Coast Guard: Observations on the Fiscal Year 2010 Budget and Related Performance and Management Challenges
Published: 2009-07-07T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The U.S. Coast Guard, a component of the Department of Homeland Security (DHS), conducts 11 statutory missions that range from marine safety to defense readiness. To enhance mission performance, the Coast Guard is implementing a modernization program to update its command structure, support systems, and business practices, while continuing the Deepwater program--the acquisition program to replace or upgrade its fleet of vessels and aircraft. This testimony discusses the Coast Guard's (1) fiscal year 2010 budget, (2) mission performance in fiscal year 2008, the most recent year for which statistics are available; and (3) challenges in managing its modernization and acquisition programs and workforce planning. This testimony is based on GAO products issued in 2009 (including GAO-09-530R and GAO-09-620T) and other GAO products issued over the past 11 years--with selected updates in June 2009--and ongoing GAO work regarding the Coast Guard's newest vessel, the National Security Cutter. Also, GAO analyzed budget and mission-performance documents and interviewed Coast Guard officials.
section_title: What GAO Found
paragraphs: The Coast Guard's fiscal year 2010 budget request totals $9.7 billion, an increase of 4.2 percent over its fiscal year 2009 enacted budget. Of the total requested, about $6.6 billion (or 67 percent) is for operating expenses--the primary appropriation account that finances Coast Guard activities, including operating and maintaining multipurpose vessels, aircraft, and shore units. This account, in comparing the 2010 budget request to the 2009 enacted budget, reflects an increase of $361 million (about 6 percent). The next two largest accounts in the 2010 budget request, at about $1.4 billion each, are (1) acquisition, construction, and improvements and (2) retired pay--with each representing about 14 percent of the Coast Guard's total request. The retired pay account--with an increase of about $125 million in the 2010 budget request compared to the 2009 enacted budget--is second only to the operating expenses account in reference to absolute amount increases, but retired pay reflects the highest percentage increase (about 10 percent) of all accounts. Regarding performance of its 11 statutory missions in fiscal year 2008, the Coast Guard reported that it fully met goals for 5 missions, partially met goals for 3 missions, and did not meet goals for 3 missions. One of the fully met goals involved drug interdiction. Specifically, for cocaine being shipped to the United States via non-commercial means, the Coast Guard reported achieving a removal rate of about 34 percent compared to the goal of at least 28 percent. Search and rescue was a mission with partially met goals. The Coast Guard reported that it met one goal (saving at least 76 percent of people from imminent danger in the maritime environment) but narrowly missed a related goal (saving at least 87 percent of mariners in imminent danger) by achieving a success rate of about 84 percent. For missions with unmet goals, the Coast Guard reported falling substantially short of performance targets for only one mission--defense readiness. The Coast Guard reported meeting designated combat readiness levels 56 percent of the time compared to the goal of 100 percent. The Coast Guard continues to face several management challenges. For example, GAO reported in June 2009 that although the Coast Guard has taken steps to monitor the progress of the modernization program, development of performance measures remains in the early stages with no time frame specified for completion. Also, as GAO reported in April 2009, although the Coast Guard has assumed the lead role for managing the Deepwater acquisition program, it has not always adhered to procurement processes, and its budget submissions to Congress do not include detailed cost estimates. GAO also reported that the Coast Guard faces challenges in workforce planning, including difficulties in hiring and retaining qualified acquisition personnel. Further, GAO's ongoing work has noted that delays associated with the Coast Guard's newest vessel, the National Security Cutter, are projected to result in the loss of thousands of cutter operational days for conducting missions through 2017. The Coast Guard is working to manage this operational challenge using various mitigation strategies.

section_title: Letter
paragraphs: I am pleased to be here today to discuss the Coast Guard’s fiscal year 2010  budget, mission performance, and related management challenges. For  many years, we have provided Congress with information and  observations on the Coast Guard’s budget and related issues. Consistent  with this approach, this statement will include information from our prior  and ongoing work to help provide perspective as appropriate. As you  know, the Coast Guard has grown considerably since 2002 to meet new  homeland security missions while continuing to carry out its traditional  missions such as marine safety and search and rescue operations. In  addition to a substantial budget increase over these years, the Coast Guard  has faced a myriad of new management challenges, which we have  identified in previous reports.
To help perform its missions, the Coast Guard is currently implementing  several important programs, including an effort to modernize its command  structure and mission-support processes, while continuing the Deepwater  program—the long-term, multibillion-dollar acquisition program to  upgrade or replace the service’s aging fleet of vessels and aircraft. Given  the history of performance and management problems associated with the  Deepwater program, such as cost breaches, schedule slips, and design  defects, the Coast Guard has initiated several major changes to its  acquisition efforts that present a new set of challenges that must be  managed effectively.  the Coast Guard’s budget for fiscal year 2010, and additional funds  received under the American Recovery and Reinvestment Act of  2009 (Recovery Act);  the Coast Guard’s mission performance in fiscal year 2008, the most  recent year for which statistics are available; and    various challenges confronting the Coast Guard in managing its  modernization program, workforce planning efforts, and large-scale  acquisition projects.
