Homeland Security: Challenges Facing the Coast Guard as it Transitions to the New Department
Published: 2003-02-12T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Coast Guard is one of 22 agencies being placed in the new Department of Homeland Security. With its key roles in the nation's ports, waterways, and coastlines, the Coast Guard is an important part of enhanced homeland security efforts. But it also has non-security missions, such as search and rescue, fisheries and environmental protection, and boating safety. GAO has conducted a number of reviews of the Coast Guard's missions and was asked to testify about the Coast Guard's implementation challenges in moving to this newly created Department.
section_title: What GAO Found
paragraphs: The Coast Guard faces major challenges in effectively implementing its operations within the Department of Homeland Security. GAO has identified critical success factors for reorganizing and restructuring agencies, and its recent work in reviewing the Coast Guard has focused on challenges dealing with six of these factors--strategic planning, communications and partnership-building, performance management, human capital strategy, information management and technology, and acquisition management. The Coast Guard faces challenges in all of these areas. The difficulty of meeting these challenges is compounded because the Coast Guard is not just moving to a new parent agency: it is also substantially reinventing itself because of its new security role. Basically, the agency faces a fundamental tension in balancing its many missions. It must still do the work it has been doing for years in such areas as fisheries management and search and rescue, but now its resources are deployed as well in homeland security and even in the military buildup in the Middle East. The Coast Guard's expanded role in homeland security, along with its relocation in a new agency, have changed many of its working parameters, and its adjustment to this role remains a work in process. Much work remains. Some of the work is strategic in nature, such as the need to define new missions and redistribute resources to meet the wide range of missions. Others include accommodating a sudden surge of new positions or trying to ensure that its most ambitious acquisition project--the Deepwater Project--remains viable.

section_title: Letter
paragraphs: I am pleased to be here today to discuss key implementation challenges  facing the Coast Guard as it transitions into the newly created Department  of Homeland Security (DHS). Creating this new department means  merging disparate organizational structures, cultures, and systems into a  cohesive working unit. The newly created DHS represents one of the  largest reorganizations and consolidations of government agencies,  personnel, programs, and operations in recent history. The department  and agencies within it must deal with a myriad of organizational, human  capital, process, technology, and environmental challenges that must be  addressed and resolved at the same time that the new department is  working to maintain readiness. For these and other reasons, we have  designated the implementation and transformation of DHS as a high-risk  area.
But the Coast Guard, even as a separate entity, was rapidly reinventing  itself in many respects in the wake of the terrorist attacks of September  11th. After these attacks, the Coast Guard’s priorities and focus had to  shift suddenly and dramatically toward protecting the nation’s vast and  sprawling network of ports and waterways. The National Strategy for  Homeland Security recognizes the important role the Coast Guard now  plays in protecting the nation’s borders and infrastructure. While  homeland security has long been one of the Coast Guard’s missions, the  agency has for decades focused its efforts on other major national  objectives, such as conducting search and rescue operations at sea,  preventing and mitigating oil spills and other threats to the marine  environment, protecting important fishing grounds, and stemming the flow  of illegal drugs and migrants into the United States. September 11th  drastically changed the Coast Guard’s priorities, and it did so by adding to  the agency’s many responsibilities rather than by replacing responsibilities  that were already in place. For example, the recently enacted Maritime  Transportation Security Act made the Coast Guard responsible for  numerous new port security functions that will likely require sizable  personnel and hardware commitments.
My testimony today, which is based on a large body of work we have  completed in recent years, both on governmental reorganization in general  and the Coast Guard in particular, focuses on six key factors for  implementation success: strategic planning, communication and  partnership-building, performance management, human capital,  information management and technology, and acquisition management. In  prior reports and testimony before the Congress, we have identified these  factors as among those that are critical to success in organizational  change. Our recent work in reviewing the Coast Guard has focused on  challenges the Coast Guard faces in dealing with these six success factors.
