Coast Guard: Deepwater Program Acquisition Schedule Update Needed
Published: 2004-06-14T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: In 2002, the Coast Guard began its $17 billion, 20-year Integrated Deepwater System acquisition program to replace or modernize its cutters, aircraft, and communications equipment for missions generally beyond 50 miles from shore. During fiscal years 2002-03, Deepwater received about $125 million less than the Coast Guard had planned. In fiscal year 2004, Congress appropriated $668 million, $168 million more than the President's request. GAO has raised concern recently about the Coast Guard's initial management of Deepwater and the potential for escalating costs. GAO was asked to review the status of the program against the initial acquisition schedule and determine the impact of the additional $168 million in fiscal year 2004 funding on this schedule.
section_title: What GAO Found
paragraphs: The degree to which the Deepwater program is on track with its original 2002 integrated acquisition schedule is difficult to determine because the Coast Guard has not updated the schedule. Coast Guard officials said they have not updated it because of the numerous changes Deepwater experiences every year and the cost, personnel, and time involved. However, in similar acquisitions--those of the Department of Defense (DOD)--cost, schedule, and performance updates are fundamental to congressional oversight. DOD is required to update the schedule at least annually and whenever cost and schedule thresholds are breached. In practice, DOD continually monitors and reports schedules for management on a quarterly basis. Updating the acquisition schedule--including phases such as design and fabrication, interim phase milestones, and critical paths linking assets-- on a more timely basis is imperative so that annual Coast Guard budget submissions can allow Congress to base decisions on accurate information. GAO used available data to develop the current acquisition status for a number of selected Deepwater assets and found that they have experienced delays and are at risk of being delivered later than anticipated. The additional $168 million in fiscal year 2004, while allowing the Coast Guard to conduct a number of Deepwater projects that had been delayed or would not have been funded in fiscal year 2004, will not fully return the program to its original 2002 acquisition schedule. Reasons include: all work originally planned for fiscal year 2004 was not funded and some will have to be delayed to fiscal year 2005; delivery of some assets has fallen so far behind schedule that ensuring their original delivery dates is impossible; and nonfunding reasons have caused delays, such as greater than expected hull corrosion of patrol boats delaying length extension upgrades.

section_title: Letter
paragraphs: In 2002, the Coast Guard began the acquisition phase of the largest and  most complex procurement in its history, the Integrated Deepwater  System program (Deepwater). Under this program, the Coast Guard will  replace or modernize its cutters, aircraft, and communications equipment  used for missions generally beyond 50 miles from shore but which may  start at ports, waterways, and coasts and extend seaward to wherever the  Coast Guard is required to take appropriate action. In developing the  program, the Coast Guard chose a contracting approach that relies heavily  on a “systems integrator”—a contractor that will translate the Coast  Guard’s mission requirements into specific acquisitions and upgrades. This  contracting approach also relies heavily on a steady, predictable funding  stream throughout the program’s anticipated 20-year acquisition span.  When the program began, we expressed concern that, given this  approach’s particularly heavy dependence on funding at planned levels,  the Coast Guard risked schedule slippages and cost escalation if program  funding fell short of planned funding amounts. During the program’s first  2 years (fiscal years 2002-03), the total amount of funding available was  nearly $125 million less than the amount the Coast Guard had planned and  $32 million less than the President’s request. The Congress then increased  the Deepwater appropriation for fiscal year 2004 to about $668 million, or  about $86 million more than the agency’s original plan for that year and  $168 million more than the President’s request.
You asked us to assess the Deepwater program’s status in light of this  increased funding. We focused our work on (1) reviewing the status of the  program against the initial acquisition schedule and (2) determining the  impact of the additional $168 million in fiscal year 2004 funding on  returning the program to this schedule. You also asked us to provide  information on the Coast Guard’s status in revising Deepwater’s mission to  meet increased homeland security requirements and the amount of  assistance the Department of Defense (DOD) has provided for Deepwater  from fiscal years 2002 to 2004. On March 12, 2004, we briefed your offices  on the preliminary results of our work to date. This report and the briefing  slides in appendix I provide our final results.