This statement is based in part on our prior work completed over the past  11 years—with selected updates in June 2009—that collectively address a  number of the Coast Guard’s programmatic and management initiatives.  The scope of our prior work included reviews of program documents,  such as the Coast Guard’s Blueprint for Acquisition Reform; analysis of  applicable program databases; and interviews with Coast Guard officials at  headquarters and field units in domestic and international locations. In  assessing the Coast Guard’s budget request for fiscal year 2010, we  reviewed the President’s budget request for that year and related Coast  Guard documents, including the U.S. Coast Guard Posture Statement,  issued in May 2009. The scope of our review did not include evaluating  whether the proposed funding levels were appropriate for the Coast  Guard’s stated needs. We also reviewed the Coast Guard’s most recent  performance report, which presents mission-specific statistics for fiscal  year 2008. In identifying and discussing various management challenges  confronting the Coast Guard, we focused especially on the information  presented in our recently issued products regarding the service’s  modernization program and the large-scale Deepwater acquisition  program. Also, this statement is based partly on the results of our ongoing  work for the Senate and House Appropriations’ Subcommittees on  Homeland Security. Our report on this ongoing work—which involves the  Coast Guard’s newest vessel, the National Security Cutter—is anticipated  to be issued later in the summer of 2009.
We conducted the work for this statement from June 2009 to July 2009, as  well as our ongoing work, 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: A component of DHS, the Coast Guard is a multimission military service  that serves as the principal federal agency responsible for maritime safety,  security, and environmental stewardship. In addition to being one of the  five Armed Services of the United States, the Coast Guard serves as a law  enforcement and regulatory agency with broad domestic authorities. In its  most recent Posture Statement, the Coast Guard reported having nearly  49,900 full-time positions—about 42,600 military and 7,300 civilians. In  addition, the service reported that it has about 8,100 reservists who  support the national military strategy or provide additional operational  support or surge capacity during times of emergency, such as natural  disasters. The Coast Guard also reported that it utilizes the services of  approximately 29,000 volunteer auxiliary personnel who conduct a wide  array of activities, ranging from search and rescue to boating education.  The Coast Guard has responsibilities that fall under two broad mission  categories—homeland security and non-homeland security. Within these  categories, the Coast Guard’s primary activities are further divided into 11  statutory missions, as shown in table 1.
For each of these 11 missions, the Coast Guard has developed  performance measures to communicate agency performance and provide  information for the budgeting process to Congress, other policymakers,  and taxpayers. Each year, the Coast Guard undergoes a process to assess  performance and establish performance targets for the subsequent year. In  May 2009, the Coast Guard published its most recent performance report,  which presents the service’s accomplishments for fiscal year 2008.
To help carry out its missions, the Coast Guard has a large-scale  acquisition program, called Deepwater, under way to modernize its fleet.
The Deepwater program now includes projects to build or modernize five  classes each of vessels and aircraft, as well as to procure other capabilities  such as improved command, control, communications, computer,  intelligence, surveillance, and reconnaissance systems. To carry out these  acquisitions, the Coast Guard awarded a contract in June 2002 to  Integrated Coast Guard Systems (ICGS), a joint venture formed by  Lockheed Martin Corporation and Northrop Grumman Ship Systems, to  serve as a systems integrator. However, in April 2007, the Coast Guard  acknowledged it had relied too heavily on contractors. This reliance,  among other concerns, contributed to an inability to control costs. As a  result, the Coast Guard initiated several major changes to the acquisition  approach to Deepwater, the key one being that the Coast Guard would  take over the lead role in systems integration from ICGS.
section_title: Coast Guard Budget Request for Fiscal Year 2010 Is 4.2 Percent Higher than the Previous Year’s Enacted Budget, but Long-Term Budget Outlook Remains Uncertain
paragraphs: The Coast Guard’s budget request for fiscal year 2010 is $9.73 billion,  which is approximately $393 million (or 4.2 percent) more than the  service’s enacted budget for fiscal year 2009 (see table 2). These  calculations do not include either the supplemental funding of $242.5  million that the Coast Guard reported receiving in fiscal year 2009 or the  $240 million provided by the Recovery Act (discussed below). When the  supplemental and the Recovery Act funding are taken into account and  added to the fiscal year 2009 enacted budget, the calculations reflect a  decrease of about 1 percent from fiscal year 2009 to fiscal year 2010.
Of the $9.73 billion requested for fiscal year 2010, about $6.6 billion, or  approximately 67 percent, is for operating expenses (OE). The OE account  is the primary appropriation that finances the Coast Guard’s activities,  including operating and maintaining multipurpose vessels, aircraft, and  shore units. In comparing the 2010 budget request to the 2009 enacted  budget, funding for the OE account represents an increase of $361 million  (or about 6 percent). The next two largest accounts in the fiscal year 2010  budget request—each with funding at about $1.4 billion—are the  acquisition, construction, and improvements account (AC&I) and the  retired pay account. Collectively, these two accounts represent about 28  percent of the Coast Guard’s total budget request for fiscal year 2010. In  terms of percentage increases in comparing the 2010 budget request to the  2009 enacted budget, the retired pay account reflects the highest  percentage increase (about 10 percent) of all accounts.
