Coast Guard: Action Needed As Approved Deepwater Program Remains Unachievable
Published: 2011-07-28T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Deepwater Program includes efforts to build or modernize ships and aircraft, including supporting capabilities. In 2007, the Coast Guard took over the systems integrator role from Integrated Coast Guard Systems (ICGS) and established a $24.2 billion program baseline which included schedule and performance parameters. Last year, GAO reported that Deepwater had exceeded cost and schedule parameters, and recommended a comprehensive study to assess the mix of assets needed in a cost-constrained environment given the approved baseline was no longer feasible. GAO assessed the (1) extent to which the program is exceeding the 2007 baseline and credibility of selected cost estimates and schedules; (2) execution, design, and testing of assets; and (3) Coast Guard's efforts to conduct a fleet mix analysis. GAO reviewed key Coast Guard documents and applied criteria from GAO's cost guide.
section_title: What GAO Found
paragraphs: The Deepwater Program continues to exceed the cost and schedule baselines approved by DHS in 2007, but several factors continue to preclude a solid understanding of the program's true cost and schedule. The Coast Guard has developed baselines for some assets that indicate the estimated total acquisition cost could be as much as $29.3 billion, or about $5 billion over the $24.2 billion baseline. But additional cost growth is looming because the Coast Guard has yet to develop revised baselines for all assets, including the OPC--the largest cost driver in the program. In addition, the Coast Guard's most recent capital investment plan indicates further cost and schedule changes not yet reflected in the asset baselines, contributing to the approved 2007 baseline no longer being achievable. The reliability of the cost estimates and schedules for selected assets is also undermined because the Coast Guard did not follow key best practices for developing these estimates. Coast Guard and DHS officials agree that the annual funding needed to support all approved Deepwater baselines exceeds current and expected funding levels, which affects some programs' approved schedules. The Coast Guard's acquisition directorate has developed action items to help address this mismatch by prioritizing acquisition program needs, but these action items have not been adopted across the Coast Guard. The Coast Guard continues to strengthen its acquisition management capabilities, but is faced with several near-term decisions to help ensure that assets still in design will meet mission needs. For example, whether or not the planned system-of-systems design is achievable will largely depend upon remaining decisions regarding the design of the command and control system. Important decisions related to the affordability, feasibility, and capability of the OPC also remain. For those assets under construction and operational, preliminary tests have yielded mixed results and identified concerns, such as design issues, to be addressed prior to initial operational test and evaluation. The Coast Guard is gaining a better understanding of cost, schedule, and technical risks, but does not always fully convey these risks in reports to Congress. As lead systems integrator, the Coast Guard planned to complete a fleet mix analysis to eliminate uncertainty surrounding future mission performance and produce a baseline for Deepwater. This analysis, which the Coast Guard began in 2008, considered the current program to be the "floor" for asset capabilities and quantities and did not impose cost constraints on the various fleet mixes. Consequently, the results will not be used for trade-off decisions. The Coast Guard has now begun a second analysis, expected for completion this summer, which includes an upper cost constraint of $1.7 billion annually--more than Congress has appropriated for the entire Coast Guard acquisition portfolio in recent years. DHS is also conducting a study to gain insight into alternatives that may include options that are lower than the program of record for surface assets. A DHS official stated that this analysis and the Coast Guard's fleet mix analysis will provide multiple data points for considering potential changes to the program of record, but Coast Guard officials stated they have no intention of examining fleet mixes smaller than the current, planned Deepwater program.
section_title: What GAO Recommends
paragraphs: GAO is making recommendations to the Department of Homeland Security (DHS) that include identifying trade-offs to the planned Deepwater fleet and ensuring the Offshore Patrol Cutter (OPC) design is achievable and to the Coast Guard that include identifying priorities, incorporating cost and schedule best practices, increasing confidence that assets will meet mission needs, and reporting complete information on risks to Congress in a timely manner. DHS concurred with the recommendations.

section_title: Letter
paragraphs: The Deepwater Program—the largest acquisition program in the Coast  Guard’s history—began in 1996 as an effort to recapitalize the Coast  Guard’s operational fleet. The program now includes projects to build or  modernize five classes each of ships and aircraft, and procurement of  other capabilities such as improved command, control, communications,  computers, intelligence, surveillance, and reconnaissance (C4ISR). Our  prior work on the Deepwater Program identified problems in the areas of  costs, management, and oversight that have led to delivery delays and  other operational challenges for certain assets, but it also recognized  several steps the Coast Guard has taken to improve Deepwater  management. For example, beginning in 2007, the Coast Guard assumed  the role of lead systems integrator for the Deepwater Program, a role  which the Coast Guard had previously contracted to Integrated Coast  Guard Systems (ICGS). In assuming this role, the Coast Guard has  taken a number of steps to manage the Deepwater projects, including  reorganizing its acquisition directorate, applying the knowledge-based  acquisition policies and practices outlined in its Major Systems Acquisition  Manual, and developing baselines for each asset. These steps have  given the Coast Guard better insight into asset-level capabilities and  costs, but we have reported that the $24.2 billion program as envisioned  in 2007 is no longer feasible, in terms of cost and schedule. Furthermore,  we also reported that it is unlikely that system-level performance  baselines established in 2007 will be met. Given this situation, we  recommended last year that the Commandant of the Coast Guard present  to Congress a comprehensive review of the Deepwater Program that  clarifies the overall cost, schedule, quantities, and mix of assets required  to meet mission needs, including trade-offs in light of fiscal constraints,  given that the currently approved Deepwater baseline is no longer  feasible.
Under the Comptroller General’s Authority, we assessed (1) the extent to  which the Deepwater Program’s planned cost and schedule baselines  have been exceeded and the credibility of cost estimates and schedules  for selected assets; (2) the progression of the execution, design, and  testing of the assets within the Deepwater Program; and (3) whether the  Coast Guard has undertaken a fleet mix study that addresses trade-offs  in a cost-constrained environment.
To conduct our work, we reviewed the Coast Guard’s Major Systems  Acquisition Manual, capital investment plans, and key asset documents  including operational requirements documents, acquisition strategies and  plans, acquisition program baselines, life-cycle cost estimates, test  reports, and contracts. We obtained and analyzed schedule and cost  estimates for selected assets using the best practices criteria set forth in  our cost guide. We also reviewed a Coast Guard analysis of various fleet  mixes—termed fleet mix analysis phase I—which was completed in  December 2009. We also reviewed the charter and contractor’s statement  of work for the phase 2 analysis. We interviewed Coast Guard officials in  the acquisitions directorate as well as officials in the directorates  responsible for budgeting and resources and for assessing and  developing operational requirements for Deepwater assets (the  capabilities directorate). In addition, we interviewed Department of  Homeland Security (DHS) officials from the Acquisition Program  Management Directorate, Cost Analysis Division, Program Analysis and  Evaluation Division, and the Science and Technology Test & Evaluation  and Standards Division. We discussed the Coast Guard’s Quarterly  Acquisition Reports to Congress with Office of Management and Budget  and DHS’s Office of the Chief Financial Officer officials. We interviewed  contractor representatives from Northrop Grumman Shipbuilding and  Bollinger Shipyards and toured their respective shipyards. We also met  with Coast Guard officials at the Navy’s Commander Operational Test  and Evaluation Force and Coast Guard operators at the Aviation Training  Center. We relied in part on our past work on the Deepwater Program.  Appendix I contains more information regarding our scope and  methodology.
We conducted this performance audit from September 2010 to July 2011  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 the  evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: The Coast Guard is a multimission, maritime military service within DHS.  The Coast Guard has a variety of responsibilities including port security  and vessel escort, search and rescue, and polar ice operations. To carry  out these responsibilities, the Coast Guard operates a number of vessels,  aircraft, and information technology programs. Since 2001, we have  reviewed the Deepwater Program and reported to Congress, DHS, and  the Coast Guard on the risks and uncertainties inherent with this program.  In our July 2010 report, we found that DHS and Coast Guard acquisition  policies and processes continued to evolve, further establishing the Coast  Guard as systems integrator, and that the Coast Guard continued to  improve its acquisition workforce and develop means to further reduce  vacancies. We also found that as the Coast Guard’s understanding of the  assets evolved, achievement of the DHS-approved May 2007 acquisition  program baseline of $24.2 billion for the Deepwater Program was not  feasible due to cost growth and schedule delays. We concluded that  while the Coast Guard had deepened its understanding of the resources  needed and capabilities required on an asset level, the Coast Guard had  not revalidated its system-level requirements and lacked the analytical  framework needed to inform Coast Guard and DHS decisions about asset  trade-offs in the future.
subsections: section_title: A Brief History of the Deepwater Program
paragraphs: At the start of the Deepwater Program in the late 1990s, the Coast Guard  chose to use a system-of-systems acquisition strategy. A system-of- systems is a set or arrangement of assets that results when independent  assets are integrated into a larger system that delivers unique  capabilities. The Coast Guard contracted with ICGS in June 2002 to be  the systems integrator for Deepwater and provided ICGS with broad,  overall performance specifications—such as the ability to interdict illegal  immigrants—and ICGS determined the assets needed and their  specifications. According to Coast Guard officials, ICGS submitted and  priced its proposal as a package; that is, the Coast Guard bought the  entire solution and could not reject any individual component.
In 2002, the Coast Guard conducted a performance gap analysis that  determined the Deepwater fleet as designed by ICGS would have  significant capability gaps in meeting emerging mission requirements  following the September 11, 2001, terrorist attacks. The Coast Guard  decided, due to fiscal constraints, not to make significant changes to the  ICGS planned Deepwater fleet, but did approve several asset capability  changes. Following these changes, the Coast Guard submitted a revised  cost, schedule, and performance baseline for the overall Deepwater  Program to DHS in November 2006. The new baseline established the  total acquisition cost of the ICGS solution at $24.2 billion and projected  the Coast Guard would complete the acquisition in 2027. DHS approved  the baseline in May 2007, shortly after the Coast Guard—acknowledging  that it had relied too heavily on contractors to do the work of the  government and that government and industry had failed to control  costs—announced its intention to take over the role of systems integrator.
With limited insight into how ICGS’s planned fleet would meet overall  mission needs, the Coast Guard has acknowledged challenges in  justifying the proposed capabilities and making informed decisions about  possible trade-offs. In October 2008, the capabilities directorate initiated a  fleet mix analysis intended to be a fundamental reassessment of the  capabilities and mix of assets the Coast Guard needs to fulfill its  Deepwater mission. As we reported last year, officials stated that this  analysis did not impose fiscal constraints on the outcome and therefore,  the results were unfeasible. As a result of discussions with DHS, the  Coast Guard started a second, cost-constrained analysis—fleet mix  analysis phase 2. Figure 1 provides a time line of key events in the  Deepwater Program.
