The Coast Guard is a multimission, maritime military service within DHS. The Coast Guard’s responsibilities fall into two general categories—those related to homeland security missions, such as port security, vessel escorts, security inspections, and defense readiness; and those related to non-homeland security missions, such as search and rescue, environmental protection, marine safety, and polar ice operations. To carry out these responsibilities, the Coast Guard operates a number of vessels and aircraft and, through its Deepwater Program, is currently modernizing or replacing those assets. At the start of the Deepwater Program, the Coast Guard chose to use a system-of-systems acquisition strategy that would replace its assets with a single, integrated package of aircraft, vessels, and communications systems through ICGS, a lead system integrator that was responsible for designing, constructing, deploying, supporting and integrating the assets to meet Coast Guard requirements. Under this approach, the Coast Guard provided the contractor with broad, overall performance specifications—such as the ability to interdict illegal immigrants—and ICGS determined the specifications for the Deepwater assets. The decision to use a lead system integrator was driven in part because of the Coast Guard’s lack of expertise in managing and executing an acquisition of this magnitude. In past reports on Deepwater, as well as the Army’s Future Combat Systems that is pursuing a similar acquisition approach for similar reasons, we have raised a number of concerns about this approach to acquiring complex systems. The role of a system integrator differs from that of a traditional prime contractor in that it includes increased responsibilities for ensuring that the design, development, and implementation of the system-of-systems it is under contract to produce meet established budget and schedule. The close working relationship with the government that this arrangement engenders has advantages and disadvantages. An advantage is that such a relationship allows flexibility in responding to shifting priorities. Disadvantages are the government’s weakened ability to provide oversight over the long term and the potential for increased costs. In a series of reports since 2001, we have noted the risks inherent in the lead system integrator approach to the Deepwater Program and have made a number of recommendations intended to improve the Coast Guard’s management and oversight. In particular, we raised concerns about the agency’s ability to keep costs under control in future program years by ensuring adequate competition for Deepwater assets and pointed to the need for better oversight and management of the system integrator. We, as well as the DHS Inspector General and others, have also noted problems in specific acquisition efforts, notably the NSC and the 110-Foot Patrol Boat Modernization, which the Commandant of the Coast Guard permanently halted in November 2006 because of operational and safety concerns. Acknowledging that the initial approach to Deepwater gave too much control to the contractor, the Coast Guard has reoriented its acquisition organization to position itself to execute systems integration and program management responsibilities formerly carried out by industry. Project managers, whose role in the past was largely one of monitoring ICGS without the authority to make decisions, have now been vested with accountability for program outcomes. In addition, integrated product teams (IPT)—a key program management tool—are now led by Coast Guard officials, not contractor representatives. The Coast Guard has also increased its leverage of its own technical authorities and third party expertise. In the midst of these positive changes, the Coast Guard, like other federal agencies, faces challenges in building a capable government workforce to manage this large acquisition. While it attempts to reduce vacancy rates, it is relying on support contractors in key positions. Since July 2007, the Coast Guard has consolidated acquisition responsibilities into a single acquisition directorate, known as CG-9, and is making efforts to standardize operations within this directorate. Previously, Deepwater assets were managed independently of other Coast Guard acquisitions by the Deepwater Program Executive Office in an insulated structure. The Coast Guard’s goal for the reorganization is to provide greater consistency in its oversight and acquisition approach by concentrating acquisition activities under a single official and allowing greater leveraging of knowledge and resources across programs. The Coast Guard’s consolidation of the acquisition function into a single directorate is consistent with best practices as it allows the agency to operate strategically to meet its overall missions and needs. Figure 1 depicts the changes to the Coast Guard’s acquisition structure. In conjunction with the restructuring of its acquisition directorate, Coast Guard officials have begun to increase the responsibilities and accountability of the project managers who oversee the acquisition of Deepwater assets. Previously, ICGS was charged with a number of key program management responsibilities—ranging from designing and constructing assets to developing concepts for deployment and operations—while Coast Guard program and project managers tracked and monitored the contractor’s activities. The Coast Guard’s new approach increases government control over these key elements of program management while vesting project managers with authority and accountability they lacked in the past. For example, a previous Deepwater management