Coast Guard: Mission Performance Challenged by the Declining Condition and Rising Costs of its Legacy Vessel Fleet
Published: 2012-09-20T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: This testimony discusses the condition of the Coast Guard's legacy vessel fleet, and challenges the Coast Guard faces in sustaining these vessels and meeting mission requirements. The Coast Guard, within the Department of Homeland Security, is the principal federal agency responsible for maritime safety, security, and environmental stewardship. The legacy vessel fleet is critical for executing Coast Guard missions, which include defense operations; search and rescue; and securing ports, waterways, and coastal areas. The comments will focus on the legacy 378-foot high endurance cutters, 270-foot and 210-foot medium endurance cutters, and 110-foot patrol boats, and are based on findings from the report we released in July 2012.
This testimony summarizes the findings of our July 2012 report and addresses (1) how the physical condition of the Coast Guard's legacy vessel fleet changed from fiscal years 2005 through 2011, and key actions the Coast Guard has taken related to the physical condition of its legacy fleet; (2) key annual maintenance expenditure trends for the legacy vessel fleet, and the extent to which the Coast Guard's cost estimating process has followed established best practices; and (3) the operational capacity of the legacy vessel fleet and the extent to which the Coast Guard faces challenges in sustaining the legacy vessel fleet and meeting mission requirements.
For information, contact contact Stephen L. Caldwell at (202) 512-9610 or caldwells@gao.gov .
section_title: What GAO Found
paragraphs: From fiscal years 2005 through 2011, the physical condition of the Coast Guard's legacy vessels was generally poor. A primary Coast Guard measure of a vessel's condition--the operational percent of time free of major casualties--shows that the high endurance cutters, medium endurance cutters, and patrol boats generally remained well below target levels from fiscal years 2005 through 2011.
The Coast Guard has taken two key actions to improve the condition of its legacy vessels. First, in 2009, the Coast Guard reorganized its maintenance command structure to focus on standardization of practices. Under this reorganization, the Coast Guard eliminated its two Maintenance and Logistics Commands and replaced them with a centralized command structure--the Surface Forces Logistics Center--whereby a single product line manager oversees the maintenance of similar classes of vessels. Coast Guard officials reported that this change was made to enable better oversight of the condition of entire classes of the vessel fleet, reduce the workload on vessel crews by providing centralized support for procurement of replacement parts, and implement centralized maintenance plans to address commonly occurring casualties. Second, Coast Guard officials also reported that the Coast Guard was on schedule to complete a 10-year, almost half-billion dollar set of sustainment projects to refurbish selected patrol boats and upgrade medium endurance cutters, known as Mission Effectiveness Projects, which are intended to improve legacy vessel operating and cost performance.
Expenditures for the two key types of legacy vessel annual depot-level maintenance--scheduled and unscheduled maintenance--declined from fiscal year 2005 to fiscal year 2007, and then rose from fiscal year 2007 to fiscal year 2011.
Further, annual depot-level maintenance expenditures often exceeded the Coast Guard's budgeted funds for depot-level maintenance for the legacy vessels--known as Standard Support Levels--from fiscal years 2005 through 2011. Our review found that the Coast Guard's process for estimating legacy vessel annual depot-level maintenance costs does not fully reflect relevant best practices. GAO's Cost Estimating and Assessment Guide states that a high-quality and reliable cost estimate includes certain best practice characteristics. We determined that the three characteristics relevant to the Coast Guard's cost estimation process are that the process should be (1) well-documented, (2) comprehensive, and (3) accurate.
The operational capacity of the Coast Guard's legacy vessel fleet declined from fiscal years 2006 through 2011. In particular, while performance varied across the legacy vessel classes, two key Coast Guard metrics--operational hours and lost cutter days--show that the legacy vessels did not meet their operational capacity targets and lost considerable planned operational time.
Coast Guard efforts to sustain its legacy vessel fleet and meet mission requirements until the replacement vessels are delivered are also challenged by uncertainties regarding the future mix of vessels, as well as the implementation of a rotational crew concept for the replacement vessel for the high endurance cutters, known as the national security cutter. The Coast Guard's fiscal year 2013 to 2017 5-year Capital Investment Plan does not allocate funds for the acquisition of the last two replacement national security cutters, as called for by the program of record, and it is unclear how this could affect the decommissioning schedule of the high endurance cutters, the last of which the Coast Guard currently plans to decommission in fiscal year 2023.