Our work for this report involved reviewing and analyzing a variety of  documents and interviewing officials from the headquarters of the Coast  Guard and Integrated Coast Guard Systems, LLC, (ICGS). To determine  the status of Deepwater’s acquisition schedule for selected assets, we  analyzed (1) the delivery task orders and their associated statements of  work for individual Deepwater assets to establish what work was started,  when it was started, and the period of performance for that work, and (2)  the monthly assessment reports of Deepwater program managers on the  performance of executing the delivery task orders. We compared these  start and end dates of the delivery task orders with the acquisition  schedule laid out in the original June 2002 Integrated Deepwater System  Implementation Plan, which covers the first 5 years of the program. To  determine the specific assets that were originally planned to have been  funded by fiscal year 2004 but were not, we compared the Coast Guard’s  original plan listing the work scheduled to begin (contract line item  numbers) for each fiscal year with the work that was actually begun (the  delivery task orders that were issued for those line items). We interviewed  Coast Guard and ICGS officials about the reliability of the data in the  Integrated Master Schedule (IMS) management tool. On the basis of those  discussions, we determined that the data within IMS were not reliable  enough for use in our report. To determine the amount of funding support  DOD provided to the Deepwater program from fiscal years 2002 to 2004,  we interviewed officials and analyzed documents from the Navy. We also  interviewed officials from other DOD components; however, they all  referred us back to the Navy. We conducted our work from January  through June 2004 and did our work in accordance with generally  accepted government auditing standards.
subsections: section_title: Background
paragraphs: In June 2002, the Coast Guard awarded a contract to ICGS to begin the  acquisition phase of the Deepwater program. Rather than using the  traditional approach of replacing classes of ships or aircraft through a  series of individual acquisitions, the Coast Guard chose to employ a  “system of systems” acquisition strategy that would replace its aging assets  of ships, aircraft, and communication capabilities with a single, integrated  package of new or modernized assets and capabilities. The focus of the  program is not just on new ships and aircraft, but rather on an integrated  approach to modernizing existing or “legacy” assets while transitioning to  newer, more capable assets, with improved command, control,  communications and computers, intelligence, surveillance, and  reconnaissance (C4ISR) capabilities. At full implementation, the  Deepwater program will replace the Coast Guard’s entire fleet of current  deepwater surface and air assets, comprising three classes of new cutters  and their associated small boats, a new fixed-wing manned aircraft fleet, a  combination of new and upgraded helicopters, and both cutter-based and  land-based unmanned air vehicles (UAVs). In addition, all of these assets  will be linked with state-of-the-art C4ISR capabilities and computers and  will be supported by an integrated logistics management system.
ICGS, a business entity jointly owned by Northrop Grumman and  Lockheed Martin, acts as the system integrator to develop and deliver the  Deepwater program. They are the two first-tier subcontractors for the  program and either provides Deepwater assets themselves or award  second-tier subcontracts for the assets. The Coast Guard’s contract with  ICGS has a 5-year base period with five additional 5-year options. The  Coast Guard is scheduled to decide on whether to extend ICGS’s contract  by June 2006, which is 1 year prior to the end of the first 5-year contract  term. Although ICGS is responsible for designing, constructing, deploying,  supporting, and integrating Deepwater assets, the Coast Guard maintains  responsibility for oversight and overall management of the program. To  help fulfill this responsibility, the Coast Guard uses several management  tools to track progress in the program, such as monthly status reports  called quad reports, a performance-based management tool called the  Earned Value Management System (EVMS), and a schedule management  system called IMS. The quad reports are monthly summaries of the work  performed on the various deepwater assets and were developed to give  managers a monthly progress report on the performance of the program in  such areas as cost, schedule, and contract administration. EVMS is used to  track cost and schedule for certain delivery orders that have been placed  to manage the risk of the major assets and activities. IMS is a three-tiered,  calendar-based schedule used to track the completion of tasks and  milestones of the individual Deepwater delivery task orders. However,  data reliability with IMS has been an area of concern for the Coast Guard,  and it is currently working with a private contractor and ICGS to address  these concerns. Currently, the Coast Guard only maintains the lowest and  most detailed level of IMS with monthly updates. These updates reflect the  status of active contracts of individual assets and feed into EVMS’s  monthly cost performance reports of those individual contracts, which  allow program management to monitor the cost, schedule, and technical  performance of ongoing work at these lowest and most detailed levels.
