Coast Guard: Change in Course Improves Deepwater Management and Oversight, but Outcome Still Uncertain
Published: 2008-06-24T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Coast Guard's Deepwater Program, under the Department of Homeland Security (DHS), has experienced serious performance and management problems. Deepwater is intended to replace or modernize Coast Guard vessels, aircraft, and the communications and electronic systems that link them together. As of fiscal year 2008, over $4 billion has been appropriated for Deepwater. The Coast Guard awarded a contract in June 2002 to a lead system integrator, Integrated Coast Guard Systems (ICGS), to execute the program using a system-of-systems approach. In response to a Senate report accompanying a Department of Homeland Security appropriations bill, 2008, this GAO report assesses whether the changes the Coast Guard is making to its management and acquisition approach to Deepwater will put it in a position to realize better outcomes. GAO reviewed key program documents and interviewed Coast Guard and contractor personnel.
section_title: What GAO Found
paragraphs: Coast Guard leadership is making positive changes to its management and acquisition approach to the Deepwater Program that should put it in a position to realize better outcomes, although challenges to its efforts remain. The Coast Guard has increased accountability by bringing Deepwater under a restructured acquisition function and investing its government project managers with management and oversight responsibilities formerly held by ICGS. Coast Guard project managers and technical experts--as opposed to contractor representatives--now hold the greater balance of management responsibility and accountability for program outcomes. However, like other federal agencies, the Coast Guard has faced obstacles in building an adequate government workforce. It has various initiatives under way to develop and retain a workforce capable of managing this complex acquisition program, but faced with an almost 20 percent vacancy rate, it is relying on support contractors, such as cost estimators, in key positions. The Coast Guard's decision to manage Deepwater under an asset-based approach, rather than as an overall system-of-systems, has resulted in increased government control and visibility over acquisitions. Agency officials have begun to hold competitions for Deepwater assets outside of the ICGS contract. While the asset-based approach is beneficial, certain cross-cutting aspects of Deepwater, such as the program's communications and intelligence components and the numbers of each asset needed, still require a systems-level approach. The Coast Guard recognizes this but is not yet fully positioned to manage these aspects. The Coast Guard has begun to follow the disciplined, project management framework of its Major Systems Acquisition Manual (MSAM), which requires documentation and high-level executive approval of decisions at key points in a program's life cycle. But the consequences of not following this approach in the past are now evident, as Deepwater assets have been delivered without a determination of whether their planned capabilities would meet mission needs. The MSAM process currently allows limited initial production to proceed before the majority of design activities have been completed. In addition, a disconnect between MSAM requirements and current practice exists because DHS had earlier delegated to the Coast Guard all Deepwater acquisition decisions, resulting in little departmental oversight. Coast Guard project managers and decision makers are now receiving information intended to help manage project outcomes, but some key information is unreliable. The earned value management data reported by ICGS lacks sufficient transparency to be useful to Coast Guard program managers, and subcontractor Northrop Grumman's system for producing the data may need to be re-certified to ensure its reliability. Officials state that they are addressing these issues through joint efforts with the Navy and the Defense Contract Management Agency.

section_title: Letter
paragraphs: Deepwater is the largest acquisition program in the Coast Guard’s  Deepwater is the largest acquisition program in the Coast Guard’s  history—one that has experienced serious performance and management  history—one that has experienced serious performance and management  problems such as cost breaches, schedule slips, and assets designed and  problems such as cost breaches, schedule slips, and assets designed and  delivered with significant defects. Appropriations for the Deepwater  delivered with significant defects. Appropriations for the Deepwater  Program totaled over $4 billion as of fiscal year 2008, and the Coast Guard  Program totaled over $4 billion as of fiscal year 2008, and the Coast Guard  has requested about $990.4 million for fiscal year 2009. The Deepwater  has requested about $990.4 million for fiscal year 2009. The Deepwater  Program, ongoing since the late 1990s, is intended to replace or modernize  Program, ongoing since the late 1990s, is intended to replace or modernize  15 major classes of Coast Guard assets—five each of vessels and aircraft,  15 major classes of Coast Guard assets—five each of vessels and aircraft,  and five other projects, including command, control, communications,  and five other projects, including command, control, communications,  computers, intelligence, surveillance, and reconnaissance (C4ISR)  computers, intelligence, surveillance, and reconnaissance (C4ISR)  systems. To carry out this acquisition, the Coast Guard awarded a contract  systems. To carry out this acquisition, the Coast Guard awarded a contract  in June 2002 to Integrated Coast Guard Systems (ICGS), a joint venture  in June 2002 to Integrated Coast Guard Systems (ICGS), a joint venture  formed by Lockheed Martin Corporation and Northrop Grumman Ship  formed by Lockheed Martin Corporation and Northrop Grumman Ship  Systems (Northrop Grumman), as a lead system integrator to execute the  Systems (Northrop Grumman), as a lead system integrator to execute the  program using a system-of-systems approach. The decision to use a system  program using a system-of-systems approach. The decision to use a system  integrator was driven in part because of the Coast Guard’s lack of  integrator was driven in part because of the Coast Guard’s lack of  expertise in managing and executing an acquisition of this magnitude.  expertise in managing and executing an acquisition of this magnitude.  Under this approach, the Coast Guard provided the contractor with broad,  Under this approach, the Coast Guard provided the contractor with broad,  overall performance specifications—such as the ability to interdict illegal  overall performance specifications—such as the ability to interdict illegal  immigrants—and ICGS determined the specifications for the Deepwater  immigrants—and ICGS determined the specifications for the Deepwater  assets. According to Coast Guard officials, the ICGS proposal was  assets. According to Coast Guard officials, the ICGS proposal was  submitted and priced as a “package,” that is, the Coast Guard bought the  submitted and priced as a “package,” that is, the Coast Guard bought the  entire solution and could not reject any individual component.  entire solution and could not reject any individual component.
Since 2001, we have reviewed the Deepwater Program and have informed  the Congress, the Department of Homeland Security (DHS), and the Coast  Guard of the risks and uncertainties inherent with a system-of-systems  approach. In March 2004, we made a number of recommendations  intended to improve the Coast Guard’s management and oversight. In  March 2008, we reported on efforts the Coast Guard has taken to address  these recommendations and provided information on the status of various  Deepwater assets.
In April 2007, the Commandant of the Coast Guard, citing the fact that the  Coast Guard had relied too heavily on contractors to do the work of the  government and that industry and government had failed to accurately  predict and control costs, announced improvements to program  management and oversight that would “change the course of Deepwater.”  The major change was that the Coast Guard was taking over the lead role  in systems integration from ICGS, with future work on individual assets  being potentially bid competitively outside of the existing contract. The  Coast Guard also planned to use the expertise of third-party organizations,  such as the American Bureau of Shipping, to increase assurances that  Deepwater assets were being designed and constructed in accordance  with established standards. As part of this shift to a government-managed  and controlled acquisition, the Commandant noted his plan to build a  government workforce to manage this large acquisition, citing the dearth  of federal contracting expertise and a loss of focus on critical government  roles and responsibilities for managing and overseeing acquisitions such  as Deepwater.