plan emphasized “partnership” between the Coast Guard and ICGS in managing Deepwater and “joint and ICGS responsibility for overall management and execution of the program, including authorization of necessary resources and resolving performance, cost, schedule, and risk tradeoff issues.” Under this scenario, according to Coast Guard officials, project managers could not provide as much direction as they wanted because of the terms of the contract, where ICGS bore ultimate responsibility for outcomes. In contrast, Coast Guard project managers are now responsible for defining, planning, and executing the acquisition projects within established cost, schedule, and performance constraints. Another significant shift has been to assert government control over Deepwater integrated product teams. These teams, a key program management tool, consist of groups of project officials and technical experts responsible for discussing options for problem solving relating to cost, schedule, and performance objectives. In the past, the teams were led and managed by the contractor, while government team members acted as “customer” representatives. Now, the teams are led by Coast Guard personnel. Figure 2 shows examples of how responsibility for program outcomes has shifted from ICGS to the Coast Guard. The Coast Guard is also establishing technical authorities within the agency who review, approve, and monitor technical standards and ensure that assets meet those standards. The Coast Guard has established a technical authority for engineering to oversee issues related to Deepwater, and officials state that a similar authority for C4ISR is pending. Previously, the Coast Guard held only an advisory role in making technical decisions, and in some cases this arrangement led to poor outcomes. For example, Coast Guard officials told us their engineering experts had raised concerns during the NSC’s design phase about its ability to meet service life requirements and recommended design changes, but were ignored. If the recommendations had been heeded, changes to the ship’s design could have been made earlier and some additional costs may have been avoided. To supplement and enhance the use of its internal expertise, the Coast Guard has increased its use of third-party, independent sources of technical expertise and advice. For example, the Coast Guard is increasing its use of the American Bureau of Shipping (ABS), an independent organization that establishes and applies standards for the design and construction of ship and other marine equipment, to assist the Coast Guard in certifying that Deepwater vessels meet certain safety and performance standards. As a case in point there are 987 standards pertaining to hull, mechanical, and electrical systems on the first NSC which must be certified. Currently, ICGS is responsible for submitting documentation to the Coast Guard for 892 of the standards, while ABS and other third parties have a minimal role. In contrast, the Coast Guard plans for ABS to be responsible for reviewing approximately 200 certifications starting with the third NSC and to have an even broader role in certifying the design and production of future assets such as the Offshore Patrol Cutter (OPC) and Fast Response Cutter (FRC). In addition, the Coast Guard is using the U.S. Navy’s Space and Naval Warfare Systems Command to verify the security of certain communications systems and has established partnerships with Naval Sea Systems Command, the Navy Board of Inspection and Survey (INSURV), Naval Air Systems Command, and Naval Surface Warfare Center to leverage their expertise. INSURV, for example, conducted acceptance trials of the NSC in April 2008. Effective management of acquisition programs depends on appropriately trained individuals properly placed within the acquisition workforce. In the initial development of the Deepwater contract, the Coast Guard sought a system integrator because it recognized that it lacked the experience and depth in workforce to manage the acquisition internally. The Coast Guard’s 2008 acquisition human capital strategic plan sets forth a number of acquisition workforce challenges that pose the greatest threats to acquisition success. Key challenges and Coast Guard actions to address them are cited below. Like many federal agencies that acquire major systems, the Coast Guard faces challenges in recruiting and retaining a sufficient number of government employees in acquisition positions such as contract specialists, cost estimators, system engineers, and program management support. The Coast Guard has taken a number of steps to hire acquisition professionals, including the increased use of recruitment incentives and relocation bonuses, utilizing direct hire authority, and rehiring government annuitants. While some vacancies are to be expected in any organization and especially in an acquisition organization given current trends across the government, the Coast Guard is experiencing vacancy rates of almost 20 percent. The Coast Guard also recognizes the impact of military personnel rotation on its ability to maintain people in key positions. The Coast Guard’s policy of regular three-year rotations of military personnel among units, including to and from the acquisition directorate, limits continuity in key project roles filled by military officers and can have a serious impact on the acquisition expertise gained and maintained by those officers. The presence of Coast Guard officers in the acquisition directorate is important, as they provide specialized expertise in Coast Guard operations and fill key positions as program and project managers and technology leads.