emphasis added): ``Rear Adm. Chad Jacoby, the 
assistant commandant of the Coast Guard for acquisition, said this 
month workforce challenges--specifically, needing more highly trained 
welders and design engineers--are contributing to delays on the Polar 
Security Cutter program at Bollinger Mississippi, formerly VT Halter 
Marine.''
---------------------------------------------------------------------------
    With PSC design maturation now approaching 80 percent--the minimum 
typically targeted by the Navy before beginning construction of a lead 
ship--a principal option for substantially accelerating the 
construction of polar icebreakers for the Coast Guard would be to 
complete the maturation of the PSC design, begin building PSCs at the 
program's current shipbuilder, Bollinger Mississippi Shipbuilding, and 
at some later point introduce a second shipbuilder to build additional 
PSCs in parallel to those being built by Bollinger. The Coast Guard has 
testified that its most recent fleet mix analysis calls for a total of 
8 to 9 polar-capable icebreakers, including 4 to 5 heavy polar 
icebreakers (i.e., PSCs), and 4 to 5 medium polar icebreakers. Given 
these figures and Bollinger's current contract to build up to 3 PSCs, 
one possible approach might be to introduce a second shipbuilder to 
build the fourth and fifth PSCs while Bollinger completes the first 3. 
Another possible approach would be to have Bollinger build all 4 or 5 
PSCs while accelerating the start date of the time line for designing 
and building the medium polar icebreakers. This second approach could 
accelerate the date for completing the larger total of 8 to 9 heavy and 
medium polar icebreakers. These 2 alternatives are not the only 
possible approaches.

                  arctic security cutter (asc) program
                  
    Of the 4 to 5 medium polar icebreakers called for in the Coast 
Guard's fleet mix analysis, one is to be the Commercially Available 
Polar Icebreaker (CAPI)--an existing, privately-owned ship that the 
Coast Guard plans to purchase and modify into a Coast Guard medium 
polar icebreaker, using funding appropriated for that purpose in the 
Coast Guard's fiscal year 2024 budget. The ship to be purchased and 
modified is Aiviq, a U.S.-registered ship that was originally built to 
serve as an Arctic oil-exploration support ship, and which has an 
icebreaking capability sufficient to serve as a Coast Guard medium 
polar icebreaker.\24\ The other 3 to 4 medium polar icebreakers are to 
be new-construction ships referred to as Arctic Security Cutters 
(ASCs).
---------------------------------------------------------------------------
    \24\ For further discussion of the CAPI program and Aiviq, see CRS 
Report RL34391, Coast Guard Polar Security Cutter (Polar Icebreaker) 
Program: Background and Issues for Congress, by Ronald O'Rourke.
---------------------------------------------------------------------------
    As discussed in the CRS report on the PSC program, one possible 
acquisition strategy for polar icebreakers would be to build PSCs and 
ASCs to a common basic design (i.e., the PSC design). A 
Congressionally-mandated July 2017 report from the National Academies 
of Sciences, Engineering, and Medicine (NASEM) on the acquisition and 
operation of polar icebreakers concluded that notional operational 
requirements for new medium polar icebreakers would result in ships 
similar in size to new heavy polar icebreakers. (The Coast Guard's 
current medium polar icebreaker, Healy, is somewhat larger than Polar 
Star.) Given this probable similarity in size, the NASEM report 
recommended building a single medium polar icebreaker to the same basic 
design as 3 new heavy polar icebreakers. This approach, the report 
concluded, would reduce the cost of the medium icebreaker by avoiding 
the cost of developing a new design and by 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.\25\ The 
same general approach could be applied to procuring 4 to 5 PSCs and 3 
to 4 ASCs.
---------------------------------------------------------------------------
    \25\ 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. See also Calvin Biesecker, ``Coast Guard Leaving Options Open for 
Future Polar Icebreaker Fleet Type,'' Defense Daily, April 12, 2018.
---------------------------------------------------------------------------
    At a November 29, 2023, hearing before the House Homeland Security 
Committee, Vice Admiral Peter Gautier, Coast Guard Deputy Commandant 
for Operations, stated that the Coast Guard in coming years will need 
to have ``a mix of heavy icebreakers like the Polar Star and the Polar 
Security Cutters that we're building now, and medium icebreakers like 
the Healy that have shallower drafts and can get into tighter spaces 
and shallower areas.''\26\ Procuring ASCs as ships with shallower 
drafts could make it difficult or impossible for PSCs and ASCs to be 
built to a common basic design: A ship's draft is a basic design 
characteristic; reducing the PSC design's draft enough to meet the 
Coast Guard's requirements might necessitate design changes that would 
effectively make it a different design.
---------------------------------------------------------------------------
    \26\ Source: CQ transcript of hearing.
---------------------------------------------------------------------------
                  offshore patrol cutter (opc) program
                                    
Cost Growth
    GAO testified in July 2023 that Offshore Patrol Cutter (OPC) 
program's ``acquisition cost estimate increase increased from $12.5 
billion to $17.6 billion between the program's 2012 and 2022 life-cycle 
cost estimates. The Coast Guard attributes the increase [of about 40 
percent] to many factors, including restructuring the stage 1 
contract--for OPCs 1 through 4--and recompeting the requirement for 
stage 2--OPCs 5 through 25--in response to a disruption caused by 
Hurricane Michael, and increased infrastructure costs for homeports and 
facilities, among other things.''\27\
---------------------------------------------------------------------------
    \27\ Government Accountability Office, Coast Guard 
Recapitalization[:] Actions Needed to Better Manage Acquisition 
Programs and Address Affordability Concerns, statement of Marie A. Mak, 
Director, Contracting and National Security Acquisitions, Testimony 
Before the Subcommittee on Coast Guard and Maritime Transportation, 
Committee on Transportation and Infrastructure, House of 
Representatives, July 27, 2023, GAO 23-106948, p. 9.
---------------------------------------------------------------------------
    Of the five factors discussed earlier in connection with a 
potential increase in PSC procurement costs, two of them in in 
particular--recent inflation in shipbuilding and the potential need for 
additional increases in worker wages and benefits--could further 
increase estimated OPC procurement costs.

Annual Procurement Quantities
    As discussed in the CRS report on the National Security Cutter 
(NSC), OPC, and Fast Response Cutter (FRC) programs, the current OPC 
procurement profile, which reaches a maximum projected annual rate of 2 
ships per year, would deliver OPCs many years after the end of the 
originally planned service lives of the Coast Guard's existing medium-
endurance cutters. GAO testified in July 2023 that under the OPC 
program's current procurement schedule, the Coast Guard's 14 Reliance-
class 210-foot medium-endurance cutters would be replaced when they 
would be (if still in service) about 60 to 65 years old, and the Coast 
Guard's 13 Famous-class 270-foot medium-endurance cutters would be 
replaced when they would be (if still in service) about 34 to 52 years 
old.\28\ These ages, particularly for the Reliance-class cutters, would 
be high, raising questions concerning the ships' future operational 
availability and ability to perform missions cost-effectively.
---------------------------------------------------------------------------
    \28\ Government Accountability Office, Coast Guard 
Recapitalization[:] Actions Needed to Better Manage Acquisition 
Programs and Address Affordability Concerns, statement of Marie A. Mak, 
Director, Contracting and National Security Acquisitions, Testimony 
Before the Subcommittee on Coast Guard and Maritime Transportation, 
Committee on Transportation and Infrastructure, House of 
Representatives, July 27, 2023, GAO 23-106948, Figure 4 on p. 14.
---------------------------------------------------------------------------
    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. Operating aged medium-endurance cutters will incur 
maintenance and repair costs, particularly during the ships' final 
years of intended service. Even with investments in their capabilities, 
the ships may remain less capable in certain regards than OPCs.
    One possible option for addressing this situation would be to 
increase the maximum annual OPC procurement rate from the currently 
planned 2 ships per year to 3 or 4 ships per year. Such an increase 
could result in the final (i.e., 25th) OPC being delivered a few to 
several years sooner than under the currently-planned maximum rate. 
Increasing the maximum procurement rate for the OPC program could, 
depending on the exact approach taken, reduce OPC unit acquisition 
costs due to improved production economies of scale. Such an increase 
might also expand opportunities for using competition in the program. 
Notional alternative approaches for increasing the OPC procurement rate 
to 3 or 4 ships per year include:
   increasing the production rate to 3 or 4 ships per year at a 
        single shipyard--an option that would depend on that shipyard's 
        production capacity;
   using 2 shipyards for building OPCs to a single OPC design;
   using 2 shipyards for building OPCs to 2 designs, with each 
        shipyard building OPCs to its own design--an option that would 
        result in two OPC classes;\29\ and
---------------------------------------------------------------------------
    \29\ Operating two OPC classes could be viewed as similar to how 
the Coast Guard currently operates two primary classes of medium-
endurance cutters.
---------------------------------------------------------------------------
   building additional NSCs in the place of some of the planned 
        OPCs--an option that might include de-scoping equipment on 
        those NSCs where possible to reduce their acquisition cost and 
        make their capabilities more similar to those of the OPC.
    The fourth alternative above could be pursued in combination with 1 
of the first 3 alternatives.

                         block buy contracting
                         
    Using block buy contracting--a form of multi-year contracting used 
in a few Navy shipbuilding programs--could reduce procurement costs for 
PSCs, ASCs, or OPCs by perhaps 5 percent to 10 percent.\30\ The Coast 
Guard typically uses contracts with options for its shipbuilding 
programs. Although a contract with options may resemble multi-year 
contracting, it operates more like a series of annual contracts. 
Contracts with options do not achieve the kinds of reductions in 
acquisition costs that are possible with multi-year contracting.
---------------------------------------------------------------------------
    \30\ For more on block buy contracting, see CRS Report R41909, 
Multiyear Procurement (MYP) and Block Buy Contracting in Defense 
Acquisition: Background and Issues for Congress, by Ronald O'Rourke.
---------------------------------------------------------------------------
    Section 311 of the Frank LoBiondo Coast Guard Authorization Act of 
2018 (S. 140/Pub. L. 115-282 of December 4, 2018) provides permanent 
authority for the Coast Guard to use block buy contracting with 
economic order quantity (EOQ) purchases (i.e., up-front batch 
purchases) of components in its major acquisition programs. The 
authority is codified at 14 U.S.C. 1137.
    Using multi-year contracting involves accepting certain tradeoffs, 
including the following:
   reduced Congressional control over year-to-year spending;
   reduced flexibility changing Coast Guard 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 multi-year contracts);
   a potential need to shift funding from later fiscal years to 
        earlier fiscal years to fund economic order quantity (EOQ) 
        purchases (i.e., up-front batch purchases) of components;
   the risk of incurring penalty payments to shipbuilders if 
        multi-year contracts are 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.
    The Navy since the 1990's has made extensive use of multi-year 
contracting in its ship and aircraft procurement programs. The Coast 
Guard, in contrast, has to date not used multi-year contracting in a 
major ship or aircraft procurement program. Given the relatively small 
size of the Coast Guard's Procurement, Construction, and Improvements 
(PC&I) account (see next section), the second trade-off listed above 
may be of particular concern to the Coast Guard in deciding whether to 
use multi-year contracting.

 coast guard procurement, construction, and improvements (pc&i) account
 
    Three of the options presented in this testimony--building PSCs in 
parallel at 2 shipyards, accelerating the start of the time line for 
designing and building ASCs, and increasing annual OPC procurement 
quantities--would require substantially increasing annual funding 
levels in the Coast Guard's Procurement, Construction, and Improvements 
(PC&I) account (or providing additional funding for Coast Guard ship 
procurement through the Navy's shipbuilding account, which has been 
done in the past).\31\ Increasing the PC&I funding level might also 
make the use of block buy contracting appear budgetarily less risky to 
Coast Guard officials.
---------------------------------------------------------------------------
    \31\ Funding from the Navy's shipbuilding account funded about 89 
percent of the procurement cost of Healy, as well as the procurement 33 
of the Coast Guard's 49 Island-class 110-foot patrol boats (the cutters 
being replaced by FRCs). Prior-year funding for the PSC program 
includes $300 million in funding from the Navy's shipbuilding account 
($150 million each in fiscal year 2017 and fiscal year 2018).
---------------------------------------------------------------------------
    Since fiscal year 2010, in nominal terms (not adjusted for 
inflation), funding for the Coast Guard's PC&I account has remained 
relatively flat while the Navy's shipbuilding account has more than 
doubled. The Navy's shipbuilding account increased from $13.844 billion 
in fiscal year 2010 (enacted) to $32.378 billion in fiscal year 2025 
(requested), a nominal increase of about 134 percent. The Coast Guard's 
PC&I account, by comparison, was $1.536 billion in fiscal year 2010 
(enacted) and is $1.564 billion in fiscal year 2025 (requested). After 
accounting for inflation, the requested fiscal year 2025 figure for the 
PC&I account amounts to about $1,095 million (i.e., about $1.1 billion) 
in fiscal year 2010 dollars, which is 29 percent less in real 
(inflation-adjusted) terms than the fiscal year 2010 enacted 
figure.\32\
---------------------------------------------------------------------------
    \32\ Fiscal year 2025 dollars were converted into fiscal year 2010 
dollars using the DOD deflator for procurement excluding pay, fuel, and 
medical in Department of Defense, National Defense Budget Estimates for 
Fiscal Year 2025, April 2024, p. 61 (Table 5-5).
---------------------------------------------------------------------------
    As noted in the CRS report on the NSC, OPC, and FRC programs, at a 
May 14, 2013, hearing on the Coast Guard's proposed fiscal year 2014 
budget before the Homeland Security Subcommittee of the Senate 
Appropriations Committee, then-Coast Guard Commandant Admiral 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 because we 
are forced to sustain older assets--older ships and older aircraft--
which ultimately cost us more money, so it eats into our operating 
funds, as well, as we try to sustain these older things.''

                            budget displays
                            
    The budget displays for the PC&I account in the Coast Guard's 
annual budget-justification book lack certain basic information about 
the Coast Guard's shipbuilding programs, including estimated per-hull 
total procurement costs and scheduled delivery dates. These omissions 
can impede the ability of Members and their staff to identify and track 
year-to-year changes in per-hull procurement costs and delivery dates, 
which in turn can make it more difficult to conduct effective oversight 
of these programs. Congress may consider whether to direct the Coast 
Guard to include, in its annual budget justification book, budget 
displays for its shipbuilding (and aircraft) procurement programs that 
are modeled after those in the Navy's annual budget-justification 
books, which include this kind of information.

                               conclusion
                               
    Chairman Gimenez, Ranking Member Thanedar, thank you again for the 
opportunity to appear before you today, and I will be pleased to 
respond to any questions the subcommittee may have.

                          Appendix.--Biography
                          
    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 the 
Congressional Research Service of the Library of Congress. He has 
written many reports for Congress on various issues relating to the 
Navy, Coast Guard shipbuilding, China's naval forces, U.S.-China 
strategic competition in the South and East China seas, U.S. defense 
strategy, defense acquisition policy, the international security 
environment, and the Arctic. 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.