According to the Coast Guard, some of the key initiatives for fiscal year  2010 include increasing the number of marine inspectors and investigative  officers, and supporting financial management improvements, among  others. Furthermore, as a result of the emergence of the U.S. Global  Positioning System (a space-based system of satellites) as an aid to  navigation, the long-range radio-navigation system known as LORAN-C (a  terrestrial-based system operated by the Coast Guard) is expected to be  terminated in fiscal year 2010. This termination, according to the Coast  Guard, is projected to result in a savings of $36 million in fiscal year 2010  and additional savings of $154 million over the following 4 years.
Although the Coast Guard receives funding by appropriation account  rather than by individual missions, the Coast Guard provides an estimated  comparison of homeland security versus non-homeland security funding  as part of its annual budget request. Based on these estimates, the Coast  Guard’s fiscal year 2010 budget request for homeland security missions  represents approximately 36 percent of the service’s overall budget, with  the non-homeland security funding representing approximately 64 percent.  However, as a multimission agency, the Coast Guard notes that it may  conduct multiple mission activities simultaneously. For example, a  multimission asset conducting a security escort is also monitoring safety  within the harbor and could potentially be diverted to conduct a search  and rescue case. As a result, it is difficult to accurately detail the level of  resources dedicated to each mission. Figure 1 shows the Coast Guard’s  estimated funding levels for fiscal year 2010 by each statutory mission.
In addition to the Coast Guard’s enacted budget for fiscal year 2009, the  Coast Guard has received $240 million of funding under the Recovery Act.  According to the Coast Guard, the service’s Recovery Act funds are to be  allocated as follows:    $142 million is to be used to fund bridge alteration projects in four  states—the Mobile Bridge in Hurricane, Alabama; the EJ&E Bridge  in Devine, Illinois; the Burlington Bridge in Burlington, Iowa; and the  Galveston Causeway Railroad Bridge in Galveston, Texas.    $88 million in Recovery Act funds is to support shore infrastructure  projects—construction of personnel housing, boat moorings, and  other improvements—in Alaska, Delaware, North Carolina, Oregon,  Virginia, and Washington.    $10 million is to help upgrade or replace worn or obsolete  components on the Coast Guard’s fleet of 12 High Endurance  Cutters. The 40-plus-year-old cutters benefiting from the Recovery  Act-funded projects are based in Kodiak, Alaska; Alameda and San  Diego, California; Honolulu, Hawaii; Charleston, South Carolina; and  Seattle, Washington.
While the Coast Guard’s budget has increased considerably since 2003, the  long-term budget outlook for the agency is uncertain. From fiscal year  2003 through fiscal year 2009, the Coast Guard’s budget increased an  average of 5.5 percent per year. However, this administration’s current  budget projections indicate that the DHS annual budget is expected to  remain constant or decrease over the next 10 years. It is important to note  that these budget projections are nominal figures, which are not adjusted  or normalized for inflation. Thus, if inflationary pressures arise in future  years, budgetary resources available to DHS could be further strained.  Given the uncertainty of future budgets, it remains important for the Coast  Guard to ensure that limited resources are utilized most effectively to  successfully manage existing challenges and emerging needs. For  example, as we reported in March 2008, affordability of the Deepwater  program has been an ongoing concern for many years, and will continue to  be a major challenge to the Coast Guard given the other demands upon the  agency for both capital and operations spending. The increasing demand  for Coast Guard resources in the arctic region also presents an emerging  challenge that will need to be balanced against competing priorities. For  example, two of the Coast Guard’s three polar icebreakers are more than  30 years old and, and in 2008 the Coast Guard estimated that it could cost  between $800 million to $925 million dollars per ship to procure new  replacement ships. Such needs could pose challenges to the Coast Guard  in an era of increased budget constraints.
section_title: Coast Guard Reported on Several New Performance Measures for Fiscal Year 2008
paragraphs: Each year, the Coast Guard conducts a process of performance evaluation,  improvement planning, and target setting for the upcoming year.  According to the Coast Guard, this process helps ensure that the  performance measures and associated targets adequately represent  desired Coast Guard mission outcomes, are reflective of key drivers and  trends, and meet applicable standards for federal performance accounting.  In addition, as part of a larger DHS effort, the Coast Guard conducted a  more comprehensive evaluation of its performance measures in fiscal year  2008. This evaluation process included input on potential improvements to  the Coast Guard’s performance measures from the DHS Office of Program  Analysis and Evaluation and us.