Key directorates involved in the management of the Deepwater Program  include the capabilities, resources, C4 and information technology, and  acquisition directorates. Most of the Deepwater assets are considered  major acquisitions, as outlined in the Coast Guard’s Major Systems  Acquisition Manual. Acquisitions with life-cycle cost estimates equal to or  greater than $1 billion are considered level I, and those with cost  estimates from $300 million to less than $1 billion are considered level II.  These major acquisition programs are to receive oversight from DHS’s  acquisition review board, which is responsible for reviewing acquisitions  for executable business strategies, resources, management,  accountability, and alignment with strategic initiatives. The Coast Guard  provides oversight to programs that have life-cycle cost estimates less  than $300 million (level III). Table 1 describes in more detail the assets  the Coast Guard plans to buy or upgrade under the Deepwater Program,  the associated investment level if known, and planned and delivered  quantities.
DHS’s acquisition review board not only provides oversight for major  acquisition programs, but also supports the department’s Acquisition  Decision Authority in determining the appropriate direction for an  acquisition at key Acquisition Decision Events (ADE). At each ADE, the  Acquisition Decision Authority approves acquisitions to proceed through  the acquisition life-cycle phases upon satisfaction of applicable criteria.  Additionally, Component Acquisition Executives at the Coast Guard and  other DHS components are responsible in part for managing and  overseeing their respective acquisition portfolios, as well as approving  level III systems acquisitions. The DHS four-phase acquisition process is:    Need phase—define a problem and identify the need for a new  acquisition. This phase ends with ADE 1, which validates the need for  a major acquisition program.    Analyze/Select phase—identify alternatives and select the best  option. This phase ends with ADE-2A, which approves the acquisition  to proceed to the obtain phase and includes the approval of the  acquisition program baseline.    Obtain phase—develop, test, and evaluate the selected option and  determine whether to approve production. During the obtain phase,  ADE-2B approves a discrete segment if an acquisition is being  developed in segments and ADE-2C approves low-rate initial  production. This phase ends with ADE-3 which approves full-rate  production.    Produce/Deploy/Support phase—produce and deploy the selected  option and support it throughout the operational life cycle. Figure 2  depicts where level I and II Deepwater assets currently fall within  these acquisition phases and decision events.
section_title: True Cost and Schedule of Deepwater Program Is Not Known
paragraphs: The Deepwater Program as a whole continues to exceed the cost and  schedule baselines approved by DHS in May 2007, but several factors  preclude a solid understanding of the true cost and schedule of the  program. The Coast Guard has developed baselines for some assets,  most of which have been approved by DHS, that indicate the estimated  total acquisition cost could be as much as $29.3 billion, or about $5 billion  over the $24.2 billion baseline. But additional cost growth is looming  because the Coast Guard has yet to develop revised baselines for all the  Deepwater assets, including the Offshore Patrol Cutter (OPC)—the  largest cost driver in the Deepwater Program. In addition, the Coast  Guard’s most recent 5-year budget plan, included in DHS’s fiscal year  2012 budget request, indicates further cost and schedule changes not yet  reflected in the asset baselines. The reliability of the cost estimates and  schedules for selected assets is also undermined because the Coast  Guard did not follow key best practices for developing these estimates.  Coast Guard and DHS officials agree that the annual funding needed to  support all approved Deepwater baselines exceeds current and expected  funding levels in this fiscal climate. This contributes to churn in program  baselines when programs are not able to execute schedules as planned. The Coast Guard’s acquisition directorate has developed several actionitems to help address this mismatch by prioritizing acquisition program  needs, b ut these action items have not been adopted across the Coast  Guard.
subsections: section_title: Additional Cost Grow and Schedule Delays beyond Those in Approv Program Baselines Are Looming
paragraphs: The estimated total acquisition cost of the Deepwater Program, based on  approved program baselines as of May 2011, could be as much as  approximately $29.3 billion, or about $5 billion more than the $24.2 b baseline approved by DHS in 2007. This represents an increase of  approximately 21 percent. As of May 2011, DHS had approved eight revised baselines from the 2007 program and the Coast Guard had  approved two based on a delegation of approval authority from DHS. The  increase in acquisition cost for these programs alone is about 43 percent.  Table 2 compares each Deepwater asset’s acquisition cost estim ate from  the 2007 program baseline with revised baselines, if available.  illion  Coast Guard officials stated that some of the approved acquisition  program baselines fall short of the true funding needs. This not only  exacerbates the uncertainty surrounding the total cost of the Deepwater  acquisition, but also contributes to the approved Deepwater Program no  longer being achievable. For example, the NSC program’s approved  baseline reflects a total acquisition cost of approximately $4.7 billion.  However, Congress has already appropriated approximately $3.1 billion  for the program and the Coast Guard’s fiscal years 2012-2016 capital  investment plan indicates an additional $2.5 billion is needed through  fiscal year 2016 for a total of $5.6 billion to complete the acquisition. This  would represent an increase of approximately 19 percent over the  approved acquisition cost estimate for eight NSCs. According to section  575 of Title 14 of the U.S. Code, the Commandant must submit a report  to Congress no later than 30 days after the Chief Acquisition Officer of the  Coast Guard becomes aware of a likely cost overrun for any level I or  level II acquisition program that will exceed 15 percent. If the likely cost  overrun is greater than 20 percent, the Commandant must include a  certification to Congress providing an explanation for continuing the  project. Senior Coast Guard acquisition officials stated that they cannot  corroborate a total cost of $5.6 billion for the NSC program, or a cost  increase of 19 percent, because the Coast Guard has not yet completed  a life-cycle cost analysis for the program. However, these officials stated  that a certification to Congress for the NSC program is pending as well as  one for the MPA program.
We previously reported several schedule delays for assets based on the  revised baselines and noted that as the Coast Guard reevaluates its  baselines, it gains improved insight into the final delivery dates for all of  the assets. While the Coast Guard’s revised baselines identify schedule  delays for almost all of the programs, these baselines do not reflect the  extent of some of these delays as detailed in the Coast Guard’s fiscal  years 2012-2016 capital investment plan. For example, the MPA’s revised  baseline has final asset delivery in 2020—a delay of 4 years from the  2007 baseline—but the capital investment plan indicates final asset  delivery in 2025—an additional 5-year delay not reflected in the baseline.  Coast Guard resource officials responsible for preparing this plan  acknowledged that the final asset delivery dates in most of the revised  baselines are not current. The forthcoming delays identified in the fiscal  years 2012-2016 capital investment plan indicate that the final asset  delivery dates approved in the 2007 Deepwater baseline are no longer  achievable for most assets. Figure 3 shows delays in final asset delivery  dates according to (1) the 2007 baseline; (2) the asset’s revised baseline,  if available; and (3) the fiscal years 2012-2016 capital investment plan  submitted to Congress.
Our analysis of selected assets’ life-cycle cost estimates found that the  Coast Guard did not fully follow best practices for developing reliable life- cycle cost estimates, which is at the core of successfully managing a  project within cost and affordability guidelines. The Major Systems  Acquisition Manual cites our Cost Estimating and Assessment Guide as a  source for guidance and best practice information. Furthermore, we  found that the Coast Guard is not receiving reliable schedules for  selected assets from its contractors, which should be inputs into a  programwide schedule. We reviewed the MPA program’s life-cycle cost  estimate and schedule because this program has the highest life-cycle  cost estimate of all Deepwater assets and has experienced schedule  delays. We also reviewed the NSC program’s schedule because this  program has the second highest life-cycle cost estimate and has also  experienced schedule delays. The Coast Guard was not able to provide  us with a current NSC life-cycle cost estimate to review because the  program is revising its estimate, an effort that was directed in a December  2008 DHS acquisition decision memorandum. Therefore, we reviewed the  C4ISR program’s life-cycle cost estimate because the estimate was  complete, but the program did not yet have a DHS-approved acquisition  program baseline and there was uncertainty concerning the direction of  the program.
Reliable life-cycle cost estimates reflect four characteristics. They are  (1) well-documented, (2) comprehensive, (3) accurate, and (4) credible.  These four characteristics encompass 12 best practices for reliable  program life-cycle cost estimates that are identified in appendix III. The  results of our review of the MPA and C4ISR life-cycle cost estimates are  summarized in figure 4. Appendix III contains a more detailed discussion  of the extent to which the two cost estimates met the four best practices  criteria.
While both life-cycle cost estimates addressed elements of best practices,  their effectiveness is limited because they do not reflect the current  program and have not been updated on a regular basis, which is  considered a best practice for an accurate cost estimate. For example,  the MPA life-cycle cost estimate was completed in August 2009. While  the Coast Guard has obtained actual costs, the program office has not  updated the formal estimate with these actual costs. This limits the  program’s ability to analyze changes in program costs and provide  decision makers with accurate information. The Coast Guard did include  a sensitivity analysis to identify cost drivers, but this analysis did not  examine possible effects of funding cuts—an area of risk for the MPA  program. The Coast Guard completed the C4ISR life-cycle cost estimate  in December 2009. DHS reviewed this estimate, but did not validate it.  We found that this estimate was minimally credible for several reasons,  including that the program did not complete a sensitivity analysis of cost  drivers—even though cost drivers were identified and major funding cuts  occurred which led to a program breach. C4ISR program officials told us  that they are currently revising the 2009 estimate because it is no longer  reflective of the current program. Coast Guard C4ISR officials agreed with  our analysis and stated that they plan to incorporate the best practices  going forward.
We found that neither the MPA nor the NSC programs are receiving  schedule data from their contractors that fully meet schedule best  practices. Our guidance identifies nine interrelated scheduling best  practices that are integral to a reliable and effective master schedule. For  example, if the schedule does not capture all activities, there will be  uncertainty about whether activities are sequenced in the correct order  and whether the schedule properly reflects the resources needed to  accomplish work. MPA and NSC contractor schedule data should feed  into each program’s integrated master schedule in order to reliably  forecast key program dates. However, the NSC program does not have  an integrated master schedule that would account for all planned  government and contractor efforts for the whole program. The program is  currently managing a schedule for only the third cutter out of a total  planned eight cutters. The MPA program does have an integrated master  schedule which it updates with the contractor schedule data. However,  our assessment found the contractor’s schedule for aircraft 12-14 is  unreliable. Because an integrated master schedule is intended to connect  all government and contractor schedule work, unreliable contractor  schedule data will result in unreliable forecasted dates within the  integrated master schedule. Figure 5 summarizes the results of our  review of the MPA contractor’s schedule for aircraft 12-14 and the NSC 3  schedule. Appendix IV includes a detailed discussion of our analysis.