section_title: Letter
paragraphs: Thank you for the opportunity to discuss the condition of the Coast  Guard’s legacy vessel fleet, and challenges the Coast Guard faces in  sustaining these vessels and meeting mission requirements. The Coast  Guard, within the Department of Homeland Security, is the principal  federal agency responsible for maritime safety, security, and  environmental stewardship. The legacy vessel fleet is critical for  executing Coast Guard missions, which include defense operations;  search and rescue; and securing ports, waterways, and coastal areas. My  comments will focus on the legacy 378-foot high endurance cutters, 270- foot and 210-foot medium endurance cutters, and 110-foot patrol boats,  and are based on findings from the report we released in July 2012.
The legacy high endurance cutters, medium endurance cutters, and  patrol boats are either approaching the end of or are past their originally- expected service lives, with a number of these vessels having entered  into service in the 1960s and 1970s. Coast Guard officials report that  these legacy vessels have become increasingly costly to maintain and  their degraded condition has negatively affected the Coast Guard’s  operational capacity to meet mission requirements. The Coast Guard is in  the midst of a long-term recapitalization plan that could cost as much as  $29 billion to replace legacy vessels, aircraft, and other related systems. However, since beginning the acquisition program in 1996, the Coast  Guard has experienced cost, management, and oversight problems that  have led to considerable delays in the delivery of new vessels—by as  much as 13 years. In turn, delays in delivery of the replacement vessels  have created uncertainties regarding how the Coast Guard will sustain its  legacy vessels and meet mission requirements.
The Coast Guard’s asset recapitalization plan includes projects to build or modernize  five classes each of vessels and aircraft and undertake procurement of other capabilities,  such as improved command, control, communications, computers, intelligence,  surveillance, and reconnaissance. This report focuses only on the legacy vessel fleet. For  more information on the recapitalization effort as a whole, see GAO, Coast Guard: Action  Needed As Approved Deepwater Program Remains Unachievable. GAO-11-743  (Washington, D.C.: July 28, 2011).
My testimony today summarizes the findings of our July 2012 report and  addresses (1) how the physical condition of the Coast Guard’s legacy  vessel fleet changed from fiscal years 2005 through 2011, and key  actions the Coast Guard has taken related to the physical condition of its  legacy fleet; (2) key annual maintenance expenditure trends for the  legacy vessel fleet, and the extent to which the Coast Guard’s cost  estimating process has followed established best practices; and (3) the  operational capacity of the legacy vessel fleet and the extent to which the  Coast Guard faces challenges in sustaining the legacy vessel fleet and  meeting mission requirements.
For our report, we analyzed Coast Guard data from fiscal years 2005  through 2011 on the legacy vessels’ condition, cost, and operational  performance. We interviewed relevant Coast Guard headquarters officials  and conducted site visits to five Coast Guard field locations where legacy  vessels were based or undergoing maintenance. We also compared the  documentation that the Coast Guard uses to compute its annual legacy  vessel maintenance cost estimates against established best practices.  We reviewed Coast Guard documents and other evidence that outlined  challenges the Coast Guard faces in sustaining its legacy vessels and  meeting mission requirements given delays in deploying replacement  vessels. Further, we evaluated the Coast Guard’s actions against Office  of Management and Budget guidance. We conducted this work in  accordance with generally accepted government auditing standards. Our July 2012 report provides further details on our scope and methodology.
subsections: section_title: Legacy Vessel Fleet’s Condition Is Poor and Generally Declining Despite Coast Guard Maintenance Efforts
paragraphs: From fiscal years 2005 through 2011, the physical condition of the Coast  Guard’s legacy vessels was generally poor. A primary Coast Guard  measure of a vessel’s condition—the operational percent of time free of  major casualties—shows that the high endurance cutters, medium  endurance cutters, and patrol boats generally remained well below target  levels from fiscal years 2005 through 2011. For example, over this 7- year period, the operational percent of time free of major casualties  averaged about 44 percent for the high endurance cutters and about 65  percent for the medium endurance cutters versus a target of 72 percent;  and the patrol boats averaged approximately 74 percent versus a target  of 86 percent. Other evidence, such as our review of vessel condition  assessments and inspections the Coast Guard conducts of the legacy  vessels, also shows that the condition of the legacy vessel fleet is  generally declining. For example, a variety of Coast Guard assessments  show that legacy vessels’ critical operating systems—such as main diesel  engines—have been increasingly prone to mission-degrading casualties.  In addition, Coast Guard senior maintenance officials and vessel crew  members we interviewed noted increased maintenance challenges  because of the advanced age of the legacy vessels. In particular, the  maintenance managers for both the high endurance and medium  endurance cutters reported that the performance of critical systems on  these legacy vessel classes has become increasingly unpredictable and  refurbishments of these vessel classes’ least reliable systems have  brought limited returns on the investments. Maintenance officials and  vessel crew members also reported devoting increasing amounts of time  and resources to troubleshoot and resolve maintenance issues because  some systems and parts on these legacy vessel classes are obsolete.