    Chairman Gimenez. Thank you, Mr. O'Rourke.
    I now recognize Mr. Labs for 5 minutes to summarize his 
opening statement.

    STATEMENT OF ERIC J. LABS, SENIOR ANALYST, NAVAL WEAP-
       ONS AND FORCES, U.S. CONGRESSIONAL BUDGET OFFICE

    Mr. Labs. Thank you, Mr. Chairman. I, too, would express my 
condolences at the passing of Congressman Payne.
    Chairman Gimenez, Ranking Member Thanedar, and Members of 
the subcommittee, thank you for inviting me to testify about 
the procurement costs of the Coast Guard's heavy polar 
icebreaker program known as the polar security cutter.
    In consultation with committee staff, I have focused this 
short statement on providing a summary of the Congressional 
Budget Office's report on the polar security cutter, which 
Chairman Green and Chairman Gimenez requested. That report is 
currently being drafted, and we expect to publish it this 
summer.
    In February 2024, the Coast Guard notified the Congress 
that the first polar security cutter would experience cost 
growth of more than 20 percent and that the ship's production 
will be delayed by another year. As both the Congressional 
Research Service and the Government Accountability Office have 
noted, in the 5 years since the contract for the first ship was 
awarded, development and design of the polar security cutter 
has progressed slowly and little work on building the first 
ship has been completed.
    In that time, the Coast Guard's design estimate of the 
ship's lightship displacement, a key indicator of cost, grew by 
40 percent while its cost estimate for a three-ship program 
increased by just 16 percent. Regardless of the contract 
structure, that was going to be an untenable situation.
    While the lead ship's design is still incomplete, the 
service is hoping that the shipyard will be able to begin 
substantial construction on the lead ship early next year with 
an estimated delivery date in 2029. The Coast Guard expects to 
release a revised estimate of the cost of the three-ship polar 
security program later this year.
    At the committee's request, CBO conducted an independent 
cost assessment of the polar security cutter. The results of 
our analysis indicate that the procurement costs of the first 
polar security cutter would be about $1.9 billion. Subsequent 
ships would average about $1.6 billion each in constant 2024 
dollars.
    Thus, the procurement costs of the current program of 
record for 3 polar security cutters would be about $5.1 
billion. That amount is 60 percent greater than the Coast 
Guard's most recent publicly-released estimate, which was 
provided to CBO by the Coast Guard in March. Of course, a 
program greater than 3 ships would cost additional money.
    Let me briefly provide some background on how CBO conducted 
its estimate. When it comes to assessing the costs of new naval 
shipbuilding programs, including those of the Coast Guard, CBO 
estimates are derived from a model that largely uses a ship's 
weight to calculate its cost. Essentially, CBO estimated the 
costs of the new polar security cutters in the same way it 
estimates the costs of new naval ships.
    CBO identified ships acquired in the past that were similar 
to the polar security cutter and calculated the cost-to-weight 
ratio of the most analogous ship. The agency then used that 
ratio as a critical input into estimating the cost of the new 
ship.
    CBO found that the best historical analog for the polar 
security cutter was the Coast Guard's existing medium 
icebreaker, the Healy. Built in the 1990's, the Healy, though 
medium icebreaker, displaces about 16,000 tons of water when 
fully loaded. It is larger than the Polar Star, a heavy 
icebreaker built in the early 1970's, that displaces 13,200 
tons when fully loaded.
    Even though the Polar Star has more installed shaft 
horsepower, which among other things makes it a heavy 
icebreaker, the polar security cutter would be significantly 
larger than them both with a full load displacement of about 
23,000 tons and would have improved capabilities compared to 
its predecessors.
    In conducting its analysis, CBO started with the estimated 
cost per 1,000 tons of lightship displacement of the polar 
security cutter using data on the ship provided by the Coast 
Guard. Lightship displacement is the weight of the water a ship 
displaces without its crew, stores, ammunition, or fuel or 
other liquids.
    CBO then adjusted it to account for current industry 
conditions and the inexperience of U.S. shipyards in building 
icebreakers, as well as the efficiencies that shipyards gain as 
they produce additional ships of a given type. CBO applied 
those adjustments to the estimated cost of the first ship of 
the class to estimate the cost of all subsequent polar security 
cutters.
    Finally, CBO adjusted its estimates to reflect its 
expectation that the cost of labor and materials would continue 
to grow at a rate that is 1 percentage point faster in the 
naval shipbuilding industry than in the economy as a whole, as 
they generally have for that past several decades.
    The CBO estimate does not represent an upper bound, but 
rather represents our best analysis of what the PSC should 
realistically cost. There are reasons to believe that the final 
price of the ship could be lower than what CBO estimates, but 
there are also reasons to believe why the final price could be 
higher than what CBO estimates.
    I hope you find this information helpful, and I am happy to 
answer any questions you may have.
    [The prepared statement of Mr. Labs follows:]
    
                   Prepared Statement of Eric J. Labs
                   
                             April 30, 2024
                             
    Chairman Gimenez, Ranking Member Thanedar, and Members of the 
subcommittee, thank you for inviting me to testify about the 
procurement costs of the Coast Guard's heavy polar icebreaker program, 
known as the Polar Security Cutter (PSC) program. In consultation with 
committee staff, I have focused this short statement on providing a 
summary of the Congressional Budget Office's report on the PSC program, 
which Chairman Green and Chairman Gimenez requested. That report is 
currently being drafted, and we expect to publish it this summer.
    CBO's findings are as follows:
   The procurement cost of the first PSC would be about $1.9 
        billion. Subsequent ships would average about $1.6 billion 
        each. (All costs in this statement are expressed in 2024 
        dollars.)
   Given those costs, the procurement cost of 3 PSCs would be 
        about $5.1 billion. That amount is 60 percent greater than the 
        Coast Guard's most recent publicly-released estimate for the 
        procurement cost of 3 heavy icebreakers, which was provided to 
        CBO by the Coast Guard in March 2024.
    CBO's estimates are largely derived from a model that uses a ship's 
weight to calculate its costs.

                               background
                               
    The Coast Guard currently has two operational polar icebreakers: 
the Polar Star, a heavy polar icebreaker, and the Healy, a medium polar 
icebreaker. The descriptors ``heavy'' and ``medium'' refer to the 
thickness of the ice that the ships can break on a continuous basis at 
3 knots, not the size or weight of the ships themselves.
    The Polar Star is 48 years old; the Coast Guard keeps it operating 
in part by scavenging parts from its nonoperational sister ship, the 
Polar Sea. The Healy is 24 years old. No U.S. shipyard has built a 
heavy or medium icebreaker since those ships entered service.
    In 2013, the Coast Guard proposed a plan to replace its two 
operational icebreakers with 6 new polar ice-breakers: 3 heavy polar 
icebreakers and 3 medium polar icebreakers. The Coast Guard's most 
recent analysis of its goals for the mix of ships in its fleet calls 
for increasing the number of new polar icebreakers to a total of 8 or 
9: 4 or 5 heavy polar icebreakers and 4 or 5 medium polar icebreakers.
    The PSC is the Coast Guard's proposed new heavy polar icebreaker; 
after delays in the design of the ship, the service expects that it 
will soon approve the start of general construction. The new medium 
icebreaker that the service plans to build at some point in the future 
has been designated as the Arctic Security Cutter. The medium 
icebreaker will have a shallower draft (the length from the waterline 
to the bottom of the ship) and will therefore be able to conduct 
patrols and visit ports in areas that are inaccessible to the deeper-
drafted heavy icebreaker.
    The increase in the number of polar icebreakers desired by the 
Coast Guard is driven by increased commercial activity and economic and 
geopolitical competition in the Arctic. Given those developments, the 
service believes that the year-round continuous presence of one polar 
icebreaker in the East Arctic and another in the West Arctic, as well 
as a half-time presence of another polar icebreaker in the Antarctic, 
is necessary. The Coast Guard has stated that maintaining a presence of 
2.5 heavy and medium icebreakers in the polar regions will require a 
total of 8 to 9 ships when accounting for maintenance and rotating ship 
patrols.
    In April 2019, the Coast Guard awarded a fixed-price incentive 
contract for the detail design and construction of the first PSC (the 
lead ship) to VT Halter Marine, Inc., now Bollinger Mississippi 
Shipyard.\1\ The Coast Guard is working with the Navy to manage the 
program and acquire the ships.
---------------------------------------------------------------------------
    \1\ Detail design in shipbuilding occurs after a preliminary or a 
contract design that aims to meet the requirements of the authority 
purchasing a ship (in this case, the Coast Guard) is established. 
Detail design involves the development of all the drawings, documents, 
and calculations that will determine the final internal layout and 
configuration of the ship.
---------------------------------------------------------------------------
    In February 2024, the Coast Guard notified the Congress that the 
PSC lead ship would experience cost growth of more than 20 percent and 
the ship's production would be delayed by more than a year. In the 5 
years since the contract was awarded, development and design of the PSC 
has progressed, but little work on building the first ship has been 
completed. In that time, the Coast Guard's estimate of the ship's 
lightship displacement--a key indicator of costs, described below--grew 
by 40 percent, while its cost estimate for a three-ship program 
increased by just 16 percent. The service hopes that the shipyard will 
begin substantial construction on the lead ship early next year, with 
an estimated delivery date in 2029. The Coast Guard also expects to 
release a revised estimate of the cost of the three-ship PSC program 
later this year.

                             cbo's analysis
                             
    CBO estimated the costs of the new PSCs in the same way it 
estimates the costs of new naval ships.\2\ Specifically, CBO identified 
ships acquired in the past that were similar to the PSC and calculated 
the cost-to-weight ratio of the most analogous ship; the agency then 
used that ratio to estimate the cost of the PSC.
---------------------------------------------------------------------------
    \2\ For an explanation of how CBO models the cost of new ships, as 
well as a detailed example of that process applied to a particular 
ship, see Congressional Budget Office, How CBO Estimates the Costs of 
New Ships (April 2018), www.cbo.gov/publication/53785.
---------------------------------------------------------------------------
    CBO found that the best analogue for the PSC was the Healy. Built 
in the 1990's, the Healy, though a medium icebreaker, displaces about 
16,000 tons of water when fully loaded (that is, when carrying crew, 
stores, ammunition, and fuel and other liquids); it is larger than the 
Polar Star, a heavy icebreaker built in the early 1970's that displaces 
13,200 tons when fully loaded. The PSC would be significantly larger 
than them both, with a full-load displacement of about 23,000 tons, and 
would have improved capabilities compared with its predecessors.
    CBO first estimated the cost per thousand tons of lightship (rather 
than full-load) displacement of the PSC, using data on the ship 
provided by the Coast Guard. (Lightship displacement is the weight of 
the water a ship displaces without its crew, stores, ammunition, or 
fuel or other liquids.) CBO then accounted for the reduction in average 
overhead costs that occurs as a shipyard builds multiple ships of the 
same type simultaneously and the efficiencies that shipyards gain as 
they produce additional ships of a given type. CBO applied those 
adjustments to the estimated cost of the first ship of the class to 
estimate the costs for all subsequent PSCs. Finally, CBO adjusted its 
estimates to reflect its expectation that the costs of labor and 
materials would continue to grow at a rate that is 1 percentage point 
faster in the naval shipbuilding industry than in the economy as a 
whole, as they generally have for several decades.\3\
---------------------------------------------------------------------------
    \3\ Congressional Budget Office, The Shipbuilding Composite Index 
and Its Rates of Change Compared With Economy-wide Inflation Rates 
(April 2024), www.cbo.gov/publication/59026.
---------------------------------------------------------------------------
    I hope you find this information helpful, and I am happy to answer 
any questions you may have.
Eric J. Labs prepared this testimony, with guidance from David Mosher 
and Edward G. Keating. In keeping with CBO's mandate to provide 
objective, impartial analysis, this testimony makes no recommendations. 
Jeffrey Kling and Robert Sunshine reviewed the testimony, Christine 
Browne edited it, and R.L. Rebach prepared it for publication. The 
testimony is available at www.cbo.gov/publication/60168.

