The Coast Guard is a multi-mission, maritime military service within DHS. The Coast Guard’s range of responsibilities includes maintaining the United States’ maritime borders, facilitating the global movement of commerce, safeguarding marine resources, and protecting those at sea. To meet its statutory missions, the Coast Guard operates a number of vessels, aircraft, and information technology systems. Many of the assets that the Coast Guard operates were delivered between 1960 and 1992 and are approaching the end of or have exceeded the period for which they were expected to perform—known as the assets’ service lives. The Coast Guard began a recapitalization effort in the late 1990s to modernize a significant portion of its entire surface and aviation fleet by rebuilding or replacing assets. The Coast Guard awarded a contract to Integrated Coast Guard Systems (ICGS) in June 2002 to be the systems integrator for the portfolio. The Coast Guard generally provided ICGS with broad, overall performance specifications—such as the ability to interdict illegal immigrants—and ICGS determined the assets needed and their specifications. A central aspect of this effort was to use information technology to connect its major assets through a single command and control architecture—C4ISR—to improve the accuracy and speed of conducting Coast Guard missions. This system of systems approach was the effort formerly known as Deepwater. In 2002, the Coast Guard conducted an analysis that determined the fleet, as designed by ICGS, would have significant capability gaps in meeting mission requirements that emerged after the September 11, 2001, terrorist attacks. The Coast Guard decided, due to fiscal constraints, not to make significant changes to the ICGS planned fleet, but did approve changes to several assets’ capabilities. In 2012, we reported on the Coast Guard’s progress in achieving these capabilities, such as adding chemical, biological, and other decontamination capability. In 2006, the Coast Guard acknowledged that it had relied too heavily on contractors and, citing cost increases, took over the role of lead systems integrator. DHS approved a new baseline in May 2007 that established the total acquisition cost of the Deepwater program at $24.2 billion and projected the Coast Guard would complete the acquisition in 2027. The Coast Guard also reconsidered the planned fleet mix, required to meet the established mission needs, through a series of analyses. We reviewed these analyses in May 2012 and found that the Coast Guard did not consider any assets with less capability than the Deepwater assets and that the Coast Guard used optimistic cost constraints to conclude that it could afford the portfolio. budget, DHS and the Coast Guard no longer use the term “Deepwater” for the program aimed at recapitalizing its surface, air, and information technology capacity. This effort is now called Coast Guard recapitalization and it includes many of the assets that made up the former Deepwater effort as well as other major acquisitions. GAO, Observations on the Coast Guard’s and the Department of Homeland Security’s Fleet Studies, GAO-12-751R (Washington, D.C.: May 31, 2012). portfolio, formerly known as Deepwater. Appendix III shows the estimated cost of programs in the current portfolio. The Coast Guard has continued to strengthen its acquisition management capabilities when purchasing individual assets. For example, in response to one of our prior recommendations, the Coast Guard released a January 2013 update to its Major Systems Acquisition Manual to, among other things, better reflect cost and schedule estimation best practices and to clarify the roles and responsibilities of the Executive Oversight Council. The Executive Oversight Council is comprised of admirals and senior executives who regularly conduct oversight meetings to govern the acquisition process. As part of the budget process, the Executive Oversight Council provides recommendations to the Investment Board, which are presented to the Investment Review Board—a higher level group—and ultimately the Commandant for final investment decisions. In addition, the Coast Guard has sought to maximize competition in its acquisitions and to buy commercial products when available. For example, the Coast Guard purchased a “reprocurement data licensing package” from Bollinger Shipyards, Inc. that contains the technical specifications and licenses necessary to build the Fast Response Cutter. The Coast Guard is planning to use this information to conduct a full and open competition for the remaining vessels. Our previous work has shown that when the government owns technical data rights, it does not need to rely on only one contractor to meet requirements. Further, the Coast Guard has developed a warranty provision under its contract with Bollinger Shipyards that has held the contractor responsible for production deficiencies. While the Coast Guard does not always have insight into how much it costs the contractor to fix these issues, after multiple deficiencies interrupted production, officials noted they are confident that the Coast Guard has received value from this warranty. The Coast Guard plans to use these strategies when purchasing the Offshore Patrol Cutter. DHS and Coast Guard acquisition guidelines provide that representative units of major acquisition assets should be operationally tested by an independent test agency before they are approved for full-rate production. The Coast Guard uses the Navy’s Commander Operational Test and Evaluation