In summary, even though the Coast Guard has in many respects done a  credible job of managing such things as strategic planning, partnership- building, and aligning its work force with its missions, it now faces major  challenges in implementing all six of the implementation success factors.  Its expanded role in homeland security and its relocation in a new agency  have changed many of its priorities and working parameters, and its  adjustment to this new environment remains a work in process. Thus,  there is much work to be done. Some of the work is strategic in nature,  such as the need to better define its homeland security mission and the  level of resources needed to meet not only its new security mission  responsibilities but its existing missions as well. Others include  accommodating a sudden surge of thousands of personnel that are being  added and trying to ensure that its most ambitious acquisition project—the  Deepwater Project to modernize its fleet of cutters and aircraft—is well  managed and remains on track. Overlying these challenges is a  fundamental tension that the agency faces in balancing its many missions.  On the one hand, it must still do the job it has been doing for years in  fisheries management, search and rescue work, ship inspections, marine  environmental protection, and other areas. On the other hand, a sizable  portion of its resources are now deployed in homeland security work. In  addition, the Coast Guard is contributing to the military buildup in the  Middle East. Effectively addressing these implementation challenges in the  context of this overarching tension is a sizeable task.
subsections: section_title: Background
paragraphs: The Coast Guard has a wide variety of missions, related both to homeland  security and its other responsibilities. Table 1 shows a breakout of these  missions—both security and non-security related—as delineated under the  Homeland Security Act of 2002.
The Coast Guard has overall federal responsibility for many aspects of  port security and is involved in a wide variety of activities. Using its  cutters, boats, and aircraft, the Coast Guard conducts security patrols in  and around U.S. harbors, escorts large passenger vessels in ports, and  provides protection in U.S. waterways for DOD mobilization efforts. It also  gathers and disseminates intelligence information, including gathering  information on all large commercial vessels calling at U.S. ports; the  agency monitors the movement of many of these vessels in U.S. territorial  waters. It conducts port vulnerability assessments; helps state and local  port authorities to develop security plans for protecting port  infrastructure; and actively participates with state, local, and federal port  stakeholders in a variety of efforts to protect port infrastructure and  ensure a smooth flow of commerce. In international maritime matters, the  Coast Guard is also active in working through the International Maritime  Organization to improve maritime security worldwide. It has spearheaded  proposals before this organization to implement electronic identification  systems, ship and facility security plans, and the undertaking of port  security assessments.
The Coast Guard’s homeland security role is still evolving; however, its  resource commitments to this area are substantial and will likely grow.  For example, under the recently enacted Maritime Transportation Security  Act, the Coast Guard will likely perform numerous security tasks, such as  approving security plans for vessels and waterside facilities, serving on  area maritime security advisory committees, assessing antiterrorism  measures at foreign ports, and maintaining harbor patrols. The Coast  Guard has not yet estimated its costs for these activities; however, the  President’s fiscal year 2004 budget request includes over $200 million for  new homeland security initiatives, including new patrol boats, additional  port security teams, and increased intelligence capabilities.
To provide for the orderly transition of the Coast Guard to DHS on March  1, 2003, the Coast Guard established a transition team last year that  identified and began addressing issues that needed attention. Coast Guard  officials told us that they patterned their transition process after key  practices that we identified as important to successful mergers,  acquisitions, and transformations. The agency’s transition team consists  of top management, led by the Chief of Staff, and enlists the assistance of  numerous staff expertise throughout the agency through matrixing.  According to Coast Guard officials, the scope of transition issues spans a  wide variety of topics, including administrative and support functions,  strategy, outreach and communication issues, legal considerations, and  information management. The transition team focuses on both DHS- related issues and on issues related to maintaining an enduring  relationship with the Department of Transportation (DOT). In addition to  its own transition team, senior Coast Guard officials participated with  OMB in developing the DHS reorganization plan late last year. Also, key  Coast Guard officials participate on joint DHS and DOT transition teams  that have been established to deal with transition issues in each  department.