In recent months, we have issued two reports that have raised concern  about the Coast Guard’s initial management of the Deepwater program  and the potential for escalating costs. In March 2004, we reported that key  components needed to manage the Deepwater program and oversee the  system integrator’s performance have not been effectively implemented.  We recommended that the Secretary of Homeland Security direct the  Commandant of the Coast Guard to take a number of actions to improve  Deepwater program management and contractor oversight. In April 2004,  we testified that the most significant challenge the Coast Guard faces as it  moves forward in the Deepwater program is keeping the program on  schedule and within planned budget estimates. We noted that the Coast  Guard was at risk of having to expend funds to repair deteriorating legacy  assets that otherwise had been planned for Deepwater modernization  initiatives, which could potentially further delay the program and increase  total program costs. We noted further that the Coast Guard’s current  estimate for completing the acquisition program within the 20-year  schedule has risen to $17.2 billion, an increase of $2.2 billion over the  original $15 billion estimate.
section_title: Results
paragraphs: The degree to which the Deepwater program is on track with regard to its  original 2002 acquisition schedule is difficult to determine, because the  Coast Guard has not maintained and updated the acquisition schedule. The  original acquisition schedule included acquisition phases (such as concept  technology and design, system development and demonstration, and  fabrication), interim phase milestones (such as preliminary and critical  design reviews, installation, and testing), and the critical paths integrating  the delivery of individual components to particular assets. However, while  the Coast Guard has what is called an integrated master schedule, it  currently uses it only at the lowest and most detailed levels and have not  updated it to demonstrate whether individual components and assets are  being integrated and delivered on schedule and in the critical sequence.  There are a number of reasons why tracking the current integrated  schedule on a major government investment or acquisition is important,  but two stand out. First, our work has shown that it is important to  identify potential risks in major acquisitions as early as possible so  problems can be avoided or minimized. The ability to achieve scheduled  events is a key indicator of risk. Second, cost, schedule, and performance  are fundamental to the Congress’s oversight of major acquisitions. In fact,  by law, DOD’s major defense acquisition programs have to report cost,  schedule, and performance updates to the Congress at least annually and  whenever cost and schedule thresholds are breached. In practice,  schedules on DOD’s major defense acquisitions are continually monitored  and reported to management on a quarterly basis.
While Coast Guard officials indicated that the management tools they use  are sufficient for tracking delivery dates throughout the acquisition, we  found that these tools could not provide a ready and reliable picture of the  current integrated Deepwater acquisition schedule. For example, IMS has  had problems with data reliability and the monthly status reports, while  assessing the progress of individual assets, do not translate those  individual assessments into an overall integrated Deepwater acquisition  schedule. In fact, the February 2004 status report noted that because there  was no accurate overall integrated schedule for the command and control  design phase, the linkages with the development of other assets were  largely unknown. Although maintaining a current integrated schedule is a  best practice for ensuring adequate contract oversight and management  and is a requirement for DOD acquisitions, Coast Guard officials said they  have not done so because of the numerous changes the Deepwater  Program experiences every year and because of the cost, personnel, and  time involved in crafting a revised master plan with the systems integrator  on an annual basis. The officials said they have not planned to update the  original acquisition schedule until just prior to deciding whether to extend  the award of the next 5-year Deepwater contract in 2007. However, we  have found that in acquisitions of similar scope—and in particular,  acquisitions made by DOD—maintaining a current schedule is a  fundamental practice that the department considers necessary.
While the Coast Guard could not provide us with an updated integrated  schedule, we developed the current acquisition status of a number of  selected Deepwater assets from documents provided by the Coast Guard.  Our analysis indicates that several Deepwater assets and capabilities have  experienced delays and are at risk of being delivered later than anticipated  in the original implementation plan. For example, the delivery of the first  two maritime patrol aircraft is behind schedule by about 1 year, and the  delivery and integration of the vertical-take-off-and-land unmanned air  vehicle to the first national security cutter has been delayed 18 months.