Consequently, the Coast Guard initiated a number of changes to its  performance reporting for fiscal year 2008 to better capture the breadth of  key mission activities and the results achieved. Our review of the Coast  Guard’s performance reporting for fiscal year 2008 indicates that the Coast  Guard revised or broadened several existing measures. As a result, the  Coast Guard reported on a total of 21 primary performance measures for  fiscal year 2008—3 homeland security mission measures and 18 non- homeland security mission measures. This represents a substantial change  from previous years, in which the Coast Guard reported on a single  performance measure for each of the service’s 11 statutory missions (see  app. I for a list of the primary performance measures and reported  performance results for fiscal years 2004 through 2008). One of the  principal changes involved the disaggregation of existing measures into  several distinct component measures. For example, in prior years, the  marine safety mission was assessed using one primary measure—the 5- year average annual mariner, passenger, and recreational boating deaths  and injuries. However, the Coast Guard reported on six different measures  for the marine safety mission in fiscal year 2008—annual deaths and  injuries for each of three separate categories of individuals (commercial  mariners, commercial passengers, and recreational boaters) as well as 5- year averages of each of these three categories.
As indicated in table 3, the Coast Guard reported meeting 15 of its 21  performance targets in fiscal year 2008.
Also, table 3 shows that the Coast Guard reported meeting all performance  targets for 5 of the 11 statutory missions—ports, waterways, and coastal  security; drug interdiction; marine environmental protection; other law  enforcement; and ice operations. Regarding the drug interdiction mission,  for example, the fiscal year goal was to achieve a removal rate of at least  28 percent for cocaine being shipped to the United States via non- commercial means. The Coast Guard reported achieving a removal rate of  34 percent.
For another 3 of the 11 statutory missions—aids to navigation, search and  rescue, and marine safety—the Coast Guard reported partially meeting  performance targets. For each of these missions, the Coast Guard did not  meet at least one performance target among the suite of different  measures used to assess mission performance. For example, regarding the  search and rescue mission, which has two performance goals, the Coast  Guard reported that one goal was met (saving at least 76 percent of people  from imminent danger in the maritime environment), but the other goal  (saving at least 87 percent of mariners in imminent danger) was narrowly  missed, as reflected by a success rate of about 84 percent.
For the other 3 statutory missions—defense readiness, migrant  interdiction, and living marine resources—the Coast Guard reported that it  did not meet fiscal year 2008 performance targets. However, for these  missions, the Coast Guard reported falling substantially short of its  performance target for only one mission—defense readiness. Although  performance for this mission rose slightly—from 51 percent in fiscal year  2007 to 56 percent in fiscal year 2008—the Coast Guard’s goal was to meet  designated combat readiness levels 100 percent of the time. However, the  Coast Guard remains optimistic that the relevant systems, personnel, and  training issues—which are being addressed in part by the Deepwater  acquisition program—will result in enhanced capability for all missions,  including defense readiness. Yet, the Coast Guard further noted in its  annual performance report that it is reviewing the defense readiness  metrics to determine what potential changes, if any, need to be made.
In comparison, the Coast Guard met targets for 6 of its 11 statutory  missions in fiscal year 2007. The overall reduction in the number of  missions meeting performance targets in fiscal year 2008 is largely because  of the inability of the Coast Guard to meet its performance target for the  migrant interdiction mission. However, this may be attributed, in part, to  the new measure used for the migrant interdiction mission for fiscal year  2008. Regarding the three statutory missions whose performance targets  were not met, the Coast Guard’s reported performance generally remained  steady in fiscal year 2008 compared with previous years, and the Coast  Guard was relatively close to meeting its performance targets. For  example, for the migrant interdiction and living marine resources  missions, the Coast Guard reported achieving over 96 and 98 percent of  the respective performance targets.
section_title: The Ongoing Modernization Program, Workforce Planning Issues, and Large-Scale Acquisitions Present Management Challenges
paragraphs: The Coast Guard faces a number of different management challenges that  we have identified in prior work. Highlighted below are four such  challenges that the Coast Guard faces as it proceeds with efforts to  modernize its organization, address shifting workforce needs, manage the  Deepwater acquisition program, and mitigate operational issues caused by  delays in the Deepwater program.
subsections: section_title: The Coast Guard Has an Ongoing Modernization Program, but Work Remains to Develop Performance Metrics
paragraphs: The Coast Guard is currently undertaking a major effort—referred to as  the modernization program—which is intended to improve mission  execution by updating the service’s command structure, support systems,  and business practices. The modernization program is specifically focused  on transforming or realigning the service’s command structure from a  geographically bifurcated structure into a functionally integrated  structure—as well as updating mission support systems, such as  maintenance, logistics, financial management, human resources,  acquisitions, and information technology.
The Coast Guard has several efforts under way or planned for monitoring  the progress of the modernization program and identifying needed  improvements. For example, the Coast Guard has established timelines  that identify the sequencing and target dates for key actions related to the  modernization program consistent with project management principles.  Our prior work has shown that such action-oriented goals along with  associated timelines and milestones are critical to successful  organizational transformation efforts and are necessary to track an  organization’s progress toward its goals. However, as we reported in June  2009, the Coast Guard’s efforts to develop applicable performance  measures to evaluate results of the modernization program remain in the  early stages. For example, the Coast Guard has begun to identify key  internal activities and outputs required for mission execution within the  realigned organizational structure. This effort, expected to be completed  in summer 2009, is intended as a preliminary step before identifying  associated business metrics that can be used to evaluate how the  modernization program has impacted the delivery of core services and  products. However, Coast Guard officials were still in the process of  developing a specific time frame for the estimated completion of this next  step. As outlined in the Government Performance and Results Act of 1993  and Standards for Internal Control in the Federal Government,  performance measures are important to reinforce the connection between  long-term strategic goals and the day-to-day activities of management and  staff.