    Chairman Gimenez. Thank you, Mr. Labs.
    Members will be recognized by order of seniority for their 
5 minutes of questioning, and I recognize myself for 5 minutes 
of questioning.
    I don't know if it was you, Mr. Labs, but somebody said 
that the Coast Guard is hoping--hoping--to begin construction 
later this year, but didn't they hope to have the first 
icebreaker in operation this year?
    Mr. Labs. Yes, Mr. Chairman, I did use the word ``hoping''. 
It was the best term I think I could come up with under the 
circumstances of the troubled history of this program. So 
delays in the past are no guarantee that those delays are not 
going to continue in the future.
    Chairman Gimenez. Where are they, if anybody--anybody can 
answer this, where are they on the design? How close are they 
to beginning construction on the icebreaker?
    Ms. Oakley. The most recent information that we have on 
that is they are about 67 percent complete with their 
functional design. GAO's best practices would say that you 
should have 100 percent of your basic and functional design 
complete by the time you begin construction, including systems 
that run throughout the ship called distributive systems.
    So the Coast Guard I know is hoping to make the case to 
start construction by the end of the year and so 67 percent to 
100 is quite a lot of work to happen over the remainder of the 
year to hit that marker. Even at their own marker of 95 
percent, which is different than ours, it is a significant 
amount of work remaining.
    Chairman Gimenez. You are saying that they are at 67 
percent design completion----
    Ms. Oakley. Mm-hm, yes.
    Chairman Gimenez [continuing]. After 5 years?
    Ms. Oakley. Yes.
    Chairman Gimenez. That is completely--do you have any 
estimate on the private sector? I come from Miami. Royal 
Caribbean, Carnival, Norwegian, they are based out of Miami. 
They design their ships in Miami and they do a really good job 
designing ships on time, on budget. It is money, OK? For them 
it is money. All right.
    So do you have any estimate how long it takes for, say, 
Norwegian or Royal to design one of their new ships? Just 
design and I am not talking about construction, but do you have 
any was on the private sector side of this?
    Ms. Oakley. I don't have exact numbers but it is certainly 
not 5 years, and it is certainly not the case that they 
overpromise how quickly they are going to be able to do it 
because it is money, right? These companies need to be able to 
start booking trips on these ships.
    Chairman Gimenez. Right.
    Ms. Oakley. So our work looking at leading commercial 
shipbuilders and buyers across the world has found that they 
are able to predictably design and pump out ships by following 
some of the best practices that we talk about like completing 
their design, relying on existing designs, and limiting their 
modifications of those designs to, you know, certain areas of 
the ship that are most important for meeting their business 
case.
    There are a number of other practices that our work has 
identified, but it is a completely different mindset and 
completely different set of outcomes.
    Chairman Gimenez. They also have, you know, really 
impressive technology, computer-aided design. Do we have such 
capability or are we still doing stuff, you know, with on a 
board and you are drawing, you know, with pencil and eraser and 
a ruler? How are we designing ships? Are we also using computer 
design and do we use the latest in that technology in trying to 
help us design our ships?
    Ms. Oakley. I think we are a little further behind in the 
U.S. shipbuilding industrial base companies themselves in the 
types of tools and practices that they use for digitally 
designing the ships, although they have made some progress. The 
things that we have seen from companies is that those digital 
tools and those digital designs allow them to understand the 
impact of their changes and it allows them to understand their 
progress and it allows multiple people, including decision 
makers, to understand the progress of the ship in real time.
    It is a big distinction, but it is a distinction that 
enables them to have efficiency and effectiveness in their 
design efforts.
    Chairman Gimenez. Well, I am a landlubber so I know about 
this stuff, OK? Do you think there is intellectual curiosity on 
the part of not only the Coast Guard but our armed services in 
looking at what the private sector is doing, how they design 
their ships, how they procure their ships, and trying to learn 
from them? Or do you think it is, no, we know better because, 
you know, we are the Coast Guard, we are the Navy? We know how 
to do this, and we don't really need the private folks to tell 
us what to do or show us what to do.
    Ms. Oakley. Yes, in my experience I can't comment as much 
on the Coast Guard aside from recent statements by the 
commandant, but the Secretary of the Navy is very focused on 
taking what he can from these leading companies and applying it 
to commercial shipbuilding.
    I think there is, unfortunately, an attitude within the 
Government that we have too many roadblocks to be able to do 
what commercial companies do. We are the Government. We have 
all these policies and regulations and they can't be overcome 
without really critically assessing how we could apply these 
practices and what we could take to be more efficient.
    The other thing I will say really quickly is that some of 
these practices require investment, right? Being able to set up 
digital tools and infrastructures to be able to support this 
will require enterprise-wide investment, both on the part of 
the Navy, the Coast Guard, and the shipbuilders that we have 
yet to really see supported and incentivized.
    Chairman Gimenez. Well, my time is up and I am actually 
over on my time, but I will be coming back for a second round 
because I do have some follow-up questions for you. Thank you.
    Now I recognize the Ranking Member, Mr. Thanedar.
    Mr. Thanedar. Thank you, Chairman Gimenez.
    Well, the DHS and Coast Guard has confronted a host of 
challenges in its polar security cutter and offshore patrol 
cutter programs. Some of these challenges were truly 
unforeseen, such as the global pandemic causing unprecedented 
supply chain disruptions.
    Others were unfortunate but perhaps within the realm of 
what can be reasonably expected to occur over the course of a 
long-term acquisition program such as hurricane-causing 
disruptions to the shipyard and challenges in finding a 
sufficient work force.
    Now, I ran small businesses for many, many years and, you 
know, one of proper planning, cost control are things that is 
just second nature for a small business because there is not 
resources, funding available to do things so everything needs 
to be planned. Everything needs to be, you know, down to the 
last dollar everything needs to be planned.
    Now, you know, Congress wants to, and committed to, you 
know, providing the technology modernization the agencies need 
is essential for our national security, but we also need to 
have some assurance that that funding is utilized properly in 
an efficient manner, you know.
    The old saying, whatever happened to measure twice and cut 
once, right? Whatever happened to that? Why is these delays 
happening? Why are we redoing work? Why aren't we planning 
everything right the first time so that we don't end up redoing 
work and costing the taxpayer all this expenses? Any one of you 
want to comment on that?
    Ms. Oakley. So I think some people don't want the answer of 
what a realistic business case could look like, right? When you 
think about the risks that were present on both of these 
programs from the very beginning, inexperienced shipbuilders' 
lack of experience with designing polar icebreakers in the case 
of that, bad business systems to be able to track progress and 
understand outcomes. These were all huge risks that were 
apparent at the beginning of the program that should have been 
factored into what the Coast Guard thought it was going to take 
in terms of time and funding to be able to execute them.
    But there is obviously a pressure to fit within a budget, 
right, and I think, unfortunately, that then leads to optimism 
in those business cases. Pushing forward with an optimistic 
business case has never in my experience worked out to get you 
something any quicker or any cheaper. It usually ends up 
costing probably what you thought it was going to cost and 
taking probably what you thought and how long you probably 
thought it was going to take.
    It is just that it wasn't planned from the beginning to be 
that. So in that old adage of if you want it bad you get it 
bad, I think that that is what we are seeing in a lot of these 
programs. It is not unique to the Coast Guard. Major 
acquisitions across the Federal Government all fall victim to 
this, and I think as decision makers within the agencies and 
within Congress we need to press these agencies to come with 
more realistic business cases so that we understand what we are 
getting into once the money starts flowing and it is hard to 
turn it off.
    Mr. Thanedar. Thank you. Thank you.
    Anybody else? How do we assure Congress, the taxpayer, the 
American people that we have the capability to change from 
these practices to something moving from hope and optimism to 
proper planning and, you know, competency? How can you assure 
that? What would it take to go to a level of competency where 
taxpayers, Congress will feel assured that the funds will be 
used properly?
    Mr. Labs. Actually, I don't know how to change the 
incentives but I do know that the incentives in the bureaucracy 
in the Navy, in the Coast Guard, and other departments do need 
to change so that there is not this preference or prevalence 
toward the optimism that Ms. Oakley talked about.
    I share her perspective on that. I think there is a culture 
of optimism that creeps into new shipbuilding programs and new 
procurement programs in general for a variety of reasons that 
may be perfectly innocent along the way. Lots of little 
decisions get taken along the way that they don't compare to 
sort-of what historical reality has been and as a result what 
comes out the other end is way too optimistic.
    Somehow we have to change the incentives so that we don't 
necessarily go with the lowest bidder because the lowest bidder 
might not be submitting a realistic cost estimate and they are 
trying to get the program locked in. Once it is locked in, then 
you have got a future where you are going to have to deal with 
that one way or another.
    But focusing on those incentives is one of the strategies 
that I think that Congress should look at.
    Mr. Thanedar. Thank you.
    I yield back.
    Chairman Gimenez. The gentleman yields back.
    I now recognize the gentleman from Louisiana, Mr. Higgins.
    Mr. Higgins. Thank you, Mr. Chairman.
    Ms. Oakley, Mr. O'Rourke, Mr. Labs, we are going to be 
focused on the polar security cutter with my questioning here 
because Bollinger Shipyards is a constituent in the State of 
Louisiana. They have taken on the responsibility of completing 
this vessel.
    Shall we say it was quite a mess that they have inherited 
and they are shouldering that burden, so we are going to dig 
into the cost of this thing and how it was so outrageously 
underestimated and what the design concerns have been 
throughout the inception of this incredibly expensive program 
that we are in the process of dealing with Congressionally.
    What will the cost be?--and we need realistic estimates.
    So we have the Government Accountability Office here, the 
Congressional Research Service here, and the Congressional 
Budget Office here for some, and I am very glad you are here 
and I appreciate you being here. We should be able to get 
answers here and specifically with regards to are we doing 
everything we can to help Bollinger Shipyards complete this 
program? It's an important program for the for the security of 
the United States, the polar security cutter.
    On the last page of the CBO report Mr. Labs has stated that 
generally speaking for decades naval cost for labor and 
materials runs higher than the commercial industry shipbuilder. 
Is that correct?
    Mr. Labs. The cost of labor and materials in naval 
shipbuilding runs higher than inflation in the economy as a 
whole, not commercial shipbuilding, but the economy as a whole.
    Mr. Higgins. So without getting into the weeds of the 
culture of the Pentagon regarding spending over there, we just 
accept that for some reason the world's biggest shipbuilder has 
greater impact from inflation, including in shipbuilding, than 
the rest of the Nation's shipbuilding industry?
    Mr. Labs. I am not sure I quite understand your question, 
Congressman.
    Mr. Higgins. OK. It is an assessment of your report----
    Mr. Labs. Yes.
    Mr. Higgins [continuing]. Saying that it is more expensive 
for the Navy to build a ship because of labor and materials----
    Mr. Labs. Correct. Yes, sir.
    Mr. Higgins [continuing]. OK, than the commercial industry, 
but they are the world's largest shipbuilders so one would--you 
know, a regular American would think that the world's largest 
shipbuilder might have more efficient programs and systems. 
Again, not to get into the weeds of Pentagon shipbuilding.
    Ms. Oakley, on page 21 of the GAO report, stepping into 
what was Halter Marine's project, it was their contract to 
build the PSC, the polar security cutter, said that Halter 
likely overestimated the extent to which you could leverage the 
original design and underestimated the magnitude of design 
changes.
    You go on to speak of the complexity of the design work, 
late design revisions, and when Bollinger took over the program 
they had to, obviously, embed their own design experts into the 
existing teams to try and work through these things. Is that 
correct?
    Ms. Oakley. Correct.
    Mr. Higgins. So we had design changes since inception and 
challenges that threaten this very important program.
    Ms. Oakley. Yes.
    Mr. Higgins. Somehow we just allowed that to move forward 
and then Bollinger purchased Halter Marine. Now Bollinger has 
that to fix, and we are going to help him.
    So, Mr. O'Rourke, in the CRS report you state 5 primary 
reasons for massive increases in the PSC program estimated 
expense from the original estimates.
    No. 1, the actual PSC design is larger than the 
Government's original design of what they anticipated, about 35 
percent. Obviously, if they are going to have a 35 percent 
larger vessel, larger displacement is going to cost a lot more.
    No. 2, the Navy has frequently underestimated lead ship 
lost. The CBO average is 25 to 40 percent in a broad study 
across 19 programs an average of 25 to 40 percent 
underestimated cost at inception for Navy shipbuilding. Our 
shipbuilders have to deal with this down the line. They are 
being told by the Navy, well, you are over cost. You are over 
cost when in reality historically the model seems to be that 
the United States Navy underestimates costs.
    No. 3, recent inflation in shipbuilding, you say, ``The 
residual effects of inflationary pressures over the past few 
years and work force challenges plus increased labor and supply 
costs across the defense enterprise all drove costs associated 
with our shipbuilding up roughly an additional 20 percent.''
    No. 4, potential need for increases in workers' wages and 
benefits. Shipyards and associated supplier firms face 
challenges in recruiting and retaining new workers.
    Finally, schedule delays which move to design. You state 
that a principal cause of delay has been the time needed to 
achieve design maturity, meaning to complete the detailed 
design of the ship.
    So we have issues in the way we are rolling out 
shipbuilding in America and the polar security cutter is no 
exception to those issues. But we are responsible to address 
the larger issues because we cannot continue to pretend that 
the original estimates for a shipbuilding project is going to 
fall within the parameters that are presented to Congress for 
funding.
    So we have questions we are going to submit in writing to 
Ms. Oakley, Mr. O'Rourke, and Mr. Labs, and we hope for a 
timely response on those written questions that we will submit 
to you. I thank you for being here. My time has expired and I 
yield back.
    Chairman Gimenez. The gentleman's time has expired.
    I now recognize the gentlelady from American Samoa, Mrs. 
Radewagen.
    Mrs. Radewagen. ``Talofa lava,'' good morning. I want to 
thank Chairman Gimenez and Ranking Member Thanedar for allowing 
me to join the subcommittee today.
    Thank you to the panel for appearing. My question is for 
Ms. Oakley. Your statement emphasizes the importance of 
maturing and finalizing a ship's design before the contractor 
starts construction. This seems like common sense.
    In your opinion, why has completing the design before 
starting construction been so hard for the Coast Guard to do on 
its major shipbuilding programs?
    Ms. Oakley. I think it comes back to the incentives that 
are there to continue to push forward with the program to meet 
the unrealistic cost and schedule baselines that are set up. So 
when you kind-of have an unexecutable program from the very 
beginning you begin to make decisions that add risk. The 
decision to move forward with construction without the design 
being complete is certainly something that adds risk to a 
program.
    Again, this isn't something that is unique to the Coast 
Guard but it is certainly something that we have seen across 
many shipbuilding programs, this kind of focus on, well, we 
have enough complete to move forward. Then design changes 
happen and they reverberate through things that have already 
been constructed, and that is where the real challenges lie.
    So by completing 100 percent of the basic and functional 
design in the systems that run throughout the ship, the design 
of the systems that run throughout the ship, it reduces that 
risk that there is going to be change and therefore then you 
can reliably predict how quickly you are going to be able to 
construct the ship.
    Mrs. Radewagen. Thank you.
    Mr. Chairman, I yield back the balance of my time.
    Chairman Gimenez. Thank you, Mrs. Radewagen.
    The Chair now recognizes the gentleman from Guam, Mr. 
Moylan.
    Mr. Moylan. Thank you, Mr. Chairman and Ranking Member. I, 
too, am saddened for the loss of our colleague, Rep. Payne, but 
I am also grateful for all the work he has done for this 
committee.
    Mr. Chairman, I will be speaking on issues of such 
importance for my district and the general safety and security 
of the Pacific region. The U.S. Coast Guard serves a critical 
role in the Indo-Pacific region, from preventing illegal, 
unreported, and unregulated fishing, IUU, to countering the 
Chinese Communist Party relying on influence in providing much-
needed aid during humanitarian missions to the Pacific 
countries. The Coast Guard serves as our Pacific Swiss Army 
knife.
    The IUU fishing represents a critical threat to our 
national security and the health of fisheries. The Coast Guard 
leads law enforcement efforts to effectively counter these 
threats and stop the blatant incursions of our sovereign 
waters.
    The existing fast response cutters also serve to prevent 
illegal migration to Guam, particularly the Chinese nationals 
that could very easily penetrate the island's defense and spy 
as a spy for their home nation.
    However, it is clear that the Coast Guard needs more 