As shown above, the MPA contractor’s schedule for aircraft 12-14 did not  substantially or fully meet any of the nine best practices. Based on our  discussions with the program manager, this condition stems, in part, from  a lack of program management resources, as the program office does not  have trained personnel to create and maintain a schedule. In addition,  while program officials stated that they do conduct meetings to provide  oversight on production and delivery schedules, it does not appear that  management is conducting proper oversight of existing schedule  requirements. Program officials stated that they were not interested in  obtaining a detailed schedule, even though it is a deliverable in the  production contract, because the MPA contract is fixed price and the  contractor’s past delivery has been good. However, regardless of contract  type, best practices call for a schedule to include all activities necessary  for the program to be successfully completed. After we raised concerns  about the Coast Guard paying for a detailed schedule that the program  office does not plan to request or use, program officials told us that the  contractor has been very responsive to Coast Guard’s subsequent  direction to update the schedule to incorporate best practices. They said  the Coast Guard has modified the schedule reporting procedures so that  the contractor will provide monthly reporting of the data.
The NSC 3 schedule substantially met two best practices and partially  met six best practices, but the program office did not conduct a schedule  risk analysis to predict a level of confidence in meeting the completion  date. The purpose of the analysis is to develop a probability distribution of  possible completion dates that reflect the project and its quantified risks.  This analysis can help project managers understand the most important  risks to the project and focus on mitigating them. A schedule risk analysis  will also calculate schedule reserve, which can be set aside for those  activities identified as high risk. Without this reserve, the program faces  the risk of delays to the scheduled completion date if any delays were to  occur on critical path activities. Senior Coast Guard acquisition officials  stated that the Coast Guard has high confidence in the projected delivery  date and uses a full range of project tools, including the schedule, to  project the delivery date. Collectively though, we found that the  weaknesses in not meeting the nine best practices for the NSC 3 program  integrated master schedule increase the risk of schedule slippages and  related cost overruns and make meaningful measurement and oversight  of program status and progress, as well as accountability for results,  difficult to achieve.
section_title: Budget Planning for Deepwater Does Not Reflect the Realities of a Cost Constrained Environment, Exacerbating Program Uncertainties
paragraphs: Coast Guard and DHS officials agreed that the annual funding needed to  support all approved Deepwater acquisition program baselines exceeds  current and expected funding levels, particularly in this constrained fiscal  climate. For example, Coast Guard acquisition officials stated that up to  $1.9 billion per year would be needed to support the approved Deepwater  baselines, but they expect Deepwater funding levels to be closer to  $1.2 billion annually over the next several years. Therefore the Coast  Guard is managing a portfolio—which includes many revised baselines  approved by DHS—that is expected to cost more than what its annual  budget will likely support. Our previous work on Department of Defense  (DOD) acquisitions shows that when agencies commit to more programs  than resources can support, unhealthy competition for funding is created  among programs. This situation can lead to inefficient funding  adjustments, such as moving money from one program to another or  deferring costs to the future.
When a program’s projected funding levels are lower than what the  program was previously projected to receive, the program is more likely to  have schedule breaches and other problems, as the program can no  longer remain on the planned schedule. From September-October 2010,  the Coast Guard reported potential baseline breaches to DHS for the  C4ISR, HC-130H, and HH-60 programs that were caused, at least in part,  by reduced funding profiles in the fiscal years 2011-2015 capital  investment plan. For example, in the fiscal years 2008 and 2009 capital  investment plans, the Coast Guard had anticipated allocating  20-27 percent of its planned $1.1 billion fiscal year 2011 Deepwater  budget to its aviation projects. In its actual fiscal year 2011 budget  request, however, the Coast Guard only allocated about 9 percent of the  $1.1 billion to aviation projects. The percentage of dollars allocated to  surface projects increased—largely driven by an increase of dollars  allocated to the FRC program. Figure 6 illustrates how the allocation of  acquisition, construction, and improvements dollars in the Coast Guard’s  budget request in fiscal years 2008, 2009, 2010, and 2011 differed from  prior year plans.
In the October 2010 Blueprint for Continuous Improvement (Blueprint),  signed by the Commandant, the Coast Guard’s Assistant Commandant  for Acquisition identified the need to develop and implement effective  decision making to maximize results and manage risk within resource  constraints. The Blueprint outlines several action items, expected to be  completed by the end of fiscal year 2011, to accomplish this goal. The  action items include:    promoting stability in the Coast Guard’s capital investment plan by  measuring the percentage of projects stably funded year to year in the  plan,    ensuring acquisition program baseline alignment with the capital  investment plan by measuring the percentage of projects where the  acquisition program baselines fit into the capital investment plan, and    establishing Coast Guard project priorities.
Acquisition officials responsible for implementing the Blueprint action  items acknowledged that successful implementation requires buy-in from  leadership. Senior resource directorate officials responsible for capital  investment planning told us that the action items in the Blueprint are  “noble endeavors,” but that the directorates outside of the acquisition  directorate are not held responsible for accomplishing them. According to  the Major Systems Acquisition Manual, the Component Acquisition  Executive (Vice-Commandant), to whom both the acquisition and  resource directorates report, is responsible for establishing acquisition  processes to track the extent to which requisite resources and support  are provided to project managers.
In addition to the acquisition directorate’s recognition of the need to  establish priorities to address known upcoming resource constraints, in  August 2010, the Coast Guard’s flag-level Executive Oversight Council— chaired by the Assistant Commandant for Acquisition with representatives  from other directorates—tasked a team to recommend strategies to revise  acquisition program baselines to better align with annual budgets. This  acknowledgment that program baselines must be revised to fit fiscal  constraints, however, is not reflected in the Coast Guard’s most recent  capital investment plan. Table 3 presents planned funding projections for  Deepwater assets as outlined in the fiscal years 2012-2016 capital  investment plan. With the exception of fiscal year 2012, the Coast Guard  is planning for funding levels well above the expected funding level of  $1.2 billion.
This outyear funding plan seems unrealistic, especially in light of the  rapidly building fiscal pressures facing our national government and  DHS’s direction for future budget planning. To illustrate, in fiscal year  2015, the Coast Guard plans to request funding for construction of three  major Deepwater surface assets: NSC, OPC, and FRC, but the Coast  Guard has never requested funding for construction of three major  Deepwater surface assets in the same year before. In a recent testimony,  the Commandant of the Coast Guard stated that the plan for fiscal year  2015 reflects the Coast Guard’s actual need for funding in that year. If  program costs and schedules are tied to this funding plan and it is not  executable, these programs will likely have schedule and cost breaches.  When a program has a breach, the program manager must develop a  remediation plan that explains the circumstances of the breach and  propose corrective action and, if required, revise the acquisition program  baseline.
section_title: Execution of the Deepwater Program Is Progressing, but Key Decisions Remain for the Design and Testing of Deepwater Assets
paragraphs: The Coast Guard continues to strengthen its acquisition management  capabilities. As lead systems integrator, the Coast Guard is faced with  several decisions to help ensure that the promised capabilities of assets  still in design are achieved. For example, whether or not the planned  system-of-systems design is achievable largely depends on the Coast  Guard’s ability to make important decisions regarding the design of the  C4ISR program, as the Coast Guard has continued to define and redefine  its strategy for this program since 2007. For those assets already under  construction and operational, preliminary tests have yielded mixed results  and identified issues that need to be addressed prior to upcoming test  events. As part of its role as lead systems integrator, the Coast Guard is  gaining a better understanding of each asset’s cost, schedule, and  technical risks, but this information is not always fully conveyed in the  Coast Guard’s quarterly reports to Congress.
subsections: section_title: Coast Guard Continues to Strengthen Its Acquisition Management Capabilities
paragraphs: The Coast Guard continues to strengthen its acquisition management  capabilities in its role of lead systems integrator and decision maker for  Deepwater acquisitions. We recently reported that the Coast Guard  updated its Major Systems Acquisition Manual in November 2010 to  better reflect best practices, in response to our prior recommendations,  and to more closely align its policy with the DHS Acquisition Management  Directive 102-01. We also reported that according to the Coast Guard, it  currently has 81 interagency agreements, memorandums of agreement,  and other arrangements in place, primarily with DOD agencies, which  helps programs leverage DOD expertise and contracts. To further  facilitate the acquisition process, the Coast Guard’s Acquisition  Directorate has increased the involvement of the Executive Oversight  Council as a structured way for flag-level and senior executive officials in  the requirements, acquisition, and resources directorates, among others,  to discuss programs and provide oversight on a regular basis.
In addition to these efforts to strengthen its management capabilities, the  Coast Guard has significantly reduced its relationship with ICGS. ICGS’s  remaining responsibilities include completing construction of the third  NSC and a portion of the C4ISR project. In moving away from ICGS, the  Coast Guard has awarded fixed-price contracts directly to prime  contractors. For example, since our last report in July 2010, the Coast  Guard: (1) awarded a sole source fixed price contract for the fourth NSC  and long lead materials for the fifth NSC to Northrop Grumman  Shipbuilding Systems, (2) exercised fixed price options for four additional  FRCs on the contract with Bollinger Shipyards, and (3) awarded a fixed  price contract to EADS for three MPAs with options for up to six additional  aircraft, following a limited competition in which EADS made the only  offer. In addition, the Coast Guard has developed acquisition strategies  intended to inject competition into future procurements where possible.  For example, the Coast Guard is planning to buy a “reprocurement data  licensing package” from Bollinger Shipyards. This information package,  according to project officials, is expected to provide the Coast Guard with  the specifications to allow full and open competition of future FRCs. Our  previous work has shown that when the government owns technical  specifications, its does not need to rely on one contractor to meet  requirements. As part of its acquisition strategy for the OPC, the Coast  Guard plans to award multiple preliminary design contracts and then  select the best value contract design for a detailed design and production  contract. This planned acquisition strategy will also include an option for a  data and licensing package, similar to the FRC. In May 2011, the Coast  Guard released a draft of the OPC specifications for industry review in  advance of releasing a request for proposals, currently planned to occur  in the fall of 2011. Lastly, the Coast Guard is in the process of holding a  competition for the over-the-horizon cutter small boat through a small  business set-aside acquisition approach.
section_title: Key Decisions Remain for Assets in Design to Ensure Promised Capabilities Are Achieved
paragraphs: Several Deepwater assets remain in the “analyze/select” or “need”  phases of the Coast Guard’s acquisition process which involve decisions  that affect the system-of-systems design. At the start of our review, these  included portions of the C4ISR project, OPC, cutter small boats,  unmanned aircraft system, and portions of the HH-60 helicopter.