section_title: The Coast Guard Faces Numerous Complex Implementation Challenges as It Transitions into DHS
paragraphs: We have testified that, despite the complexity and enormity of the  implementation and transformation of DHS, there is likely to be  considerable benefit over time from restructuring homeland security  functions. These benefits include reducing risk and improving the  economy, efficiency, and effectiveness of these consolidated agencies and  programs. In the short term, however, there are numerous complicated  challenges that will need to be resolved, making implementation a process  that will take considerable time and effort. Reorganizations frequently  encounter start-up problems and unanticipated consequences, and it is not  uncommon for management challenges to remain for some time. Our past  work on government restructuring and reorganization has identified a  number of factors that are critical to success in these efforts. Coast Guard  officials now involved in transition efforts told us that they are aware of  these factors and are addressing many of them as they prepare to move to  DHS. Our testimony today focuses on six of these factors—strategic  planning, communication and partnership-building, performance  management, human capital strategy, information management and  technology, and acquisition management—and, based on past work, some  of the key challenges the Coast Guard faces in addressing and resolving  them.
subsections: section_title: Strategic Planning
paragraphs: The strategic planning process involves assessing internal and external  environments, working with stakeholders, aligning activities, processes,  and resources in support of mission-related outcomes. Strategic planning  is important within the Coast Guard, which now faces a challenge in  merging past planning efforts with the new realities of homeland security.  The events of September 11th produced a dramatic shift in resources used  for certain missions. Cutters and patrol boats that were normally used  offshore were quickly shifted to coastal and harbor security patrols. While  some resources have been returned to their more traditional activities,  others have not. For example, Coast Guard patrol boats in the nation’s  Northeast were still conducting security patrols many months later,  reducing the number of fisheries patrols by 40-50 percent from previous  years. Even now, the Coast Guard continues to face new security-related  demands on its resources. Most notably, as part of the current military  build-up in the Middle East, the Coast Guard has sent nine cutters to assist  the DOD in the event of war with Iraq.
While its greatly expanded homeland security role has already been  merged into its day-to-day operations, the Coast Guard faces the need to  develop a strategic plan that reflects this new reality over the long term.  Where homeland security once played a relatively small part in the Coast  Guard’s missions, a new plan must now delineate the goals, objectives,  strategies, resource requirements, and implementation timetables for  achieving this vastly expanded role while still balancing resources among  its various other missions. The agency is now developing a strategic  deployment plan for its homeland security mission and plans to finish it  sometime this year. However, development has not begun on a long-term  strategy that outlines how it sees its resources—cutters, boats, aircraft,  and personnel—being distributed across all of its various missions, as well  as a timeframe for achieving desired balance among missions. We  recommended in a recent report to this Subcommittee that the Coast  Guard develop such a strategy to provide a focal point for all planning  efforts and serve as a basis for spending and other decisions. The Coast  Guard has taken this recommendation under advisement but has not yet  acted on it.
section_title: Communication and Partnership-Building
paragraphs: There is a growing realization that any meaningful results that agencies  hope to achieve are likely to be accomplished through matrixed  relationships or networks of governmental and nongovernmental  organizations working together. These relationships exist on at least three  levels. First, they exist within and support the various internal units of an  agency. Second, they include the relationships among the components of a  parent department, such as DHS. Third, they are also developed  externally, to include relationships with other federal, state, and local  agencies, as well as private entities and domestic and international  organizations. Our work has shown that agencies encounter a range of  barriers when they attempt coordination across organizational  boundaries. Such barriers include agencies’ concerns about protecting  jurisdictions over missions and control of resources, differences in  procedures, processes, data systems that lack interoperability, and  organizational cultures that may make agencies reluctant to share  sensitive information.
Specifically, our work has shown that the Coast Guard faces formidable  challenges with respect to establishing effective communication links and  building partnerships both within DHS and with external organizations.  While most of the 22 agencies moving to DHS will report to under  secretaries for the department’s various directorates, the Coast Guard  will remain a separate entity reporting directly to the Secretary of DHS.  According to Coast Guard officials, the Coast Guard has important  functions that will require coordination and communication with all of  these directorates, particularly the Border and Transportation Security  Directorate. For example, the Coast Guard plays a vital role with Customs,  Immigration and Naturalization Service, the Transportation Security  Administration, and other agencies that are organized in the Directorate of  Border and Transportation Security. Because the Coast Guard’s homeland  security activities require interface with these and a diverse set of other  agencies organized within several DHS directorates, communication,  coordination, and collaboration with these agencies is paramount to  achieve department-wide results.