cutters in Guam to properly accomplish their stated mission in 
the region. Captain Nicholas Simmons, the commander of the U.S. 
Coast Guard force's Micronesian Sector Guam, has said that Guam 
maritime search-and-rescue region is two-thirds the size of the 
continental United States that they patrol with 3 ships and 300 
people.
    While we are grateful to hear the following that this year 
the Coast Guard reauthorization of two more FRCs are on the 
way, the region can and must be served by more than just 5 
small vessels.
    So my question No. 1, Mr. O'Rourke, is Guam has been called 
the tip of the spear for the United States in the Indo-Pacific 
region and for good reason. The people at the Republic of 
China's maritime militia and distant water fishing operations 
pressure our allies and threaten regional security. So how does 
increasing the Coast Guard's capability, capacity in the region 
directly respond to the threat that China poses?
    Mr. O'Rourke. The Coast Guard has identified a need for 
increasing its operations and presence in the Indo-Pacific 
region to counter China and to serve other U.S. interests in 
the region. You mentioned one of those, which is EEZ, 
enforcement, fisheries enforcement both for U.S. EEZ waters and 
those of the Pacific Island countries.
    In connection with that, the Coast Guard has identified a 
need, for among other things, 6 additional fast response 
cutters to be assigned out into that region. Of those 6, 2 were 
funded in last year's appropriation and another 2 are requested 
for procurement in this year's appropriation.
    The Coast Guard has also moved another older medium 
endurance cutter out into the region and engages in a wide 
range of not always well-reported or well-understood engagement 
activities with many of the countries in that region.
    All these things are directed at serving not just law 
enforcement missions but also broader U.S. interests in 
countering China and strengthening our relationships with the 
countries in that region.
    Mr. Moylan. Thank you, Mr. O'Rourke.
    In the little time here just a couple more questions for 
you, please, sir? The FRCs are required to undergo maintenance 
every 4 years. This requires making a long journey back to 
Honolulu to dry dock and undergo repair.
    In your opinion, would the Coast Guard and the Navy benefit 
from a ship repair capacity on Guam and in the form of a dry 
dock?
    Mr. O'Rourke. That is possible, yes. It would depend on the 
costs, but, yes, avoiding the longer transits back to the 
continental United States could increase time on station if the 
maintenance could be done locally rather than back in CONUS.
    Mr. Moylan. Quickly just for my last question, this goes to 
Ms. Oakley, what are the top 3 most important things DHS and 
Coast Guard can do to improve the outcomes for their 
shipbuilding programs and get the capabilities out to the 
operators?
    Ms. Oakley. First, I think DHS in its oversight role of the 
Coast Guard can demand the Coast Guard to present better 
business cases for its programs that are based on realistic 
assessments of risk. That would include not only what you can 
do from a requirements perspective, but also from a cost and 
schedule perspective as well.
    Second, I would say that the Coast Guard needs to begin to 
look toward these commercial companies that I mentioned before 
and identify how they could begin to incentivize their builders 
that they work with in the broader industrial base to operate 
more in that space, more how these commercial builders operate.
    I think there that the Congress also plays a role, too. 
There are demands and accountability that the Congress can ask 
for from the Coast Guard and from DHS about the basis for its 
programs and what the realistic assessment is of those programs 
before they are approved such that, you know, once that funding 
spigot is turned on it is not usually turned off pretty 
quickly.
    Mr. Moylan. Thank you very much.
    Thank you, Mr. Chairman.
    Chairman Gimenez. Thank you.
    I am going to start a second round. I do have some follow-
up questions, and I will start with myself and then I will 
yield to the Ranking Member.
    Ms. Oakley, it seems to me like when the Air Force is 
procuring a new fighter or a new plane they put out the 
requirements, the mission of that plane, what the performance 
they expect out of that plane, and then they put those 
requirements out and then companies will come back with their 
design that then accomplishes that mission, correct?
    It appears that the Navy and the Coast Guard don't do it 
that way for ships anyway. Do they put out a, these are the 
requirements of the ship. This is the size that we want to ship 
to be, how many people are going to be on it. This is the 
mission of the ship, how fast we want it to be.
    What capability do we want and then put it out to, you 
know, the shipbuilding industry and then they come back with a 
design that says this is accomplished and then they evaluate 
the designs and pick the winner. Do they do that or is it some 
something different here?
    Ms. Oakley. They do do that, yes. There is an effort there 
at the beginning to kind-of put, here is what we want, can 
anybody do it, out there, right? That is the----
    Chairman Gimenez. You said beginning.
    Ms. Oakley. Yes, at the beginning.
    Chairman Gimenez. You said beginning to do that.
    Ms. Oakley. No, no, no, no.
    Chairman Gimenez. They are beginning to do that or they did 
that already?
    Ms. Oakley. They did do. They do do that, yes.
    Chairman Gimenez. OK. So tell me how it is that 5 years 
after they did that----
    Ms. Oakley. Yes.
    Chairman Gimenez [continuing]. And supposedly come back 
with a design that fits all the capabilities and all that, they 
still haven't started construction on this thing? Tell me how 
that is possible.
    Ms. Oakley. Yes. I think that the Coast Guard is the victim 
of the atrophied industrial base. I know that I mentioned, you 
know, things outside of their control. This is certainly one of 
the things outside their control.
    The number of shipyards in the United States that build 
ships in general has completely declined since the 1990's and 
in particular, as you mentioned----
    Chairman Gimenez. Could I stop you there for a second?
    Ms. Oakley. Mm-hm.
    Chairman Gimenez. All right. So I went back to you have a 
design, you have the capabilities, the specifications, how many 
people, OK. Did they put that out and did somebody come back 
with here is the design, here is the ship?
    Ms. Oakley. Here is what we can do. Yes.
    Chairman Gimenez. What we can do.
    Ms. Oakley. Yes.
    Chairman Gimenez. OK. That means that there was a 
shipbuilder that said this is what we can do.
    Ms. Oakley. Mm-hm.
    Chairman Gimenez. So where is this industrial base thing 
all about because you wouldn't have had somebody come back to 
you and say, hey, we can build this ship but really can't build 
a ship? Was it fantasy or what?
    Ms. Oakley. It happens all the time, unfortunately, in 
Government acquisitions where contractors come back and say 
they can meet these requirements because they know, again, as I 
have mentioned a few times, once the spigot turns on, once the 
contract is let, it is unlikely to be canceled, right?
    So when you think about, yes, we can do it, here is what we 
can do, this is where it is incumbent on the Coast Guard and on 
DHS to critically evaluate what it is that they are getting 
from the contractor and how realistic it is that a contractor 
that has never built a polar icebreaker before in an industrial 
base that hasn't built a polar icebreaker in 50 years, how 
likely it is going to be that they are going to meet these 
costs and schedule goals and these targets for what the 
capability is going to provide? That is----
    Chairman Gimenez. Ms. Oakley, Ms. Oakley, I don't have a 
problem with that. I do have a problem that not one rivet has 
been put on anything on this. I don't know if they still use 
rivets, I don't know, OK, or nobody has welded anything 
together yet.
    I could see you starting the program. I could see you 
starting building a ship and then say, hey, wow, we are having 
difficulty with this, this, and this, but we haven't even 
started building this ship 5 years after somebody was awarded a 
contract to deliver something they said they could deliver.
    Ms. Oakley. Yes. For the polar security cutter they are 
building prototype units so some things are being built right 
now on the ship prototype blocks that they are using to learn 
about the specialized welding techniques that they have to use 
for the steel that is required for a polar icebreaker.
    So there is some initial construction that is going on 
right now. My question about that for the Coast Guard that I 
would be interested in, if I were you, is how are they learning 
from that and how are they incorporating that into their 
construction plan going forward for how long and how much it is 
going to take?
    Chairman Gimenez. OK. This is not convincing me, OK, 
because this is not like, gee, we are building a spaceship to 
go to Saturn. Nobody has ever built one before, OK?
    So we are building an icebreaker----
    Ms. Oakley. Yes.
    Chairman Gimenez [continuing]. Which a bunch of countries, 
even friendly to us, build icebreakers, right?
    Ms. Oakley. Yes.
    Chairman Gimenez. They know the welding techniques and they 
know all the steel that is necessary. Are we trying to reinvent 
a wheel here that has already been invented all around the 
world?
    Ms. Oakley. It is true that, you know, many of our allies 
around the world are building icebreakers and have built 
icebreakers and are pretty effective at it. We did not take 
that approach.
    We are obviously, you know, needing to use a U.S. shipyard 
to build these ships, and I think that that capability, since 
we haven't done it in a long time, is needing to be built back 
up. That is what I was getting at with the industrial base.
    Chairman Gimenez. OK. My time has expired.
    I now yield to the Ranking Member, Mr. Thanedar.
    Mr. Thanedar. Thank you, Chairman Gimenez.
    Just a quick question, I just want to understand the 
procurement process. How were these contractors chosen? What is 
the process? Is the procurement do the applications come from 
all over the world or is this only domestic producers? What is 
the whole process like?
    Mr. O'Rourke. So, in general and for the PSC program there 
was an operational requirement that the Coast Guard spent many 
years defining. They put that out for bidding. It was an open 
competition.
    They received bids from at least three shipbuilders. All 
the bidders were required to show what parent design they were 
proposing to use as the basis for the new cutter, and the Coast 
Guard evaluated the bids that it received, the three at least 
that were reported publicly and chose the one that it thought 
best.
    That was Halter's design. Halter said their parent design 
would be the German icebreaker Polarstern II, which was a new 
polar research ship for Germany. Halter said that they went 
through 6 or 7 design spirals to take the German design and 
turn it into what they were presenting to the Coast Guard in 
the bidding process.
    The Coast Guard evaluated that proposal along with the 
others that it received and chose Halter. So there was a 
requirement that the Coast Guard actually spent many years to 
define and make very specific. This was done at a time when the 
polar security cutter wasn't getting a lot of funding so there 
wasn't much else the Coast Guard could do except study the 
requirements to a very fine degree.
    Then they received the bids. They went with the one that 
they thought was the best. It was the Halter design and what 
turned out, apparently, is that the Halter design, even having 
gone through the design spirals and after receiving the design 
from Germany, turned out to need a lot more change than they 
thought.
    The volume of design work to then get to a mature design 
turned out to be much greater than was anticipated and then 
that was exacerbated by limits on the numbers of naval 
architects and naval engineers that could be applied to working 
that design task down. That is why things have proceeded so 
slowly and gradually since then.
    Mr. Thanedar. Thank you. Thank you so much.
    Chair, I yield back.
    Chairman Gimenez. Thank you.
    Mrs. Radewagen or Mr. Moylan, do you want a follow-up? OK. 
The Chair recognizes the gentlewoman from American Samoa, Mrs. 
Radewagen.
    Mrs. Radewagen. Thank you, Mr. Chairman.
    So, Dr. Labs, your estimate that you present to us today 
pins the total cost of the PSC program almost 60 percent higher 
than the Coast Guard's current estimate.
    You have a long record of assessing the Navy's shipbuilding 
programs. Is it common that your estimates are that much higher 
than the Navy's original estimate?
    Mr. Labs. You are right, Congresswoman, I have been doing 
this for a long time. Sometimes my estimates are that higher, 
that much higher than the Navy's, sometimes even higher.
    I recently put out an estimate on the Navy's medium landing 
ship that has essentially doubled what the Navy's current 
estimate is. Back in the 2000's they estimated a new destroyer 
program at 50 percent higher than what the Navy was estimating. 
It took 15 years, but the Navy has estimated the final cost of 
that ship ultimately reached very close to what my initial 
estimate was back in the mid-2000's.
    So yes, there has been a range of numbers. It will vary 
from ship program to ship program, but 60 percent is not 
common, but it is not unheard-of.
    Mrs. Radewagen. So, Dr. Labs, on average how does CBO 
estimates usually compare with the Navy's original estimate for 
a given program? It looks like you have partially answered 
that. Is there a pattern?
    Mr. Labs. Well, I think the pattern that I have observed 
over the years is that CBO consistently has estimates that are 
higher than the Navy's. The vehicle in which this is most often 
done is through the annual shipbuilding analysis that CBO is 
required to do by statute of the Navy's 30-year shipbuilding 
plan.
    I go through those programs one by one, ship program by 
ship program. What you see from one year to the next is that I 
will put out an estimate and one year's analysis and then a 
couple years down the road the Navy will be changing their 
estimates along the way so that those gaps get closer. I, 
generally speaking, have not substantially overpriced a ship 
yet that I am aware of, certainly not a lead ship program.
    All too often what happens is that even though I have an 
estimate that is a good deal higher than the Navy's, it is just 
as frequently possible that I am still underestimating the cost 
of that ship program. The PSC is one of those examples today 
where even using the Navy's or the Coast Guard's own 
information.
    If you look, for example, at their first life-cycle cost 
estimate analysis where they had a 13,000-ton lightship 
displacement ship for, you know, about a little more than a 
billion dollars, if you looked at that metric and then applied 
that cost metric to the current design, you could come up with 
an estimate that is higher than the CBO estimate is today.
    So that is the way I would answer your question at this 
point.
    Mrs. Radewagen. Mr. O'Rourke, you also have spent 
significant time in your career assessing Navy and Coast Guard 
shipbuilding programs. What causes the Coast Guard's estimates 
to come in so much lower than the actual cost?
    Does the Coast Guard's track record in shipbuilding mirror 
the Navy's in terms of programs coming under or over budget, 
ships being delivered on time or late, and the overall programs 
being managed well or poorly?
    Mr. O'Rourke. To build on what Eric said and to get to the 
question that you put to Eric, it has been my observation over 
the years in observing the differences between the CBO's 
estimates, Eric's estimates, and the Navy's that eventually the 
answer is going to settle a lot more closer to Eric's than it 
will to the Navy's. It may take some time, but you asked if 
there was a pattern? In my observation that is the pattern. It 
is going to be closer to what Eric says. It may take some time 
to get there, but that has been the pattern.
    Now, as for why you have services underestimating costs, I 
would say that there are 3 reasons, and Ms. Oakley mentioned 
one of them and Eric also commented on it, which is that at the 
start of a program if there is a range of uncertainty about 
what a ship might cost there is an incentive to set the number 
at the lower end of the range so as to help get the program 
started and established.
    A second cause, I believe in looking at this over many 
years, is that when people in the program offices bring 
programs forward they are allowed to talk about how doing it 
differently this time will save money in one regard or another, 
a new shipbuilding process, the CAD/CAM technology that was 
mentioned earlier, for example, or different manufacturing 
techniques.
    They can identify those and take credit for them and roll 
them into the cost estimates. What they can't identify ahead of 
time and roll into the cost estimate is what may go wrong 
because they don't know what that is.
    So they are allowed to fold in the stuff that can lower the 
cost. They are not really at liberty to then put a wedge in for 
stuff that will go wrong and, as a result, the estimate tends 
to be biased toward the optimistic for that reason as well.
    Eric gets around----
    Chairman Gimenez. The gentlewoman's time has expired.
    The Chair now recognizes the gentleman from Guam, Mr. 
Moylan.
    Mr. Moylan. Thank you, Mr. Chair.
    Mr. O'Rourke, speaking about numbers, this year's budget 
for the Coast Guard was $1.5 billion. What would be a more 
realistic number do you think that they need to adequately 
fulfill their mission and, I am sorry, their acquisition needs?
    Mr. O'Rourke. Right, what funding level in the Coast 
Guard's procurement account would more adequately take care of 
their needs? The Coast Guard itself testified to that several 
years ago, and the figure they provided at that time was $2 
billion to $2.5 billion. If you were to adjust that into 
today's dollars that would be more like $2.5 billion to $3 
billion a year.
    A figure of $3 billion a year would be twice what the 
request is this year.
    Mr. Moylan. Thank you, sir.
    Thank you, Mr. Chair.
    Chairman Gimenez. The gentleman yields back.
    I thank the witnesses for their valuable testimony and the 
Members for their questions. The witnesses are dismissed and 
the committee will stand in brief recess while the clerks 
arranged for the second panel of witnesses.
    [Recess.]
    Chairman Gimenez. The committee will come to order. I am 
pleased to welcome our second panel of witnesses.
    I ask that the witnesses please rise and raise your right 
hand.
    [Witnesses sworn.]
    Chairman Gimenez. Let the record reflect that the witnesses 
have answered in the affirmative. Thank you and please be 
seated.
    I would now like to formally introduce our second panel of 
witnesses. Vice Admiral Paul Thomas serves as the U.S. Coast 
Guard's deputy commandant for mission support. Mr. Randolph Tex 
Alles, did I pronounce that right, Alles? Alles, serves as the 
undersecretary for management for the Department of Homeland 
Security. I thank each of our distinguished witnesses for being 
here today.
    I now recognize Vice Admiral Thomas for 5 minutes to 
summarize his opening statements.