The Deepwater Program was designed to improve the detection and  engagement of potential targets in the maritime domain. Key to the Coast  Guard’s success is engaging targets of interest, such as a terrorist activity  within the U.S. maritime domain. To do this, the Coast Guard goes  through a process of surveying the maritime domain, detecting and  classifying targets, and then responding to the situation. The planned  system-of-systems design connects the Deepwater assets through a  single command and control architecture—C4ISR—that is designed to  increase the probability of mission success by improving the accuracy  and speed of this process. For example, as envisioned, the MPA would  conduct more efficient searches in conjunction with other assets. During a  search for a missing vessel, the MPA would receive information from the  operational commander regarding the location of the distress signal and  then communicate search information back to the commander and with  other on-scene Coast Guard assets. The commander and the MPA could  then increase the speed of the response by locating the closest available  cutter and informing it of injuries and other issues.
Figure 7 depicts the Deepwater concept of using information technology  to more quickly and successfully execute missions.
To achieve the system-of-systems design, the Coast Guard planned for  C4ISR to be the integrating component of Deepwater. This was expected  to improve mission performance by increasing the success rate and  frequency of engaging targets. However, the $600 million ICGS- developed Coast Guard command and control system, currently on the  NSC, MPA, and HC-130J, does not achieve the system-of-systems  vision. After taking over as lead systems integrator in 2007, the Coast  Guard has changed its C4ISR strategy multiple times in an effort to  achieve a common software system for all Deepwater assets that  facilitates data sharing between these assets and external partners. But  as the Coast Guard continues to change its strategy, decisions remain  regarding how to achieve this promised capability in a feasible manner.  These decisions relate to realizing the overall goal of sharing data  between all of the Deepwater assets, creating and updating acquisition  documents, and developing a strategy for designing and managing the  C4ISR technical baselines.
The Coast Guard has yet to achieve the promised capability of an  interoperable system with communication and data sharing between all  assets and may limit some of the planned capability. According to the  approved Deepwater mission needs statement, data sharing, centralized  networks, and information from sensors are critical for the Coast Guard  and DHS to achieve mission performance in a resource-constrained  world. While according to information technology officials, the Coast  Guard has voice communications between assets, the currently  operational Deepwater assets— NSC, MPA, HC-130J, HH-60, and  HH-65—do not yet have the capability to fully share data with each other  or commanders. In addition, the Coast Guard has not fully established a  centralized network for C4ISR, creating communications problems. For  example, the NSC and MPA use classified systems to record and process  C4ISR data while the HC-130J and HC-130H have unclassified systems.  According to operators, sharing data gathered by the MPA during the  Deepwater Horizon oil spill incident was difficult because all information  gathered by the MPA was maintained on a classified system. According  to senior officials, the Coast Guard recognizes that classification issues  inhibit fully sharing data and is working to address these issues through  changes to Coast Guard policies, which have not been finalized.
Furthermore, it is unclear whether or not full data interoperability between  all assets remains a goal for the Deepwater program. Overall, according  to the Coast Guard’s recent cost estimating baseline document, the  C4ISR system will be installed on only 127 air and surface assets, which  is fewer than half of the approximately 300 assets within the Deepwater  acquisition. For example, senior acquisition officials stated that the  helicopters are not going to be equipped with the C4ISR software that is  planned to enable data sharing with commanders and other assets, but  this has not yet been reflected in project documentation. A senior official  with the information technology directorate questioned the extent to which  the level of shared data communications as set forth in the mission needs  statement would help the Coast Guard more efficiently achieve mission  success because some Coast Guard assets, such as the cutters, rarely  work in tandem. Additionally, project officials stated that the vision of full  data-sharing capability between assets, depicted above, is transforming  into a “hub and spoke” model where assets share data with shore-based  command centers that maintain the operating picture and maritime  awareness; this also has yet to be detailed in project documentation.  Given these uncertainties, the Coast Guard does not have a clear vision  of the C4ISR required to meet its missions.
The Coast Guard is also currently managing the C4ISR program without  key acquisition documents, including an acquisition program baseline that  reflects the planned program, a credible life-cycle cost estimate, and an  operational requirements document for the entire program.    The Coast Guard has replanned the C4ISR project baseline multiple  times since 2007, which, under ICGS, contained a high-level  description of the system with no requirements document to provide  further detail. In November 2009, the Coast Guard submitted a  revised baseline to DHS that provided some additional detail of the  planned capabilities, including capabilities designed to protect the  homeland, but also delayed development of these capabilities due to  concerns about the reliability and affordability of the ICGS system.  DHS approved the baseline in February 2011, but by that time it was  out of date. For example, according to this baseline, the Coast Guard  was planning to reach a milestone for developing improved  capabilities on selected assets in early fiscal year 2010—an event that  was indefinitely deferred before the baseline was approved and is  now scheduled to take place no sooner than 2017. Coast Guard  officials stated that a revised acquisition program baseline is currently  being drafted.    A key input into the acquisition program baseline is a credible life- cycle cost estimate, but the Coast Guard is currently revising the  C4ISR estimate and officials stated that the current cost estimate no  longer reflects the current status of the program.    An operational requirements document for the entire project has not  yet been completed; project officials told us that requirements  documents for portions of the system are in the review process or  under development. However, the documents in review do not include  C4ISR requirements for the OPC. C4ISR project officials stated that  those requirements are included in the OPC’s operational  requirements document, but acknowledged that these requirements  are vague.
In addition to inadequate or incomplete acquisition documentation, the  Coast Guard also lacks technical planning documents necessary to both  articulate the vision of a common C4ISR baseline—a key goal of the  C4ISR project—and to guide the development of the C4ISR system in  such a way that the system on each asset remains true to the vision.  While Coast Guard officials told us that their goal is still a common  software baseline, we have identified at least four software variants in  operation or under development but whose commonality is not clear:  the legacy Coast Guard system prior to Deepwater,  the ICGS-developed Coast Guard command and control system  (ICGS system),    a Coast Guard-developed command and control system called    a forthcoming Seawatch-ICGS hybrid system for the NSC.
The Coast Guard continues to maintain a legacy C4ISR system which is  operational on the 210-foot and 270-foot cutters and maintains the ICGS  system on the NSC, MPA, and HC-130J. The Coast Guard also planned  to put the ICGS system on the 110-foot patrol boats that were to be  converted to 123-foot boats. According to FRC program officials, after  this conversion failed for structural reasons and the FRC program was  accelerated to offset the loss of planned patrol boat capability, the Coast  Guard planned to use the legacy C4ISR system for the FRC. However,  due to obsolescence of the legacy system, the Coast Guard’s information  technology directorate developed a new system called Seawatch for  FRC. The Coast Guard has since decided to also incorporate Seawatch  into the upgrades to the original ICGS system for NSCs five through eight  and plans to do so for NSCs one through four, but this effort is currently  not funded. Until this Seawatch-ICGS hybrid system is installed on the  first four NSCs, the Coast Guard will have to maintain two systems for the  NSC. Further, according to C4ISR project officials, the Coast Guard is  currently analyzing the extent to which the Seawatch-ICGS hybrid system  meets the requirements for the OPC.
The C4ISR project has yet to identify a software system that will meet the  requirements of the HC-130H, HH-60, and HH-65 aircraft and that is also  compatible with surface assets. The Coast Guard is redesigning the ICGS  system currently on the MPA and HC-130J to replace some parts that are  now obsolete so that the Coast Guard can hold a competition for the  system. The goal is to develop a common software baseline for the MPA  and the HC-130J to address variations in the ICGS system currently on  these assets. Once the Coast Guard finishes developing this common  software baseline for the MPA and HC-130J, it will be a new baseline in  addition to the four baselines identified above. While some officials in the  capabilities directorate told us that Seawatch could become the common  command and control system for the Coast Guard, Seawatch system  developers in the information technology directorate told us that  Seawatch is not currently suitable for aviation assets. Table 4 shows the  software system currently installed on each asset and the anticipated  system for the asset.
According to Coast Guard information technology officials, the abundance  of software baselines could increase the overall instability of the C4ISR  system and complexity of the data sharing between assets. Moreover,  additional baselines may continue to proliferate because each asset is  now responsible for managing and funding technology obsolescence as  opposed to having a Coast Guard-wide technology obsolescence  prevention program. From 2008 to 2010, the Coast Guard had funded a  technology obsolescence program to avoid costly C4ISR system  replacements by proactively addressing out-of-date technology. For  example, program officials stated that the Coast Guard established a  uniform software baseline for 12 MPA mission system pallets under this  program. The Coast Guard is currently developing a policy to manage  obsolete technology now that the technology obsolescence program is no  longer funded.
Important decisions remain to be made regarding the OPC, the largest  cost driver in the Deepwater program. DHS approved the OPC’s  requirements document in October 2010 despite unresolved concerns  about three key performance parameters—seakeeping, speed, and  range—that shape a substantial portion of the cutter’s design. For  example, DHS questioned the need for the cutter to conduct full  operations during difficult sea conditions, which impact the weight of the  cutter and ultimately its cost. The Coast Guard has stated that limiting the  ability to conduct operations during difficult sea conditions would preclude  operations in key mission areas. While it approved the OPC requirements  document, DHS at the same time commissioned a study to further  examine these three key performance parameters. According to Coast  Guard officials, the study conducted by the Center for Naval Analysis  found that the three key performance parameters were reasonable,  accurate, and adequately documented. By approving the operational  requirements document before these factors were resolved, DHS did not  ensure that the cutter was affordable, feasible, and unambiguous and  required no additional trade-off decisions, as outlined in the Major  Systems Acquisition Manual. Our previous work on DHS acquisition  management found that the department’s inability to properly execute its  oversight function has led to cost overruns, schedule delays, and assets  that do not meet requirements.
In addition to the three performance parameters discussed above, other  decisions, with substantial cost and capability implications for the OPC,  remain unresolved. For example, it is not known which C4ISR system will  be used for the OPC, whether the cutter will have a facility for processing  classified information, and whether the cutter will have air search  capabilities. The Coast Guard’s requirements document addressed these  capabilities but allowed them to be removed if design, cost, or  technological limitations warrant. According to Coast Guard officials,  remaining decisions must be made before the acquisition program  baseline is approved as part of the program’s combined acquisition  decision event 2A/B and the request for proposals is issued, both of  which are planned for the fall of 2011. In addition, following the approval  of the requirements document, the Coast Guard formed a ship design  team tasked with considering the affordability and feasibility of the OPC.
This team has met with Assistant Commandants from across the Coast  Guard on several occasions to discuss issues that impact the affordability  and feasibility of the cutter, including, among others, the size of the living  quarters, the aviation fuel storage capacity, and the range of the cutter.  The Coast Guard has stated that affordability is a very important aspect of  the OPC project and that the request for proposal process will inform the  project’s efforts to balance affordability and capability.
