As the lead federal agency for maritime homeland security within the Department of Homeland Security, the Coast Guard is responsible for a variety of missions, including ensuring security in ports and waterways and along coastlines, conducting search and rescue missions, interdicting drug shipments and illegal aliens, enforcing fisheries laws, and responding to reports of pollution. The Deepwater fleet, which currently consists of 186 aircraft and 88 vessels of various sizes and capabilities, plays a critical role in all of these missions. Some Coast Guard Deepwater vessels were built in the 1960s. Notwithstanding extensive overhauls and other upgrades, a number of the vessels are nearing the end of their estimated service lives. Similarly, while a number of the Deepwater legacy aircraft have received upgrades in engines, operating systems, and sensor equipment since they were originally built, they too have limitations in their operating capabilities. The Integrated Deepwater System acquisition program, which the Coast Guard began developing in 1996, is its major effort to replace or modernize these aircraft and vessels. This Deepwater program is designed to replace some assets—such as deteriorating vessels—with new assets, and to upgrade other assets—such as some types of helicopters—so they can meet new performance requirements. The Deepwater program represents a unique approach to a major acquisition in that the Coast Guard is using a prime contractor—the system integrator—to identify and deliver the assets needed to meet a set of mission requirements the Coast Guard has specified. In 2002, the Coast Guard awarded a contract to Integrated Coast Guard Systems (ICGS), a joint venture of Lockheed Martin and Northrop Grumman, as the system integrator for the Deepwater program. Lockheed Martin and Northrop Grumman, as the two main subcontractors, in turn contract with other subcontractors. Rather than using the traditional approach of replacing classes of ships or aircraft through a series of individual acquisitions, the Coast Guard chose to employ a system-of-systems acquisition strategy that would replace its deteriorating Deepwater assets with a single, integrated package of new or modernized assets. This system-of-systems approach is designed to provide an improved, integrated system of aircraft, vessels, and unmanned aerial vehicles to be linked effectively through systems that provide command, control, communications, computer, intelligence, surveillance, reconnaissance, and supporting logistics. The Deepwater program’s three overarching goals are to maximize operational effectiveness, minimize total ownership cost, and satisfy the customer— the operational commanders, aircraft pilots, cutter crews, maintenance personnel, and others who will use the assets. We have been reviewing the Deepwater program for several years, pointing out successes as well as difficulties and expressing concern over a number of facets comprising the program. In 2001, we identified several areas of risk for Deepwater. First, the Coast Guard faced potential risk in the overall management and day-to-day administration of the contract. At the time, we reported on the major challenges in developing and implementing plans for establishing effective human capital practices, having key management and oversight processes and procedures in place, and tracking data to measure system integrator performance. In addition, we expressed concerns about the potential lack of competition during the program’s later years and the reliance on a single system integrator for procuring the Deepwater assets. We also reported there was little evidence that the Coast Guard had analyzed whether the approach carried any inherent risks for ensuring the best value to the government and if so, what to do about them. We reviewed the Deepwater program again in 2004 and found many of the same concerns. Specifically, we reported that key components needed to manage the program and oversee the system integrator’s performance had not been effectively implemented. The Coast Guard’s primary tool for overseeing the system integrator, integrated product teams (IPT), were struggling to effectively collaborate and accomplish their missions because of changing membership, understaffing, insufficient training, and inadequate communication among members. Also, the Coast Guard had not adequately addressed the frequent turnover of personnel in the program and the transition from existing assets to those assets that will be part of the Deepwater program moving forward. Further, the Coast Guard’s assessment of the system integrator’s performance in the first year of the contract lacked rigor, and the factors that formed the basis for the award fee were unsupported by quantifiable measures. This resulted in the system integrator receiving an award fee of $4.0 million out of a maximum of $4.6 million despite documented problems in schedule, performance, cost controls, and contract administration. At the time of our 2004 report, the Coast Guard had begun to develop models to measure the extent to which Deepwater was achieving operational effectiveness and had reduced total ownership cost, but it had not made a decision as to which specific models would be used. Further, Coast Guard officials were not able to project a time frame for when the Coast Guard would be able to hold the contractor accountable for progress toward the goals of maximizing operational