       STATEMENT OF VICE ADMIRAL PAUL F. THOMAS, DEPUTY
        COMMANDANT FOR  MISSION  SUPPORT, UNITED STATES
        COAST GUARD

    Admiral Thomas. Good afternoon, Chairman Gimenez, Ranking 
Member Thanedar, distinguished Members of the subcommittee, my 
written testimony has been provided and I request to have it 
entered into the official record.
    Chairman Gimenez. Without objection.
    Admiral Thomas. On behalf of our commandant, I want to 
first offer my deepest condolences to the family, friends, and 
colleagues of Representative Payne. We are deeply appreciative 
of his steadfast support of our Coast Guard and our Coast Guard 
women and men.
    Thank you for the opportunity to speak about the Coast 
Guard's on-going activities to recapitalize the service's 
assets and capabilities and efforts to meet increasing mission 
demands across the Nation and around the world for our Coast 
Guard.
    Over the next 10 years to answer increased call for the 
service's unique capabilities, the Coast Guard will field new 
assets, expand our enduring presence in critical areas like the 
Arctic and the Indo-Pacific, build new infrastructure, and grow 
our work force to operate these assets.
    To do so, the Coast Guard, under the guidance of the 
Department of Homeland Security, is investing in a multi-
billion dollar portfolio of acquisition programs to meet the 
Nation's needs of today and tomorrow. We are guided by a 
comprehensive framework of acquisition policies informed by 
statutory and regulatory requirements and leveraging the best 
practices identified by GAO and others as we oversee our 
acquisition programs.
    To meet the growing needs for Coast Guard presence and to 
protect the Nation's strategic objectives in the polar regions, 
the Coast Guard and the U.S. Navy have established an 
integrated program office to design and deliver a fleet of 3 
polar security cutters. This arrangement leverages each 
service's experience and expertise in large, complex vessel 
acquisition programs.
    The integrated program office has awarded a contract for 
the detailed design and construction of the lead polar security 
cutter. Detailed design activities are under way and the prime 
contractor has begun limited activities to support early 
production through a prototype fabrication assessment program.
    Even with this innovative production process we know that 
we cannot build these national assets alone. The defense 
industrial base plays a critical role in supporting our 
national security and economic prosperity.
    We are not just investing in the polar security cutter 
here. We are investing in national capability to build and 
field large, complex vessels, the capability the Nation needs 
to meet demands around the world.
    However, we face large-scale economic and geopolitical 
challenges to do so. While Americans have long prided ourselves 
on our ability to do big and complex things, the world has 
changed and we have work to do.
    The defense industrial base underwent significant 
consolidation over the last 2 decades in an attempt to reduce 
costs and operate more efficiently. An unintended consequence 
of this consolidation was the erosion of the defense industrial 
base expertise and capacity to produce military vessels, 
despite the demand signal for recapitalization and growth of 
our fleets.
    Additionally, much of the global expertise in ship design 
has moved overseas, placing an even greater burden on our 
domestic shipbuilders. Moreover, lagging investment in capital 
infrastructure at our shipyards has eroded our Nation's ability 
to produce the largest, most complex ships, such as the polar 
security cutter.
    Today's challenges go beyond the infrastructure investment 
though. Equally concerning, America's defense industrial base 
is encountering some of the same challenges our services are 
with regard to recruiting and retaining a work force.
    The increased demand for highly-trained welders, 
pipefitters, and other trades, along with design engineers and 
technical experts is just one example of how work force 
challenges are contributing to delays and cost increases across 
the Coast Guard shipbuilding portfolio.
    With a concentration of shipyards supporting Coast Guard 
and Navy programs on the Gulf Coast of our Nation, competition 
between shipyards for labor amplifies the challenge.
    I appreciate the continued bipartisan support of this 
committee, and I look forward to continue to work with you on 
advancing our recapitalization efforts. Thank you for the 
opportunity to testify before you today and for all that you do 
for the women and men of the United States Coast Guard. I look 
forward to your questions.
    [The prepared statement of Vice Admiral Thomas follows:]
    
           Prepared Statement of Vice Admiral Paul F. Thomas
           
                              May 7, 2024
                              
                              introduction
                              
    Good morning, Chairman Gimenez, Ranking Member Thanedar, and 
distinguished Members of the subcommittee. Thank you for your continued 
oversight and strong support of the U.S. Coast Guard. I am honored to 
appear before you today to update you on our on-going efforts to 
recapitalize the Nation's legacy fleet of polar icebreakers. This work 
is a part of a larger, comprehensive effort to deliver mission 
capability across the Coast Guard's surface and aviation fleets; 
Command, Control, Communications, Computers, Cyber, Intelligence, 
Surveillance and Reconnaissance (C5ISR) systems; and shore 
infrastructure.
    Our Commandant speaks regularly about the need to adapt to the 
ever-increasing pace of change. To keep up with the changing world 
around us, we must provide our total workforce with modern assets, 
systems, and infrastructure to support mission execution. In line with 
this direction, the Service continues to invest in a multibillion-
dollar portfolio of acquisition programs established to identify and 
deliver the right capabilities for the Service. At the same time, the 
Coast Guard continues to prioritize investments in shore 
infrastructure, where every mission begins and ends: the facilities, 
piers, runways, and buildings that are as necessary for operations as 
our ships, boats, aircraft, and C5ISR systems.
    Indeed, recapitalization remains a top priority for the Commandant 
and the Service, and today's efforts to invest in tomorrow's needs will 
shape the Coast Guard and impact national security for decades. This 
subcommittee's continued support has helped us make tremendous 
progress, and it is critical that we continue to deliver assets to the 
field that improve mission execution and provide the capabilities the 
Nation needs. Simply put, we must act today to be prepared for 
tomorrow.
    Significant investment is needed to advance our Nation's interests 
in the Arctic, and I embrace the trust Congress and the American people 
have placed in the Coast Guard. The Service will continue to prioritize 
actions that safeguard U.S. interests while promoting safe, secure, and 
environmentally responsible maritime activity in the Arctic.

              enduring mission needs in the polar regions
              
    As 1 of only 8 Arctic Nations, the United States has both sovereign 
rights and responsibilities to safeguard our interests in the Arctic. 
Similarly, the United States has strong interests in the Antarctic 
region. The Coast Guard has been the lead Federal agency in assuring 
surface access to the Polar Regions since 1965, meeting the Nation's 
most critical mission needs in the high latitudes.
    In the Arctic, we are witnessing a dramatic transformation of the 
physical, operational, and geostrategic environment. Climate change is 
opening up new access to Arctic waters, and Arctic activity is 
increasing and evolving at a rapid pace, from a surge in oil and gas 
exploration a decade ago to growth in types and locations of vessel 
transits, including an expansion of environmental tourism. Dynamic and 
accelerated changes in the Arctic environment create new opportunities 
and challenges.
    In addition to the challenges posed by increased access, the Arctic 
is a region of increasing strategic competition with the potential to 
elevate geopolitical tensions. In the U.S. Arctic, the Coast Guard is 
engaging more often with a growing number of strategic partners and 
competitors. Among the competitors, the Service is observing an 
increased presence by the People's Republic of China and the Russian 
Federation. Both nations have declared the Arctic a strategic priority; 
both have made significant investments in new or refurbished 
capabilities; and both are attempting to exert direct or indirect 
influence across the region using instruments of national power.
    Likewise, the Coast Guard is a critical mission enabler in the 
Antarctic region, supporting scientific and U.S. objectives in the 
region by conducting the annual Operation Deep Freeze, which involves 
breaking a navigable channel through miles of ice up to 21 feet thick 
to allow fuel and supply ships to reach McMurdo Station, the U.S. 
Antarctic Program's logistics hub and largest station.

                     delivering enhanced capability
                     
    Coast Guard polar icebreakers are the foundation of U.S. 
operational presence and influence in the Polar Regions. These multi-
mission cutters provide assured, year-round access not only for Coast 
Guard missions, but also in support of critical activities that protect 
key U.S. interests in the high latitudes.
    With the strong support of this subcommittee, we are moving forward 
with the acquisition of the Nation's first new heavy polar icebreakers 
in nearly 5 decades. The Polar Security Cutter (PSC) is one of the top 
acquisition priorities for the Coast Guard. When fully operational, 
PSCs will provide the global reach and icebreaking capability necessary 
to project U.S. presence and influence, conduct Coast Guard missions in 
the high latitudes, and advance our national interests in the Arctic 
and Antarctic regions.
    The Coast Guard has established an Integrated Program Office (IPO) 
with the Navy to leverage each service's experience and expertise in 
large, complex vessel acquisition programs. The roles and 
responsibilities for each service are well-defined, and the acquisition 
is following established processes and procedures under the Department 
of Homeland Security's (DHS) acquisition framework.
    The Coast Guard and Navy remain committed to attaining the 
necessary design maturity prior to beginning production activities. 
This approach ensures shipyard readiness and mitigates overall schedule 
risk. Detail design activities are on-going, and long lead-time 
material for the lead ship has been delivered to the shipyard. The IPO 
has adopted an innovative and incremental approach to support early 
production, Prototype Fabrication Assessment (PFA), which is based on 
Navy best practices. By prioritizing and starting construction on up to 
8 low-risk modules, PFA allows the shipbuilder to progressively build 
workforce capability, test new processes and equipment, and reduce 
production risk. Four modules are currently under construction. These 
modules have achieved near-100 percent design maturity and present very 
low risk of re-work. These modules, unlike work done under special 
studies previously authorized, are part of the first PSC.
    As the first heavy polar icebreaker to be constructed in the United 
States in nearly 50 years, we recognize the challenges associated with 
this effort, especially given the Defense Industrial Base's lack of 
recent experience and available infrastructure to design and build such 
a complex vessel. The Defense Industrial Base is a critical component 
of the United States' economic prosperity and national security, and 
the Coast Guard recognizes the strategic need to preserve national 
shipbuilding capacity. Bollinger Mississippi Shipyard is one of few 
U.S. shipyards with the capacity and capability to build and launch 
large Government and commercial vessels, and we are committed to 
working together to produce the PSC.
    Earlier this year, the Coast Guard notified Congress that the PSC 
program would exceed cost and schedule thresholds, in accordance with 
statutory and policy requirements. The program is in the process of 
reviewing cost and schedule projections provided by the PSC prime 
contractor to formally establish new cost and schedule parameters in 
the acquisition program baseline. This work is occurring in parallel 
with on-going program activities to support delivery of the PSC fleet 
as quickly as possible.
    PSCs will provide the global reach and icebreaking capability 
necessary to project U.S. influence, conduct Coast Guard missions in 
the high latitudes, and advance our national interests in the Arctic 
and Antarctic regions. Continued investment is key to meeting our 
Nation's growing needs in these rapidly-evolving and dynamic areas of 
responsibility.

                   addressing needs in the near-term
                   
    To maintain heavy polar icebreaking capability until the PSC class 
is delivered, the Coast Guard established an effort to complete a 
service life extension on Coast Guard Cutter Polar Star, the Nation's 
only operational heavy polar icebreaker. The cutter recently began the 
fourth of 5 planned annual work periods to enable continued operation 
of the aging cutter and availability for the annual breakout of 
national facilities in Antarctica's McMurdo Sound and other missions in 
the high latitudes.
    Likewise, the Service has initiated a service life extension 
program for Coast Guard Cutter Healy, the Service's only operational 
medium polar icebreaker, which was commissioned in 1999. The 5-year 
phased production builds upon the lessons learned from Polar Star's 
service life extension and is planned to be completed between 2026 and 
2030. When complete, this effort will recapitalize a number of major 
systems while addressing significant operational degraders to maintain 
the Coast Guard's required heavy icebreaking capability.
    In addition to the on-going maintenance and service life-extending 
work in the Service's current fleet and with the subcommittee's 
support, the Coast Guard received funding in the fiscal year 2024 
Homeland Security appropriation to procure a commercially-available 
polar icebreaker. The purchase of a commercially-available polar 
icebreaker is an effective strategy to increase operational presence in 
the near term and add long-term national capacity in the Arctic. Under 
the authority granted by the Don Young Coast Guard Authorization Act of 
Fiscal Year 2022, the Coast Guard intends to acquire a domestically-
produced commercially-available polar icebreaker through a streamlined 
acquisition process that aligns with DHS and Coast Guard policy 
requirements. Initial activities will be directed at achieving initial 
operational capability, followed by a series of phased modifications to 
achieve full operational capability between annual Arctic operations.

                               conclusion
                               
    The physical, operational, and geopolitical environment in the high 
latitudes continues to change rapidly, driving demand for Coast Guard 
presence, influence, and missions. The Coast Guard has served in these 
regions for more than 150 years and is central to a U.S. whole-of-
Government approach to ensuring national interests in the Polar Regions 
are protected. The continued support of the administration and Congress 
for a modernized and capable polar fleet and increased Coast Guard 
capacity and capabilities in the high latitudes will fortify the 
Nation's position at this critical juncture.
    Since 1790, the Coast Guard has safeguarded our Nation's maritime 
interests and natural resources on our rivers, in our ports, on the 
high seas, and around the world. Each day, the Coast Guard carries out 
its missions to protect lives, protect the environment, secure our 
maritime borders, and facilitate commerce. Our mission support and 
acquisition enterprises are, likewise, working each day to plan and 
deliver the assets and capabilities needed to support these critical 
missions.
    The cutters, aircraft, boats, C5ISR systems, and shoreside 
infrastructure we acquire today will provide vital capability for 
decades to come. We are committed to maximizing the Nation's return on 
these important investments. Thank you for the opportunity to testify 
before you today and for all you do for the women and men of the Coast 
Guard. I look forward to answering your questions.

    Chairman Gimenez. Thank you, Vice Admiral Thomas.
    Now I recognize Mr. Alles for 5 minutes to summarize his 
opening statements.