The Coast Guard has taken two key actions to improve the condition of its  legacy vessels. First, in 2009, the Coast Guard reorganized its  maintenance command structure to focus on standardization of practices.  Under this reorganization, the Coast Guard eliminated its two  Maintenance and Logistics Commands and replaced them with a  centralized command structure—the Surface Forces Logistics Center— whereby a single product line manager oversees the maintenance of  similar classes of vessels. Coast Guard officials reported that this  change was made to enable better oversight of the condition of entire  classes of the vessel fleet, reduce the workload on vessel crews by  providing centralized support for procurement of replacement parts, and  implement centralized maintenance plans to address commonly occurring   Second, Coast Guard officials also reported that the Coast  casualties.Guard was on schedule to complete a 10-year, almost half-billion dollar  set of sustainment projects to refurbish selected patrol boats and upgrade  medium endurance cutters, known as Mission Effectiveness Projects,  which are intended to improve legacy vessel operating and cost  performance. Our July 2012 report provides additional information  regarding these actions but, as noted in the report, the condition of these  legacy vessels continues to decline despite these efforts.
section_title: Maintenance Expenditures Have Recently Increased, and the Process for Estimating Costs Does Not Fully Meet Best Practices
paragraphs: Expenditures for the two key types of legacy vessel annual depot-level  maintenance—scheduled and unscheduled maintenance—declined from  fiscal year 2005 to fiscal year 2007, and then rose from fiscal year 2007  to fiscal year 2011. For example, scheduled maintenance expenditures  rose from about $43 million in fiscal year 2007 to about $70 million in  fiscal year 2011. Coast Guard officials attributed the increase in  scheduled maintenance expenditures to better identifying maintenance  needs, increasing the prioritization of completing all scheduled  maintenance, and the receipt of supplemental funding. In contrast,  unscheduled maintenance expenditures varied by vessel class from fiscal  years 2005 through 2011, but the high endurance cutter fleet consistently  incurred the greatest share of unscheduled maintenance expenditures.  For example, high endurance cutters accounted for 86 percent of all  unscheduled maintenance expenditures in fiscal year 2011. Coast Guard  officials attributed the comparatively high unscheduled maintenance  expenditures to the high endurance cutters’ advanced age and size.
According to Coast Guard officials, Standard Support Levels are established when a  vessel class enters service or undergoes a service life extension program. For example,  the Coast Guard reset the Standard Support Level for the high endurance cutters after  conducting a service life extension program between 1987 and 1992—the Fleet  Renovation and Modernization Program—but has not reset the Standard Support Levels  for the medium endurance cutters or patrol boats. Coast Guard officials indicated that the  Coast Guard increases Standard Support Levels using non-pay inflation, but it has not  done so every year. noting that supplemental funding had been critical to enable the Coast  Guard to fund necessary maintenance for the legacy vessel fleet. Our  July 2012 report provides further information regarding the Coast Guard’s  annual depot-level maintenance expenditures.
Our review found that the Coast Guard’s process for estimating legacy  vessel annual depot-level maintenance costs does not fully reflect  relevant best practices. GAO’s Cost Estimating and Assessment Guide  states that a high-quality and reliable cost estimate includes certain best  practice characteristics. We determined that the three characteristics  relevant to the Coast Guard’s cost estimation process are that the  process should be (1) well-documented, (2) comprehensive, and (3)  accurate. Our assessment showed that the Coast Guard’s legacy vessel  maintenance cost-estimating process partially met the three  characteristics, as follows:
Partially comprehensive: The Coast Guard’s process for estimating  annual legacy vessel depot-level maintenance costs defines the  program, among other things, but does not document all cost- influencing ground rules and assumptions (e.g., inflation rate).