In response to a Senate report accompanying a Department of Homeland  Security Appropriations bill, fiscal year 2008, we assessed whether the  changes the Coast Guard is making to its management and acquisition  approach to the Deepwater Program will put it in a position to realize  better outcomes. Specifically we assessed the Coast Guard’s    efforts to increase accountability and program management through a  re-organized acquisition function, including building a government  workforce to manage Deepwater;  transition to an asset-based paradigm for Deepwater, including how  system-level aspects, such as C4ISR, are being managed;  implementation of a disciplined, project management process for  Deepwater acquisitions; and    efforts to provide project managers and decision makers with  information they need to manage project outcomes.
To conduct our work on Deepwater initiatives, we reviewed a variety of  key Coast Guard documentation, including its July 2007 Blueprint for  Acquisition Reform, Major Systems Acquisition Manual, acquisition  program baselines, and the Coast Guard’s human capital plan. We  interviewed Coast Guard acquisition officials, including program and  project managers, contracting officials, and other key staff. In addition, we  interviewed officials from ICGS and its first tier subcontractors, Northrop  Grumman and Lockheed Martin. We also relied on our past work  regarding the Deepwater Program. Appendix I contains more information  on our scope and methodology. Appendix II contains information on  selected Deepwater surface and air assets. We conducted this  performance audit from October 2007 to June 2008 in accordance with  generally accepted government auditing standards. Those standards  require that we plan and perform the audit to obtain sufficient, appropriate  evidence to provide a reasonable basis for our findings and conclusions  based on our audit objectives. We believe that the evidence obtained  provides a reasonable basis for our findings and conclusions based on our  audit objectives.
subsections: section_title: Background
paragraphs: The Coast Guard is a multimission, maritime military service within DHS.  The Coast Guard’s responsibilities fall into two general categories—those  related to homeland security missions, such as port security, vessel  escorts, security inspections, and defense readiness; and those related to  non-homeland security missions, such as search and rescue,  environmental protection, marine safety, and polar ice operations. To  carry out these responsibilities, the Coast Guard operates a number of  vessels and aircraft and, through its Deepwater Program, is currently  modernizing or replacing those assets. At the start of the Deepwater  Program, the Coast Guard chose to use a system-of-systems acquisition  strategy that would replace its assets with a single, integrated package of  aircraft, vessels, and communications systems through ICGS, a lead  system integrator that was responsible for designing, constructing,  deploying, supporting and integrating the assets to meet Coast Guard  requirements. Under this approach, the Coast Guard provided the  contractor with broad, overall performance specifications—such as the  ability to interdict illegal immigrants—and ICGS determined the  specifications for the Deepwater assets. The decision to use a lead system  integrator was driven in part because of the Coast Guard’s lack of  expertise in managing and executing an acquisition of this magnitude.
In past reports on Deepwater, as well as the Army’s Future Combat  Systems that is pursuing a similar acquisition approach for similar reasons,  we have raised a number of concerns about this approach to acquiring  complex systems. The role of a system integrator differs from that of a  traditional prime contractor in that it includes increased responsibilities  for ensuring that the design, development, and implementation of the  system-of-systems it is under contract to produce meet established budget  and schedule. The close working relationship with the government that  this arrangement engenders has advantages and disadvantages. An  advantage is that such a relationship allows flexibility in responding to  shifting priorities. Disadvantages are the government’s weakened ability to  provide oversight over the long term and the potential for increased costs.
In a series of reports since 2001, we have noted the risks inherent in the  lead system integrator approach to the Deepwater Program and have made  a number of recommendations intended to improve the Coast Guard’s  management and oversight. In particular, we raised concerns about the  agency’s ability to keep costs under control in future program years by  ensuring adequate competition for Deepwater assets and pointed to the  need for better oversight and management of the system integrator. We, as  well as the DHS Inspector General and others, have also noted problems in  specific acquisition efforts, notably the NSC and the 110-Foot Patrol Boat  Modernization, which the Commandant of the Coast Guard permanently  halted in November 2006 because of operational and safety concerns.
section_title: Coast Guard Has Established a More Accountable Acquisition Organization but Faces Challenges in Building Acquisition Workforce
paragraphs: Acknowledging that the initial approach to Deepwater gave too much  control to the contractor, the Coast Guard has reoriented its acquisition  organization to position itself to execute systems integration and program  management responsibilities formerly carried out by industry. Project  managers, whose role in the past was largely one of monitoring ICGS  without the authority to make decisions, have now been vested with  accountability for program outcomes. In addition, integrated product  teams (IPT)—a key program management tool—are now led by Coast  Guard officials, not contractor representatives. The Coast Guard has also  increased its leverage of its own technical authorities and third party  expertise. In the midst of these positive changes, the Coast Guard, like  other federal agencies, faces challenges in building a capable government  workforce to manage this large acquisition. While it attempts to reduce  vacancy rates, it is relying on support contractors in key positions.
subsections: section_title: Reorganization of the Acquisition Directorate Has Potential Benefits for Deepwater
paragraphs: Since July 2007, the Coast Guard has consolidated acquisition  responsibilities into a single acquisition directorate, known as CG-9, and is  making efforts to standardize operations within this directorate.  Previously, Deepwater assets were managed independently of other Coast  Guard acquisitions by the Deepwater Program Executive Office in an  insulated structure. The Coast Guard’s goal for the reorganization is to  provide greater consistency in its oversight and acquisition approach by  concentrating acquisition activities under a single official and allowing  greater leveraging of knowledge and resources across programs. The  Coast Guard’s consolidation of the acquisition function into a single  directorate is consistent with best practices as it allows the agency to  operate strategically to meet its overall missions and needs. Figure 1  depicts the changes to the Coast Guard’s acquisition structure.
section_title: Deepwater Management Improved with Better Use of Project Managers and Government Control over Integrated Product Teams
paragraphs: In conjunction with the restructuring of its acquisition directorate, Coast  Guard officials have begun to increase the responsibilities and  accountability of the project managers who oversee the acquisition of  Deepwater assets. Previously, ICGS was charged with a number of key  program management responsibilities—ranging from designing and  constructing assets to developing concepts for deployment and  operations—while Coast Guard program and project managers tracked  and monitored the contractor’s activities. The Coast Guard’s new  approach increases government control over these key elements of  program management while vesting project managers with authority and  accountability they lacked in the past. For example, a previous Deepwater  management plan emphasized “partnership” between the Coast Guard and  ICGS in managing Deepwater and “joint  and ICGS  responsibility for overall management and execution of the program,  including authorization of necessary resources and resolving performance,  cost, schedule, and risk tradeoff issues.” Under this scenario, according to  Coast Guard officials, project managers could not provide as much  direction as they wanted because of the terms of the contract, where ICGS  bore ultimate responsibility for outcomes. In contrast, Coast Guard project  managers are now responsible for defining, planning, and executing the  acquisition projects within established cost, schedule, and performance  constraints.
Another significant shift has been to assert government control over  Deepwater integrated product teams. These teams, a key program  management tool, consist of groups of project officials and technical  experts responsible for discussing options for problem solving relating to  cost, schedule, and performance objectives. In the past, the teams were  led and managed by the contractor, while government team members  acted as “customer” representatives. Now, the teams are led by Coast  Guard personnel.