     STATEMENT OF RANDOLPH D. ``TEX'' ALLES, DEPUTY UNDER
      SECRETARY,  MANAGEMENT,  U.S. DEPARTMENT  OF  HOME-
      LAND SECURITY

    Mr. Alles. Chairman Gimenez, Ranking Member Thanedar, and 
distinguished Members of the subcommittee, it is a privilege to 
appear before you today to discuss how the management director 
of the Department supports recapitalization of the Coast Guard 
fleet.
    I would also like to express my condolences to the 
committee for the loss of Mr. Payne, a tragic, tragic 
situation.
    As noted, I serve as the deputy under secretary for 
management and I have since July 2019. In that capacity I 
oversee the Department-wide management and oversight of all 
mission support functions, such as information technology, 
budget, and financial management procurement, acquisition, 
human capital, security, and asset management.
    In my role as the deputy under secretary of management I am 
also the chief acquisition officer for the Department. The 
management director works collaboratively with the Coast Guard 
overseeing the acquisition of maritime and aviation fleets 
needed by our front-line personnel to protect the homeland.
    As chief acquisition officer of the Department, I recognize 
the critical role effective acquisition management plays in 
meeting mission needs.
    Being proactive in security efforts across the Department's 
various mission sets requires the acquisition community to work 
hard to streamline efforts without sacrificing our ability to 
execute the Department's missions.
    DHS acquisition programs vary in size, scope, and cost. 
Collectively, the Department's acquisition program portfolio 
works together to provide security for our Nation's borders 
both land and maritime.
    As the commandant of the Coast Guard has previously 
conveyed, we have never experienced a greater demand for Coast 
Guard services, and we anticipate this demand to grow in the 
future. At the Department we are focused on facilitating the 
delivery of capabilities to meet these demands and confront the 
dynamic and complex challenges faced by Coast Guard personnel.
    We need new and more cable cutters, aircraft, boats, and 
command-and-control and communication systems that are required 
to support mission execution domestically in some of the most 
challenging environments around the world, including the polar 
regions, the Indo-Pacific region, and the Persian Gulf.
    Recapitalization of the Coast Guard is an important 
priority of the Department, and we were focused on effective 
program oversight and governance to ensure the investment in 
our critical assets has the greatest opportunity to meet the 
mission needs at an affordable cost and in a timely manner to 
support our personnel.
    These acquisitions require executable strategies that 
consider the need to plan and scope acquisitions before work 
begins, to oversee the design and production processes, and 
prepare future crews and the maintenance community for the 
delivery of future operational capabilities.
    By teaming with component acquisition executives, program 
managers, and other acquisition professionals, the Department's 
goals to enhance these acquisition activities which provide the 
appropriate number of checks and balances to promote better 
outcomes and achieving program success.
    Among the active Coast Guard shipbuilding the average DHS 
is currently governing 6 of these programs as major 
acquisitions, either as Level 1 programs, meaning that they 
exceed $1 billion, or Level 2 programs with a life-cycle cost 
exceeding $300 million.
    These programs are also in various stages of the 
Department's acquisition life-cycle framework from established 
programs at the tail end of production, such as our national 
security cutters and fast response cutters to more recent 
programs that are in the earlier phase of acquisition, such as 
the polar security cutter and the waterway commerce cutters.
    The Coast Guard's new shipbuilding programs include on-
going construction at 5 private shipyards across the United 
States with the preponderance of the activities for building 
the major cutters centered in the Gulf Coast region of 
Louisiana, Mississippi, Alabama, and Florida.
    We recognize that the shipbuilding industry as a whole is 
facing pressure from diminished industrial base capacity. The 
main issue is limiting private shipbuilders and the long-term 
lies in the lack of personnel, rising costs of materials, and 
fluctuating acquisition priorities.
    Along with the rest of the industry, our Coast Guard 
programs are also seeing challenges caused by these issues. As 
legacy cutters continue to age, maintaining the older ships 
will be more of a challenge due to cost and obsolescence. With 
that in mind, we continually strive to improve our acquisition 
process with a focus on meeting mission performance at an 
affordable cost within the required schedule.
    Thank you again for your attention to the important mission 
and for the opportunity to discuss the management directorate's 
governance of critical Coast Guard shipbuilding efforts. I look 
forward to answering your questions.
    [The prepared statement of Mr. Alles follows:]
    
            Prepared Statement of Randolph D. ``Tex'' Alles
            
                              May 7, 2024
                              
                              introduction
                              
    Chairman Gimenez, Ranking Member Thanedar, and distinguished 
Members of the subcommittee: It is a privilege to appear before you 
today to represent the Department of Homeland Security (DHS or the 
Department) and its Management Directorate.
    My name is Randolph ``Tex'' Alles, and I have served as the Deputy 
Under Secretary for Management (DUSM) since July 2019. In my capacity 
as DUSM, I oversee Department-wide management and oversight for all 
mission support functions, such as Information Technology, budget and 
financial management, procurement, acquisition, human capital, 
security, and asset management. In addition to my role as DUSM, I serve 
as the chief acquisition officer for the Department.
    I am pleased to be joined today by my colleague from the United 
States Coast Guard (USCG), Vice Admiral Paul Thomas, deputy commandant 
for mission support. The Management Directorate works collaboratively 
with the USCG to oversee the acquisition of maritime and aviation 
fleets needed by our front-line employees to protect our homeland.
    As chief acquisition officer for the Department, I recognize the 
critical role effective acquisition management plays in meeting mission 
needs. Being proactive in security efforts across the Department's 
various mission sets requires the acquisition community to work hard to 
streamline efforts without sacrificing our ability to execute the 
Department's missions. DHS's acquisition programs vary in size, scope, 
and cost. Collectively, the Department's acquisition program portfolio 
works together to provide security for our Nation's borders, both land 
and maritime.
    As the Commandant of the USCG has previously conveyed, we have 
never experienced a greater demand for USCG services, and we anticipate 
this demand to grow in the future. At the Department, we are focused on 
facilitating the delivery of capabilities to meet these demands and 
confront the dynamic and complex challenges faced by USCG personnel. 
New and more capable cutters; aircraft; boats; and command, control, 
and communications systems are required to support mission execution 
domestically and in some of the most challenging environments around 
the world, including the Polar Regions, Indo-Pacific region, and 
Persian Gulf.
    Recapitalization of the USCG is an important priority of the 
Department, and we are focused on providing effective program oversight 
and governance to ensure that investment in our critical assets has the 
greatest opportunity to meet the mission needs, at an affordable cost, 
and in a timely manner to support our personnel.

              the homeland security acquisition enterprise
              
    As the chief acquisition officer of the Department, I am 
responsible for the management, administration, and oversight of the 
Department's acquisition programs and acquisition management systems. I 
am proud to lead a talented team of professionals that facilitate the 
acquisition of necessary capital assets, infrastructure, and systems 
across all of the Department's operational components. These 
acquisitions require executable strategies that consider the need to 
plan and scope acquisitions before work begins; to oversee the design 
and production processes; and to prepare future crews and the 
maintenance community for the delivery and future operation of new 
capabilities. By teaming with the component acquisition executives, 
program managers, and other acquisition professionals, the Department's 
goal is to enhance these acquisition activities, while providing the 
appropriate number of checks and balances to promote better outcomes in 
achieving program success.

                     u.s. coast guard shipbuilding
                     
    Among the active USCG shipbuilding efforts, DHS is currently 
governing 6 of these programs as major acquisitions, either as Level 1 
programs with life-cycle costs exceeding $1 billion or Level 2 programs 
with life-cycle costs exceeding $300 million. These programs are in 
various stages of the Department's Acquisition Lifecycle Framework, 
from established programs at the tail end of production, such as our 
National Security Cutters (NSC) and Fast Response Cutters (FRC), to 
more recent programs in an earlier phase of the acquisition life cycle, 
such as the Polar Security Cutters (PSC) and Waterway Commerce Cutters 
(WCC).
    Of the USCG's white-hull cutter fleet, the NSC is the largest and 
most technologically sophisticated. The USCG accepted delivery of the 
10th NSC on October 13, 2023, and construction of the 11th and final 
NSC is currently under way in Pascagoula, Mississippi. We also continue 
to deliver FRCs into the fleet. Just this March, USCG accepted delivery 
of the 56th of the planned 65 FRCs. The fiscal year 2024 appropriations 
provided funding for another 2 FRCs which we plan to put under contract 
soon.
    The Offshore Patrol Cutter (OPC) remains a top acquisition priority 
for the Department and is vital to recapitalizing the capability 
provided by our legacy fleet of 210-foot and 270-foot Medium Endurance 
Cutters (MEC). The program is progressing, with production of OPCs 1-4 
under way with the Stage 1 contractor. Additionally, we are continuing 
with design activities on the Stage 2 contract, which will lead to the 
future production of up to 11 additional OPCs. As a bridging strategy 
to maintain mission capabilities until the OPCs are delivered, USCG has 
undertaken a service life extension program that will address key 
systems and component obsolescence on board the legacy MECs, many of 
which already exceed 50 years in service.
    We are also investing in the acquisition of the Nation's first new 
heavy polar icebreakers in over 4 decades. PSC design activities are 
on-going, and initial long lead-time material has been delivered to the 
shipyard. Recognizing the critical need for these assets, the USCG is 
working closely with the prime contractor to mitigate schedule risks 
and ensure production readiness. When fully operational, PSCs will 
provide the global reach and icebreaking capability necessary to 
project U.S. sovereignty and influence, conduct missions in the high 
latitudes, and advance our national interests in the Arctic and 
Antarctic regions. The USCG Cutter POLAR STAR is the Nation's only 
remaining heavy polar icebreaker. She was commissioned in 1976, along 
with her sister ship, POLAR SEA. The PSC will be considerably larger at 
22,900 tons displacement compared to the 13,200-ton displacement of the 
previous polar icebreakers, to meet modern habitability and 
environmental standards and provide additional multi-mission spaces.
    On October 5, 2022, the USCG awarded the WCC contract for the 
design and future production of the river buoy tender and inland 
construction tender variants. The contract includes options for 
production of up to 27 cutters, and a separate effort is planned to 
deliver 3 inland buoy tenders to achieve a total fleet of 30 WCCs. The 
prime contractor began design activities earlier last year. Investment 
in our inland fleet is critical to the continued operation of the 
Nation's Marine Transportation System, which accounts for more than $4 
trillion in annual economic activity. The legacy fleet is approaching 
obsolescence, and maintenance costs are rising. Continued progress 
toward delivering these new assets and replacing the legacy fleet, 
which has an average age of over 55 years, is critical to maintaining 
the USCG's capability to execute this important mission.

                        shipbuilding challenges
                        
    The USCG's new shipbuilding programs include on-going construction 
at 5 private shipyards across the United States, with a preponderance 
of the activities for building the major cutters centered in the Gulf 
Coast region of Louisiana, Mississippi, Alabama, and Florida. We 
recognize that the U.S. shipbuilding industry as a whole is facing 
pressure from a diminished industrial base capacity. The main issues 
limiting private shipbuilders in the long term lies in lack of 
personnel, rising costs of materials, and fluctuating acquisition 
priorities. Along with the rest of the industry, our USCG programs are 
also seeing challenges caused by these issues. Two of our highest-
priority programs--the OPC and PSC--have faced, and are continuing to 
face, significant schedule delays and cost increases.
    While it is common to see cost growth on first-in-class ships 
across the industry, the OPC program experienced unprecedented events 
early in the design process. The catastrophic effects of Hurricane 
Michael in 2018 as well as COVID-19-era inflation have resulted in the 
acquisition cost estimate increasing significantly since the initial 
estimate in 2012. We have increased Department-level oversight of the 
OPC Program, and I am briefed by the program manager regularly to stay 
up-to-date on the program status. The USCG is working closely with the 
OPC shipbuilders to establish an updated baseline and schedule to 
determine what it will realistically take to get the first and follow-
on OPCs in operation.
    The PSC program is now years behind the original schedule, without 
having attained the level of maturity we require prior to authorizing 
the start of construction. In addition to the general lack of U.S. 
experience designing and building polar icebreakers, the prime 
contractor suffered from organizational instability and has undergone 
managerial restructuring following its acquisition by a competitor 
shipyard in 2022. With the new management in place, we are now 
expecting to complete the Critical Design Review later this year, 
allowing us to start construction soon thereafter. In addition to 
enhancing our oversight and analysis of design metrics, in May 2022, I 
approved the USCG's plan to begin construction on up to 8 prototype 
units of the cutter that will eventually be incorporated into the 
construction of the first icebreaker. These prototype units are 
intended to allow the yard to exercise their fabrication processes in a 
controlled environment and are expected to reduce future production and 
schedule risk. Four of the 8 prototype units are now under construction 
and are, as we hoped, yielding valuable lessons for the craft workers 
to incorporate into the future full production. Additionally, the USCG 
received $125 million in fiscal year 2024 appropriations for the 
acquisition of a commercially-available icebreaker to increase its 
near-term presence in the Arctic. We are streamlining the processes to 
acquire this capability with the goal of providing some degree of 
operational presence in the Arctic within the next 24 months.

                               conclusion
                               
    Chairman Gimenez, Ranking Member Thanedar, and distinguished 
Members of the subcommittee, thank you again for your attention to this 
important mission and for the opportunity to discuss the Management 
Directorate's governance of critical USCG shipbuilding efforts. As the 
legacy cutters continue to age, maintaining the older ships will be 
more of a challenge due to cost and obsolescence. With that in mind, we 
continually strive to improve our acquisition process with a focus on 
meeting mission performance, at an affordable cost, and within the 
required schedule. I look forward to answering your questions.