Partially well-documented: The Coast Guard’s process for  estimating annual legacy vessel depot-level maintenance costs  discusses the technical baseline description, and the data in the  baseline are consistent with the estimate; however, the Coast Guard  did not provide documentation that discusses key cost estimating  factors, such as how the data were normalized or the reliability of the  data.
Partially accurate: The Coast Guard’s process for estimating annual  legacy vessel depot-level maintenance costs contains few, if any,  minor mathematical mistakes and is regularly updated to reflect  significant program changes and current status. However, we  assessed the cost estimate as being not fully accurate because Coast  Guard officials could not provide us with documentation that would  allow us to assess the reliability of the historical data used, the  accuracy of the calculations, the relationship of the data to the  historical contractor bids, or the final estimates for all maintenance  costs.
To address these issues, in our July 2012 report, we recommended that  the Secretary of Homeland Security direct the Commandant of the Coast  Guard to ensure that the Coast Guard’s annual depot-level maintenance  cost estimates conform to cost estimating best practices. DHS concurred  with this recommendation and described actions the Coast Guard has  taken or plans to take, but these actions may not fully address the intent  of this recommendation. For example, DHS noted that given current fiscal  constraints, the Coast Guard will focus on improvements that do not  require additional resources. While we agree that federal resources are  limited, aligning the cost estimating process for legacy vessel  maintenance with best practices would not necessarily require an  increased investment of resources. Rather, having a well documented  cost estimating process and using accurate historical data should enable  the Coast Guard to operate more efficiently.
section_title: Declining Condition of the Legacy Vessel Fleet Makes Operational Capacity Targets Increasingly Unachievable
paragraphs: The operational capacity of the Coast Guard’s legacy vessel fleet  declined from fiscal years 2006 through 2011. In particular, while  performance varied across the legacy vessel classes, two key Coast  Guard metrics—operational hours and lost cutter days—show that the  legacy vessels did not meet their operational capacity targets and lost  considerable planned operational time. For example, the high endurance  cutters and 210-foot medium endurance cutters did not meet any of their  operational hour targets from fiscal years 2006 through 2011, and the  270-foot medium endurance cutters met their targets only in fiscal year  2008. Specifically, operational hours for the high endurance cutters  declined by about 32 percent from fiscal year 2008 to 2011, and the  combined operational hours of the 210-foot and 270-foot medium  endurance cutters declined nearly 21 percent from fiscal year 2007 to  fiscal year 2011.medium endurance cutters, collectively, averaged about 618 lost cutter  days per year from fiscal years 2006 through 2011. Further, the number  of lost cutter days for the high endurance cutters has been nearly   In addition, Coast Guard data show the high and  equivalent to three high endurance cutters being out of service for an  entire year in each of the last 3 fiscal years. Moreover, lost cutter days for  both the 210-foot and 270-foot medium endurance cutters combined  more than doubled, from 122 lost cutter days in fiscal year 2006 to 276  lost cutter days in fiscal year 2010. Coast Guard headquarters officials  reported that the declining operational capacity of its legacy vessel fleet— particularly the high and medium endurance cutters—has been a prime  contributor to the Coast Guard’s declining ability to meet mission  requirements and intercept threats beyond U.S. territorial waters.
The Naval Engineering Manual defines remaining service life as the time period during  which no major expenditures will be required for hull and structural repairs or  modernizations, or for machinery or system modernizations based solely on the vessel’s  capability to meet existing mission requirements. also increase the vessel fleet’s operational capacity gap because the  Coast Guard will not receive sufficient numbers of replacement vessels  during this time period to make up for the lost capacity.