Figure 2 shows examples of how responsibility for program outcomes has  shifted from ICGS to the Coast Guard.
section_title: Shift Away from System Integrator Involves Increased Use of Coast Guard Technical Experts and Third Parties
paragraphs: The Coast Guard is also establishing technical authorities within the  agency who review, approve, and monitor technical standards and ensure  that assets meet those standards. The Coast Guard has established a  technical authority for engineering to oversee issues related to Deepwater,  and officials state that a similar authority for C4ISR is pending. Previously,  the Coast Guard held only an advisory role in making technical decisions,  and in some cases this arrangement led to poor outcomes. For example,  Coast Guard officials told us their engineering experts had raised concerns  during the NSC’s design phase about its ability to meet service life  requirements and recommended design changes, but were ignored. If the  recommendations had been heeded, changes to the ship’s design could  have been made earlier and some additional costs may have been avoided.
To supplement and enhance the use of its internal expertise, the Coast  Guard has increased its use of third-party, independent sources of  technical expertise and advice. For example, the Coast Guard is increasing  its use of the American Bureau of Shipping (ABS), an independent  organization that establishes and applies standards for the design and  construction of ship and other marine equipment, to assist the Coast  Guard in certifying that Deepwater vessels meet certain safety and  performance standards. As a case in point there are 987 standards  pertaining to hull, mechanical, and electrical systems on the first NSC  which must be certified. Currently, ICGS is responsible for submitting  documentation to the Coast Guard for 892 of the standards, while ABS and  other third parties have a minimal role. In contrast, the Coast Guard plans  for ABS to be responsible for reviewing approximately 200 certifications  starting with the third NSC and to have an even broader role in certifying  the design and production of future assets such as the Offshore Patrol  Cutter (OPC) and Fast Response Cutter (FRC). In addition, the Coast  Guard is using the U.S. Navy’s Space and Naval Warfare Systems  Command to verify the security of certain communications systems and  has established partnerships with Naval Sea Systems Command, the Navy  Board of Inspection and Survey (INSURV), Naval Air Systems Command,  and Naval Surface Warfare Center to leverage their expertise. INSURV, for  example, conducted acceptance trials of the NSC in April 2008.
section_title: Coast Guard Faces Challenges in Building Acquisition Workforce
paragraphs: Effective management of acquisition programs depends on appropriately  trained individuals properly placed within the acquisition workforce. In  the initial development of the Deepwater contract, the Coast Guard sought  a system integrator because it recognized that it lacked the experience and  depth in workforce to manage the acquisition internally. The Coast  Guard’s 2008 acquisition human capital strategic plan sets forth a number  of acquisition workforce challenges that pose the greatest threats to  acquisition success. Key challenges and Coast Guard actions to address  them are cited below.
subsections: section_title: Shortage of Civilian Acquisition Staff
paragraphs: Like many federal agencies that acquire major systems, the Coast Guard  faces challenges in recruiting and retaining a sufficient number of  government employees in acquisition positions such as contract  specialists, cost estimators, system engineers, and program management  support. The Coast Guard has taken a number of steps to hire acquisition  professionals, including the increased use of recruitment incentives and  relocation bonuses, utilizing direct hire authority, and rehiring government  annuitants. While some vacancies are to be expected in any organization  and especially in an acquisition organization given current trends across  the government, the Coast Guard is experiencing vacancy rates of almost  20 percent.
section_title: Lack of an Acquisition Career Path for Coast Guard Military Personnel
paragraphs: The Coast Guard also recognizes the impact of military personnel rotation  on its ability to maintain people in key positions. The Coast Guard’s policy  of regular three-year rotations of military personnel among units, including  to and from the acquisition directorate, limits continuity in key project  roles filled by military officers and can have a serious impact on the  acquisition expertise gained and maintained by those officers. The  presence of Coast Guard officers in the acquisition directorate is  important, as they provide specialized expertise in Coast Guard operations  and fill key positions as program and project managers and technology  leads. While the Coast Guard concedes that it does not have the personnel  required to form a dedicated acquisition career field for military personnel,  such as that found in the Navy, it is seeking to improve the base of  acquisition knowledge throughout the Coast Guard by exposing more  officers to acquisitions as they follow their regular rotations. To build this  base, the Coast Guard is creating acquisition policy courses at the Coast  Guard Academy and other institutions and is working with the academy to  create an internship program where interested officer candidates can  work within the acquisition directorate.
section_title: Reliance on Contractors for Technical and Programmatic Expertise
paragraphs: Some of the positions that rely on technical and other expertise, such as  project technology leads and contracting officials, remain vacant. In the  absence of new personnel to fill these positions, the Coast Guard is forced  to turn elsewhere. Officials stated that for some specialties, such as cost  estimation, the Coast Guard can leverage existing relationships, such as  with the Navy. However, because of a shortage of acquisition personnel  across government, support contractors are often used to supplement  government staff. For example, all the cost and earned value analysts  currently employed by the aviation program are support contractors.  Program managers stated that they would prefer these positions be filled  by government employees. The head of contracting activity for the Coast  Guard cited similar concerns, specifically for using contractors as contract  specialists. The issue of support contractors in acquisition is not unique to  the Coast Guard. In our recent report on the acquisition of major weapons  systems in the Department of Defense (DOD), we found that it too relies  heavily on contractors to perform roles in program management, cost  estimation, and engineering and technical functions. For example, of the  52 programs we reviewed, support contractors represented 34 percent of  program office staff for engineering and technical positions and 22 percent  for program management functions.
While support contractors can provide a variety of essential services, their  use must be carefully overseen to ensure that they do not perform  inherently governmental roles. As we recently reported in our work on  Army contracting practices, for example, using contractors as contract  specialists can create the risk of decreased government control over and  accountability for policy and program decisions when contractors provide  services that closely support inherently governmental functions. Conflicts  of interest, improper use of personal services contracts, and increased  costs are also potential risks of reliance on contractors. According to  officials, the Coast Guard is currently analyzing its workforce to better  determine which roles are appropriate for contractors and to what extent  support contractors can be used. In addition, it is investigating practices  and policies to improve oversight of contractors and ensure their work  remains in a supporting role.
section_title: Identifying Long-Term Needs Is Important for Sustained Progress
paragraphs: In order to provide a clearer picture of its future needs for acquisition  personnel, the Coast Guard evaluated two potential workforce forecasting  tools: one developed internal to the Coast Guard and another developed  by the Air Force and tested as part of a broader effort by DHS. The Coast  Guard tool is intended to forecast the potential workload of a project  office and its acquisition staff requirements by determining the number of  hours spent on specific acquisition-oriented work functions, such as  contract management, business management, and systems engineering.  Coast Guard officials stated that this tool has the potential, if managed  correctly, to forecast workforce needs beyond the current fiscal year to  enable long-term planning and workforce development. A potential  weakness of the tool, according to the Coast Guard, is the significant time  investment required of project managers to establish and maintain it. The  other forecasting tool relies on historical DOD and Air Force data on  program management, supplemented with annual interviews with  appropriate project managers, to create estimates of workforce and  workload needs. According to the Coast Guard, testing of both tools has  been completed and a decision has been made to implement the Air Force  staffing model.