    Chairman Gimenez. Thank you, Mr. Alles.
    Members will be recognized by order of seniority for their 
5 minutes of questioning, and I recognize myself for my 5 
minutes of questioning.
    Vice Admiral, where does the buck stop? We have got a 
cutter, I mean, I am sorry. We have an icebreaker that we put 
out a contract for 5 years ago. We have not even started 
construction on it, so where does the buck stop? Whose fault is 
that and what have we done to resolve this issue?
    Admiral Thomas. Congressman, I appreciate your frustration 
because I share it. You know, in the case of the polar 
icebreaker you had a conversation earlier in the last panel 
about how it really works.
    You know, the Coast Guard does not design the ship. We let 
a contract that includes the detailed design of that ship. Our 
first contractor early on, I believe, decided they were going 
to try to get out of this deal and they essentially stopped 
designing the ship. They made very, very little progress. They 
talked about their subcontractor not delivering, et cetera.
    Now that we have a new prime contractor we are making very 
good progress on that detail design. We have taken some action 
to restructure the contract to put additional resources after 
it, more engineers for example.
    There were a lot of roadblocks, but right now the buck 
stops with me, and I am focused on getting to a detail design 
and construction because our Nation needs the ship and our 
Nation needs the shipyard. That is our focus.
    Chairman Gimenez. Give me a time. When will you be done 
with design? When will construction stop?
    Admiral Thomas. We----
    Chairman Gimenez. I am going to hold you to it, so what is 
the time?
    Admiral Thomas. We intend to begin construction late this 
year.
    Chairman Gimenez. What is late this year?
    Admiral Thomas. Probably in December. We are currently 
building prototype modules that will become part of the ship. 
We will not be at the level of design maturity that the GAO 
would like to see when we do that.
    Chairman Gimenez. In December I will call you back, and I--
--
    Admiral Thomas. We are----
    Chairman Gimenez [continuing]. And I will call you back in 
December, OK? We are going to see where we are with this 
icebreaker.
    The offshore patrol cutter, I suppose we are having trouble 
with that. How many of these are we procuring?
    Admiral Thomas. Well, we currently have a program of record 
of 25 ships. We have awarded the Stage 1 contract for hulls 1 
through 4 and those are being built at Eastern Shipbuilding, 
Ship Group. Then we have a contract for----
    Chairman Gimenez. For hulls 1 through 4 are they started 
construction?
    Admiral Thomas. Yes, sir. All 3 are under construction and 
hull 1 is in the water. She will be delivered in May of next 
year.
    Chairman Gimenez. When was the original contract given?
    Admiral Thomas. That ship will be--well, the----
    Chairman Gimenez. The original contract, when was the 
original contract?
    Admiral Thomas. The original contract delivery date was in 
May 2024. I don't remember. I have got that here, but the 
ship----
    Chairman Gimenez. Is that for the first ship, May 2024?
    Admiral Thomas. The ship will be late, just like most of 
the ships----
    Chairman Gimenez. Is the program late?
    Admiral Thomas. Yes, sir. That program is behind schedule 
and over target budget, and we are working to adjust that.
    Chairman Gimenez. For both the Navy and the Coast Guard I 
am hearing the same the same thing, that the industrial base, 
that we have lack of skilled workers in the industrial base. Is 
that your assessment, welders, et cetera, the things that we 
actually need to build to a ship, the people that we actually 
need to build the ships? Are we short of those kind of skill 
sets here in the United States?
    Admiral Thomas. Yes, we are, sir, and that is one of the 
reasons why the estimates vary so wildly because----
    Chairman Gimenez. Oh, now hold on. That is just a yes or no 
answer to that. OK. So what is the Coast Guard, what is the 
Navy doing about that?
    Admiral Thomas. The Navy has some authorities to actually 
do something about that, including spending money to train 
people in key trades that they need particularly for building 
submarines. The Coast Guard doesn't have those authorities 
although we do work closely with the Navy so that they 
understand our needs as well. They target those monies to the 
trades that we need as well.
    Chairman Gimenez. Do you think you need that authority?
    Admiral Thomas. As I said, right now we work very closely 
with the Navy and we leverage their authority so I think we are 
OK. If we were to have the authority then we would need the 
same appropriations that the Navy has in order to have the 
money to actually----
    Chairman Gimenez. Do those skill sets exist around the 
world?
    Admiral Thomas. There are labor challenges in shipbuilding 
around the world.
    Chairman Gimenez. Around the world. OK.
    Admiral Thomas. At least in the Western world.
    Chairman Gimenez. Fair enough. OK. Vice Admiral, I will be 
bringing you back in December. I still will be here in 
December, OK? I am going to probably be here after that, too.
    Admiral Thomas. OK.
    Chairman Gimenez. But in December for sure I will be here 
and so we will be having this conversation again about the 
cutter and then also these programs that are falling behind.
    I just feel it is completely inexcusable that a contract 
was let 5 years ago and we haven't even started construction on 
this, especially when supposedly the design was built, was 
already--it is here is the design, here is the ship. Here we go 
and then nothing. If somebody was giving you trouble and 
delaying you, we should have known about that.
    So with that, my time is expired.
    I now recognize the Ranking Member, Mr. Thanedar.
    Mr. Thanedar. Thank you, Chairman Gimenez.
    Several questions here. I wonder if we have enough of an 
expertise in-house, shipbuilding expertise, expertise to 
oversee the shipbuilder's expertise to evaluate their 
submissions, expertise to monitor it. Do we have enough in-
house expertise? If not, what can you do to build such an 
expertise so we can effectively monitor these acquisitions and 
oversight?
    Admiral Thomas. Well, one of the reasons that we have an 
integrated project office with the Navy is so that we can 
leverage their expertise as well as the Coast Guard expertise, 
particularly given the complexity of the polar security cutter 
in this case. You know, our expertise is typically around 
smaller vessels.
    As a Nation we need to make sure we don't lose this 
expertise. We need to support STEM programs because we are not 
building the engineers as a Nation that are near-peer 
competitors are building, and so that is a concern across 
shipbuilding across the maritime or the military industrial 
base. It is a real concern. I appreciate you noticing that.
    Mr. Thanedar. Well, not only domestically United States but 
world-wide, where can we go get this expertise if we need to?
    Admiral Thomas. Well, I mean, in the case of polar security 
cutter, you know, I think the Chairman mentioned earlier that, 
you know, there is real expertise in icebreakers in places like 
Finland. That is where we went when we first put out the 
proposal and we had to choose an indicative design.
    We said we want something like this. They came back and we 
didn't provide them a design. We said here are the 
requirements. Here is one that it is pretty close. They came 
back and said we want to use this design over here and then, 
you know, by the way, the ship that they chose for the parent 
design has actually never been constructed and that is why the 
detail design has taken so long.
    Mr. Thanedar. Thank you. Now, Admiral Thomas, I represent 
much of Detroit, Michigan. My constituents depend upon maritime 
commerce and tourism on the Great Lakes. In fact, 55 percent of 
the Great Lakes regional economy is dependent on key shipping 
channels according to Coast Guard.
    We have heard a lot about polar security cutter program, 
how the Coast Guard struggles to respond to mission needs in 
the Arctic, but is the same true on the Great Lakes where Coast 
Guard rely on a fleet of aging vessels?
    What mix of small, medium, and heavy icebreakers does the 
Coast Guard believe it will need in the Great Lakes? What can 
Congress do to support the Coast Guard's Great Lakes 
icebreaking effort and acquisitions?
    Admiral Thomas. Well, thank you for the question. The Coast 
Guard is committed to recapitalizing our system of icebreakers 
on the Great Lakes because it takes a system. It takes the 
small, medium, and the large in order to, you know, get those 
ships all the way to the pier.
    We believe that we need about 2 heavies, and in this case a 
heavy would be equivalent to the Mackinaw, which is currently 
there, and about 11 of what is currently a 140-foot, you know, 
tug and about 8 of the smaller ones that can work closer to the 
piers.
    We have, you know, we have gotten some support from 
Congress and particularly to build another Great Lakes heavy 
icebreaker. We got enough money in the budget last year to 
begin the acquire phase of the acquisition program, analyze and 
acquire.
    We are going to need another $20 million to finish that 
phase, but we have started.
    Mr. Thanedar. Thank you. Thank you so much, Admiral.
    I yield back.
    Chairman Gimenez. The Ranking Member yields back.
    I recognize the gentleman from Louisiana, Mr. Higgins.
    Mr. Higgins. Thank you, Mr. Chairman.
    Admiral Thomas, Mr. Alles, thank you for being here today. 
Admiral Thomas, you have got 39 years in the rearview mirror in 
your uniform, sir. Thank you for your service. My understanding 
is that you will be retiring soon, and we wish you the best.
    I am an old Army veteran NCO and a couple of my district 
staff members are prior Army combat veteran, another NCO and a 
lieutenant colonel, so we were predisposed to love Army in my 
office and but in my district in south Louisiana we have so 
much interaction with the Coast Guard.
    The last 8 years have been a real awakening. The old Army 
veterans in my office said just how squared away the Coast 
Guard is. So if you have been there for 39 years, my brother, 
then you are partly responsible for just how impressive the 
United States Coast Guard is, so thank you for that service.
    Regarding these vessels and getting them finished and 
built, figuring out what is wrong, we are going to do that. We 
are going to work together.
    Congress is going to work with the Coast Guard and the 
Navy. We are going to identify what the problems have been. We 
are going to iron them out.
    You have an excellent shipbuilder on the polar security 
cutter now in Bollinger Shipyards so we are going to fix these 
issues. I thank you for your service, sir.
    Admiral, clearly in the last panel we identified some 
challenges that we must overcome with two major vessel 
programs, including the polar security cutter. Can you please 
describe the relationship between the Navy, the Department of 
Defense, and the Coast Guard as it pertains to the polar 
security cutter? Like, who is in charge? Which Government 
entity has the ultimate decision-making authority when it comes 
to interacting with the shipbuilder? Can you clear that up for 
America?
    Admiral Thomas. Well, first, Congressman, thank you. It has 
been a privilege to serve for 39 years, and I am retiring in 
July so I just signed my relief up to meet the Chairman in 
December.
    But, you know, the Coast Guard and the Navy work very, very 
closely on the polar security cutter. The Coast Guard really is 
driving the, you know, the requirements and the design review, 
and we have a joint office with the Navy down at the shipyard.
    The Navy helps us. It is a Navy contract, not a Coast Guard 
contract, so that is really where the Navy plays the biggest 
role is in contract modifications. But we tell them what we 
would like to see and they have been very helpful in that 
regard.
    Mr. Higgins. So contract modification, you said that is the 
major role that the Navy plays? That the Coast Guard is driving 
what the needs are for the design but the Navy is responsible 
for actual contract modification with the shipbuilder. Is that 
accurate?
    Admiral Thomas. We work together on that, so the Coast 
Guard is driving the train with regard to what it is going to 
take to get this ship and that includes regular meetings with 
the ownership of that yard----
    Mr. Higgins. Yes, sir.
    Admiral Thomas [continuing]. Understanding where they are 
and then understanding how the contract must be modified so 
that we get both the ship and a shipyard. Then we go and we 
work with the Navy to make those necessary modifications.
    Mr. Higgins. Mr. Alles, do you have anything to add to that 
question regarding the relationship between the Coast Guard and 
the Navy and the shipbuilder?
    Mr. Alles. Just as the Admiral said, sir, the contract is 
Navy, but they respond to the requirements the Coast Guard 
gives them. The money at this point purchasing the cutter is 
DHS money through DHS appropriations.
    The initial money for the contract was shipbuilding 
construction Navy, which is why the contract went to them 
originally. Now it is DHS money. So they are very responsive, 
as the Admiral said.
    Mr. Higgins. OK. Well, we are going to work closely with 
the Coast Guard, the Navy, and the shipbuilder to help these 
projects move forward and get back on track.
    Admiral, closing question here regarding unmanned systems, 
the strategic plan. Last year the Coast Guard released a report 
highlighting that the use of unmanned systems is critical for 
mission readiness.
    Has the Coast Guard thought about incorporating autonomous 
vessels into its fleet? What is the status of that?
    Admiral Thomas. Thank you, Congressman. You mentioned we 
have a strategy for incorporation of unmanned systems. Right 
now our focus really is on aerial systems. We have experimented 
with unmannered autonomous surface vessels as well, but we are 
working to develop those CONOPS and definitely in the future we 
will need those systems.
    Mr. Higgins. We will talk more about that. My time has 
expired. Thank you.
    Chairman Gimenez. The gentlemen's time has expired.
    Admiral, I also want to thank you for your service. Please 
let your successor know, he or she, that they will be back here 
in December to talk about the polar icebreaker. Thank you.
    The Chair now recognizes the gentlewoman from American 
Samoa, Mrs. Radewagen.
    Mrs. Radewagen. Thank you, Mr. Chairman.
    I represent American Samoa in the South Pacific. Our 
largest industry is fishing, which is at threat from Chinese 
IUU fishing.
    Coast Guard presence in American Samoa is the best 
deterrence from Chinese incursions into our EEZ. Every single 
Pacific Island leader has asked for 2 things in the Pacific 
Coast Guard and the Peace Corps. Today we are discussing the 
fleet of the future, one that can operate in the South Pacific.
    American Samoa recently just hosted the commandant of the 
Coast Guard, Admiral Fagan, in February and American Samoa 
stands ready to host a larger permanent presence of the Coast 
Guard.
    With the success of the Harriet Lane's tour of the Indo-
Pacific, I would like to focus on OPC. My first question is for 
Admiral Thomas. With regard to its aging fleet, what are the 
operational consequences the Coast Guard is currently and 
anticipates facing due to delays in the OPC and PSC programs? 
What operational and financial tradeoffs are the Coast Guard 
having to make as a result?
    Admiral Thomas. Thank you for that question, Congresswoman. 
I know the commandant told me she really enjoyed her visit with 
you there.
    Yes. The delays in our offshore patrol cutter have caused 
us to undertake a service life extension program for our 270-
foot Harriet Lane-type ships, and then we are doing that in 
order to maintain that capability and that capacity until we 
can get the offshore patrol cutter into full production, and 
that, you know, eventually that would be 2 ships per year.
    Mrs. Radewagen. Thank you. For my next question, and both 
you and Mr. Alles can answer, what lessons learned from OPC 
stage 1 has the Coast Guard collected and will proactively 
apply to mitigate design and construction delays on stage 2?
    Mr. Alles. I think I would just comment the stage 2 program 
is progressing quite well at this point. A design is coming 
along well. They have done their initial critical design review 
so we are very encouraged by what we are seeing from the 
offshore contractor there.
    Lessons learned from OPC 1 have clearly been incorporated 
into that effort and we are seeing good progress.
    Mrs. Radewagen. Admiral Thomas.
    Admiral Thomas. No, I agree with everything Mr. Alles said. 
The primary contractor for stage 2 is progressing very, very 
well on the design, and we expect to begin production on that 
ship this year as well.
    Mrs. Radewagen. Thank you. As a follow-up, what are the 
biggest risks to OPC's stage 2? What is the Coast Guard doing 
to mitigate them? What off ramps does the Coast Guard have in 
place to descope requirements if needed to get ships out faster 
and is this enough?
    Admiral Thomas. I would say the biggest risk to stage 2 is 
the availability of labor. Again, because that shipyard is on 
the Gulf Coast with all the other ship routes that are doing a 
lot of work for both the Navy and the Coast Guard they have on 
a lot of Navy work in that very shipyard as well so their 
ability to get the number of laborers they need to deliver 
those ships on time is the biggest risk.
    Mr. Alles. I think likewise. I agree with Admiral Thomas' 
response. I think also there is the competition with the Navy 
itself, so we will make sure we stay in the fight there for our 
production.
    Mrs. Radewagen. Thank you.
    Mr. Chairman, I yield back the balance of my time.
    Chairman Gimenez. The gentlewoman yields back.
    The Chair now recognizes the gentleman from Guam, Mr. 
Moylan.
    Mr. Moylan. Thank you, Mr. Chairman.
    Vice Admiral, all 3 FRCs currently stationed in Guam are 
due for repair next year. What is the Coast Guard's plan for 
the region during this time when the FRCs will be completely 
absent from Guam's area of responsibility and how can we ensure 
that this gap in service and structure will never happen again?
    Admiral Thomas. So all 3 of those vessels will go into dry 
dock but not at the same time. We will sequence them so there 
will always be 2 in Guam. Then very likely we will home port 
another FRC there in the coming 2 or 3 years.
    Mr. Moylan. Good to hear, thank you. Second question, Vice 
Admiral, I recently had a chance to host Chairman Sam Graves to 
see Guam's Apra Harbor breakwater. I continue working with both 
the Department of the Navy and the House Armed Services 
Committee to find solutions on how the marine infrastructure 
can be repaired.
    The breakwater is just one typhoon away from completely 
washing out and rendering Apra Harbor useless. If this was to 
happen, what would be the impact on the Coast Guard operations 
and the capacity in Sector Guam?
    Admiral Thomas. So I have been to Apra Harbor as well and I 
share your concern. Obviously, if we lose that breakwater and 
the ability to have sheltered moorings there we would not be 
able to operate out of Guam, at least not on a full-time basis. 
So it is a concern for us.
    Mr. Moylan. It is considered an emergency, and I appreciate 
your continued push to get this repaired as quickly as 
possible.
    For my final question, Vice Admiral, as the deputy 
commander commandant for mission support, we have received 
reports from senior Coast Guard leaders in Guam about the need 
for increased capability and personnel support for operations 
out of Guam. What, if anything, have your commanders said to 
you about what it takes to realize their needs in supporting 
Homeland's mission in Guam and what steps have been taken to 
address the stated concerns?
    Admiral Thomas. Coast Guard commanders around the world 
tell me they don't have enough to do what they need to do and 
they are right. Two-thousand-eighteen we had a PC&I budget of 
$2.6 billion. You just heard in 2025 that it is $1.6. We are 
going in the wrong direction. We need at least a $3 billion 
PC&I budget to do all the infrastructure work that we need to 
do around the Nation, and we simply are going in the wrong 
direction.
    So I hear that everywhere I go. It is one of the greatest 
frustrations of being the guy responsible to provide things 
that float and fly have runways and roofs, and I can't do it.
    Mr. Moylan. I can imagine the pressure you are facing and I 
really appreciate your experience and support in fighting for 
the Coast Guard, for the Indo-PACOM area, for Guam, and free 
associated states and America Samoa as well, we rely on you 
heavily to protect our fisheries and most especially keeping 
out the CCP from our area. We just can't do it without your 
support, so we are going to fight for you and appreciate that. 
Thank you for your service, sir.
    Admiral Thomas. Thank you. Our members love serving out 
there.
    Mr. Moylan. Mr. Chairman, I yield back. Thank you.
    Chairman Gimenez. The gentleman yields back.
    I am going to do a second short round of questioning for 
those that want to. Admiral Thomas, do you have a, in the Coast 
Guard, do you have a number of engineers, naval architects, et 
cetera, that work for the Coast Guard that help you?
    Admiral Thomas. Congressman, thank you for the question. I 
am, in fact, an MIT-trained naval architect. We have a number 
of naval architects who both work on our ships and work on 
review of design for commercial vessels that we regulate. So 
that is an expertise that we do have in our force, both on our 
civilian side and on our military side.
    Chairman Gimenez. Does the Navy have the same kind of set-
up over on their side?
    Admiral Thomas. Yes, Congressman, they do and, in fact, 
while I was in grad school for naval architect most of my 
classmates were Navy officers.
    Chairman Gimenez. Do you guys, does the Navy and the Coast 
Guard, are you collocated or do you talk to each other? I mean, 
do you operate separately? Do you operate quasi together or is 
it just separate Coast Guard here, Navy there?
    Admiral Thomas. We are integrated to the point where we 
actually do exchanges of some of our employees so that we can 
get our Coast Guard members some experience working on Navy 
projects and vice versa. So we are talking to NAVSEA. Their 
ship design headquarters is just across the river from Coast 
Guard headquarters so we are there often.
    Chairman Gimenez. You are there often? OK, but you are not 
collocated technically. You are not together. They are across 
the river, right?
    Admiral Thomas. Yes. Yes, sir, but as I said, we do have 
embeds and they have embeds with us.
    Chairman Gimenez. OK, fair enough. You said that you needed 
more money. Everybody in the Federal Government says they need 
more money and I tend to agree with you. You probably do. The 
submission that you gave to the administration, was that pared 
down by the administration?
    Admiral Thomas. Just like every component or at an agency 
we are given a top line that we have to stay underneath and we 
have to make hard choices in order to get underneath that top 
line, which is why you see so much on the unfunded priorities 
list.
    In the case particularly of the polar security cutter, we 
will not be able to build that ship from money within our base 
and still do everything else the Nation needs us to do. We need 
top line relief in order to build a polar security cutter. We 
have not gotten that and that relief has to really be at the 
Department level so it doesn't come from Department priorities 
as well.
    Chairman Gimenez. All right. So you don't have the money to 
build the icebreaker that you need. Is that what you are 
telling me? You don't have the money to do that? For our 
Nation's security you don't have the money to do that?
    Admiral Thomas. What I am telling you, sir, is that with 
the current top lines that we are given to build a budget to we 
cannot build a polar icebreaker and still produce 2 OPCs per 
year and transition our rotary-winged fleet to H-60's and build 
C-130's and build waterway commerce cars. We cannot do it.
    So if we are forced to do it within our base we are going 
to have to make some really tough choices, which includes 
probably curtailing the OPC program or perhaps flying less 
aircraft, which will really hurt our ability to provide the 
same level of service to the Nation.
    Chairman Gimenez. Will you provide that information to 
Congress as to what you can do with the money that Congress is 
allocating to you instead of saying, well, yes, we will do all 
these things, knowing full well you can't do all these things?
    Admiral Thomas. Absolutely happy to provide a brief. I 
mean, we do come up once a quarter and brief where we are in 
acquisitions, but we can definitely provide you a brief on what 
we will and will not be able to do if we stay at a $1.5 billion 
PC&I budget.
    Chairman Gimenez. Well, I think what we need to know is 
what is it you believe you need to maintain the national 
security of the United States, what equipment you need, how 
much it will cost, and then what you can actually do with the 
budget that is allocated to you. So I would like to see that.
    Admiral Thomas. Absolutely.
    Mr. Thanedar. With that, I yield the balance of my time.
    I now recognize the Ranking Member, Mr. Thanedar.
    Mr. Thanedar. Thank you, Chairman Gimenez.
    Thank you to our panelists here. Mr. Alles, you know, and 
Admiral Thomas, I, you know, I appreciate the hard work of the 
men and women of U.S. Coast Guard. I appreciate your long 
service and I wish you, you know, a very happy retirement.
    As I look at all these cost overruns and the delays and how 
expensive these programs have become and, obviously, you have a 
limited budget, what are these additional expenses, additional 
costs, how is that impacting? What programs is that impacting?
    As you try to cut costs, what does that do to our national 
security?
    Mr. Alles. I would just say that, obviously, as the Admiral 
mentioned, it means tradeoffs, tradeoffs in mission 
performance. It will possibly mean tradeoffs in the Department 
where we put money. It is going to have to come from somewhere 
to support the Coast Guard mission sets, but it is a national 
priority that the Secretary takes seriously and will have to be 
evaluated.
    I would mention that as we think about costs overall we 
have seen a very dramatic acceleration across all of our 
building areas, not just shipbuilding, just building 
construction, labor, materials, costs have accelerated much 
more rapidly than consumer price index, in some cases up to 80 
percent. So that has a big impact. The pandemic has had a 
lasting effect overall and we are navigating that.
    Mr. Thanedar. Thank you. That is all the questions I have.
    I yield back.
    Chairman Gimenez. The Ranking Member yields.
    The Chair now recognizes the gentlelady from American 
Samoa, Mrs. Radewagen.
    Mrs. Radewagen. Thank you, Mr. Chairman.
    Admiral Thomas, can you go into how the Francis Scott Key 
Bridge collapse is affecting the work at the Coast Guard yard, 
especially in regards to the 270 service life extensions?
    Admiral Thomas. Thank you for that question. I love any 
opportunity to talk about the Coast Guard yard. Fortunately, we 
have not experienced any adverse impacts from the bridge 
collapse, so we have a deep enough channel open now to get our 
ships back and forth.
    But the Coast Guard yard is another place where the Nation 
needs to invest. We are not going to be able to service our own 
ships. The new ships are too big for the current facilities at 
the Coast Guard yard. We need to maintain that ability in-house 
so that we can keep the military industrial base competitive.
    When they know they are the only game in town it becomes 
really difficult, so we as a Nation need to invest in the Coast 
Guard yard and particularly in a dry dock that can lift the OPC 
and the NSC.
    Mrs. Radewagen. So this question is for Mr. Alles and 
Admiral Thomas, too. Secretary Mayorkas recently testified to 
the Senate Homeland Security Appropriations Committee that the 
Coast Guard is underfunded. Do you agree with the Secretary?
    Does the Coast Guard have the necessary assets to fulfill 
all 11 of the service's statutory mission sets? What more is 
needed to fill in the operational gaps?
    Mr. Alles. So I would agree with the statement that the 
Department has historically been underfunded overall at the 
level of many billion dollars. This rolls over on the Coast 
Guard programs. I won't give an amount they need. That is 
something I would think we probably can provide back to the 
committee, but definitely the funding levels are not sufficient 
to do all the mission sets for the Coast Guard.
    I will defer to Admiral Thomas.
    Admiral Thomas. Well, the Chairman said it earlier. The 
demand for the Coast Guard around the globe has never been 
higher. We are being asked to be in more places more often and 
for longer periods of time, and our budget has been flatlined, 
in particular our PC&I budget, as I had mentioned, is going in 
the wrong direction.
    So we are underfunded and we will have to make some tough 
choices if we continue to be underfunded.
    Mrs. Radewagen. Thank you.
    Mr. Chairman, I yield back the balance of my time.
    Chairman Gimenez. The gentlewoman yields back.
    The Chair now recognizes the gentleman from Guam, Mr. 
Moylan.
    Mr. Moylan. No further questions, Mr. Chairman. I just want 
to thank the panel. Thank you very much.
    Chairman Gimenez. The gentleman yields back.
    I thank the witnesses for their valuable testimony and the 
Members for their questions. The Members of the subcommittee 
may have some additional questions for the witnesses, and we 
would ask the witnesses to respond to these in writing.
    Pursuant to committee rule VII(D), the hearing record will 
be open for 10 days. Without objection, the subcommittee stands 
adjourned.
    [Whereupon, at 12:20 a.m., the subcommittee was adjourned.]