The cutter small boats project was delayed when the initial ICGS plan  was halted due to unrealistic requirements that we have reported on in  the past. The Coast Guard has since made decisions on providing small  boats for the NSC, but key decisions remain regarding the Coast Guard’s  overall strategy for buying a standard cutter small boat fleet, including  quantities. According to project officials, a standard cutter boat fleet is an  important capability for the Coast Guard because it permits shared  training and maintenance and allows for sharing small boats among the  larger cutters, potentially reducing acquisition and maintenance costs.
There are two types of cutter small boats that the Coast Guard plans to  use to engage targets—a 36-foot version launched from the NSC and  potentially the future OPC and a 25-foot version planned for the three  largest Deepwater cutters: NSC, OPC, and FRC. Following the failure of  ICGS’ cutter small boats, the Coast Guard identified requirements for the  cutter small boat project to supply the three large cutters with at least 135  small boats. However, in August 2010, DHS changed the project to a  nonmajor acquisition after the Coast Guard downsized the scope of the  project to only 27 cutter small boats—which includes a mix of 25-foot and  36-foot boats—for the NSC, thus lowering the life-cycle cost for the  project. As a result, the program is no longer subject to DHS’s review or  independent testing. Project officials told us that despite this change in  quantities, a standard cutter boat for all three cutters nevertheless  remains a key goal; in fact, the current 25-foot small boat project plan  recognizes the potential for the project to buy up to 101 small boats,  which includes the ability for other DHS components to buy boats off of  that contract. The project plan for the 36-foot boats is not yet complete.  If the Coast Guard intends to still buy a standard cutter boat fleet,  depending on the mix, the life-cycle cost of the project could mean the  project is actually a major system acquisition subject to DHS review.
The UAS was envisioned as a key component of the Deepwater system  that would enhance surveillance capability on board the NSC and OPC  and also from land. Congress has appropriated over $100 million since  2003 to develop an unmanned aerial vehicle, but the Coast Guard  terminated the program due to cost increases and technical risks in June  2007. In February 2009, DHS approved a strategy for the Coast Guard to  acquire UASs, but the Coast Guard has not yet decided what specific  solutions are required to perform operations. Lead asset delivery was  originally scheduled for 2008, but the Coast Guard is waiting until Navy  technology for cutter-based UASs advances and is partnering with  Customs and Border Protection for use of the maritime land-based UAS,  Guardian. There are some indications that the Coast Guard UAS program  will continue to incur substantial delays. For example, there is currently no  funding for the program in the Coast Guard’s fiscal years 2012-2016  capital investment plan and the Coast Guard does not expect the C4ISR  software for the UAS to share data with other assets to be ready for  operations until 2024. Until the Coast Guard buys UASs, the planned  capability of the major cutter fleet is limited. Without a UAS, for instance,  the DHS Inspector General estimates that the aerial surveillance  capability of the NSC is reduced from 58,160 square nautical miles to  18,320 square nautical miles, a 68 percent decline.
The HH-60 project office is continuing to make progress upgrading the  Coast Guard’s largest helicopter, but decisions remain concerning the  extent to which the Coast Guard will use the helicopter for surveillance.  According to the current acquisition program baseline, the Coast Guard  plans to replace the existing weather radar on the HH-60 with a surface  search radar to improve detection and classification capabilities. The  project office originally planned to begin this work in fiscal year 2006, but  is now planning to begin the work in fiscal year 2012. Officials at the  Coast Guard’s Aviation Logistics Center, where the helicopter depot  maintenance is conducted, stated that funding for the workforce currently  conducting the upgrades on the HH-60 will expire in the summer of 2014.  These officials expressed concern that if the Coast Guard delays surface  search radar work further, there will be a loss of learning on the  production line, leading to an increase in the cost of the project due to  production restart costs. Furthermore, project officials told us that the  Coast Guard is developing a preliminary-operational requirements  document that will address requirements for the HH-60’s C4ISR  capabilities. These remaining decisions for the HH-60 will shape the  extent to which the helicopter shares information collected by the surface  search radar with operational commanders and other Coast Guard  assets.
section_title: Preliminary Test Events Have Yielded Mixed Results in Advance of Initial Operational Testing
paragraphs: None of the Deepwater assets have completed initial operational test and  evaluation, a major test event which identifies deficiencies by evaluating  operational effectiveness during the execution of simulated operational  missions. The NSC, MPA, and FRC are scheduled to complete this  testing in fiscal years 2012 and 2013. The HC-130J will not undergo any  operational testing or assessments by an independent operational test  authority, and the other Deepwater assets are not yet scheduled to start  this testing. In advance of this testing, the Coast Guard has completed  preliminary tests for the NSC, MPA, and FRC, such as operational  assessments, which the Coast Guard is using to mitigate risk and  address problems during asset development prior to initial operational  test and evaluation. The Coast Guard also conducts acceptance testing,  which helps ensure that the functionality of the delivered asset meets  contract requirements and may help demonstrate that it will meet defined  mission needs. Using these tests, officials have identified issues that  need to be addressed prior to initial operational testing on the following  assets.
During acceptance testing for the second NSC in October 2010, Coast  Guard officials identified five key issues, also identified on NSC 1 in an  operational assessment completed in September 2010:  reliability and maintenance problems with the crane on the back of the  cutter,    an unsafe ammunition hoist for the main gun,        an impractical requirement for using the side rescue door in difficult  instability with the side davit for small boat launch,  insufficient power to a key system used for docking the cutter, and  sea conditions.
Senior acquisition directorate officials stated that there are currently  workarounds for some of these issues and the cutters do meet  contractual requirements. Program officials added that funding and  design changes have yet to be finalized for these five issues and in some  cases, correcting these issues will likely require costly retrofits.
In January 2011, Coast Guard officials canceled the Aircraft Ship  Integrated Secure and Traverse (ASIST)—a system intended to automate  the procedure to land, lock down, and move the HH-65 helicopter from  the deck to the hangar on the NSC—after significant deficiencies were  identified during testing conducted by the U.S. Naval Air Warfare Center.  Examples of deficiencies included increased pilot workload during  landing, excessive stress on the helicopter components as the aircraft  moved across the deck into the hangar, and failure to reduce the number  of people needed to secure the helicopter as the system was designed to  do. In addition, testing officials determined that the system could cause  injury to the aircrew because the landing operator could not communicate  with the pilot in a timely manner, and the system demonstrated  unpredictable failures to locate the aircraft while it was hovering over the  NSC’s flight deck. The ASIST system was identified by ICGS as a  solution to a Coast Guard requirement. Several Coast Guard officials told  us that the Coast Guard was aware of potential problems with ASIST as  early as 2007, but the Coast Guard moved forward with it until testing was  complete. The Coast Guard invested approximately $27 million to install  the system on three NSCs, purchase long lead materials for the fourth  NSC, and modify one HH-65 helicopter for the test event. The Coast  Guard is now exploring solutions in use by the Navy to replace the  system. For the two operational NSCs, officials stated that operators  secure the HH-65 using legacy cutter technology.
In a May 2009 operational assessment, an independent test authority— the Navy’s Commander Operational Test and Evaluation Force—found  that, while the MPA airframe provides increased capability for cargo and  passenger transport, the C4ISR system on the aircraft’s mission system  pallet is a significant area of risk. Deficiencies included poor performance  of the two main sensors used to identify and track targets, need for  system reboots that result in system downtime—which we observed  during our visit with the pallet operators in Mobile, Alabama in January  2011—and a lack of training equipment. The operators told us that issues  with these capabilities persist and that other aspects of the system  prevent operators from working efficiently. For example, the operators  stated that the screens on the pallet are too small for the number of  applications that normally run simultaneously and the main camera needs  to be held on target manually because it cannot automatically locate  previously identified targets. Since our visit, the Coast Guard has installed  a software upgrade which officials stated corrected several problems  inherent with the previous version. DHS Test and Evaluation officials told  us that the Coast Guard is not permitted to buy additional pallets until  successful completion of initial operational testing, scheduled for  September 2011. These officials told us that they were optimistic that  testing would be successful.
The MPA’s acquisition plan does not include a strategy to buy additional  mission system pallets; currently, the Coast Guard has received all 12 of  the pallets under contract with ICGS. According to officials, the Coast  Guard is planning to seek a full-rate production decision for the MPA by  the end of fiscal year 2012, at which point almost one-third of the planned  36 MPA airframes will have been purchased. Prior to a full-rate  production decision, in accordance with the Major Systems Acquisition  Manual, the program must have identified a preferred solution and an  acquisition plan for buying the pallet. Currently, the Coast Guard is  assessing how to buy future pallets. Options include continuing to buy the  pallet directly from Lockheed Martin or conducting a full and open  competition to determine if another vendor can build the pallet. Senior  Coast Guard acquisition officials stated that they determined the Coast  Guard does not have sufficient capability to build the pallet itself.
The FRC program is planning to use the first cutter for initial operational  test and evaluation. The original delivery date for the lead cutter was  scheduled for January 2011, but that date has slipped to December 2011.  Officials told us that the delay is due to a last minute design change,  directed by the Coast Guard’s engineering and logistics technical  authority, to enhance the structure of the cutter. An early operational  assessment that reviewed design plans for the FRC was completed in  August 2009 and identified 74 design issues, 69 of which were corrected  during the assessment. Officials explained that they are confident in the  reliability of the FRC design and do not expect any major operational  issues to arise during initial operational testing and evaluation. In addition,  program officials explained that the Coast Guard has used a lead vessel  for initial operational test and evaluation in the past and is now also  planning to conduct an operational assessment on the lead FRC to  reduce risk. Officials from the Navy’s Commander Operational Test and  Evaluation Force, however, stated that there are risks associated with  using the first cutter for initial operational test and evaluation; operators  are not as familiar with the system, the logistics enterprise may not be  fully operational to support the asset, and enough time may not have  passed to collect sufficient data on what operational issues need to be  addressed prior to testing.