Effective communication and coordination with agencies outside the  department is also critical to achieving the homeland security objectives,  and the Coast Guard must maintain numerous relationships with other  public and private sector organizations outside DHS. For example,  according to Coast Guard officials, the Coast Guard will remain an  important participant in DOT’s strategic planning process, since the Coast  Guard is a key agency in helping to maintain the maritime transportation  system. Also, the Coast Guard maintains navigation systems used by DOT  agencies such as the Federal Aviation Administration. In the homeland  security area, coordination efforts will extend well beyond our borders to  include international agencies of various kinds. For example, the Coast  Guard, through its former parent agency, DOT, has been spearheading U.S  involvement in the International Maritime Organization. This is the  organization that, following the September 11th attacks, began  determining new international regulations needed to enhance ship and  port security. Also, our work assessing efforts to enhance our nation’s port  security has underscored the formidable challenges that exist in forging  partnerships and coordination among the myriad of public and private  sector and international stakeholders.
section_title: Performance Management
paragraphs: A performance management system that promotes the alignment of  institutional, unit, and individual accountability to achieve results is an  essential component for organizational success. Our work has shown  performance management is a key component of success for high- performing, results-oriented organizations. High-performing organizations  have recognized that a key element of a fully successful performance  management system is aligning individual employees’ performance  expectations with agency goals so that employees can see how their  responsibilities contribute to organizational goals. These organizations (1)  define clear missions and desired outcomes, (2) measure performance as a  way of gauging progress toward these outcomes, and (3) use performance  information as a basis for decision-making. In stressing these actions, a  good performance management system fosters accountability.
The changed landscape of national security work presents a challenge for  the Coast Guard’s own performance management system. The Coast  Guard has applied the principles of performance management for most of  its missions, but not yet for homeland security. However, the Coast Guard  has work under way to define its homeland security mission and the  desired outcomes stemming from that mission. The Coast Guard expects  to have such measures this year and begin collecting data to gauge  progress in achieving them. Progress in this area will be key in the Coast  Guard’s ability to make sound decisions regarding its strategy for  accomplishing its security mission as well as its various other missions.
section_title: Human Capital Strategy
paragraphs: In any organization, people are its most important asset. One of the major  challenges agencies face is creating a common organizational culture to  support a unified mission, common set of core values, and organization- wide strategic goals. The Coast Guard, like the 21 other agencies moving  to DHS, will have to adjust its own culture to work effectively within the  department. The Coast Guard also faces other important new human  capital challenges. For example, to deal with its expanded homeland  security role and meet all of its other responsibilities, the Coast Guard  expects to add thousands of new positions over the next 3 years. The  Coast Guard acknowledges that such a large increase could well strain the  agency’s ability to hire, develop, and retain talent. Coast Guard officials  acknowledge that providing timely training for the 2,200 new personnel it  plans to bring on by the end of fiscal year 2003 and the additional 1,976  staff it plans to add by the end of fiscal year 2004 will likely strain its  training capabilities. Compounding this challenge is that over the next  decade, the Coast Guard is modernizing its entire fleet of cutters and  aircraft with more modern, high technology assets that require a higher  skill level to operate and maintain.
section_title: Information Management and Technology
paragraphs: One factor that often contributes to an organization’s ineffectiveness or  failure is the lack of accurate, complete, and timely information.  Sometimes this lack of information contributes to the failure of a system  or to cumbersome systems that cannot be effectively coordinated. In other  instances, however, it can relate to the institutional willingness to share  information across organizational boundaries. Concerns about information  management have been well chronicled in the discussions about  establishing DHS. Programs and agencies will be brought together from  throughout the government, each bringing its own systems. Integrating  these diverse systems will be a substantial undertaking.