                            A P P E N D I X

                              ----------                              

  Questions From Honorable Michael Waltz for Vice Admiral Paul Thomas
  
        u.s. coast guard vs chinese coast guard in indo-pacific
        
    Question 1a. Per Rep. Waltz, ``As the U.S. strives to protect a 
free and open Indo-Pacific by the following of international rules, 
norms, and laws, the U.S. Coast Guard (USCG) continues to comply with 
all international law and legal boardings. However, the Chinese Coast 
Guard (CCG) continues to violate international law as exemplified in 
protecting illegal Chinese fishing in the South China Sea, and in other 
South Asian economic exclusion zones (EEZ) like the Philippines and 
Vietnam.''
    How is the USCG competing with the CCG in the South China sea with 
our limited USCG assets (we only have a couple in USCG assets in 
Singapore)? Why are we not building out our USCG capacity in the region 
to prevent illegal CCG activity?
    Answer. The Service works closely with our Department of State and 
Defense colleagues to leverage their authorities and funding to develop 
partnerships with like-minded nations, and execute tailored training 
engagements. The opportunities for capacity building are only limited 
by funding and associated authorities provided by interagency 
colleagues for which the U.S. Coast Guard has the unique skill set to 
execute.
   The Coast Guard operates National Security Cutters, Fast 
        Response Cutters, Seagoing Buoy Tenders, and aircraft to patrol 
        and combat illegal, unreported, and unregulated fishing in the 
        U.S. economic exclusion zone (EEZ), the high seas, and the EEZs 
        of Pacific Island nations through bilateral maritime law 
        enforcement agreements with 12 Oceania countries.
   The Coast Guard provides deployable specialized forces on-
        board U.S. and allied naval vessels to conduct maritime law 
        enforcement, interdiction, and security operations across the 
        North and West Pacific and in Oceania.
   A trusted partner in the region, the Coast Guard is well-
        positioned to continue current operations and expand activities 
        across the region.
   The fiscal year 2024-enacted appropriation provided funding 
        for 2 additional 154-foot Fast Response Cutters to support the 
        Indo-Pacific, which will add capacity to complete further-
        reaching deployments once cutters are delivered to the region. 
        However, the Service is still limited by its force structure in 
        the region and is not poised to keep pace with mounting demands 
        from partners for support to assist in securing their waters 
        from coercive behavior.
   The fiscal year 2025 President's budget requests $263 
        million to further accelerate expansion in the Indo-Pacific.
   The Coast Guard's fiscal year 2025 Unfunded Priority List 
        features $232 million in investments that would further the 
        expansion supported by the President's budget, including an 
        additional 270-foot Indo-Pacific Support Cutter to further the 
        work currently being supported by USCGC Harriet Lane, shore 
        infrastructure projects, and increased Marine Transportation 
        System Assessment Team, Maritime Engagement Team, and regional 
        engagement personnel.
    Question 1b. Why is there a lack of USCG assets in the Pacific when 
the USCG is best positioned to operate in the gray zone of the South 
China Sea (i.e. if there was a search-and-rescue mission in American 
Samoa we'd have to ask the NZ coast guard for help)? We have USCG 
assets in Guam, but why not in Japan?
    Answer. The Coast Guard's role as part of the Indo-Pacific Strategy 
is largely centralized in Oceania, aside from National Security Cutters 
supporting the Department of Defense in the First Island Chain. The 
administration has called the Compacts of Free Association the bedrock 
of the U.S. role in the Pacific--including our regional search-and-
rescue responsibilities and shared maritime boundaries. The Coast Guard 
has long undertaken presence, patrolling (including pursuant to ship-
rider agreements with partner nations), training, and advisory missions 
in this vital region. The investments in the fiscal year 2025 
President's budget and Unfunded Priorities List represent the next step 
to building Coast Guard capacity in the region.
          u.s. coast guard heavy icebreaker--arctic operations
    Question 2. Per Rep. Waltz, ``I am happy to see that we are looking 
to replace the 1979 U.S. Coast Guard Icebreaker POLAR STAR with 3 
additional Heavy Ice Breakers by 2029, albeit 5 years behind 
schedule.''
    With Russia's fleet of 40+ heavy icebreakers and a Russian goal of 
50 nuclear ice breakers, how is the U.S. Coast Guard competing in the 
2,500 nautical miles of strategic Arctic waterway that Russia and China 
both want to monopolize and militarize, with only 1 active USCG heavy 
ice breaker?
    Answer. The Coast Guard remains committed to safeguarding U.S. 
sovereignty and interests in the Arctic as outlined in the 2022 
National Security Strategy, 2022 National Strategy for the Arctic 
Region, and the USCG's 2023 Arctic Strategic Outlook Implementation 
Plan. Expanding Arctic surface capabilities, based on the objectives 
expressed in the national strategies, is one of various initiatives 
that the Coast Guard is pursuing to meet national security objectives 
in the Arctic.

  Question From Honorable Michael Waltz for Randolph D. ``Tex'' Alles
  
                  eastern vs. austal for uscg cutters
                  
    Question. Austal Limited, the Australian-based corporation is the 
parent company of Austal USA, an Alabama shipbuilder selected in 2022 
over Eastern Shipbuilding for a more than $3 billion U.S. Coast Guard 
contract to build ships 5 through 15 in the Coast Guard's Offshore 
Patrol Cutter Program (part of a $10.5 billion project with the Coast 
Guard to build up to 25 Heritage Class Offshore Patrol Cutters).
    Eastern Shipbuilding was commissioned to build the first 4 cutters 
in the program. The Panama City company also was given the rights for 
the first 11 ships in 2016, but that contract was reduced to 4 after 
Category 5 Hurricane Michael devastated Bay County and other parts on 
the Panhandle in October 2018.
    Eastern officials have said they think Austal USA's bid for the 
latest Coast Guard contract was unrealistic. They also have noted 
Austal USA does not have experience building steel hull ships. The 
company instead is known for building aluminum ships for the Navy.
    Prior to receiving the Coast Guard contract last year, the foreign-
owned Alabama shipbuilder was commissioned by the Navy to build 
Littoral Combat Ships that were reported to be ``plagued by cracked 
hulls, broken equipment, and technologies that do not work.''
    Why did DHS/USCG switch from an American-based Eastern shipbuilders 
to a foreign Austal Limited? Especially with a disastrous recent track 
record for the LCS program.
    Answer. Response was not received at the time of publication.

                                 [all]`