The $168 million appropriated in fiscal year 2004 for the Deepwater  program above the President’s request of $500 million will allow the Coast  Guard to conduct a number of projects that had been delayed or would not  have been funded in fiscal year 2004, but it will not fully return the  program to its original 2002 acquisition schedule. Our analysis indicates  there are several reasons for this result. First, even with the additional  amount, the program still had a cumulative funding shortfall of $39 million  through fiscal year 2004, as compared to the Coast Guard’s planned  funding amount. Second, because part of the additional $168 million was  needed to start work delayed from fiscal year 2003, it did not provide  enough funding for the delayed work and for all the work that the Coast  Guard had originally planned for fiscal year 2004. As a result, some of this  work will have to be delayed to fiscal year 2005. Third, the delivery of  some assets has fallen so far behind schedule that it is impossible to  ensure their delivery according to the original 2002 implementation  schedule by simply providing more money. For example, according to the  2002 implementation schedule, nine maritime patrol aircraft were to be  delivered by the end of 2005; according to the current contract, none will  be delivered in 2005 and two will be delivered by the end of 2006.  Similarly, the original schedule called for completing 18 123-foot patrol  boat conversions by the end of 2005; according to the current contract, 8  will be completed by the end of 2005. Fourth, the acquisition of some  assets has been delayed for reasons other than funding. For example,  greater than anticipated hull corrosion in the 110 ft. patrol boats has  delayed the conversion of those into 123 footers and delays in the  availability of faster satellite service for legacy cutters has delayed the  delivery of those upgraded legacy cutters. Finally, in keeping with  appropriations conference committee directives for how the additional  amount was to be spent, part of the additional funding went for design of  the offshore patrol cutter, work that, under the original schedule, would  not begin for another 6 to 8 years. This work may speed up acquisition of  these assets, but they were not on the original schedule this early in the  program.
The Coast Guard is currently revising Deepwater’s mission needs  statement in response to increased homeland security requirements  resulting from the terrorist attacks of September 11, 2001. According to  the Coast Guard, in May 2004 it submitted the revised statement to the  Department of Homeland Security’s (DHS) Joint Requirements Council,  which conditionally accepted it until the Deepwater contractor, ICGS,  completes a new estimate of the costs needed to acquire the necessary  functional capabilities resulting from the revised mission needs statement.  The council further directed the Coast Guard to complete the new cost  estimate in order to brief the DHS Investment Review Board in October  2004. Acting as an agent of the DHS, the board will approve any increases  in the Deepwater total ownership cost associated with the revised mission  needs statement and any growth in the Deepwater budget. Specifications  for some specific Deepwater assets—most notably the National Security  Cutter—will be changed in light of the Coast Guard’s added homeland  security responsibilities. Coast Guard officials said the main impact of the  revision would be to close the gaps in Deepwater asset capabilities created  by the expansion of Coast Guard mission requirement after September 11.
Regarding DOD’s assistance to the Coast Guard for Deepwater, the Navy  budgeted $25 million for the Deepwater program in fiscal years 2002-04,  mainly to help outfit the National Security Cutter. The Navy budgeted  these funds to provide capabilities and equipment it regarded as important  for the Coast Guard to have for potential national defense missions that  would be carried out in conjunction with Navy operations.
section_title: Conclusions
paragraphs: The 2002 Deepwater acquisition schedule showed not only the individual  planned phases and interim milestones for designing, testing, and  fabricating assets but also the integrated schedules of critical linkages  between assets. The absence of an up-to-date integrated acquisition  schedule for the Deepwater program is a concern, because it is a symptom  of the larger issues we reported in March 2004 that are related to whether  this complicated acquisition is being adequately managed and whether the  government’s interests are being properly safeguarded. Since the inception  of the unique contracting approach to this project, we have pointed out  that it poses risks, in that it would be expensive to alter and, because of  the unique “systems integrator” approach, does not operate like a  conventional acquisition. The recent disclosure that, just 3 years into the  acquisition, costs have risen by $2.2 billion points to the need for a clear  understanding of what assets are being acquired, when they are being  acquired, and at what cost. This lack of such a current schedule lessens  the Coast Guard’s ability to monitor the contractor’s performance and to  take early action on potential risks before they become problems later in  the program.
The Coast Guard has so far maintained that it is not worth the time and  cost involved to update the acquisition schedule until just before the  award of the next 5-year Deepwater contract, but we disagree. We  recognize that there are costs involved with keeping an acquisition  schedule updated. However, for Department of Defense acquisitions of  such scope, maintaining a current schedule is a fundamental and  necessary practice. Deepwater remains a program in transition, in that the  Coast Guard is currently revising the program’s mission requirements to  include increased homeland security requirements. The major  modifications that may result to key assets make keeping the program on  track that much harder. As evolving mission requirements are translated  into decisions about what assets are needed and what capabilities they  will need to have, it becomes even more imperative that Coast Guard  officials update the acquisition schedule on a more timely basis, so that  budget submissions by the Coast Guard can allow DHS and Congress to  base decisions on accurate information.