The Coast Guard is among several agencies moving to DHS that will bring  with it existing information technology problems. For example, 14 years  after legislation was passed requiring the Coast Guard to develop a vessel  identification system to share vessel information, no such system exists,  and future plans for developing the system are uncertain. Given today’s  heightened state of homeland security, such a system has even more  potential usefulness. Coast Guard officials stated that law enforcement  officials could use a vessel identification system to review all vessels that  have been lost or stolen and verify ownership and law enforcement  history.
section_title: Acquisition Management
paragraphs: Sound acquisition management is central to accomplishing the  department’s mission. DHS is expected to spend billions annually to  acquire a broad range of products, technologies, and services. Getting the  most from this investment will depend on how well DHS manages its  acquisition activities. Our reports have shown that some of the  government’s largest procurement operations need improvement.
The Coast Guard has major acquisitions that pose significant challenges.  The agency is involved in two of the most costly procurement programs in  its history—the $17 billion Integrated Deepwater Project to modernize its  entire fleet of cutters and aircraft, and the $500 million national response  and distress system, called Rescue 21, to increase mariner safety. We have  been reviewing the planning effort for the Deepwater Project for a number  of years, and the agency’s management during the planning phase was  among the best of the federal agencies we have evaluated, providing a  solid foundation for the project. While we believe the Coast Guard is in a  good position to manage this acquisition effectively, the current phase of  the project represents considerably tougher management challenges. The  major challenges are:    Controlling costs. Under the project’s contracting approach, the  responsibility for the project’s success lies with a single systems integrator  and its contractors for a period of 20 years or more. This approach starts  the Coast Guard on a course potentially expensive to alter once funding  has been committed and contracts have been signed. Moreover, this  approach has never been used on a procurement of this size or  complexity, and, as a result, there are no models in the federal government  to guide the Coast Guard in developing its acquisition strategy. In response  to the concerns we and others have raised about this approach, the Coast  Guard developed cost-related processes and policies, including  establishing prices for deliverables, negotiating change order terms, and  developing incentives.
Stable sustained funding. The project’s unique contracting approach is  based on having a steady, predictable funding stream of $500 million in  1998 dollars ($544.4 million in 2003 dollars) over the next 2 to 3 decades.  Significant reductions in levels from planned amounts could result in  reduced operations, increased costs, and/or schedule delays, according to  the Coast Guard. Already the funding stream is not materializing as the  Coast Guard planned. The 2002 fiscal year appropriation for the project  was about $18 million below the planned level. The fiscal year 2003  transportation appropriations have not yet been signed into law; however,  the Senate appropriations committee has proposed $480 million for the  Deepwater Project, and the House appropriations committee proposed  $500 million.
Contractor oversight. Because the contracting approach is unique and  untried, the challenges in managing and overseeing the project will  become more difficult. To address these challenges, the Coast Guard’s  plans require the systems integrator to implement many management  processes and procedures according to best practices. While these  practices are not yet fully in place, in May 2002, the Coast Guard released  its Phase 2 Program Management Plan, which establishes processes to  successfully manage, administer, monitor, evaluate, and report contract  performance.
Unproven technology. Our reviews of other acquisitions have shown that  reliance on unproven technology is a frequent contributor to escalated  costs, schedule and delays, and compromised performance standards.  While the Coast Guard has successfully identified technologies that are  sufficiently mature, commercially available, and proven in similar  applications for use in the first 7 years of the project, it has no structured  process to assess and monitor the potential risk of technologies proposed  for use in later years. Specifically, the Coast Guard has lacked uniform and  systematic criteria, which is currently available, to judge the level of a  technology’s readiness, maturity, and risk. However, in response to our  2001 recommendation, the Coast Guard is incorporating a technology  readiness assessment in the project’s risk management process.  Technology readiness level assessments are to be performed for  technologies identified in the design and proposal preparation and  procurement stages of the project.
