As the lead federal agency for maritime homeland security within the Department of Homeland Security, the Coast Guard is responsible for homeland and nonhomeland security 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 consists of 186 aircraft and 88 cutters of various sizes and capabilities, plays a critical role in all of these missions. As shown in table 1, the fleet includes fixed-wing aircraft, helicopters, and cutters of varying lengths. Some Coast Guard deepwater cutters were built in the 1960s. Notwithstanding extensive overhauls and other upgrades, a number of the cutters 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. In 1996, the Coast Guard began developing what came to be known as the Integrated Deepwater System acquisition program as its major effort to replace or modernize these aircraft and cutters. This Deepwater program is designed to replace some assets—such as deteriorating cutters—with new cutters and 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 relying on 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) as the system integrator for the Deepwater program. ICGS has two main subcontractors—Lockheed Martin and Northrop Grumman—that in turn contract with other subcontractors. The resulting program is designed to provide an improved, integrated system of aircraft, cutters, and unmanned aerial vehicles to be linked effectively through systems that provide command, control, communications, computer, intelligence, surveillance, reconnaissance, and supporting logistics. We have been reviewing the Deepwater program for several years. In recent reports we have pointed out difficulties the Coast Guard has been having in managing the Deepwater program and ensuring that the acquisition schedule is up to date and on schedule. The existing schedule calls for acquisition of new assets under the Coast Guard’s Deepwater program to occur over an approximately 20-year period. By 2007, for example, the Coast Guard is to receive the first National Security Cutter, which will have the capability to conduct military missions related to homeland security. Plans call for 6 to 8 of these cutters to replace the 12 existing 378-foot cutters. However, in order to carry out its mission effectively, the Coast Guard will also need to keep all of the deepwater legacy assets operational until they can be replaced or upgraded. Coast Guard condition measures show that the deepwater legacy assets generally declined between 2000 and 2004, but the Coast Guard’s available condition measures are inadequate to capture the full extent of the decline in the condition of deepwater assets with any degree of precision. Other evidence we gathered, such as information from discussions with maintenance personnel, point to conditions that may be more severe than the available measures indicate. The Coast Guard acknowledges that it needs better condition measures but has not yet finalized or implemented such measures. During fiscal years 2000 through 2004, the Coast Guard’s various condition measures show a general decline, although there were year-to-year fluctuations (see table 2). For deepwater legacy aircraft, a key summary measure of the condition—the availability index (the percentage of time aircraft are available to perform their missions)—showed that except for the HU-25 medium-range surveillance aircraft, the assets continued to perform close to or above fleet availability standards over the 5-year period. In contrast, other condition measures for aircraft, such as cost per flight hour and labor hours per flight hour, generally reflected some deterioration. For cutters, a key summary measure of condition—percent of time free of major casualties—fluctuated but generally remained well below target levels. The number of major casualties generally rose from fiscal years 2000 through 2003, and then dropped slightly in fiscal year 2004. Another, albeit less direct, measure of an asset’s condition is deferred maintenance—the amount of scheduled maintenance that must be postponed on an asset in order to pay for unscheduled repairs. Such deferrals can occur when the Coast Guard does not have enough money to absorb unexpected maintenance expenditures and still perform all of its scheduled maintenance, thus creating a backlog. For example, in spring 2004, while on a counter-drug mission, the 210-foot cutter Active experienced problems in the condition of its flight deck that were to be corrected during its scheduled depot-level maintenance. However, because of a shortage of maintenance funds, the maintenance was deferred and the flight deck not repaired. As a result, the cutter lost 50 percent of its patrol time, since the required support helicopters could not take off from or land on it. As table 3 shows, deferred maintenance does not show a clear pattern across all classes of deepwater legacy assets. For the deepwater legacy aircraft, the overall amount of estimated deferred maintenance increased each year during fiscal years 2002 through 2004, from $12.3 million to about $24.6 million. However, most of the increase came for one type of asset, the HH-60 helicopter, and the increase came mainly from shortening the interval between scheduled depot-level maintenance from 60 months to 48 months—thereby increasing the scheduled maintenance workload— and not from having to divert money to deal with unscheduled maintenance. For the deepwater cutters, the amount of estimated deferred maintenance increased from fiscal year 2002 to 2003, but then dropped significantly in fiscal year 2004. The decrease in fiscal year 2004 came mainly because (1) the Coast Guard ceased maintenance on an icebreaker, thus freeing up some maintenance funds; and (2) the Coast Guard also received additional operational and maintenance funding, allowing it to deal with both scheduled and unscheduled maintenance. Thus, the drop in the estimate of deferred maintenance costs for fiscal year 2004 is not necessarily an indicator that the condition of the legacy assets was improving; it could result from the Coast Guard having more money to address the maintenance needs. At the time we began our work, the Coast Guard’s condition measures were not sufficiently robust to systematically link assets’ condition with degradation in mission capabilities. As we discussed with Coast Guard officials, without such condition measures, the extent and severity of the decline in the existing deepwater legacy assets and their true condition cannot be fully determined. As a result, the picture that emerges regarding the condition of the deepwater legacy assets based on current Coast Guard condition measures should be viewed with some caution. While there is no systematic, quantitative evidence sufficient to demonstrate that deepwater legacy assets its deepwater legacy assets are “failing at an unsustainable rate” as the Coast Guard has asserted, this does not mean the assets are in good condition or have been performing their missions safely, reliably and at levels that meet or exceed Coast Guard standards. We identified two factors that need to be considered to put these condition measures in proper context. The first factor deals with limitations in the measures themselves. Simply put, the Coast Guard’s measures of asset condition do not fully capture the extent of the problems. As such, they may understate the decline in the legacy assets’ condition. More specifically, Coast Guard measures focus on events, such as flight mishaps or equipment casualties, but do not measure the extent to which these and other incidents degrade mission capabilities. Here are two examples in which the Coast Guard’s current measures are not sufficiently robust to systematically capture degradation in mission capabilities: The surface search radar system on the HC-130 long-range surveillance aircraft, called the APS-137 radar, is subject to frequent failures and is quickly becoming unsupportable, according to Coast Guard staff with whom we met. Flight crews use this radar to search for vessels in trouble and to monitor ships for illegal activity, such as transporting illicit drugs or illegal immigrants. When the radar fails, flight crews are reduced to looking out the window for targets, greatly reducing mission efficiency and effectiveness. A flight crew in Kodiak, Alaska, described this situation as being “like trying to locate a boat looking through a straw.” Mission capability degradations such as these are not reflected in the Coast Guard’s current condition measures. The 378-foot cutter Jarvis recently experienced a failure in one of its two main gas turbines shortly after embarking on a living marine resources and search and rescue mission. While Jarvis was able to accomplish its given mission, albeit at reduced speeds, this casualty rendered the cutter unable to respond to any emergency request it might have received—but did not in this case—to undertake a mission requiring higher speeds, such as drug interdiction. The Coast Guard condition measures are not robust enough to capture these distinctions in mission capability. The second factor that needs to be kept in mind is the compelling nature of the other evidence we gathered apart from the Coast Guard’s condition measures. This evidence, gleaned from information collected during our site visits and discussions with maintenance personnel, indicated deteriorating and obsolete systems and equipment as a major cause of the reduction in mission capabilities for a number of deepwater legacy aircraft and cutters. Such problems, however, are not captured by the Coast Guard’s condition measures. One example of this involves the HH-65 short-range recovery helicopter. While this helicopter consistently exceeded availability standards established by the Coast Guard over the 5-year period we examined, it is currently operating with underpowered engines that have become increasingly subject to power failures. As a result, Coast Guard pilots employ a number of work arounds, such as dumping fuel or leaving the rescue swimmer on scene if the load becomes too heavy.