Coast Guard: Agency Could Better Assess Its Impact on Arctic Capability Gaps and Is Exploring Icebreaker Acquisition Options
Released: 2016-07-12T00:00:00

Letter

The Coast Guard Has Assessed Its Arctic Capabilities and Taken Actions to Mitigate Gaps but Has Not Systematically Assessed Its Progress

In our June 2016 report, we found that although the Coast Guard had assessed its Arctic capabilities and worked with its Arctic partners—such as other federal agencies— to carry out actions to help mitigate Arctic capability gaps—it had not systematically assessed how its actions have helped to mitigate these gaps. Specifically, we reported that the Coast Guard had assessed its capability to conduct its Arctic missions and had identified various capability gaps, primarily through two key studies. The capability gaps identified in these reports—which Coast Guard officials confirmed remain relevant and highlighted in their Arctic strategy—include (1) communications, (2) Arctic maritime domain awareness, (3) infrastructure, (4) training and exercise opportunities, and (5) icebreaking. These gaps are similar to the ones we identified in 2010.

According to Coast Guard officials, through the agency’s role in implementing the various Arctic strategies and implementation plans, the Coast Guard has taken actions, along with its Arctic partners, that have helped to mitigate capability gaps. For example, the Coast Guard is the lead agency for implementing the strategies’ tasks related to enhancing Arctic maritime domain awareness. In addition, Coast Guard officials reported that they utilize the annual Arctic Shield operations as the primary operational method to better understand the agency’s Arctic capabilities and associated gaps and to take actions to help mitigate them. For example, during Arctic Shield operations, the Coast Guard tested communications equipment belonging to the Department of Defense—extending communications capabilities further north than previously possible—and conducted Arctic oil spill response exercises.

However, we found in our June 2016 report that the Coast Guard had not systematically tracked the extent to which its actions agency-wide have helped mitigate Arctic capability gaps. Coast Guard officials attributed this, in part, to not being able to unilaterally close the gaps. While fully mitigating these gaps requires joint efforts among Arctic partners, the Coast Guard has taken actions in the Arctic that are specific to its missions and has responsibility for assessing the extent to which these actions have helped to close capability gaps. Standards for Internal Control in the Federal Government provide that ongoing monitoring should occur in the course of normal operations and should help ensure that the findings of reviews, such as the capability gaps identified in the previously mentioned reports, are resolved. As a result, we recommended in our June 2016 report that the Coast Guard develop measures, as appropriate, and design and implement a process for systematically assessing the extent to which its actions have helped mitigate Arctic capability gaps.

DHS concurred with our recommendations, and in response, the Coast Guard reported that it planned to develop specific measures for some of its Arctic activities and systematically assess how its actions have helped to mitigate the capability gaps for which the Coast Guard is the lead agency, such as icebreaking capacity. We believe that these actions, if implemented, will help the Coast Guard better understand the status of these capability gaps and better position it to effectively plan its Arctic operations. However, we continue to believe that it is important for the Coast Guard to also systematically assess how its actions affect Arctic capability gaps for which it is not the lead, such as communications. Although the Coast Guard may not be the lead for these gaps, assessing the impact of Coast Guard actions for such capability gaps would better enable the Coast Guard to understand the effectiveness of its actions and the status of all capability gaps. Also, as these gaps may affect its Arctic missions, this knowledge may be helpful to the Coast Guard in planning its operations.

Coast Guard Has Been Unable to Fulfill All Polar Icebreaking Operations and Is Taking Steps to Begin Icebreaker Acquisition

Our June 2016 report found the Coast Guard has been unable to fulfill some of its polar icebreaking responsibilities with its aging polar icebreaking fleet, and had efforts underway to acquire a heavy icebreaker—which has greater icebreaking capability than a medium icebreaker. Specifically, in 2011 and 2012 when its heavy icebreakers were not active, the Coast Guard was unable to maintain assured, year- round access to the Arctic and did not meet 4 of 11 requests for polar icebreaking services. The Coast Guard reported that increased heavy icebreaking capacity is needed to fully meet requirements in the Arctic and Antarctic regions. A 2010 Coast Guard-commissioned study found that at least six icebreakers—three heavy and three medium—would be required to carry out the Coast Guard’s statutory missions, if the Coast Guard were to fully accomplish all of its polar icebreaking responsibilities. Recognizing the fiscal challenges posed by such a request, Coast Guard officials have stated that obtaining a minimum of two heavy icebreakers is needed to at least maintain the fleet’s self- rescue capability in the event one vessel became beset in ice—a capability the Coast Guard does not currently have.

We also found that the Coast Guard initiated a program in 2013 to acquire a new heavy icebreaker to maintain polar icebreaking capability after the Polar Star’s projected service life ends between 2020 and 2023.