In April 2008, to evaluate aspects of the modernization program and  identify potential improvements, the Coast Guard engaged the National  Academy of Public Administration (NAPA) to conduct a third-party,  independent review. After completing its review, NAPA provided a report  to the Coast Guard in April 2009. The report recognized that the Coast  Guard’s planned organizational realignment “makes logical sense” and that  the service’s leadership “is collectively engaged” to improve mission  execution and support-related business processes. NAPA cautioned,  however, that the Coast Guard remains in the early stages of its  organizational transformation. To help mitigate potential implementation  risks and facilitate a successful modernization process, NAPA  recommended, among other steps, that the Coast Guard develop a clear  quantifiable business case for modernization, measurement tools, and a  process of metrics assessment to track modernization progress and the  effects on mission execution.
Similar to GAO’s findings, NAPA concluded that one of the key challenges  faced by the Coast Guard is the development of adequate measures to  assess the progress and outcomes of the modernization program. NAPA  noted that such measures are important to ensure that the impacts of  modernization are aligned with intended objectives and that they provide  an opportunity to “course-correct” as necessary. NAPA further noted that  the development of appropriate measurement tools will help to provide  quantifiable support for the modernization business case and facilitate  stakeholder buy-in. After receiving NAPA’s report, the Coast Guard  established a new organizational entity—the Coast Guard Enterprise  Strategy, Management and Doctrine Oversight Directorate. Among other  functions, this directorate is to be responsible for strategic analysis,  performance management, and ongoing coordination of change initiatives  within the modernization effort and beyond.
section_title: Workforce Planning Presents Challenges for the Coast Guard
paragraphs: Generally, it has been noted by Congress and supported by our past  reviews that the Coast Guard faces significant challenges in assessing  personnel needs and providing a workforce to meet the increased tempo  of maritime security missions as well as to conduct traditional marine  safety missions such as search and rescue, aids to navigation, vessel  safety, and domestic ice breaking. Workforce planning challenges are  further exacerbated by the increasingly complex and technologically  advanced job performance requirements of the Coast Guard’s missions.  Workforce planning challenges include managing the assignments of  military personnel who are subject to being rotated among billets and  multiple missions. As we have previously reported, rotation policies can  affect, for example, the Coast Guard’s ability to develop professional  expertise in its personnel and to retain qualified personnel as they  progress in their careers.
In October 2008, the Coast Guard received congressional direction to  develop a workforce plan that would identify the staffing levels necessary  for active duty and reserve military members, as well as for civilian  employees, to carry out all Coast Guard missions. The workforce plan is to  include (1) a gap analysis of the mission areas that continue to need  resources and the type of personnel necessary to address those needs;   (2) a strategy, including funding, milestones, and a timeline for addressing  personnel gaps for each category of employee; (3) specific strategies for  recruiting individuals for hard-to-fill positions; and (4) any additional  authorities and resources necessary to address staffing requirements. In  response, the Coast Guard plans to provide Congress with a workforce  plan this summer. As part of our ongoing work for the House  Transportation and Infrastructure Committee, we plan to review the Coast  Guard’s workforce plan. The scope of our work includes assessing  whether the Coast Guard’s workforce plan comports with the parameters  set out by DHS guidanceand contains the elements that we previously  reported as being essential for effective workforce plans. Our scope will  also include assessing the Coast Guard’s related workforce initiatives,  such as the Sector Staffing Model and the Officer Specialty Management  System.
As an example of its workforce planning challenges, the Coast Guard cites  continued difficulties in hiring and retaining qualified acquisition  personnel—challenges that pose a risk to the successful execution of the  service’s acquisition programs. According to Coast Guard human capital  officials, the service has funding for 855 acquisition-program personnel  (military and civilian personnel) but has filled 717 of these positions,  leaving 16 percent of the positions unfilled, as of April 2009. The Coast  Guard has identified some of these unfilled positions as core to the  acquisition workforce, such as contracting officers and specialists,  program management support staff, and engineering and technical  specialists.