Force (COTF) to conduct operational tests and other evaluations for its major acquisition assets. COTF serves as an independent evaluator of an asset’s capabilities and has experience testing Navy assets. Operational testing characterizes the performance of an asset during a discrete period of time but testers may also use actual mission performance data when available. In conducting operational testing, COTF evaluates an asset’s operational effectiveness and suitability: For operational effectiveness, testers determine whether or not an asset can meet its missions. For operational suitability, testers determine whether or not the agency can logistically support the asset to an acceptable standard, such as having the asset available for operations 80 percent of the year. According to DHS and Coast Guard acquisition guidance, results of operational tests are used to evaluate the degree to which the capability or system being acquired meets its requirements and is able to operate in its intended environment, both before and often after full-rate production commences. In addition to verifying that an asset is operationally effective and suitable, operational testing also tests key performance parameters, which are the capabilities considered essential for mission success. For example, a key performance parameter for the Fast Response Cutter is being able to reach a top speed of at least 28 knots. According to DHS and Coast Guard acquisition guidance, when programs fail to meet key performance parameters, program managers are required to file breach memorandums stating that the program failed to demonstrate the required performance threshold. Program managers are also required to formally notify Coast Guard leadership, DHS, and certain congressional committees and file a remediation plan within 30 days that proposes corrective actions to mitigate the issues that resulted in the breach. Within 90 days of filing the breach notification the program should have accomplished one of the following three actions: (1) re-validate the original baseline parameters, (2) have a new baseline approved that revises the parameters that were breached, or (3) conduct a program review that evaluates the proposed baseline revisions and makes recommendations to the acquisition decision authority. The Coast Guard’s new asset classes that we reviewed—the National Security Cutter, Fast Response Cutter, HC-144, and the C4ISR information technology system—are generally demonstrating improved mission performance over the assets they are replacing, according to Coast Guard officials who operate these assets. For example, these new assets have greater fuel and food capacity, automation, and handling/sea-keeping, all of which increase endurance and effectiveness. However, the Coast Guard has not been able to prove that assets meet key requirements through operational testing. Of these four newly fielded asset classes, the Fast Response Cutter and the HC-144 completed initial operational testing, but did not successfully demonstrate many key requirements during these tests. For example, the Fast Response Cutter did not meet its operational availability requirement due to a key engine part that failed during testing. DHS and the Coast Guard approved both assets for full-rate production noting planned improvements, but DHS and Coast Guard acquisition guidance is not clear as to when a program needs to meet minimum performance standards. For example, the guidance does not specify whether the performance standards must be met before entering full-rate production. The National Security Cutter and C4ISR programs have not completed operational testing. The Coast Guard recently conducted testing on the National Security Cutter although seven of eight vessels are completed or currently under construction. Based on early assessments and mission performance of the first three National Security Cutters, the Coast Guard has determined that design changes costing at least $140 million are necessary to meet requirements. Lastly, due to performance, maintenance, and obsolescence issues, the Coast Guard is replacing its initial C4ISR software, which cost about $413 million to develop and field, on the National Security Cutter, HC-144, and HC-130J. Coast Guard operators and commanding officers in several locations told us that the National Security Cutter, Fast Response Cutter, and HC-144 are performing well during missions and are an improvement over the vessels and aircraft they are replacing. Operators primarily attribute the performance improvements to better endurance and communication capabilities, which help to position and keep these assets in high threat areas. Specifically, these new assets have greater fuel capacity and efficiency, engine room and boat launch automation, handling/sea- keeping, and food capacity, all of which increase endurance and effectiveness. Operators stated that these new assets, using information technology systems, can also share pictures and locations of vessels, and communicate more frequently and accurately with shore-based operational commanders than the legacy vessels being replaced. For example, operators said they now use chat rooms on secure networks in addition to radios. These chat rooms improve communication because multiple parties can communicate at the same time and messages remain available on the screen for reference. Figure 1 below compares endurance-related capabilities of the National Security Cutter, Fast Response Cutter, and HC-144 with the assets they are replacing.