section_title: Recommendation for Executive Action
paragraphs: We recommend that the Secretary of Homeland Security direct the  Commandant of the Coast Guard to update the original 2002 Deepwater  acquisition schedule in time to support the fiscal year 2006 Deepwater  budget submission to DHS and Congress and at least once a year  thereafter to support each budget submission. The updated schedule  should include the current status of asset acquisition phases (such as  concept technology and design, system development and demonstration,  and fabrication), interim phase milestones (such as preliminary and  critical design reviews, installation, and testing), and the critical paths  linking the delivery of individual components to particular assets.
section_title: Agency Comments
paragraphs: We provided a draft of this report to DHS and the Coast Guard for their  review and comment. In written comments, which are reproduced in  appendix II, the Coast Guard generally concurred with the findings and  recommendations in the report. The Coast Guard also provided technical  comments, which we incorporated as appropriate.
The Coast Guard, however, did not concur with three areas of discussion.  First, the Coast Guard said that our draft report did not accurately portray  its current acquisition tools and disagreed with our determination that  data within one of those tools, the IMS, was not reliable enough for use in  our report. As we noted in the report, at the time of our review Coast  Guard officials expressed concerns about the reliability of IMS data, such  as out-dated data and less than adequate data input and adjustment, and  told us that they had hired a consultant to address those concerns. For  that reason and with Coast Guard and ICGS agreement on our  methodology, we based our analysis on the same source documents the  Coast Guard uses as inputs to IMS’s lowest, most detailed level. The Coast  Guard stated in its written comments that while not in the form of an  acquisition schedule, IMS’s lower level data are reliable. According to its  written comments, the Coast Guard is making improvements in updating  IMS at all levels.
Second, the Coast Guard said that we did not highlight that delays in the  delivery schedule have been caused by a lack of funding and the  subsequent need to sustain legacy assets rather than a lack of acquisition  schedule updates. The scope of our review was to determine the impact of  the additional $168 million in fiscal year 2004 on returning Deepwater to  its original 2002 schedule, not to determine effects of receiving  appropriations that were less than requested in previous years. However,  in explaining why the $168 million will not return the Deepwater to its  original schedule, we did note that part of the $168 million was needed to  start work delayed from fiscal year 2003, and that the acquisition of some  assets had been delayed due to greater than anticipated hull corrosion in  legacy 110-foot patrol boats causing the delay in converting them to 123- footers.
Finally, we did not intend to imply that the lack of acquisition schedule  updates caused delays in delivery schedule. However, we continue to  believe that not updating an integrated schedule to show the acquisition  linkages between critical assets is a management concern. We believe in  the importance of updating acquisition schedules at least annually not only  as a best practice for managing and overseeing a complex integrated  acquisition such as Deepwater but also as a up-to-date source of  information on which DHS and the Congress can base annual budget  decisions.
As agreed with your office, unless you publicly announce its contents  earlier, we plan no further distribution of this report until 15 days from its  issue date. At that time, we will send copies of this report to the Secretary  of Homeland Security, the Commandant of the Coast Guard, appropriate  congressional committees, and other interested parties. The report will  also be available at no charge on GAO’s Web site at http://www.gao.gov. If  you or your staffs have any questions about this report, please contact me  at (415) 904-2200 or by email at wrightsonm@gao.gov, or Steve Calvo,  Assistant Director, at (206) 287-4839 or by email at calvos@gao.gov. Other  key contributors to this report were Shawn Arbogast, Leo Barbour, David  Best, Michele Fejfar, Paul Francis, Sam Hinojosa, David Hooper, Michele  Mackin, and Stan Stenersen.
section_title: Appendix I: Briefing Slides
subsections: section_title: Table of Contents
section_title: Objectives
subsections: section_title: During the Integrated Deepwater System (Deepwater) program’s first 2 years (fiscal years 2002-03), the total amount of funding available was nearly $125 million less than the Coast Guard had planned. In fiscal year 2004, Congress appropriated an additional $168 million above the President’s request of $500 million to help return Deepwater to its original 2002 acquisition schedule. Our work for congressional requesters has focused on the following: Reviewing the status of the program against the initial acquisition schedule. Determining the impact of the additional $168 million in fiscal year 2004 funding on returning the program to the original 2002 acquisition schedule. Providing information on
paragraphs: the Coast Guard’s status in revising Deepwater’s mission to meet increased homeland security requirements and the amount of funding support the Department of Defense (DOD) has  provided for the Deepwater program for fiscal years 2002-2004.