In addition, the Coast Guard has begun to address several workforce  planning challenges raised by Congress related to its marine safety  mission. In November 2008, the Coast Guard published the U.S. Coast  Guard Marine Safety Performance Plan FY2009-2014, which is designed to  reduce maritime casualties, facilitate commerce, improve program  processes and management, and improve human resource capabilities.  The Coast Guard recognized that marine safety inspectors and  investigators need increased competency to fulfill this mission. The plan  sets out specific objectives, goals, and courses of action to improve this  competency by building capacity of inspectors and investigators, adding  civilian positions, creating centers of expertise specific to marine safety,  and expanding opportunities for training in marine safety. As noted, the  challenge for the Coast Guard is to successfully implement this plan, along  with the others we have described above.
section_title: The Coast Guard Has Taken Steps to Become the Deepwater Systems Integrator, but Some Concerns Remain Regarding Procurement Processes and Cost Reporting
paragraphs: In addition to workforce planning challenges, the Coast Guard faces other  acquisition-related challenges in managing the Deepwater program. The  Coast Guard has taken steps to become the systems integrator for the  Deepwater program and, as such, is responsible for planning, organizing,  and integrating the individual assets into a system-of-systems to meet the  service’s requirements. First, the Coast Guard has reduced the scope of  work performed by ICGS and has assigned those functions to Coast  Guard stakeholders. For example, in March 2009, the Coast Guard issued a  task order to ICGS limited to tasks such as data management and quality  assurance for assets currently under contract with ICGS. The Coast Guard  has no plans to award additional orders to ICGS for systems integrator  functions when this task order expires in February 2011. Second, as part  of its system integration responsibilities, the Coast Guard has initiated a  fundamental reassessment of the capabilities, number, and mix of assets it  needs to fulfill its Deepwater missions by undertaking a “fleet mix  analysis.” The goals of this study include validating mission performance  requirements and revisiting the number and mix of all assets that are part  of the Deepwater program. According to the Coast Guard, it hopes to  complete this study later this summer. Third, at the individual Deepwater  asset level, the Coast Guard has improved and begun to apply the  disciplined management process found in its Major Systems Acquisition  Manual, which requires documentation and approval of acquisition  decisions at key points in a program’s life-cycle by designated officials at  high levels. However, as we reported in April 2009, the Coast Guard did  not meet its goal of complete adherence to this process for all Deepwater  assets by the second quarter of fiscal year 2009. For example, key  acquisition management activities—such as operational requirements  documents and test plans—are not in place for assets with contracts  recently awarded or in production, placing the Coast Guard at risk of cost  overruns or schedule slippages. In the meantime, as we reported in April  2009, the Coast Guard continues with production of certain assets and  award of new contracts in light of what it views as pressing operational  needs.
Since the establishment of the $24.2 billion baseline estimate for the  Deepwater program in 2007, the anticipated cost, schedules, and  capabilities of many of the Deepwater assets have changed, in part  because of the Coast Guard’s increased insight into what it is buying.  Coast Guard officials stated that the original baseline was intended to  establish cost, schedule, and operational requirements as a whole, which  were then allocated to the major assets comprising the Deepwater  program. As a result, the baseline figure did not reflect a traditional cost  estimate, which generally assesses costs at the asset level, but rather the  overall anticipated costs as determined by the contractor. However, as the  Coast Guard has assumed greater responsibility for management of the  Deepwater program, it has begun to improve its understanding of costs by  developing its own cost baselines for individual assets using traditional  cost estimating procedures and assumptions. As a result of these revised  baselines, the Coast Guard has determined that some of the assets it is  procuring may cost more than anticipated. As we reported in April 2009,  information showed that the total cost of the program may grow by $2.1  billion. As more baselines for other assets are approved by DHS, further  cost growth may become apparent. These cost increases present the Coast  Guard with additional challenges involving potential tradeoffs associated  with quantity or capability reductions for Deepwater assets. In addition,  our April 2009 testimony noted that while the Coast Guard plans to update  its annual budget requests with asset-based cost information, the current  structure of its budget submission to Congress does not include certain  details at the asset level, such as estimates of total costs and total numbers  to be procured.
In our previous reports on the Deepwater program, we have made a  number of recommendations to improve the Coast Guard’s management of  the program. The Coast Guard has implemented or is in the process of  implementing these recommendations.
section_title: Problems in Deepwater Management and Oversight Have Led to Delivery Delays and Other Operational Challenges That the Coast Guard Is Working to Overcome
paragraphs: Other management challenges associated with the Deepwater program  have operational or mission performance implications for the Coast  Guard. Our prior reports and testimonies have identified problems with  management and oversight of the Deepwater program that have led to  delivery delays and other operational challenges for certain assets— particularly (1) patrol boats and their anticipated replacements, the Fast  Response Cutters and (2) and the National Security Cutters. The Coast  Guard is working to overcome these issues, as discussed below.
As we reported in June 2008, under the original (2002) Deepwater  implementation plan, all 49 of the Coast Guard’s 110-foot patrol boats were  to be converted into 123-foot patrol boats with increased capabilities as a  bridging strategy until their replacement vessel (the Fast Response Cutter)  became operational. Conversion of the first eight 110-foot patrol boats  proved unsuccessful, however, and effective November 2006, the Coast  Guard decided to remove these vessels from service and accelerate the  design and delivery of the replacement Fast Response Cutters. The  removal from service of the eight converted patrol boats in 2006 created  operational challenges by reducing potential patrol boat availability by  20,000 annual operational hours. For example, fewer patrol boats  available on the water may affect the level of deterrence provided as part  of homeland security missions and reduce the Coast Guard’s ability to  surge during periods of high demand, such as may occur during missions  to interdict illegal drugs and undocumented migrants.