section_title: Transition to Asset- by-Asset Approach Results in Greater Visibility and Control, but the Coast Guard Has Not Determined How to Manage System-Level Aspects
paragraphs: The Coast Guard’s move away from the ICGS contract and the system-of- systems model to a more traditional, asset-level acquisition strategy has  resulted in greater government visibility and control. For example, cost  and schedule information are now captured at the individual asset level  rather than at the overall, system-of-systems program level, which was  difficult to manage. At the same time, however, key aspects of Deepwater  still require a system-of-systems approach. These aspects include the  C4ISR system and the numbers of each Deepwater asset the Coast Guard  requires to achieve its missions. The Coast Guard has not yet determined  how to manage these aspects under its new paradigm, yet it is proceeding  with Deepwater acquisitions.
subsections: section_title: Asset-Based Acquisition Approach Facilitates Improved Management
paragraphs: The Coast Guard’s transition away from the ICGS system-of-systems  contract to an asset-by-asset acquisition strategy is enabling increased  government visibility and control over its acquisitions. Cost and schedule  information are now captured at the individual asset level rather than at  the system-of-systems program level, which did not yield useful  information for decision making. For example, while cost and schedule  breaches in the past were to be reported to DHS at the Deepwater system- of-systems level only—an unlikely occurrence as only a catastrophic event  would ever trigger a threshold breach under that approach—the Coast  Guard is now reporting breaches by asset. In 2007, for example, the Coast  Guard reported breaches for the NSC and for the C-130J. Because of a  number of factors including changes to the ship’s design and requirements,  the total acquisition cost of the NSC class increased by $520 million, or 15  percent, and the schedule for lead ship delivery was delayed by  approximately 2 years. The cost increase for the C-130J is projected to be  between 10 and 20 percent of the original contract price and stems from  issues such as changes in requirements and concurrent design and  installation activities.
The Coast Guard recently demonstrated this new approach of increased  control over acquiring Deepwater assets by holding its own competition  for the Fast Response Cutter-B (FRC-B), in lieu of obtaining the asset  through the ICGS contract after determining that it could better control  costs by doing so. According to the Coast Guard’s head of contracting  activity, the contract award is expected in July 2008. The Coast Guard  plans to hold other competitions outside of the ICGS contract for  additional assets in the future. However, Coast Guard officials told us that,  in the near term, they may continue to issue task orders under the ICGS  contract for specific efforts, such as logistics, or for assets that are already  well under way.
section_title: Coast Guard Is Not Fully Positioned to Manage Crucial System-Level Aspects of Deepwater
paragraphs: Although the shift to individual acquisitions is intended to provide the  Coast Guard with more visibility and control, key aspects still require a  system-level approach. These aspects include an integrated C4ISR system,  which is needed to provide critical information to field commanders and  facilitate interoperability with DHS and DOD, and the numbers of each  Deepwater asset the Coast Guard requires to achieve its missions. The  Coast Guard is not fully positioned to manage these aspects under its new  paradigm. It has not approved an acquisition strategy for C4ISR and lacks  at present the ability to model the capabilities of existing and planned  assets in a way that could inform the numbers of Deepwater assets it  requires. The Coast Guard maintains, however, that it must proceed with  its acquisitions in the absence of this information.
subsections: section_title: C4ISR Acquisition Strategy Not Finalized
paragraphs: C4ISR is a key aspect of the Coast Guard’s ability to meet its homeland  security, as well as its traditional, missions. How the Coast Guard  structures C4ISR—referred to as the “architecture”—is fundamental to the  success of the Deepwater Program. C4ISR encompasses the connections  between surface, aircraft, and shore-based assets, the means by which  information is communicated through them and the way information is  displayed across that architecture—referred to as a common operating  picture. C4ISR is intended to provide operationally relevant information  to Coast Guard field commanders to allow for the efficient and effective  execution of their missions across the full range of Coast Guard  operations. The Coast Guard plans to integrate the Deepwater C4ISR  architecture with legacy cutters and shore facilities as well in order to  establish common components across all the assets and further enhance  this effort. The Coast Guard recently had an unscheduled demonstration  of new capabilities made possible through C4ISR improvements. In  February 2008, a Maritime Patrol Aircraft (MPA) diverted from a training  flight to participate in the rescue of two downed fighter pilots. With the  C4ISR capabilities on board, the aircraft coordinated search and rescue  efforts with a number of civilian and military assets it identified in the  area.
According to Coast Guard officials, a C4ISR acquisition strategy is still in  development. The Coast Guard recognizes the need to develop an  architecture with common components for use on all assets. However, no  agreement has been reached on whether to acquire C4ISR on an asset  basis or at a system level. An asset-based approach for C4ISR would entail  some risk, as interoperability among all Coast Guard units and DHS  components, as well the Navy and others, must be assured.
Officials stated that the Coast Guard is revisiting the C4ISR incremental  acquisition approach proposed by ICGS and analyzing that approach’s  requirements and architecture. In the meantime, the Coast Guard is  continuing to contract with ICGS for C4ISR. The first increment, now  drawing to a close, is providing core capabilities for Deepwater assets,  including common software. Program officials state that the second  increment is planned to reduce the reliance on proprietary software and  begin the migration toward government owned software where it is  practical to do so. The third increment is anticipated to be a new C4ISR  solution for the Coast Guard. As the Coast Guard continues to analyze its  strategy for procurement of these and other C4ISR increments, a key  concern will be to negotiate the data rights it needs to maintain and  upgrade the necessary software.
section_title: Coast Guard Developing Modeling Capability to Assist in Determining Number of Each Asset to Procure
paragraphs: An additional risk in transitioning from a system-of-systems based  acquisition strategy to an asset-based strategy is that the Coast Guard may  lose the strategic vision needed to know how many of each Deepwater  asset to procure to meet Coast Guard needs. When deciding how many of  a specific vessel or aircraft to procure, it is important to consider not only  the capabilities of that asset, but how it can complement or duplicate the  capabilities of the other assets with which it operates. The Coast Guard  has stated that it will continue to use a systems approach in determining  the overall capabilities it needs but has not yet developed the tools  necessary to make this assessment. For example, the Coast Guard recently  contracted for a Deepwater alternatives analysis that revisited the  acquisition approach for many of the individual assets and made a number  of recommendations on options for future procurements. The analysis, in  general, did not make recommendations about the number of each asset to  be procured. It did, however, suggest revisiting the number of NSCs if the  capabilities of the OPC allowed it to fill the same missions and eliminating  the vertical unmanned aerial vehicle for technical and manufacturing  reasons. Coast Guard officials stated that the study was abbreviated in  scope because of the limited time available.