Currently, the Coast Guard is working to determine the optimal acquisition strategy. To move forward with the acquisition process, the Coast Guard would need to receive funding for an icebreaker—which, according to a 2013 preliminary estimate, would be about $1.09 billion—and ensure that a U.S.-based commercial shipyard would be able to build the vessel. For many years, the Coast Guard’s annual acquisition budget has been allocated primarily to other projects. The President’s fiscal year 2017 budget request outlined plans to accelerate the acquisition process for a heavy icebreaker, so that production activities could commence by 2020.

Various factors limit the options available to the Coast Guard to maintain, or increase, its icebreaker capacity. The Coast Guard has reported that the long-term lease of a polar icebreaker is unlikely to result in cost savings when compared with a purchase. Specifically, we reported in June 2016 that two key factors limiting the Coast Guard’s options for acquiring icebreaking capacity are the lack of an available icebreaker that meets agency and legal requirements, and the total cost that would be associated with a long-term lease.

Availability. The Coast Guard reported that no existing heavy icebreakers were available to lease or purchase that met both its legal and operational requirements. Specifically, to meet legal requirements, the Coast Guard would need to either purchase or demise charter the icebreaker, as legal requirements associated with several Coast Guard missions prohibit a short-term lease.

Specifically, under federal law, to be capable of conducting all of its statutory missions, the Coast Guard must use a public vessel, which federal law defines as one that the United States owns or demise charters. For example, federal law states that the Coast Guard’s Ports, Waterways, and Coastal Security Mission may be carried out with public vessels or private vessels tendered gratuitously for that purpose. Further, federal law provides that no Coast Guard vessel may be constructed in a foreign shipyard. According to the Coast Guard, besides the Polar Star and the Polar Sea, the only existing icebreakers powerful enough to meet the Coast Guard’s operational requirements were built in and are owned by Russia and would not comply with this legal requirement.

Budgeting and Total Cost. Budget requirements also affect the Coast Guard’s ability to acquire an icebreaker. For example, Office of Management and Budget (OMB) guidelines require federal agencies to acquire assets in the manner least costly overall to the government. Specifically, for a large acquisition like a heavy icebreaker, OMB Circular A-94 requires the Coast Guard to conduct a lease-purchase analysis based on total lifecycle costs of the asset. To proceed with a lease, the Coast Guard would need to show that leasing is preferable to direct government purchase and ownership. Budget scorekeepers—specifically, OMB, the Congressional Budget Office, and the House and Senate Budget Committees—score purchases and capital leases at the outset of the acquisition. A 2011 preliminary cost analysis prepared for the Coast Guard indicated that the lease option would be more costly to the federal government over an icebreaker’s expected 30-year service life. According to this analysis, the prospective ship owner’s profit rate would increase the overall expense as this profit rate is priced into the lease, such that government ownership would be less costly in the long run. Moreover, because a demise charter requires the lessee to operate and maintain the vessel, the Coast Guard would not be able to outsource crewing or maintenance activities to reduce its operating costs. Previous GAO work on the question of leasing versus buying an icebreaker identified important assumptions in comparing the costs to the federal government and suggested that outright purchase could be a less costly alternative than a long-term vessel lease. Assuming that the cost of building and operating the vessel was the same under both the buy and the lease scenarios, the cost advantage to government purchase over leasing in our previous work was based on two factors. First, the costs of private sector financing under a lease arrangement—which were higher than the government’s borrowing costs—could be expected to be passed on to the federal government in lease payments, thereby increasing the vessel’s financing costs over what they would be under outright government purchase. Second, under a lease arrangement, an additional profit would accrue to the lessor for services related to its retained ownership of the vessel.

Anticipating a likely gap of 3 to 6 years in heavy icebreaker capability between the expected end of the Polar Star’s service life between 2020 and 2023 and the deployment of a new icebreaker in 2026, we reported in June 2016 that the Coast Guard is developing a bridging strategy, as required by law, to determine how to address this expected gap (see fig. 2).

We reported in June 2016 that the Coast Guard has not determined the cost-effectiveness of reactivating the Polar Sea, and that a Bridging Strategy Alternatives Analysis will assess and make recommendations on whether to reactivate the Polar Sea and whether to further extend the service life of the Polar Star. Coast Guard officials said that they have not established a completion date for this report, but do not anticipate a final decision on the Polar Sea before fiscal year 2017, after which they will evaluate the cost-effectiveness of extending the Polar Star’s life, if necessary.