To mitigate the loss of these patrol boats and their associated operational  hours in the near term, the Coast Guard implemented a number of  strategies beginning in fiscal year 2007. For example, the Coast Guard  began using the crews from the eight patrol boats removed from service to  augment the crews of eight other patrol boats, thereby providing two  crews that can alternate time operating each of the eight patrol boats (i.e.,  double-crewing). According to Coast Guard officials, additional strategies  employed by the Coast Guard that are still in use include increasing the  operational hours of 87-foot patrol boats and acquiring four new 87-foot  patrol boats, among others. To help fill the longer-term patrol boat  operational gap, Coast Guard officials are pursuing the acquisition of a  commercially available Fast Response Cutter. The first of these cutters is  scheduled to be delivered in early fiscal year 2011, and the Coast Guard  intends to acquire a total of 12 by early fiscal year 2013. While the contract  is for the design and production of up to 34 cutters, the Coast Guard plans  to assess the capabilities of the first 12 Fast Response Cutters before  exercising options for additional cutters.
Regarding National Security Cutters, the first vessel (National Security  Cutter USCGC Bertholf) was initially projected for delivery in 2006, but  slipped to August 2007 after design changes made following the terrorist  attacks of September 11, 2001, and was again delayed until May 2008  because of damage to the shipyard caused by Hurricane Katrina. Based on  the results of our ongoing review, the USCGC Bertholf will likely be 1 year  behind schedule when it is certified as fully operational, scheduled for the  fourth quarter of fiscal year 2010. Further, the eighth and final National  Security Cutter was to be fully operational in 2016 but is currently  projected to be fully operational by the fourth quarter of calendar year  2018. The Coast Guard has not yet acquired the unmanned aircraft and  new small boats that are to support the National Security Cutters. The  Coast Guard plans to draft operational specifications for the unmanned  aircraft in 2010, and to acquire new small boats that are expected to be  deployed with the first National Security Cutter by the end of calendar  year 2010. After the unmanned aircraft is selected, the Coast Guard must  contract for the acquisition and production of the unmanned aircraft,  accept delivery of it, and test its capabilities before deploying it with the  National Security Cutter—activities that can take several years. Delays in  the delivery of the National Security Cutters and the associated support  assets are expected to lead to a projected loss of thousands of anticipated  cutter operational days for conducting missions through 2017, and may  prevent the Coast Guard from employing the full capabilities of the  National Security Cutters and the support assets for several years. Given  the enhanced capabilities that the Coast Guard believes the National  Security Cutters have over existing assets, a loss in operational days could  negatively affect the Coast Guard’s ability to more effectively conduct  missions, such as enforcement of domestic fishing laws, interdiction of  illegal drugs and undocumented migrants, and participation in Department  of Defense operations.
To address these potential operational gaps, the Coast Guard has decided  to continue to rely on its aging fleet of High Endurance Cutters and to use  existing aircraft and small boats to support the National Security Cutters.  However, because the High Endurance Cutters are increasingly unreliable,  the Coast Guard plans to perform a series of upgrades and maintenance  procedures on selected vessels. However, before this work begins, the  Coast Guard plans to conduct an analysis on the condition of the High  Endurance Cutters and complete a decommissioning schedule. As a result,  work on the first selected High Endurance Cutter is not scheduled for  completion until 2016. Until the Coast Guard has acquired new unmanned  aircraft and small boats, the Coast Guard plans to support the National  Security Cutters with the small boats and manned aircraft it currently uses  to support the High Endurance Cutter. We will continue to assess this  issue as part of our ongoing work and plan to issue a report on the results  later this summer.
Madam Chair and Members of the Subcommittee, this completes my  prepared statement. I will be happy to respond to any questions that you  or other Members of the Subcommittee may have.
section_title: GAO Contacts and Staff Acknowledgments
paragraphs: For information about this statement, please contact Stephen L. Caldwell,  Director, Homeland Security and Justice Issues, at (202) 512-9610, or  caldwells@gao.gov. Contact points for our Office of Congressional  Relations and Office of Public Affairs may be found on the last page of this  statement. Other individuals making key contributions to this testimony  include Danny Burton, Christopher Conrad, Katherine Davis, Christoph  Hoashi-Erhardt, Paul Hobart, Dawn Hoff, Lori Kmetz, Ryan Lambert, David  Lutter, Brian Schwartz, Debbie Sebastian, and Ellen Wolfe.
section_title: Appendix I: Performance Results by Mission, Fiscal Years 2004 through 2008
paragraphs: This appendix provides a detailed list of performance results for the Coast  Guard’s 11 statutory missions for fiscal years 2004 through 2008 (see table  4).
section_title: Related GAO Products
paragraphs: Coast Guard: Observations on the Genesis and Progress of the Service’s  Modernization Program. GAO-09-530R. Washington, D.C.: June 24, 2009.
Coast Guard: Administrative Law Judge Program Contains Elements  Designed to Foster Judges’ Independence and Mariner Protections  Assessed Are Being Followed. GAO-09-489. Washington, D.C.: June 12,  2009.