Senior Coast Guard officials, while stating that the mix of Deepwater  assets identified in the alternatives analysis—such as small, medium, and  large cutters—is generally reasonable, acknowledge the need to revisit the  numbers of each of these assets to be procured in light of Deepwater  capabilities as a whole and the move away from the ICGS solution.  Officials state, however, that increased capabilities in modeling and  simulations are necessary to fully inform this effort. According to officials,  the Coast Guard is working to upgrade a model that plots the planned  capabilities of Deepwater assets, as well as the capabilities and operations  of existing assets, against the requirements for Coast Guard missions. The  Coast Guard intends to use this model as a means of testing each planned  asset to ensure its capabilities fill stated deficiencies in the Coast Guard’s  force structure and to inform how many of a particular asset are needed  given the capabilities of the rest of the force. Officials stated that they  intend to use this analysis to inform their development of the Deepwater  acquisition strategy. In the meantime, the Coast Guard continues to plan  for asset acquisitions in numbers very similar to those determined by  ICGS, such as procurement of 8 NSCs and 25 OPCs.
section_title: Disciplined Project Management Approach Is Beneficial Going Forward, but Key Decision Point Is Missing and Consequences of Prior Decisions May Be Costly
paragraphs: As the Coast Guard moves the Deepwater Program from a system-of- systems acquisition to a more traditional asset-based approach, it is  introducing the use of a more disciplined and formalized process under its  Major Systems Acquisition Manual (MSAM). While the introduction of  this process is a significant improvement over the prior acquisition  process, the absence of a key milestone decision point before low-rate  initial production begins and the lack of formal approvals of acquisition  decisions by DHS could be problematic. The consequences of not  following a more disciplined acquisition approach, especially for the  establishment and demonstration of mission requirements, are now  apparent for assets already in production and are likely to pose continued  problems—such as increased costs—for the Coast Guard.
subsections: section_title: Use of Major Systems Acquisition Manual Process Improves Oversight
paragraphs: The Coast Guard is now following the process set forth in its MSAM for all  Deepwater assets. This process requires documentation and approval of  program activities at key points in a program’s life-cycle. The MSAM  represents a disciplined management approach that begins with an  identification of deficiencies in overall Coast Guard capabilities and then  proceeds through a series of structured phases and decision points to  identify requirements for performance, develop and select candidate  systems that match these requirements, demonstrate the feasibility of  selected systems, and produce a functional capability. At each decision  point, referred to as a “milestone,” entities across the Coast Guard, such as  those responsible for oversight of the budget process or command and  control, are to be consulted. Designated officials at high levels—including  the Vice Commandant of the Coast Guard—then formally approve the  program to proceed to the next phase. Each milestone requires  documentation that captures key information needed for decision making.  For example, when the Coast Guard makes its milestone decision, under  the MSAM process, to proceed with the OPC from the initiation phase into  development, the project office presented documentation that described  the capabilities the ship is expected to provide, a draft concept for  operations, and an initial assessment of cost and schedule. Figure 3  presents the key phases and milestones of the MSAM process and the  current status of Deepwater assets within the process.
The MSAM process provides a number of benefits that have the potential  to improve acquisition outcomes. Primarily, it requires event-driven  decision-making by high ranking acquisition executives at a number of key  points in an asset’s lifecycle. The process also requires documentation to  provide the information and criteria necessary for these decisions. In  addition, as the assets proceed through each phase of the process and the  requirements and capabilities of the assets become more defined, these  assets’ ability to fill deficiencies identified by the Coast Guard must be  established.
Previously, the Coast Guard authorized the Deepwater Program to deviate  from its major systems acquisition process, stating that the process was  focused on acquiring discrete assets and contains requirements and  documentation that may be inappropriate for the Deepwater system-of- systems approach. Instead, Deepwater Program reviews were required on  a schedule-driven basis—planned quarterly or annually—to report the  status and performance of the contractor’s efforts. Key decision points  were focused primarily at the Deepwater Program as a whole and held  only occasionally. Coast Guard officials told us that little, if any, formal  documentation of key decisions was maintained.
section_title: Lack of Key Milestone in MSAM Process Poses Risks
paragraphs: GAO’s work on best practices for major acquisitions has demonstrated  that a knowledge-based approach to decision making, where specific  knowledge is gathered and measured against standards at key points in the  acquisition process to inform decisions about the path forward, can  significantly improve program outcomes. While the MSAM process  contains many characteristics of a knowledge-based approach, there are  key differences that could affect acquisition outcomes. For example, the  Milestone 2 decision to approve low-rate initial production precedes the  majority of the design activities in the capability development and  demonstration phase. By following such a process, the Coast Guard may  decide to enter production before a design is proven, a decision that could  result in increased costs as design and production activities are conducted  concurrently. In a previous report, we reviewed DHS’ acquisition process,  with which the Coast Guard’s MSAM process is aligned and intended to  complement, and found a similar weakness. Recognition and correction  of this weakness in the MSAM approach is particularly important as key  assets within Deepwater, most noticeably the FRC, approach a low-rate  production decision.
section_title: Improved Oversight by DHS Necessary
paragraphs: The MSAM requires the Coast Guard to obtain approval from DHS on all  major program decisions beginning with the start of an acquisition  program. This requirement would apply to Deepwater, as it has been  designated a DHS major investment program. However, DHS approval of  Deepwater acquisition decisions as part of its investment review process is  not technically necessary because the department deferred decisions on  specific assets to the Coast Guard in 2003. The department did require  notification of changes to the Deepwater Program that could result in  significant changes to cost, schedule, and performance, but this  requirement was at the overall systems level. In practice, the Coast Guard  has increased communication and coordination with DHS through good  will and informal procedures such as personal working relationships.  While increased communication between the Coast Guard and DHS is to  be applauded, without a formal process in place, DHS could lose the  ability to make strategic decisions—such as how and whether to fund  certain projects—across its components if informal procedures and  relationships should change. Coast Guard and DHS officials told us that  the processes and procedures for coordinating acquisitions with DHS’  Investment Review Board, which is tasked with reviewing major  acquisition programs, are currently undergoing revision, and changes to  the process are expected near the end of fiscal 2008.
section_title: Consequences of Not Following MSAM Process Are Apparent for Assets in Production
paragraphs: The Coast Guard is facing the consequences of its decision not to follow  the MSAM process as it attempts to better define requirements for  individual assets already being procured, such as the NSC, Long-Range  Interceptor (LRI), and the MPA, and to ensure that desired capabilities are  met within cost and schedule constraints. Under the MSAM, the  requirements generation process takes broad mission needs and translates  them to operational capability requirements and then to asset performance  specifications. Figure 4 depicts this traceability from mission needs to  performance specifications.
For example, under the MSAM process, before the design of an asset is  selected, representatives of the operational forces within the Coast Guard  are required to generate the Operational Requirements Document that  determines the capabilities or characteristics considered essential to  achieve their mission. Operational requirements described in this  document—such as operating environment, functions to be performed,  and the need for interoperability with other assets—ultimately drive the  performance and capability of an asset and should be traceable  throughout development, design, and testing. They should also include  basic asset requirements such as speed, maneuvering, and range to serve  as threshold and objective values for future trade-off analyses.
Under the ICGS-led system-of-systems acquisition approach, the Coast  Guard developed high-level system requirements for capabilities, such as  the ability to interdict illegal migrants. ICGS then developed an integrated  force mix of specific aircraft, vessels, and communications systems to  meet those needs. But because the disciplined MSAM approach was not  followed, the Coast Guard could not trace the ICGS-proposed asset  performance to actual mission needs. Program and project managers are  “backfilling” the necessary requirements documentation in programs that  are already well underway, with the intent of providing the traceability  that was previously lacking. For example, in 2006, the Coast Guard  acknowledged that the lack of a traditional requirements document for the  NSC, which was then under construction, would inhibit the Coast Guard’s  ability to evaluate the vessel’s suitability and effectiveness for Coast Guard  missions. To resolve this problem, the Coast Guard developed a document  that lists all the operational requirements for the NSC, as derived from  identified mission needs, to guide operational testing. According to Coast  Guard officials, operational testing based on these requirements will  commence when the third NSC is complete. Under the MSAM, operational  requirements would have been established prior to design and production  to serve as the basis to link the asset’s performance to its ability to fill a  mission need.