The Coast Guard currently has 6 HC-130Js in operation, but the aircraft  did not undergo any operational testing or assessments by an  independent operational test authority. As we reported last year, DHS and  Coast Guard had agreed that no further testing or documentation was  necessary for the HC-130J because production of the aircraft was  complete, and a report was developed that defines the aircraft’s  performance by describing the demonstrations that have already been  conducted to quantify the characteristics of the aircraft and mission  systems. However, since our last report, the Navy received funding to  buy two additional HC-130Js for the Coast Guard. As a result, DHS  officials stated that they may revisit the decision to not fully test the  HC-130J. Officials at the Aviation Logistics Center stated that they are  concerned that initial operational test and evaluation was never  completed and that current operations essentially serve as an  assessment of capability. The mission system, a C4ISR suite of  components which is similar to the suite on the MPA, has had problems  such as unplanned reboots. These officials stated that operational testing  might have helped to identify these issues sooner. Also, since HC-130J  spare parts have not been sufficient, these officials explained that the  Coast Guard has “demissionized” two HC-130Js to provide spare parts  for the remaining four HC-130Js. These two HC-130Js are now partially  mission capable, meaning they cannot use the electronic suite of C4ISR  equipment. Coast Guard acquisition officials told us that fiscal year 2011  funding for HC-130J spares should allow the Coast Guard to  re-missionize these assets.
section_title: Coast Guard’s Quarterly Reports to Congress Do Not Fully Capture Program Risks
paragraphs: As part of its role in program execution, the Coast Guard is gaining a  better understanding of each asset’s cost, schedule, and technical risks,  but not all of this information is transparent to Congress. The Coast  Guard maintains two different quarterly reports to track information on its  major acquisitions, including narrative and mitigation actions pertaining to  risks, and Coast Guard officials told us that the same database is used to  populate both reports. One is the Quarterly Project Report which is an  internal acquisition report used by Coast Guard program managers. The  other, known as the Quarterly Acquisition Report to Congress (QARC),  was required by various appropriations laws to be submitted to the  congressional appropriations committees and to rank on a relative scale  the cost, schedule, and technical risks associated with each acquisition  project. We found that this statutory requirement is no longer in effect.  However, the Coast Guard and DHS continue to submit the QARC  pursuant to direction in committee and conference reports and the Coast  Guard’s Major Systems Acquisition Manual. These committee and  conference reports generally reiterate an expectation that the Coast  Guard submit the QARC by the 15th day of the fiscal quarter.
We found that the Coast Guard’s fiscal year 2010 QARCs did not always  include risks identified in the Quarterly Project Reports. The Coast  Guard’s Major Systems Acquisition Manual states that the QARC  incorporates the Quarterly Project Report for each major acquisition  project. The Quarterly Project Report includes, among other things, the  top three project risks. In comparing both sets of reports—the Quarterly  Project Report and the QARC—from fiscal year 2010, we found that over  50 percent of medium and high risks identified in the internal Quarterly  Project Reports were not included in the QARC. For example, the Coast  Guard reported to Congress that the OPC program had no risks in fiscal  year 2010, but several were identified in the internal report—including  concerns about affordability. In addition, for all of fiscal year 2010, the  Coast Guard reported no risks for the MPA project in the QARC even  though several were identified in the internal report.
Before transmittal to Congress, the QARCs are reviewed by officials  within the Coast Guard’s resource directorate, the DHS Chief Financial  Officer’s office, and the Office of Management and Budget. Resource  directorate officials told us they do not include risks in the QARC if those  risks contradict the Coast Guard’s current budget request. For example,  the resource directorate did not include the risk related to spare parts for  the MPA in the fiscal year 2010 reports to Congress because the Coast  Guard did not request funding for spare parts. DHS officials told us that  they do not remove medium and high risks from the report. Office of  Management and Budget officials stated that they will discuss several  items with the Coast Guard, including factors that the agency may want to  consider with regard to the medium and high risks identified in their draft  submissions, but that the Office of Management and Budget does not  direct the Coast Guard to remove medium or high risks from the reports  before they are transmitted. We could not obtain documentation to  determine at what point in the review process the decision is made to not  include risks.
For all four quarters of fiscal year 2010, the QARC was submitted  consistently late. And as of May 2011, the Coast Guard had not submitted  the first quarter fiscal year 2011 report to Congress—a delay of at least  4 months—but the second quarter fiscal year 2011 internal report was  already complete. According to senior Coast Guard acquisition directorate  officials, the QARC is intended to be the program manager’s  communication with Congress about risks. However, when risks are not  included, the Coast Guard is not presenting to Congress a complete and  timely picture of the risks some assets face.
section_title: Coast Guard Has Not Completed a Comprehensive Trade-Off Analysis for the Deepwater Assets
paragraphs: To support its role as systems integrator, the Coast Guard planned to  complete a fleet mix analysis in July 2009 to eliminate uncertainty  surrounding future mission performance and to produce a baseline for the  Deepwater acquisition. We previously reported that the Coast Guard  expected this analysis to serve as one tool, among many, in making  future capability requirements determinations, including future fleet mix  decisions. The analysis, which began in October 2008 and concluded in  December 2009, is termed fleet mix analysis phase 1. Officials from the  Coast Guard’s capabilities directorate comprised the majority of the  project team for the analysis, which also included contractor support to  assist with the analysis. As of May 2011, DHS had not yet released phase  1 to Congress. We received the results of the analysis in December 2010.
To conduct the fleet mix analysis, the Coast Guard assessed asset  capabilities and mission demands in an unconstrained fiscal environment  to identify a fleet mix—referred to as the “objective fleet mix”—that would  meet long-term strategic goals. The objective fleet mix resulted in a fleet  that would double the quantity of assets in the program of record, the  $24.2 billion baseline. For example, the objective fleet mix included 66  cutters beyond the program of record. Given the significant increase in  the number of assets needed for this objective fleet mix, the Coast Guard  developed, based on risk metrics, incremental fleet mixes to bridge the  objective fleet mix and the program of record. Table 5 shows the  quantities of assets for each incremental mix, according to the Coast  Guard’s analysis.
While the analysis provided insight on the performance of fleets larger  than the program of record, the analysis was not cost-constrained. The  Coast Guard estimated the total acquisition costs associated with the  objective fleet mix could be as much as $65 billion—about $40 billion  higher than the approved $24.2 billion baseline. As a result, as we  reported last year, Coast Guard officials stated that they do not consider  the results to be feasible due to cost and do not plan to use it to provide  recommendations on a baseline for fleet mix decisions. Since we last  reported, Coast Guard officials stated that phase 1 supports continuing to  pursue the program of record.
Because the first phase of the fleet mix analysis was not cost constrained,  it does not address our July 2010 recommendation that the Coast Guard  present to Congress a comprehensive review of the Deepwater Program  that clarifies the overall cost, schedule, quantities, and mix of assets  required to meet mission needs, including trade-offs in light of fiscal  constraints given that the currently approved Deepwater Program is no  longer feasible. The Coast Guard has undertaken what it refers to as a  cost-constrained analysis, termed fleet mix analysis phase 2; however,  according to the capabilities directorate officials responsible for the  analysis, the study primarily assesses the rate at which the Coast Guard  could acquire the Deepwater program of record within a high ($1.7 billion)  and low ($1.2 billion) bound of annual acquisition cost constraints.  These officials stated that this analysis will not reassess whether the  current program of record is the appropriate mix of assets to pursue and  will not assess any mixes smaller than the current program. Alternative  fleet mixes are being assessed, but only to purchase additional assets  after the program of record is acquired, if funding remains within the  yearly cost constraints. The Coast Guard expects to complete its phase 2  analysis in the summer of 2011. As we reported in April 2011, because  phase 2 will not assess options lower than the program of record, it will  not prepare the Coast Guard to make the trade-offs that will likely be  needed in the current fiscal climate.
Further, despite Coast Guard statements that phase 2 was cost  constrained, there is no documented methodology for establishing the  constraints that were used in the analysis, and we found confusion about  their genesis. The acquisition directorate, according to the study’s charter,  was to provide annual funding amounts, but Coast Guard officials  responsible for phase 2 told us that DHS’s Program Analysis & Evaluation  office provided the lower bound and the acquisitions directorate provided  the upper bound. An official from the Program Analysis & Evaluation  office stated that DHS informally suggested using historical funding levels  of $1.2 billion to establish an average annual rate but was unaware that  the Coast Guard was using this number as the lower bound for the study.  A senior Coast Guard acquisition directorate official stated that the  directorate agreed with using the $1.2 billion as the lower constraint and  had verbally suggested the upper bound of $1.7 billion. Based on our  review of historical budget data, $1.7 billion for Deepwater is more than  Congress has appropriated for the entire Coast Guard’s acquisition  portfolio since 2007 and as such, is not likely a realistic constraint. Coast  Guard officials stated that the upper bound was not necessarily a realistic  level, rather an absolute upper bound to establish the range of possible  acquisition levels. In addition, the Coast Guard does not have  documentation of the cost constraints; according to a Coast Guard  official, these cost constraints were verbally communicated to the  contractor.
In addition to the Coast Guard’s analysis, DHS’s Program Analysis &  Evaluation office is conducting a study, at the request of the Office of  Management and Budget, to gain insight into alternatives to the  Deepwater surface program of record. Office of Management and Budget  officials told us that they recommended DHS conduct this study because  DHS was in a position to provide an objective evaluation of the program  and could ensure that the analysis of the trade-offs of requirements in a  cost constrained environment would align with the Department’s  investment priorities. A DHS official involved in the study stated that the  analysis will examine performance trade-offs between the NSC, OPC, a  modernized 270’ cutter, and the Navy’s Littoral Combat Ship. The official  also explained that the analysis is based on a current estimate of surface  asset acquisition costs, which serves as a cap to guide surface asset  trade-offs. This cutter study is expected to be completed in the summer of  2011. This official also stated that the cutter study is not expected to  contain recommendations, but Office of Management and Budget officials  told us they plan to use the results to inform decisions about the fiscal  year 2013 budget. A DHS official responsible for this study stated that this  analysis and the Coast Guard’s fleet mix analysis will provide multiple  data points for considering potential changes to the program of record,  including reductions in the quantities planned for some of the surface  assets. However, as noted above, Coast Guard capabilities directorate  officials have no intention of examining fleet mixes smaller than the  current, planned Deepwater program.
section_title: Conclusions
paragraphs: Over the past 4 years, the Coast Guard has strengthened its acquisition  management capabilities in its role as lead systems integrator and  decision maker for Deepwater acquisitions. Now, the Coast Guard needs  to take broader actions to address the cost growth, schedule delays, and  expected changes to planned capabilities that have made the Deepwater  program, as presented to Congress, unachievable. Today’s climate of  rapidly building fiscal pressures underscores the importance of assessing  priorities—from an acquisition, resource, and capabilities perspective—so  that more realistic planned budgets can be submitted to Congress. Such  a step would help alleviate what has become a pattern of churn in  revising program baselines when planned funding does not materialize.
At the same time, decision makers in the Coast Guard and Congress  need accurate and timely information. Cost and schedule estimates that  are not based on current and comprehensive information do not provide  an effective basis for assessing the status of acquisition programs.  Further, the quarterly acquisition reports to Congress were intended by  the Coast Guard to convey program risks, but the Coast Guard is not  consistent in reporting cost, schedule, and technical risks and has not  submitted the reports in the time frame requested by Congress. From a  broader perspective, it is unclear how, or whether, DHS and the Coast  Guard will reconcile and use the multiple studies—the DHS cutter study  and the Coast Guard’s two fleet mix analyses—to make trade-off  decisions regarding the program of record that balance effectiveness with  affordability. Without a process for doing so, decisions may not  adequately balance mission needs and affordability.