Interviewed Coast Guard and contractor officials.
Examined delivery task orders and associated statements of work for  individual Deepwater assets to establish what work was actually started,  when it began, and the period of performance for that work; and monthly  status reports of Deepwater program managers assessing the performance  of the work.
Compared the actual start and end dates of work with what was planned in  the original 2002 acquisition schedule.
Compared the original plan’s listing of the work scheduled to begin for each  fiscal year with the work that was actually begun. Interviewed program officials regarding the reliability of data in the  Deepwater integrated master schedule. Interviewed DOD officials and examined Navy budget documents to  determine DOD funding support for Deepwater.
The degree to which the Deepwater program is on track with regard to its  original 2002 acquisition schedule is difficult to determine, because the  Coast Guard has not kept the acquisition schedule updated. Several assets  are experiencing delays and are at risk for being delivered later than  originally planned.
The additional $168 million appropriated in fiscal year 2004 will allow the  Coast Guard to conduct a number of projects that had been delayed or  would not have been funded in fiscal year 2004, but it will not fully return  the program to its original 2002 acquisition schedule.
Additional information on the Deepwater Program.
The Coast Guard submitted a revised Mission Needs Statement to the  Department of Homeland Security in May 2004.
Navy budgeted $25 million in fiscal years 2002-04 for intermediate gun  and combat systems for cutters.
section_title: Background
subsections: section_title: Deepwater is a $17 billion, 20-year acquisition to modernize and/or replace
paragraphs: of over 90 cutters and 200 aircraft used for missions that generally occur  beyond 50 miles from shore but may start at coasts and extend seaward to  wherever the Coast Guard is required to take appropriate action. In June 2002, the Coast Guard awarded a 5-year base contract to  Integrated Coast Guard Systems (ICGS), Inc., to begin the acquisition  phase of the Deepwater program, with five additional 5-year options.
The Coast Guard is scheduled to decide on whether to extend ICGS’s contract by June 2006, 1 year prior to the end of the first 5-year contract  term.
The Coast Guard chose to employ a "system of systems" acquisition  strategy that would replace its aging Deepwater assets with a single,  integrated package of new or modernized assets. ICGS acts as the system integrator to develop and deliver an improved  integrated system of ships, aircraft, unmanned air vehicles, command,  control, communications, computers, intelligence, surveillance and  reconnaissance (C4ISR), and supporting logistics.
Background (cont’d)
ICGS is responsible for designing, constructing, deploying, supporting, and  integrating Deepwater assets. The Coast Guard maintains responsibility for  oversight and overall management of the program.
The Coast Guard uses several management tools to track progress in the  program, such as monthly status reports, Earned Value Management  System (EVMS), and an integrated master schedule.
However, because data reliability with the integrated master schedule has  been an area of concern for the Coast Guard, they are currently working  with a private contractor and ICGS to address these concerns.
Background (cont’d)
GAO recently reported concerns with the Coast Guard’s initial  management of the Deepwater program and the potential for escalating  costs.
Key components needed to manage the Deepwater program and  oversee the system integrator’s performance have not been effectively  implemented. Contract Management: Coast Guard’s Deepwater  Program Needs Increased Attention to Management and Contractor  Oversight, GAO-04-380 (Washington, D.C.: Mar. 9, 2004).
The most significant challenge to the Coast Guard is keeping the Deepwater program on schedule and within planned budget estimates  through a well-managed and adequately funded effort. The Coast  Guard estimates that the project’s cost is now $2.2 billion more than  the initial estimate. Coast Guard: Key Management and Budget  Challenges for Fiscal Year 2005 and Beyond, GAO-04-636T  (Washington, D.C.: Apr. 7, 2004).
section_title: Status of Acquisition Schedule
subsections: section_title: The degree to which the program is on track with regard to its original 2002
paragraphs: acquisition schedule is difficult to determine, because the Coast Guard  does not maintain and update the acquisition schedule. The Coast Guard  cannot readily and reliably present the integrated acquisition status of the  Deepwater program.