Failure to follow a disciplined approach in requirements generation is also  apparent with problems related to the LRI, a small boat intended to be  launched from larger cutters such as the NSC. The Coast Guard accepted  the ICGS-proposed performance specifications for the LRI as part of the  overall Deepwater specification, but the specifications were not tied to  Coast Guard mission requirements. Thus, the Coast Guard had no  assurance that the boat it was buying was what it needed to accomplish its  missions. As a result of Coast Guard-identified technical deficiencies in the  performance specifications, design changes were required after the LRI  task order was issued. For example, a number of C4ISR specifications had  to be added; the initial specification for the fuel tank size was deleted, as  its capacity would not enable the boat’s 400 nautical mile range to be met;  and a more powerful electrical system was needed. These and other  changes, which were required for the boat to accomplish what ICGS had  proposed, drove the price for design and production from $744,621 to  almost $3 million. The Coast Guard is beginning to define needed  capabilities for the LRI under the MSAM process, with an eye towards  developing the service’s own requirements for the asset. For example,  Coast Guard officials told us that ICGS’ proposed top speed of 45 knots is  unrealistic and would under no circumstances be needed to accomplish  Coast Guard missions. The LRI has been equipped with a C4ISR suite that  officials believe to be much more extensive than they need. They are also  concerned that the boat is too heavy, at 22,000 pounds.
The ramifications of accepting asset performance specifications not tied to  Coast Guard mission requirements also became apparent during recent  testing of the system that launches and recovers small boats, such as the  LRI, from the NSC’s stern. Design changes to the launch system had to be  made because it was found to be inadequate to handle the heavy weight of  the LRI. The Coast Guard will pay for this change because the NSC is a  cost-plus incentive fee contract. In addition, Coast Guard officials told us  that the LRI’s inboard spray rail, which had initially been installed to  enable the boat to reach 45 knots, had to be removed to allow the boat to  effectively launch from the NSC, a cost ICGS will bear under that fixed- price contract. Coast Guard officials stated that the current LRI acquisition  will be terminated with delivery of the first boat (now being considered a  prototype with the potential to be used to test launch and recovery  mechanisms on future NSCs).
The Coast Guard’s procurement of MPAs is another example of the  consequences of not following a disciplined acquisition approach, as key  program documents that establish the Coast Guard’s requirements for this  asset and a plan for operational testing to those requirements have not  been finalized. The testing is expected to occur between June 2008 and  December 2008. The Coast Guard has contracted with ICGS for eight  MPAs and accepted delivery of three aircraft between December 2006 and  June 2007. In March 2008, it also accepted delivery of three mission system  pallets, which provide the aircraft with C4ISR capabilities. The Coast  Guard anticipates putting another 4 MPAs on contract with ICGS in fiscal  year 2008 and has requested funding for the 13th and 14th aircraft.
section_title: Coast Guard Is Working to Improve the Use and Quality of Program Information, but Key Information Is Unreliable
paragraphs: The proper functioning of an acquisition organization and the viability of  the decisions made through its acquisition process are only as good as the  information it receives. The Coast Guard is developing two new means of  communicating information related to the Deepwater Program. Quarterly  project reports will consolidate and standardize how it communicates  information to decision makers, and the probability of project success tool  is intended to help officials discern and correct problems before they have  cost and schedule impacts. However, Coast Guard officials have concerns  about the reliability of the data they receive from the contractor as they  lack the visibility required to determine the causes of cost and schedule  variances. In addition, Coast Guard officials have stated that Northrop  Grumman’s earned value system, which provides the necessary cost and  schedule information, may need to be re-certified for compliance with  government standards. While the Coast Guard is taking steps to improve  its visibility into and confidence in data received from the contractor, it  plans to proceed with issuance of a task order for long lead materials for  the fourth NSC.
subsections: section_title: New Project Tools Designed to Better Convey Key Information to Decision Makers
paragraphs: The Coast Guard recently developed quarterly project reports, a  compilation of cost and schedule information created by the project  managers that summarizes the status of each acquisition for reporting  through the Coast Guard as well as to DHS and the Congress. The Coast  Guard developed these reports to standardize and consolidate asset  reporting across all acquisitions, including those outside of Deepwater.  Currently, the quarterly performance reports are being developed for 14  separate assets. The reports present general information about the project  such as contract value and type, as well as more specific, timely  information such as project accomplishments and risks. Project risks are  rank-ordered by probability of occurrence and severity of impact, and  include such things as technical challenges and production issues.
The Coast Guard has also begun to analyze program information using the  “probability of project success” tool. This tool was developed by the Army  and the Air Force to evaluate projects on factors other than basic cost,  schedule, and performance data and is being considered by DHS for  application across its acquisitions. Currently, the tool is being applied to  the same 14 projects covered under the quarterly performance reports.  Coast Guard acquisition officials told us they will use this tool to grade  each asset on 19 different elements in 5 categories, including project  resources and project execution, to assess the risk of assets failing to meet  their goals. Figure 5 lists these categories and elements.
The probability of project success tool is developed by acquisition support  staff separate from the program and project offices. Of the 19 different  elements, only one, health of the contractor, is graded by the project  manager. The results of this tool are not seen as an assessment of the  project manager, but of the support that the acquisition directorate has  given them. Officials stated that the tool allows acquisition executives to  identify projects that require assistance before they experience cost  breaches or other problems and also allows for a comparison of risks and  challenges across all Coast Guard acquisition projects to identify trends.
section_title: Usefulness of Earned Value Management Information Is Questionable
paragraphs: The production and analysis of earned value management data—the cost  and schedule data reported by the contractor and used to evaluate  progress toward program goals—are critical to informing both the  quarterly performance reports and the probability of project success tool.  However, Coast Guard officials are concerned about the utility of the  earned value data they receive because, under the terms of the ICGS  contract, they lack visibility at the levels required to inform decision- makers and manage projects. In addition, officials believe that Northrop  Grumman’s earned value system may require re-certification to meet  government standards to ensure the reliability of the data. Receiving  useful and reliable earned value data could be particularly important for  the Deepwater Program, as these data are also used to inform decisions on  future projects, such as the pending orders to Northrop Grumman for the  materials and production of the fourth NSC.