At the individual project level, knowledge-based decisions are needed as  Deepwater enters its fourth year with the Coast Guard as systems  integrator. Uncertainties about the C4ISR systems, which were intended  to be the key to making Deepwater a system of systems, continue and  are compounded as assets are designed and delivered without a  coherent vision for the overall program. This includes the MPA mission  system pallet, which is needed to carry out the full range of this aircraft’s  planned missions but for which the Coast Guard has not developed an  acquisition strategy. Because DHS approved the requirements document  for the OPC despite significant unknowns concerning feasibility,  capability, and affordability, future decisions about this asset must be  based on a more rigorous knowledge base. And the ambiguities about  cutter small boat quantities suggest that this program’s risk level may  need to be reassessed.
section_title: Recommendations for Executive Action
paragraphs: To provide Congress with information needed to make decisions on  budgets and the number of assets required to meet mission needs within  realistic fiscal constraints, we recommend that the Secretary of Homeland  Security develop a working group that includes participation from DHS  and the Coast Guard’s capabilities, resources, and acquisition  directorates to review the results of multiple studies—including fleet mix  analysis phases 1 and 2 and DHS’s cutter study—to identify cost,  capability, and quantity trade-offs that would produce a program that fits  within expected budget parameters. DHS should provide a report to  Congress on the findings of the study group’s review in advance of the  fiscal year 2013 budget submission.
To help the Coast Guard address the churn in the acquisition project  budgeting process and help ensure that projects receive and can plan to  a more predictable funding stream, we recommend that the Commandant  of the Coast Guard take the following two actions:  Implement GAO’s Cost Estimating and Assessment Guide’s best  practices for cost estimates and schedules as required by the Major  Systems Acquisition Manual, with particular attention to maintaining  current cost estimates and ensuring contractor’s schedules also meet  these best practices.    As acquisition program baselines are updated, adopt action items  consistent with those in the Blueprint related to managing projects  within resource constraints as a Coast Guard-wide goal, with input  from all directorates. These action items should include milestone  dates as well as assignment of key responsibilities, tracking of specific  actions, and a mechanism to hold the appropriate directorates  responsible for outcomes, with periodic reporting to the Vice- Commandant.
To help ensure that Congress receives timely and complete information  about the Coast Guard’s major acquisition projects, we recommend that  the Commandant of the Coast Guard and the Secretary of the  Department of Homeland Security:  include in the project risk sections of the Quarterly Acquisition Report  to Congress the top risks for each Coast Guard major acquisition,  including those that may have future budget implications such as  spare parts; and  submit the Quarterly Acquisition Report to Congress by the 15th day  of the start of each fiscal quarter.
Because DHS approved the OPC operational requirements document  although significant uncertainties about the program’s feasibility,  capability, and affordability remained, we recommend that the Secretary  of DHS take the following two actions:    ensure that all subsequent Coast Guard decisions regarding  feasibility, capability, and affordability of the OPC’s design are  thoroughly reviewed by DHS in advance of the program’s next  acquisition decision event (ADE 2A/B); and    determine whether a revised operational requirements document is  needed before the program’s next acquisition decision event  (ADE 2A/B).
To increase confidence that the assets bought will meet mission needs,  we recommend that the Commandant of the Coast Guard take the  following three actions:    As the Coast Guard reevaluates and revises its C4ISR project  documentation—including the operational requirements document,  acquisition program baseline, and life-cycle cost estimate—determine  whether the system-of-systems concept for C4ISR is still the planned  vision for the program. If not, ensure that the new vision is  comprehensively detailed in the project documentation.    Develop and finalize a strategy for the acquisition of the MPA mission  system pallets before a full-rate production decision is made.    Specify the quantities of cutter small boats that the Coast Guard plans  to purchase, given that the current project plan does not clearly do so,  and categorize the appropriate acquisition level in accordance with a  life-cycle cost that reflects these planned quantities.
section_title: Matter for Congressional Consideration
paragraphs: To help ensure that it receives timely and complete information about the  Coast Guard’s major acquisition projects, Congress should consider  enacting a permanent statutory provision that requires the Coast Guard to  submit a quarterly report within 15 days of the start of each fiscal quarter  on all major Coast Guard acquisition projects and require the report to  rank for each project the top five risks and, if the Coast Guard determines  that there are no risks for a given project, to state that the project has no  risks. In addition, Congress should consider restricting the availability of  the Coast Guard’s Acquisition, Construction and Improvements  appropriation after the 15th day of any quarter of any fiscal year until the  report is submitted.
section_title: Agency Comments and Our Evaluation
paragraphs: DHS provided us with written comments on a draft of this report. In its  comments, DHS concurred with all of the recommendations. The written  comments are reprinted in appendix II. We also provided draft sections of  the report to Office of Management and Budget officials, who provided us  technical comments via e-mail; we incorporated their comments as  appropriate.
With respect to our first recommendation, that DHS form a working group  to review the results of the fleet mix and cutter studies and report to  Congress in advance of the fiscal year 2013 budget, DHS agreed to  initiate the review and analysis of the studies and report to Congress on  the findings. However, DHS added that given available resources,  competing priorities and demands, and the Office of Management and  Budget’s timeline for fiscal year 2013 budget submission, this will occur  as soon as reasonably practical. We understand that department officials  have multiple demands on their time, but we believe that DHS should  make every effort to report to Congress on the findings of this review  before submitting its next budget. The Deepwater assets account for  billions in acquisition dollars, and Office of Management and Budget  officials told us that they plan to use the results of the DHS cutter study to  inform the fiscal year 2013 budget. The working group’s findings could  provide the Congress with important insights into costs, capabilities, and  quantity trade-offs prior to receiving the department’s budget request.
In concurring with our recommendation to implement GAO’s Cost  Estimating and Assessment Guide’s best practices for cost estimates and  schedules as required by the Major Systems Acquisition Manual, the  Coast Guard noted that implementing some of these best practices may  not always be cost effective in a production environment. However, the  Coast Guard agreed to establish an appropriate cost estimate update  frequency for each project and review Integrated Master Schedules and  make schedule adjustments as needed. Sustained attention to the Cost  Estimating and Assessment Guide’s practices will be very important,  particularly as one of the largest acquisitions of the Deepwater program— the OPC—is expected to proceed to ADE-2A/B in fall 2011.
DHS also agreed with our recommendation that as the Coast Guard  updates its acquisition program baselines, these baselines must conform  to known resource constraints. However, in responding to this  recommendation, DHS and the Coast Guard did not address plans for  developing action items to manage projects within resource constraints as  a Coast Guard-wide goal, citing instead the existing senior-level resource  governance process and annual budget process. We recognize that part  of the standard budget development process includes trade-off decisions  regarding recapitalization versus operation and maintenance funding.  However, under this standard process, DHS and the Coast Guard have  continued to face the problem of approved acquisition programs not being  feasible. We also recognize that the Blueprint for Continuous  Improvement is an acquisition directorate document that does not reflect  resource priorities across the entire budget. However, this key document  is signed by the Commandant, and the October 2010 version does  include several budget-related action items, such as establishing project  priorities. Our recommendation, to adopt action items “consistent” with  those in the Blueprint regarding managing projects within resource  constraints—with input from all directorates—reflects our belief that the  Coast Guard needs to be more proactive in addressing its mismatch of  expected funding levels and actual funding needs for approved  acquisition programs.
With respect to our recommendations concerning the comprehensiveness  and timeliness of the Coast Guard’s quarterly acquisition reports to  Congress, DHS agreed to report the top risks for each major acquisition  and to submit the reports to Congress by the 15th day of the start of each  fiscal quarter. However, DHS stated that OMB policy limits the Coast  Guard’s ability to report project risks that are pre-decisional or address  out-year funding plans. We made this recommendation because no risks  had been included in the quarterly reports to Congress for two programs  in fiscal year 2010. DHS also noted that the it strives to submit the reports  on time, but that this is difficult, especially given the time required to  coordinate its release outside of the department. We believe that when  risks are not included and the reports are not transmitted in a timely  manner, Congress will not have a complete and timely picture of the risks  some assets face.
DHS agreed to thoroughly review all subsequent Coast Guard decisions  regarding feasibility, capability, and affordability of the OPC’s design in  advance of the program’s ADE 2A/B. DHS also agreed with our  recommendation to determine whether a revised operational  requirements document is needed before ADE 2A/B. In its response,  DHS stated that an independent validation study, directed by the Deputy  Secretary as part of the approval of the OPC operational requirements  document, found that the key parameters of range, speed, and sea- keeping were reasonable, accurate, and adequately documented. We  have not yet reviewed this study.
DHS also agreed with our three recommendations to increase confidence  that the assets bought will meet mission needs. With respect to C4ISR,  DHS stated that the Coast Guard remains committed to the system-of- systems concept and plans to provide DHS with an affordable and  executable C4ISR acquisition program baseline that leverages work  already completed. With respect to the mission system pallet, DHS stated  that the Coast Guard plans to present a revised mission system pallet  acquisition strategy to the DHS Acquisition Review Board for the full-rate  production decision planned for the fourth quarter fiscal year 2012. This  will follow initial operational test and evaluation of the current  configuration of both the Maritime Patrol Aircraft and the mission system  pallet. Finally, DHS stated that the Coast Guard will work with the  department to determine the appropriate acquisition level for the small  boats project. DHS also noted that the current approved project plan is for  27 small boats which have a life-cycle cost estimate that categorizes the  project as a non major acquisition. The response, however, did not  address the fact that the approved project plan recognizes the potential to  buy up to 101 small boats. We maintain that, moving forward, the Coast  Guard needs to specify the quantities of small boats it plans to purchase  to ensure that the project’s acquisition level is appropriately categorized.
Coast Guard also provided technical comments which we incorporated  into the report as appropriate, such as when we were provided with  documentation to support the comments. The Coast Guard requested  that we remove the term “Deepwater” and replace it with “major  acquisitions.” We did not make this change because, at the time of this  report, Congress had not yet passed the fiscal year 2012 appropriations  act which may address DHS’s and Coast Guard’s proposal to eliminate  the term “Integrated Deepwater System” from its annual appropriation.  Furthermore, the program baseline for one of the Coast Guard’s largest  major acquisitions—the OPC—still remains part of the 2007 Deepwater  acquisition program baseline.
We are sending copies of this report to interested congressional  committees, the Secretary of Homeland Security, and the Commandant  of the Coast Guard. This report will also be available at no charge on  GAO’s web site at http://www.gao.gov.
If you or your staff have any questions about this report or need additional  information, please contact me at (202) 512-4841 or huttonj@gao.gov.