The Coast Guard’s reasons for not updating the schedule include:  Updating more regularly is impractical and unnecessary because  Deepwater experiences numerous program changes each year and  keeping track of those changes would consume too much funding,  time, and personnel.
Monthly status reports, EVMS, and other management tools are  adequate for tracking Deepwater’s acquisition.
The Coast Guard intends to update the schedule prior to deciding whether  to extend the first 5-year option to the contractor in 2007.
Status of Acquisition Schedule (cont’d)
Tracking the current integrated schedule on a major government  investments or acquisitions similar to the Deepwater program is important  because identifying potential risks in major acquisitions as early as possible is  important so problems can be avoided or minimized.  The ability to  achieve scheduled events is a key indicator of risk.  cost, schedule, and performance are fundamental to the Congress’s  oversight of major acquisitions.
By law, DOD’s major defense acquisition programs have to report cost,  schedule, and performance updates to the Congress at least annually and  whenever cost and schedule thresholds are breached.  10 U.S.C. Sections 2430, 2432, 2433, and 2435, on major defense  acquisition programs.
section_title: Status of Acquisition Schedule (cont’d)
paragraphs: In practice, schedules on major defense acquisitions are continually  monitored and reported to DOD management on a quarterly basis.
DOD Practice: Interim Defense Acquisition Guidebook (October 2002).
GAO best practices reports: Best Practices: Better Matching of Needs  and Resources will Lead to Better Weapon System Outcomes, GAO- 01-288 (Mar. 8, 2001); Defense Acquisitions: DOD’s Revised Policy  Emphasizes Best Practices, but More Controls are Needed, GAO 04- 53 (Nov. 10, 2003); and Defense Acquisitions: Assessments of Major  Weapons Programs, GAO-04-248 (Mar. 31, 2004).
section_title: Status of Acquisition Schedule (cont’d)
subsections: section_title: Although Coast Guard officials indicated that the management tools they use are sufficient for tracking delivery dates throughout the course of the acquisition, we found these tools could not provide a ready and reliable picture of the current integrated acquisition schedule.
paragraphs: They only only track the schedules of individual assets at the lowest, most  detailed level and not at the integrated level.
The integrated master schedule has data reliability problems.
The monthly status reports do not translate the progress of individual assets  into an overall Deepwater acquisition schedule. A February 2004 status report  noted that because there was no accurate overall integrated schedule for the  command and control design, the linkages with the development of other  assets were largely unknown.
section_title: While the Coast Guard could not provide an updated integrated acquisition
paragraphs: schedule, our analysis showed that a number of key Deepwater assets  would be delivered later than originally scheduled.
Status of Acquisition Schedules for  Selected Assets (cont’d)
Part of the additional $168 million in funding allowed the Coast Guard to  start work delayed from fiscal year 2003 or to start work originally   scheduled for fiscal year 2004.
Atlantic area Pacific area Greater antilles section, San Juan, P.R.
section_title: Impact of Additional Funding (cont’d)
subsections: section_title: However, for several reasons, the additional $168 million in fiscal year
paragraphs: 2004 will not fully return Deepwater to its original 2002 acquisition  schedule.
Reason 1: A cumulative shortfall of $39 million still exists.
Reason 2: The additional amount did not fund all work planned for  fiscal year 2004; some will be delayed to fiscal year 2005 or beyond.
Type of asset or work delayed to fiscal year 2005 or beyond C4ISR Modification of 270 Class Cutter ships 10,13 CAMS CC-2 Low Rate of Initial Production COMMSTA CC-2 Low Rate of Initial Production (CSTA-01,02,03,04,05,06)
Production and Deployment for Major Modification  of 110/123 Class Patrol Cutter Lot 5 (follow ships 13-20)
Coast Guard Air Station (CGAS) Production and Deployment Aircraft Repair and Supply Center (AR&SC) Production and Deployment Aircraft Training Center (ATC) Production and Deployment Aviation Technical Training Center (ATTC) Production and Deployment Production and Deployment of MPA Low rate of initial production (aircraft 7-9)
Impact of Additional Funding (cont’d)
Reason 3: Some assets are so far behind schedule that it is impossible to  return them to their original schedule.
Nine maritime patrol aircraft were originally planned for delivery by the  end of 2005; current plans show 2 to be delivered by the end of 2006.