Coast Guard: Update on Deepwater Program Management, Cost, and  Acquisition Workforce. GAO-09-620T. Washington, D.C.: April 22, 2009.
Coast Guard: Observations on Changes to Management and Oversight of  the Deepwater Program. GAO-09-462T. Washington, D.C.: March 24, 2009.
Maritime Security: Vessel Tracking Systems Provide Key Information,  but the Need for Duplicate Data Should Be Reviewed. GAO-09-337.  Washington, D.C.: March 17, 2009.
Coast Guard: Change in Course Improves Deepwater Management and  Oversight, but Outcome Still Uncertain. GAO-08-745. Washington, D.C.:  June 24, 2008.
Coast Guard: Strategies for Mitigating the Loss of Patrol Boats Are  Achieving Results in the Near Term, but They Come at a Cost and  Longer Term Sustainability Is Unknown. GAO-08-660. Washington, D.C.:  June 23, 2008.
Status of Selected Aspects of the Coast Guard’s Deepwater Program.  GAO-08-270R. Washington, D.C.: March 11, 2008.
Coast Guard: Observations on the Fiscal Year 2009 Budget, Recent  Performance, and Related Challenges. GAO-08-494T. Washington, D.C.:  March 6, 2008.
Coast Guard: Deepwater Program Management Initiatives and Key  Homeland Security Missions. GAO-08-531T. Washington, D.C.: March 5,  2008.
Maritime Security: Coast Guard Inspections Identify and Correct  Facility Deficiencies, but More Analysis Needed of Program’s Staffing,  Practices, and Data. GAO-08-12. Washington, D.C.: February 14, 2008.
Maritime Security: Federal Efforts Needed to Address Challenges in  Preventing and Responding to Terrorist Attacks on Energy Commodity  Tankers. GAO-08-141. Washington, D.C.: December 10, 2007.
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: Observations on the Fiscal Year 2008 Budget,  Performance, Reorganization, and Related Challenges. GAO-07-489T.  Washington, D.C.: April 18, 2007.
Port Risk Management: Additional Federal Guidance Would Aid Ports in  Disaster Planning and Recovery. GAO-07-412. Washington, D.C.: March  28, 2007.
Coast Guard: Status of Efforts to Improve Deepwater Program  Management and Address Operational Challenges. GAO-07-575T.  Washington, D.C.: March 8, 2007.
Maritime Security: Public Safety Consequences of a Terrorist Attack on  a Tanker Carrying Liquefied Natural Gas Need Clarification.  GAO-07-316. Washington, D.C.: February 22, 2007.
Coast Guard: Preliminary Observations on Deepwater Program Assets  and Management Challenges. GAO-07-446T. Washington, D.C.: February  15, 2007.
Coast Guard: Coast Guard Efforts to Improve Management and Address  Operational Challenges in the Deepwater Program. GAO-07-460T.  Washington, D.C.: February 14, 2007.
Homeland Security: Observations on the Department of Homeland  Security’s Acquisition Organization and on the Coast Guard’s  Deepwater Program. GAO-07-453T. Washington, D.C.: February 8, 2007.
Coast Guard: Condition of Some Aids-to-Navigation and Domestic  Icebreaking Vessels Has Declined; Effect on Mission Performance  Appears Mixed. GAO-06-979. Washington, D.C.: September 22, 2006.
Coast Guard: Non-Homeland Security Performance Measures Are  Generally Sound, but Opportunities for Improvement Exist. GAO-06-816.  Washington, D.C.: August 16, 2006.
Coast Guard: Observations on the Preparation, Response, and Recovery  Missions Related to Hurricane Katrina. GAO-06-903. Washington, D.C.:  July 31, 2006.
Maritime Security: Information-Sharing Efforts Are Improving.  GAO-06-933T. Washington, D.C.: July 10, 2006.
United States Coast Guard: Improvements Needed in Management and  Oversight of Rescue System Acquisition. GAO-06-623. Washington, D.C.:  May 31, 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.: April 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: Station Readiness Improving, but Resource Challenges and  Management Concerns Remain. GAO-05-161. Washington, D.C.: January  31, 2005.
Maritime Security: Better Planning Needed to Help Ensure an Effective  Port Security Assessment Program. GAO-04-1062. Washington, D.C.:  September 30, 2004.
Maritime Security: Partnering Could Reduce Federal Costs and  Facilitate Implementation of Automatic Vessel Identification System.  GAO-04-868. Washington, D.C.: July 23, 2004.
Coast Guard: Relationship between Resources Used and Results Achieved  Needs to Be Clearer. GAO-04-432. Washington, D.C.: March 22, 2004.
Contract Management: Coast Guard’s Deepwater Program Needs  Increased Attention to Management and Contractor Oversight.  GAO-04-380. Washington, D.C.: March 9, 2004.
Coast Guard: Comprehensive Blueprint Needed to Balance and Monitor  Resource Use and Measure Performance for All Missions. GAO-03-544T.  Washington, D.C.: March 12, 2003.
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