In conclusion, the Coast Guard has made progress in assessing its capabilities in the Arctic and taking steps to address identified capability gaps, but the Coast Guard could do more to systematically determine the progress it has made in helping to mitigate these various gaps. Further, several factors exist that affect the Coast Guard’s options for acquiring a new icebreaker, including both legal and budgetary considerations that suggest a purchase of an icebreaker may be preferable to a long-term lease. Regardless of the acquisition approach, there is a strong likelihood of a 3 to 6 year gap in heavy icebreaking service, which underscores the need for the Coast Guard to move forward with its bridging strategy.

Chairman Hunter, Ranking Member Garamendi, and Members of the Subcommittee, this completes my prepared statement. I would be pleased to respond to any questions that you may have at this time.

Contacts and Staff Acknowledgments

If you or your staff have any questions about this testimony, please contact Jennifer Grover at (202) 512-7141 or groverj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Individuals making key contributions to this testimony include Dawn Hoff (Assistant Director), Tracey Cross (Analyst-in-Charge), Chuck Bausell, Linda Collins, John Crawford, Michele Fejfar, Laurier Fish, Eric Hauswirth, Carol Henn, Susan Hsu, Tracey King, Jan Montgomery, Jillian Schofield, Katherine Trimble, and Eric Warren.

Appendix I: Selected Polar Icebreaking Authorities and Mandates

Description Requires the Coast Guard to, in part, establish, develop, maintain, and operate icebreaking facilities on, under, and over the high seas and waters subject to the jurisdiction of the United States; and, pursuant to international agreements, requires the Coast Guard to develop, establish, maintain, and operate icebreaking facilities on, under, and over waters other than the high seas and waters subject to the jurisdiction of the United States.

Requires the President to facilitate planning for the design, procurement, maintenance, deployment, and operation of icebreakers as needed to support the statutory missions of the Coast Guard in the polar regions by allocating all funds to support icebreaking operations in such regions, except for recurring incremental costs associated with specific projects, to the Coast Guard.

Authorizes the Coast Guard to maintain icebreaking facilities. Requires the Coast Guard to conduct such oceanographic research, use such equipment or instruments, and collect and analyze such oceanographic data, in cooperation with other agencies of the government, or not, as may be in the national interest.

Authorizes the Coast Guard to provide and accept personnel and facilities, from other federal and state agencies, to perform any activity for which such personnel and facilities are especially qualified and as may be helpful in the performance of its duties, respectively.

Congress finds that the United States has important security, economic, and environmental interests in developing and maintaining a fleet of icebreaking vessels capable of operating effectively in the heavy ice regions of Antarctica. The Department of Homeland Security is required to facilitate planning for the design, procurement, maintenance, deployment, and operation of icebreakers needed to provide a platform for Antarctic research.

Congress finds that the United States has important security, economic, and environmental interests in developing and maintaining a fleet of icebreaking vessels capable of operating effectively in the heavy ice regions of the Arctic.

Strategic policies Implementation Framework for the National Strategy for the Arctic Region (2016)

The Coast Guard is the lead agency for ensuring the United States maintains icebreaking capability with sufficient capacity to project an assured Arctic maritime access, supports U.S. interests in the polar regions, and facilitates research that advances the fundamental understanding of the Arctic.

National Security Presidential Directive 66/Homeland Security Presidential Directive 25 (NSPD-66/ HSPD- 25): Artic Region Policy (2009)

The Department of Homeland Security and other departments shall “reserve the global mobility of United States military and civilian vessels and aircraft throughout the Arctic region” and “project a sovereign United States maritime presence in the Arctic in support of essential United States interests.”

Presidential Memorandum 6646: United States Antarctic Policy and Programs (1982)

The Departments of Defense and Transportation (now Department of Homeland Security) shall provide logistical support as requested by the National Science Foundation to support the United States Antarctic Program.

Interagency agreements Memorandum of Agreement between Department of the Navy and Department of the Treasury on the Operation of Icebreakers (1965)

Navy agreed to transfer all icebreakers to the Coast Guard, and the Coast Guard agreed, among other things, to maintain and operate the U.S. icebreaker fleet, to prepare for contingency or wartime operations in polar regions, to assign icebreakers to the Navy’s operational control for seasonal polar deployments, and to support scientific programs to the extent possible.

Memorandum of Agreement between Coast Guard and National Science Foundation (2010)

The Coast Guard agreed to provide polar icebreaker support to conduct the resupply of McMurdo Station to support the U.S. Antarctic program and to conduct research in the Antarctic.

Memorandum of Agreement between the Department of Defense and Department of Homeland Security on the Use of U.S. Coast Guard Capabilities and Resources in Support of the National Military Strategy (2008/2010)

In ice-covered and ice-diminished waters, Coast Guard icebreakers are the only means of providing assured surface access in support of the Department of Defense missions. .

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