effectiveness, minimizing total ownership cost, and increasing customer satisfaction. Additionally, the Coast Guard had not measured the extent of competition among suppliers of Deepwater assets or held the system integrator accountable for taking steps to achieve competition. At the time, the Coast Guard’s lack of progress on these issues had contributed to our concerns about the Coast Guard’s ability to rely on competition as a means to control future programmatic costs. In response to these concerns, we made a number of recommendations to improve Deepwater management and oversight of the system integrator. In 2005, we reported that the Coast Guard had fully addressed three of the recommendations and had actions underway on others. For the past several years, the Coast Guard has been revising its Deepwater plan to incorporate expanded homeland security requirements it received after the terrorist attacks of September 11, 2001. On May 31, 2005, the Coast Guard submitted a revised implementation plan to the House Subcommittee on Homeland Security, Committee on Appropriations, which included both a 20-year and a 25-year plan. The House Appropriations Committee directed the Department of Homeland Security and the Coast Guard to select a single revised implementation plan to accompany the Deepwater fiscal year 2006 budget request. In compliance with the Committee’s direction, the Coast Guard Commandant testified on July 21, 2005 to the 25-year revised Deepwater implementation plan. Further, in February 2006, the Coast Guard submitted an updated Deepwater implementation plan to align with its fiscal year 2007 budget submission. These 2005 and 2006 revised plans are the ones we are using to compare to the Coast Guard’s August 26, 2002, original implementation plan. To reflect added homeland security responsibilities based on the terrorist attacks of September 11, 2001, the August 2005 revision and February 2006 update to the Deepwater implementation plan change the balance of upgraded legacy versus new assets, the delivery schedules, and program costs from the original 2002 plan. For aircraft, the revised plans include upgrading many of the legacy aircraft rather than replacing them with new assets as called for in the original plan. For vessels, the revised plans maintain the original plan’s strategy of replacing all of the legacy vessels, but include some changes in the number of small boats being acquired. Overall, the revised plan (1) increases the program length by 5 years, to a total of 25 years; (2) changes the delivery schedules for a number of assets; and (3) increases overall costs to $24 billion, $7 billion more than earlier estimates. The program’s higher costs largely reflect the Coast Guard’s expanded homeland security responsibilities and cover such changes as greater weaponry, improved communications systems, and greater operating capabilities. Coast Guard officials caution, however, that this 25-year program is heavily dependent on receiving the anticipated budget amount each fiscal year. If full funding is not available in any given year—for example, because of competing budget priorities—the shortfall could have cascading effects on overall costs for the Deepwater program. The original Deepwater plan, while published in 2002, was developed before the terrorist attacks of September 11, 2001. It reflected an emphasis on the Coast Guard’s traditional Deepwater missions, such as conducting search and rescue operations at sea, preventing and mitigating oil spills and other threats to the marine environment, inspecting foreign vessels, protecting important fishing grounds, and stemming the flow of illegal drugs and migrants into the United States. After the events of September 11, 2001, the revised plans took into account the increased security threats by incorporating a new mission to provide greater security for ports, waterways, and coastal areas and enhancing the capabilities of the Deepwater assets to better meet the increased threats. In particular, the revised plans call for equipping Deepwater helicopters to provide warning and disabling weapons fire at sea and in ports, waterways, and coastal areas. Further, while the original plan called for assets to have Deepwater interoperability—meaning that all Deepwater aircraft and vessels could communicate with one another—the revised plans call for Deepwater assets to also have interoperability with assets from the Departments of Homeland Security and Defense, as well as with the Coast Guard’s Rescue21 (R21) project. According to Coast Guard officials, this increased interoperability involves such things as adding circuits and data transmission capability to allow for more reliable and secure communication. Table 1 provides further information on some of the key differences between Deepwater asset capabilities in the original and revised plans. The revised plans change the final mix of Deepwater aircraft more significantly than the mix of vessels. For example, the original plan called for replacing all 41 HH-60 Medium-Range Recovery Helicopters with 34 AB-139 helicopters. Under the revised plans, the Coast Guard will upgrade the HH-60s and not purchase any AB-139 helicopters. Coast Guard officials said they elected to retain the HH-60s because they determined that the AB-139 aircraft was unsuitable to meet new requirements for weaponry and for tactical operations. Retaining and upgrading HH-60 helicopters cost $500 million less than replacing them.