The ongoing delivery of replacement vessels is expected to help mitigate  the existing operational capacity gap for the legacy high endurance cutter  and patrol boat fleets. However, Coast Guard officials reported, and our  analysis of Coast Guard documents confirms, that the medium endurance  cutter fleet will be most affected by delays in delivery of replacement  vessels. The Coast Guard is refurbishing its medium endurance cutters  through the Mission Effectiveness Project to increase these cutters’  reliability and reduce longer-term maintenance costs, and third-party  assessments show that the performance of those medium endurance  cutters that have completed the project has improved. Even if the most  optimistic projections were realized, though, and the Mission  Effectiveness Project was to extend the medium endurance cutters’  service lives by 15 years, the medium endurance cutters would remain in  service increasingly beyond the end of their originally-expected service  lives before full deployment of their replacement vessels—the offshore  patrol cutters. In particular, according to current plans, some of the 270- foot medium endurance cutters are to remain in service as late as 2033— up to 21 years beyond the end of their originally-expected service lives— before they are replaced. Coast Guard officials reported that a further  refurbishment of the medium endurance cutters will be necessary to meet  operational requirements and that the Coast Guard is in the early stages  of developing plans for addressing the expected gap between remaining  medium endurance cutter fleet service lives and the delivery of the  replacement offshore patrol cutters.
Coast Guard efforts to sustain its legacy vessel fleet and meet mission  requirements until the replacement vessels are delivered are also  challenged by uncertainties regarding the future mix of vessels, as well as  the implementation of a rotational crew concept for the replacement  vessel for the high endurance cutters, known as the national security  cutter. The Coast Guard’s fiscal year 2013 to 2017 5-year Capital  Investment Plan does not allocate funds for the acquisition of the last two  replacement national security cutters, as called for by the program of  record, and it is unclear how this could affect the decommissioning  schedule of the high endurance cutters, the last of which the Coast Guard  currently plans to decommission in fiscal year 2023.
The Coast Guard has established operational hour targets for the number  of hours its vessels are expected to conduct operations or missions each  fiscal year and uses these targets to inform planning decisions, such as  setting performance targets and corresponding resource allocations.  Although senior Coast Guard headquarters officials reported considering  various factors when setting overall mission performance targets  annually, these officials reported doing so based on the assumption that  vessel class assets will achieve 100 percent of their operational hour  targets. Our analysis of Coast Guard data, though, makes it clear that the  Coast Guard’s legacy vessel fleet has increasingly fallen below  operational hour targets in recent years, and this trend is expected to  continue. In addition, Coast Guard officials reported that the decline in  legacy vessel operational capacity has challenged the Coast Guard’s  ability to meet its mission performance targets. Further, Coast Guard  operational commanders reported taking actions to mitigate the effect of  declining legacy vessel capacity, such as diverting vessels tasked to  other missions to help complete operations. Nevertheless, the Coast  Guard has not revised legacy vessel operational hour targets because,  according to Coast Guard officials, doing so would lower its mission  performance targets. However, these targets have gone unmet because  of the declining operational capacity of the legacy vessel fleet. Because it  sets mission performance targets and allocates resources on the  assumption that legacy vessels will achieve 100 percent of operational  hour targets, the Coast Guard’s allocation of resources is not realistic.  Further, because the Coast Guard uses vessels’ operational hour targets  to set agency-wide performance targets and to allocate resources,  consistent achievement of its performance targets is at increased risk.
In our July 2012 report, we recommended that the Secretary of Homeland  Security direct the Commandant of the Coast Guard to adjust legacy  vessel fleet operational hour targets to reflect actual capacity, as  appropriate by class. DHS did not concur with this recommendation and  noted, among other things, that reducing the operational hour targets  would fail to fully utilize those assets not impacted by maintenance  issues. We disagree with DHS’s position because, as noted in the July  2012 report, while senior Coast Guard officials reported that the Coast  Guard adjusts its mission performance targets annually, it does not also  adjust legacy vessel operational hour targets annually. These officials  also stated that the Coast Guard’s mission performance targets are  based on each vessel class’s capacity, with the assumption that each  vessel will operate at 100 percent of its planned operating time. Thus, we  do not believe that reducing the operational hour targets would result in a  failure by the Coast Guard to fully utilize assets not impacted by  maintenance challenges and continue to believe that this  recommendation has merit.
Chairman LoBiondo, Ranking Member Larsen, and members of the  subcommittee, this completes my prepared statement. I would be happy  to respond to any questions you may have at this time.
section_title: GAO Contact and Staff Acknowledgements
paragraphs: For questions about this statement, please contact Stephen L. Caldwell at  (202) 512-9610 or caldwells@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this statement. Individuals making key contributions to this statement  include Christopher Conrad (Assistant Director) and Michael C.  Lenington. Additional contributors include Jason Berman, Chloe Brown,  and Lara Miklozek.
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