Coast Guard officials expressed concerns about the level of detail of the  earned value data provided by ICGS. A Coast Guard official responsible  for analyzing the contractor’s reported earned value data for the NSC  stated that the data do not provide sufficient visibility for decision making  at the asset level. The concerns stem in part from the system-of-systems  contract structure with ICGS and how the terms for reporting earned value  data to the government were negotiated. Earned value data are reported at  different levels of activity, descending in order from the general to the  specific, as determined in advance by the government. The levels of  activity required for earned value reporting are very important and can  determine the usefulness of the data received. Under the ICGS contract,  the earned value data are reported at seven levels, beginning with the  Deepwater system-of-systems level—”ICGS”—and stopping at the major  component level—such as propulsion and armaments. Coast Guard  officials stated that previously data on the NSC was reported to the fifth  level, which only presents data on the progress of production of the cutter  as a whole. A Coast Guard official stated that in order to gain adequate  visibility into reported cost variances, a deeper level of reporting is  necessary. While the Coast Guard has negotiated a more detailed level of  earned value reporting on the first three NSCs to receive data at the major  component level, according to an official, the Coast Guard may seek even  more detailed levels of cost data in upcoming negotiations for the fourth  NSC.
In addition to concerns about visibility into contractor earned value data,  Coast Guard officials have concerns about the reliability of the underlying  systems the contractors use to collect this data. An important  consideration in relying on contractor-provided earned value management  data is ensuring that the contractor’s process for generating the data is  compliant with government standards. Contractors are expected to have  earned value management plans that document the methodology,  products, and tools they have in place to track earned value. Independent  third parties, such as the Defense Contract Management Agency (DCMA)  or the Defense Contract Audit Agency, ensure the contractor’s initial  compliance with government standards and perform surveillance reviews  to ensure that the contractor remains compliant. While Lockheed Martin’s  earned value management system has been certified as compliant by  DCMA, Coast Guard officials have stated that Northrop Grumman—the  first tier subcontractor responsible for work on the NSC—may require re- certification. Previously, Northrop Grumman’s earned value management  system had been certified by the Navy, but this certification is no longer  considered acceptable by the Coast Guard. According to officials, the  Coast Guard is working with DCMA and the Navy to review and, if  necessary, re-certify Northrop Grumman’s earned value system. In the  meantime, the Coast Guard intends to improve its insight into how the  contractor produces and reports earned value data by executing a  memorandum of agreement with the DCMA for on-site surveillance at the  shipyard. Such on-site presence is critical to increase the likelihood that  the Coast Guard receives accurate earned value data.
These concerns about visibility into, and reliability of, earned value data  affect not only the information the Coast Guard needs for decision making  on current projects, but also the information necessary for decisions on  future projects, such as the production of the fourth NSC. As the Coast  Guard compiles earned value information on the ships being constructed  by Northrop Grumman, it can use this information in the estimates of  future costs used to establish target prices for additional work to be  performed. Because the Coast Guard lacks confidence in how Northrop  Grumman is representing its cost and schedule performance on current  projects, it may be in the position of paying the contractor for future  projects, such as the long lead material and production of the fourth NSC,  without the understanding necessary to evaluate proposed prices.
section_title: Conclusions
paragraphs: In response to significant problems in achieving its intended outcomes  under Deepwater, Coast Guard leadership has made a major change in  course in its management and oversight of this program. Even with this  change, the Coast Guard continues to face numerous risks of varying  magnitude in moving forward with an acquisition program of this size.  While the initiatives the Coast Guard has underway have already begun to  have a positive impact on reducing these risks, the extent and durability of  their impact depends on positive decisions that continue to increase and  improve government management and oversight.
The current reliance on informal procedures to keep DHS informed of  Deepwater developments is not appropriate for an acquisition of this  magnitude. The Deepwater Program will continue for some time to come,  and the full burden of transcending the inevitable challenges should not  rest solely with the initiatives of the current Coast Guard leadership. The  Coast Guard’s major systems acquisition process requires DHS approval of  milestone decisions; however, the 2003 DHS delegation to the Coast Guard  of such approval means that DHS does not have formal approval authority,  and it could lack the information needed to strategically allocate funding  by balancing requirements and needed capabilities across departmental  components. In addition, the Coast Guard’s acquisition process calls for a  decision to authorize initial production before knowledge is gathered  about the stability of an asset’s design and production processes, which is  contrary to best practices and could result in cost increases and schedule  delays because of redesign. And because the Coast Guard’s knowledge of  the reasonableness of contractors’ proposed cost and schedule targets for  Deepwater assets relies in part on visibility into and confidence in the  contractors’ earned value management data, the Coast Guard may lack a  solid basis to evaluate future proposals by Northrop Grumman until  known problems with its data are resolved.
section_title: Recommendations for Executive Action
paragraphs: To help ensure that the initiatives to improve Deepwater management and  oversight continue as intended and to facilitate decision-making across the  department, we recommend that the Secretary of Homeland Security  direct the Under Secretary for Management to rescind the delegation of  Deepwater acquisition decision authority.
We also recommend that the Commandant of the Coast Guard take the  following two actions:    To improve knowledge-based decision-making for its acquisitions,  revise the procedures in the Major Systems Acquisition Manual  related to the authorization of low-rate initial production by requiring a  formal design review to ensure that the design is stable as well as a  review before authorizing initial production.
To improve program management of surface assets contracted to  Northrop Grumman Ship Systems, develop an approach to increase  visibility into that contractor’s earned value management data  reporting before entering into any further contractual relationships,  such as for long lead material for and production of the fourth NSC.
section_title: Agency Comments and Our Evaluation
paragraphs: In written comments on a draft of this report, the Department of  Homeland Security concurred with our findings. The department stated  that it would take our recommendation on rescinding the delegation of  Deepwater acquisition decision authority under advisement, but neither  concurred nor disagreed with the recommendation. The Coast Guard  concurred with our recommendation on requiring a formal design review  before low-rate initial production, and plans to incorporate such a review  in its next revision of the MSAM process. In addition, it partially concurred  with our recommendation to improve program management of surface  assets by developing an approach to increase visibility into Northrop  Grumman’s earned value management data. The Coast Guard stated that it  agrees with the recommendation and is in the process of funding DCMA  for surveillance of Northrop’s earned value system and increasing the level  of visibility into Northrop’s data starting with the fourth NSC production  contract. However, the Coast Guard stated that earned value data would  provide limited utility for the fixed-price long lead materials contract for  this acquisition and that obtaining the data would pose a significant cost  and schedule impact. To determine a fair and reasonable price for the long  lead and production contracts, the Coast Guard plans to obtain and review  Northrop’s certified cost and pricing data. It appears to us that the Coast  Guard has developed an approach for increasing visibility into the earned  value management data for future contracts with Northrop Grumman. We  believe this approach, if implemented as planned, will address our  recommendation.
The comments from the Department of Homeland Security are included in  their entirety in appendix III. Technical comments were also provided and  incorporated into the report as appropriate.
We are sending copies if this report to interested congressional  committees, the Secretary of Homeland Security, and the Commandant of  the Coast Guard. We will provide copies to others on request. This report  will also be available at no charge on GAO’s Web site at  http://www.gao.gov.
If you or your staff have any questions about this report or need additional  information, please contact me at (202) 512-4841 or huttonj@gao.gov.
Contact points for our Offices of Congressional Relations and Public  Affairs may be found on the last page of this report. Staff  acknowledgements are provided in appendix IV.
section_title: Appendix I: Scope and Methodology
paragraphs: Overall, in conducting this review, we relied in part on the information and  analysis in our March 2008 report, Status of Selected Aspects of the Coast  Guard’s Deepwater Program and testimony, Coast Guard: Deepwater  Program Management Initiatives and Key Homeland Security  Missions. We also reviewed the Coast Guard’s 2007 Deepwater  expenditure plan and fiscal year 2009 budget request. Additional scope and  methodology information on each objective of this report follows.