Contact points for our Offices of Congressional Relations and Public  Affairs may be found on the last page of this report. Staff  acknowledgments are provided in appendix VI.
section_title: Appendix I: Scope and Methodology
paragraphs: In conducting this review, we relied in part on the information and analysis  in our past work, including reports completed in 2008, 2009, 2010, and  2011. Additional scope and methodology information on each objective  of this report follows.
To determine the extent to which the Deepwater Program’s planned cost  and schedule baselines have been exceeded, we reviewed the  Deepwater Program’s 2007 baseline and compared it to the revised  baselines for individual assets that have been approved to date. We also  reviewed budget documents and compared them against revised program  baselines to identify any differences in reported cost and schedule  estimates. To assess cost estimating and scheduling practices of  selected Deepwater Programs, we selected the Maritime Patrol Aircraft  (MPA), National Security Cutter (NSC), and command, control,  communications, computers, intelligence, surveillance, and  reconnaissance (C4ISR) programs. We reviewed the MPA program’s cost  estimate and schedule because this program has the highest life-cycle  cost estimate of all Deepwater assets and has experienced schedule  delays. We also reviewed the NSC program’s schedule because the  program has the second highest life-cycle cost estimate and has also  experienced schedule delays. The Coast Guard was not able to provide  us with a current NSC life-cycle cost estimate because the program is  revising the estimate. As a result, we selected the C4ISR life-cycle cost  estimate to review because the estimate was complete but the program  did not yet have a Department of Homeland Security-approved  acquisition program baseline and there was uncertainty concerning the  direction of the program. In performing our analysis, we focused on the  schedules and cost estimates available at the time of our review and  evaluated them using the criteria set forth in GAO’s cost guide. In  assessing the program’s cost estimates, we used the GAO cost guide to  evaluate the estimating methodologies, assumptions, and results to  determine whether the life-cycle cost estimates were comprehensive,  accurate, well-documented, and credible. We also used the GAO guide to  determine the extent to which each schedule was prepared in accordance  with the best practices that are fundamental to having a reliable schedule.
We discussed the results of our assessments with the program offices  and cost estimators. We supplemented these analyses by interviewing  Coast Guard officials from the capabilities, acquisition, and resources  directorates to determine any challenges the Coast Guard is facing in  achieving these baselines as well as some of the potential implications of  schedule and cost breaches. Further, we analyzed five capital investment  plans that were included in the 2008 through 2012 budgets, breach  memos, and the acquisition directorate’s October 2010 Blueprint for  Continuous Improvement to identify any funding issues and the extent to  which they were factors leading to breaches in established program  baselines. We also interviewed Coast Guard program staff and DHS  officials from the Cost Analysis Division and Acquisition Program  Management Division to corroborate program information.
To determine the progression of the execution, design, and testing of  Deepwater assets, we reviewed the following documents: Coast Guard’s  Major Systems Acquisition Manual, asset operational requirements  documents, acquisition strategies and plans, acquisition program  baselines, program briefings to the Coast Guard’s Executive Oversight  Council and associated meeting minutes, acquisition decision  memorandums, test reports, and contracts. We also reviewed Quarterly  Project Reports, and Quarterly Acquisition Reports to Congress, and  various appropriations laws and related committee and conference  reports regarding the reports to Congress. For fiscal year 2010, we  compared the program risks identified in the Quarterly Project Reports to  the risks identified in the Quarterly Acquisition Reports to Congress. We  also reviewed the dates the fiscal year 2010 Quarterly Acquisition  Reports to Congress had been transmitted to Congress. We interviewed  officials responsible for collecting and reviewing information for these  reports including officials from the Coast Guard’s acquisition and  resources directorates, DHS’s Chief Financial Officer’s office, and the  Office of Management and Budget. For design and testing, we also  interviewed Coast Guard officials from the capabilities, resources, and  acquisition directorates as well as the Navy’s Commander Operational  Test and Evaluation Force and DHS’s Science and Technology Test &  Evaluation and Standards Division. In addition, we met with Coast Guard  operators at the Aviation Training Center in Mobile, Alabama, and Coast  Guard officials at the Aviation Logistics Center. In addition, we also met  with contractor and Coast Guard officials at Northrop Grumman  Shipbuilding facilities in Pascagoula, Mississippi to discuss NSC  construction and with a Bollinger Shipyards’ official in Lockport, Louisiana  to discuss Fast Response Cutter construction and toured their respective  shipyards. We also met with Coast Guard officials at Lockheed Martin  facilities in Moorestown, New Jersey; and the Command, Control, and  Communications Center in Portsmouth, Virginia to discuss their role in the  C4ISR project.
To assess the current status of the Coast Guard’s fleet mix analysis and  determine how the Coast Guard and DHS are using the analysis to inform  acquisition decisions, we reviewed key documents including charters and  statement of works for the two fleet mix analysis phases. We also  reviewed the December 2009 final report for the fleet mix analysis phase  1. We interviewed Coast Guard officials from the capabilities, resources,  and acquisition directorates and Coast Guard officials overseeing work for  phase 1 and phase 2. Additionally, we interviewed a senior DHS official  from the office of Program Analysis and Evaluation and Office of  Management and Budget officials to identify the scope of the Office of  Management and Budget-directed cutter study and to understand  similarities and differences between that study and the Coast Guard’s  fleet mix analysis.
We conducted this performance audit between September 2010 and July  2011 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.
section_title: Appendix II: Comments from the Department of Homeland Security and Coast Guard
section_title: Appendix III: Assessments of MPA and C4ISR Cost Estimates
paragraphs: This appendix provides the results of our analysis of the extent to which  the processes and methodologies used to develop and maintain the MPA  and C4ISR cost estimates meet the characteristics of high-quality cost  estimates. The four characteristics of high-quality estimates are  explained and mapped to the 12 steps of such estimates in table 6.
Tables 7 and 8 provide the detailed results of our analysis of the MPA  and C4ISR program cost estimates. “Not met” means the Coast Guard  provided no evidence that satisfies any of the criterion. “Minimally” means  the Coast Guard provided evidence that satisfies a small portion of the  criterion. “Partially” means the Coast Guard provided evidence that  satisfies about half of the criterion. “Substantially” means the Coast Guard  provided evidence that satisfies a large portion of the criterion. “Fully met”  means the Coast Guard provided evidence that completely satisfies the  criterion.
section_title: Appendix IV: Assessments of MPA and NSC Schedules
paragraphs: Tables 9 and 10 provide the results of our analysis of the extent to which  the processes and methodologies used to develop and maintain  schedules for the Maritime Patrol Aircrafts 12-14 and NSC 3 meet the  nine best practices associated with effective schedule estimating.  “Not met” means the program provided no evidence that satisfies any of  the criterion. “Minimally” means the Coast Guard provided evidence that  satisfies a small portion of the criterion. “Partially” means the Coast Guard  provided evidence that satisfies about half of the criterion. “Substantially”  means the Coast Guard provided evidence that satisfies a large portion of  the criterion. “Fully met” means the Coast Guard provided evidence that  completely satisfies the criterion.
section_title: Appendix V: Allocation of Deepwater Acquisition, Construction, and Improvement Dollars in the Fiscal Years 2008, 2009, 2010, and 2011 Capital Investment Plans (Then-Year Dollars)
paragraphs: V: Allocation of Deepwater  cquisition, Construction, and Improvement  Appendix A Dol an Year Dollarslars in the Fiscal Years 2008, 2009, 2010,  d 2011 Capital Investment Plans (Then- )
section_title: Appendix VI: GAO Contacts and Staff Acknowledgments
paragraphs: For further information about this report, please contact John P. Hutton,  Director, Acquisition and Sourcing Management, at (202) 512-4841 or  huttonj@gao.gov. Other individuals making key contributions to this report  include Michele Mackin, Assistant Director; Molly Traci; William Carrigg;  Tisha Derricotte; Jennifer Echard; Laurier Fish; Carlos Gomez; Kristine  Hassinger; Jason Lee; Karen Richey; and Rebecca Wilson.
section_title: Related GAO Products
paragraphs: Coast Guard: Opportunities Exist to Further Improve Acquisition  Management Capabilities. GAO-11-480. Washington, D.C.: April 13,  2011.
Coast Guard: Observations on Acquisition Management and Efforts to  Reassess the Deepwater Program. GAO-11-535T. Washington, D.C.:  April 13, 2011.
Coast Guard: Deepwater Requirements, Quantities, and Cost Require  Revalidation to Reflect Knowledge Gained. GAO-10-790. Washington,  D.C.: July 27, 2010.
Department of Homeland Security: Assessments of Selected Complex  Acquisitions. GAO-10-588SP. Washington, D.C.: June 30, 2010.
Coast Guard: Observations on the Requested Fiscal Year 2011 Budget,  Past Performance, and Current Challenges. GAO-10-411T. Washington,  D.C.: February 25, 2010.
Coast Guard: Better Logistics Planning Needed to Aid Operational  Decisions Related to the Deployment of the National Security Cutter and  Its Support Assets. GAO-09-497. Washington, D.C.: July 17, 2009.
Coast Guard: As Deepwater Systems Integrator, Coast Guard Is  Reassessing Costs and Capabilities but Lags in Applying Its Disciplined  Acquisition Approach. GAO-09-682. Washington, D.C.: July 14, 2009.
Coast Guard: Observations on Changes to Management and Oversight of  the Deepwater Program. GAO-09-462T. Washington, D.C.: March 24,  2009.
Coast Guard: Change in Course Improves Deepwater Management and  Oversight, but Outcome Still Uncertain. GAO-08-745. Washington, D.C.:  June 24, 2008.
Status of Selected Assets of the Coast Guard’s Deepwater Program.  GAO-08-270R. Washington, D.C.: March 11, 2008.
Coast Guard: Status of Efforts to Improve Deepwater Program  Management and Address Operational Challenges. GAO-07-575T.  Washington, D.C.: March 8, 2007.
Coast Guard: Status of Deepwater Fast Response Cutter Design GAO-06-764. Washington, D.C.: June 23, 2006.
Efforts.
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: Preliminary Observations on the Condition of Deepwater  Legacy Assets and Acquisition Management Challenges. GAO-05-651T Washington, D.C.: June 21, 2005. .
Coast Guard: Deepwater Program Acquisition Schedule Update Needed. GAO-04-695. Washington, D.C.: June 14, 2004.
Contract Management: Coast Guard’s Deepwater Program Needs  Increased Attention to Management and Contractor Oversight.  GAO-04-380. Washington, D.C.: March 9, 2004.
Coast Guard: Actions Needed to Mitigate Deepwater Project Risks.  GAO-01-659T. Washington, D.C.: May 3, 2001.