Eighteen conversions of 110-foot patrol boats to 123 feet were  originally planned for delivery by the end of 2005; current plans show 8  to be completed by the end of 2005.
section_title: Impact of Additional Funding (cont’d)
subsections: section_title: Reason 4: Acquisition of some assets has been delayed for reasons other
paragraphs: than funding.
Greater than anticipated hull corrosion in the 110-foot patrol boats has  delayed their conversion to 123 feet and delivery several months.
Legacy cutters are scheduled to receive a C4ISR upgrade of higher  speed International Maritime Satellite service.  However, the  availability of the higher speed service has been delayed several times  from early 2003 to the Coast Guard’s current projection of June 2004.
section_title: Impact of Additional Funding (cont’d)
subsections: section_title: Reason 5: Some of the additional funding went for a project originally not
paragraphs: scheduled to begin for several years.
In keeping with fiscal year 2004 appropriations conference committee  directives for how the additional amount was to be spent, $20 million  went to begin the design phase for the Offshore Patrol Cutter (OPC).
The Coast Guard had planned to begin the design phase about 2010 for delivery of the first OPC in 2012; current estimate is that the  acquisition schedule has been accelerated by several years.
section_title: Additional Information on the Deepwater Program
paragraphs: Incorporation of new homeland security requirements into the Deepwater  mission needs statement is still under way. In May 2004, the DHS Joint  Requirements Council conditionally accepted it and directed the Coast  Guard to develop new total ownership cost estimates for submission to and  approval by the DHS Investment Review Board in October 2004.
Coast Guard officials said the revision’s main impact will be an increase in  number of assets.  RAND concluded in an April 2004 study that the Coast  Guard probably needs twice as many cutters and 50 percent more aircraft.   In the interim, some requirements changes have been made to individual  assets, mainly the National Security Cutter.
Operating requirement for chemical-biological-radiological-nuclear defense  capabilities was expanded to enable the cutter to operate in a contaminated  environment, not just pass through it.
Size of flight deck enlarged to accommodate Navy, Army, and Customs and  Border Protection Agency models of the H-60 helicopter.
Shipboard sensitive compartmented information facility added for collection and  use of intelligence.
section_title: Additional Information on the Deepwater Program (cont’d)
subsections: section_title: Navy budgeted $25.1 million in fiscal years 2002-04 to support equipment
paragraphs: used for Deepwater program.  $12.6 million in fiscal years 2002-03 was for testing/evaluating an  intermediate gun system for the National Security Cutter (and possibly  other cutters).  $12.5 million in fiscal year 2004 was for combat systems suites for the  National Security Cutter.
The Navy did not transfer the $25.1 million to the Coast Guard but will  transfer the resulting equipment. Through a 1987 agreement, the Navy  provides to the Coast Guard all Navy-owned, military readiness  equipment and associated support materials that the Navy deems  necessary to enable the Coast Guard to carry out assigned missions  while operating with the Navy.  Upon declaration of war, or when the  President directs, the Coast Guard operates as a service of the Navy  and is subject to the orders of the Secretary of the Navy.
section_title: Conclusions
subsections: section_title: We disagree with the Coast Guard that updating the acquisition schedule is
paragraphs: not worth the time and cost involved.
Absence of an up-to-date integrated acquisition schedule for Deepwater is  a concern, because it is a symptom of the larger issues related to whether  this complicated acquisition is being adequately managed.
The recent disclosure by the Coast Guard that Deepwater costs have risen  by an estimated $2.2 billion points to the need for a clear understanding of  what is being acquired, when it is being acquired, and at what cost.
Maintaining a current integrated schedule for a DOD acquisition of such  scope is a fundamental and necessary practice.
Evolving mission requirements and the need to evaluate contractor  performance for contract renewal heighten need for timely and accurate  information so the Coast Guard and Congress can base decisions on  accurate information.
We recommend the Secretary of Homeland Security direct the  Commandant of the Coast Guard to update the original 2002 Deepwater  acquisition schedule in time to support the fiscal year 2006 Deepwater  budget submission to the Department of Homeland Security and Congress  and at least once a year thereafter to support each budget submission.   The updated schedule should include the current status of asset acquisition phases (such as concept  technology and design, system development and demonstration, and fabrication); interim phase milestones (such as preliminary and critical design  reviews, installation, and testing); and  the critical paths linking the delivery of individual components to  particular assets.
section_title: Appendix II: Coast Guard’s Comments