To assess the Coast Guard’s efforts to increase accountability and program  management through its reorganized acquisition function, we reviewed the  Coast Guard’s July 2007 Blueprint for Acquisition Reform, organizational  structures before and after the July 2007 reorganization, 2004 and 2008  Deepwater Program Management Plans, and project manager and  integrated product team charters. We also interviewed senior acquisition  directorate officials, program and project managers, and Integrated Coast  Guard Systems (ICGS) representatives to discuss the Coast Guard’s  increased role in program management and oversight and changes in roles  and responsibilities of key positions. We held discussions with officials  from the Coast Guard’s engineering and C4ISR technical authorities and  the American Bureau of Shipping, and reviewed lists of certifications for  the National Security Cutter (NSC). To assess Coast Guard actions to  improve the acquisition workforce, we reviewed additional documentation  such as the acquisition human capital strategic plan, documentation of  workforce initiatives, and organization charts for aviation, surface, and  C4ISR components showing government, contractor, and vacant positions.  We supplemented the documentation review with interviews of acquisition  directorate officials, including contracting and Office of Acquisition  Workforce Management officials and program and project managers. We  discussed workforce initiatives, challenges and obstacles to building an  acquisition workforce, recruiting, difficulty in filling key positions, use of  support contractors, inherently governmental positions, and tools for  projecting acquisition workforce needs. We spoke with representatives of  a support contractor developing one of the workforce planning tools. We  also relied on our past work identifying management and workforce  problems within the Deepwater Program and the Department of Defense  (DOD).
To evaluate the Coast Guard’s transition to an asset-based paradigm for  Deepwater, including how system-level aspects such as C4ISR are being  managed, we analyzed a 2007 alternatives analysis prepared for the Coast  Guard. We also discussed the planned C4ISR procurement strategy with  the acquisition directorate C4ISR program manager and the Coast Guard  Chief, Office of Cyber Security and Telecommunications. We reviewed the  overall Deepwater and the NSC acquisition program baselines. Other  acquisition program baselines were in draft form and not made available  to us. We reviewed reports on NSC and C-130J missionization cost  breaches to understand the change in how cost breaches are reported to  DHS under the new approach. We analyzed the Long-Range Interceptor  (LRI) task order and associated modifications and interviewed senior  acquisition directorate officials, the surface asset program manager, and  the LRI project manager about problems with the LRI’s design and its  ability to interface with the NSC’s launch and recovery system during  testing. We reviewed documentation of the Coast Guard’s acceptance of  the first three Maritime Patrol Aircraft and associated mission system  pallets and interviewed the aviation program manager.
To assess the Coast Guard’s implementation of a disciplined, project  management process for Deepwater acquisitions, we reviewed the Major  Systems Acquisition Manual and compared its processes with the  knowledge-based, best practices processes we have identified through our  prior work on large acquisitions at DOD. We reviewed the Coast Guard’s  April 2000 memorandum waiving the acquisition manual requirements for  the Deepwater Program to understand the rationale for the waiver, as well  as the 2003 DHS memorandum giving the Coast Guard acquisition decision  authority for Deepwater assets. We interviewed acquisition directorate  officials and program and project managers to discuss efforts to transition  the acquisition of Deepwater assets to the MSAM process, particularly for  assets already under way. We also spoke with DHS officials about the DHS  major acquisition review process and reporting requirements.
We assessed Coast Guard initiatives to improve the quality of program  management information by analyzing Deepwater asset quarterly project  reports for the fourth quarter, fiscal year 2007, and probability of project  success information. We also analyzed selected earned value management  cost performance reports for the NSC and reviewed earned value  management system compliance letters for Northrop Grumman and  Lockheed Martin, the Coast Guard’s standard operating procedure for  earned value management systems, the Deepwater work breakdown  structure dictionaries for Northrop Grumman and Lockheed Martin, and  ICGS’ earned value management plan. We discussed the information  contained within this documentation with acquisition directorate officials,  the NSC business finance manager, Coast Guard support contractors  responsible for analyzing the earned value management data, and ICGS  and Northrop Grumman representatives.
We conducted this performance audit from October 2007 to June 2008 in  accordance with generally accepted government auditing standards. Those  standards require that we plan and perform the audit to obtain sufficient,  appropriate evidence to provide a reasonable basis for our findings and  conclusions based on our audit objectives. We believe that the evidence  obtained provides a reasonable basis for our findings and conclusions  based on our audit objectives.
section_title: Appendix II: Information on Selected Deepwater Surface and Air Assets
section_title: Appendix III: Comments from the Department of Homeland Security
section_title: Appendix IV: GAO Contact and Staff Acknowledgments
subsections: section_title: Acknowledgments
paragraphs: In addition to the individual named above, Michele Mackin, Assistant  Director; J. Kristopher Keener; Martin G. Campbell; Maura Hardy; Angie  Nichols-Friedman; Scott Purdy; Kelly Richburg; Raffaele Roffo; Sylvia  Schatz; and Tatiana Winger made key contributions to this report.
section_title: GAO Products Related to the Deepwater Program
paragraphs: Status of Selected Aspects of the Coast Guard’s Deepwater Program.  GAO-08-270R (Washington, D.C.: Mar. 11, 2008).
Coast Guard: Deepwater Program Management Initiatives and Key  Homeland Security Missions. GAO-08-531T (Washington, D.C.:   Mar. 5, 2008).
Coast Guard: Challenges Affecting Deepwater Asset Deployment and  Management and Efforts to Address Them. GAO-07-874 (Washington,  D.C.: June 18, 2007).
Coast Guard: Status of Efforts to Improve Deepwater Program  Management and Address Operational Challenges. GAO-07-575T  (Washington, D.C.: Mar. 8, 2007).
Coast Guard: Status of Deepwater Fast Response Cutter Design Efforts.  GAO-06-764 (Washington, D.C.: June 23, 2006).
Coast Guard: Changes to Deepwater Plan Appear Sound, and Program  Management Has Improved, but Continued Monitoring is Warranted.  GAO-06-546 (Washington, D.C.: Apr. 28, 2006).
Coast Guard: Progress Being Made on Addressing Deepwater Legacy  Asset Condition Issues and Program Management, but Acquisition  Challenges Remain. GAO-05-757 (Washington, D.C.: July 22, 2005).
Coast Guard: Preliminary Observations on the Condition of Deepwater  Legacy Assets and Acquisition Management Challenges. GAO-05-651T  (Washington, D.C.: June 21, 2005).
Coast Guard: Deepwater Program Acquisition Schedule Update Needed.  GAO-04-695 (Washington, D.C.: June 14, 2004).
Contract Management: Coast Guard’s Deepwater Program Needs  Increased Attention to Management and Contractor Oversight.   GAO-04-380 (Washington, D.C.: Mar. 9, 2004).
Coast Guard: Actions Needed to Mitigate Deepwater Project Risks.   GAO-01-659T (Washington, D.C.: May 3, 2001).