For these and other reasons, our most recent series of Performance and  Accountability Reports continues to list the Deepwater Project as a project  meriting close management attention. We will continue to assess the  department’s actions in these areas.
The Coast Guard’s move to DHS may complicate these challenges further.  For example, central to the acquisition strategy for the Deepwater Project  is a clear definition of goals, needs, and performance capabilities, so that a  contractor can design a system and a series of acquisitions that can be  carried out over 2 to 3 decades, while meeting the Coast Guard’s needs  throughout this time. These system goals and needs were all developed  prior to September 11th. Whether the Coast Guard’s evolving homeland  security mission will affect these requirements remains to be seen.  Properly aligning this program within the overall capital needs of DHS is  critical to ensuring the success of the Deepwater Project. Also, the  Homeland Security Act of 2002 requires the Secretary of DHS to submit a  report to the Congress on the feasibility of accelerating the rate of  procurement of the Deepwater Project. If the project is accelerated, even  greater care would need to be exercised in managing a project that already  carries numerous risks.
In conclusion, these challenges are daunting but not insurmountable. The  Coast Guard continues to do an admirable job of adapting to its new  homeland security role through the hard work and dedication of its  people, and it has the management capability to address the  implementation issues discussed here as well. However, reorganizations  frequently encounter startup problems and unanticipated consequences,  and even in the best of circumstances, implementation is a lengthy process  that requires a keen focus, the application of sound management  principles, and continuous reexamination of challenges and issues  associated with achieving desired outcomes. As the Coast Guard  addresses these and other challenges in the future, we will continue to  monitor its efforts as part of our ongoing work on homeland security  issues, and we will be prepared to report to you on this work as you deem  appropriate.
Madame Chair, this concludes my testimony today. I would be pleased to  respond to any questions that you or members of the Subcommittee may  have at this time.
section_title: Contacts and Acknowledgements
paragraphs: For information about this testimony, please contact JayEtta Z. Hecker,  Director, Physical Infrastructure, at (202) 512-2834, or heckerj@gao.gov.  Individuals making key contributions to this testimony include  Christopher Jones, Sharon Silas, Stan Stenersen, and Randall Williamson.
section_title: Related GAO Products
paragraphs: Major Management Challenges and Program Risks: Department of  Transportation. GAO-03-108. Washington, D.C.: January 30, 2003.
Major Management Challenges and Program Risks: Department of  Homeland Security. GAO-03-102. Washington, D.C.: January 30, 2003.
Homeland Security: Management Challenges Facing Federal Leadership.  GAO-03-260. Washington, D.C.: December 20, 2002.
Container Security: Current Efforts to Detect Nuclear Materials, New  Initiatives, and Challenges. GAO-03-297T. New York, NY: November 18,  2002.
Highlights of a GAO Forum: Mergers and Transformation: Lessons  Learned for a Department of Homeland Security and Other Federal  Agencies. GAO-03-293SP. Washington, D.C.: November 14, 2002.
Coast Guard: Strategy Needed for Setting and Monitoring Levels of  Effort for All Missions. GAO-03-155. Washington, D.C.: November 12,  2002.
National Preparedness: Technology and Information Sharing  Challenges. GAO-02-1048R. Washington, D.C.: August 30, 2002.
Homeland Security: Effective Intergovernmental Coordination Is Key to  Success. GAO-02-1011T. Washington, D.C.: August 20, 2002.
Port Security: Nation Faces Formidable Challenges in Making New  Initiatives Successful. GAO-02-993T. Washington, D.C.: August 5, 2002.
Homeland Security: Critical Design and Implementation Issues. GAO- 02-957T. Washington, D.C.: July 17, 2002.
Managing for Results: Using Strategic Human Capital Management to  Drive Transformational Change. GAO-02-940T. Washington, D.C.: July 15,  2002.
Homeland Security: Title III of the Homeland Security Act of 2002. GAO- 02-927T. Washington, D.C.: July 9, 2002.
Homeland Security: Intergovernmental Coordination and Partnerships  Will Be Critical to Success. GAO-02-899T. Washington, D.C.: July 1, 2002.