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 and vessel escorts, and those related to non–homeland security missions, such as search and rescue 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 in the late 1990s, the Coast Guard chose to use a system-of-systems acquisition strategy. A system-of-systems is defined as a set or arrangement of assets that results when independent assets are integrated into a larger system that delivers unique capabilities. As the systems integrator, ICGS was responsible for designing, constructing, deploying, supporting, and integrating the Deepwater assets into a system-of-systems. 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 asset specifications. According to Coast Guard officials, the ICGS proposal was submitted and priced as a package; that is, the Coast Guard bought the entire solution and could not reject any individual component. In November 2006, the Coast Guard submitted a cost, schedule, and performance baseline to DHS that established the total acquisition cost of the ICGS solution at $24.2 billion and projected that the acquisition would be completed in 2027. In May 2007, shortly after the Coast Guard had announced its intention to take over the role of systems integrator, DHS approved the baseline. Table 1 describes in more detail the assets the Coast Guard is planning to procure according to approved baselines. In deciding to take over the systems integrator role from ICGS, the Coast Guard has taken steps to increase government control and accountability by, among other things, applying the disciplined program management processes in its Major Systems Acquisition Manual (MSAM) to Deepwater assets. The MSAM requires documentation and approval of acquisition decisions at key points in a program’s life-cycle by designated officials at high levels. The Coast Guard has established a number of goals and deadlines for completing these activities in its Blueprint for Acquisition Reform, which was initially released in July 2007 and was last updated in July 2008. The Coast Guard has taken three major steps to become the systems integrator for the Deepwater Program. It has defined and assigned systems integrator functions to Coast Guard stakeholders, begun to reassess the capabilities and mix of assets it requires, and significantly reduced the contractual responsibilities of ICGS. While the Coast Guard has made progress in applying the disciplined MSAM acquisition process to its Deepwater assets, it did not meet its goal of being fully compliant by the second quarter of fiscal year 2009. In the meantime, the Coast Guard continues with production of certain assets and award of new contracts in light of what it views as pressing operational needs. The role of systems integrator involves planning, organizing, and integrating a mix of assets into a system-of-systems capability greater than the sum of the capabilities of the individual parts. ICGS’s role as systems integrator for the Deepwater Program included requirements management, systems engineering, and defining how assets would be employed by Coast Guard users in an operational setting. In addition, the contractor had technical authority over all asset design and configuration decisions. In 2008, the Coast Guard acknowledged that in order to assume the role of systems integrator, it needed to define systems integrator functions and assign them to Coast Guard stakeholders. Through codified changes to internal relationships, policies, and contractual arrangements, the Coast Guard has done so. For example, the Coast Guard formally designated certain directorates as technical authorities to establish, monitor, and approve technical standards for Deepwater assets related to design, construction, maintenance, logistics, C4ISR, and life-cycle staffing and training. The Coast Guard’s capabilities directorate determines operational requirements and the asset mix to satisfy those requirements and establishes priorities. This directorate is expected to collaborate with the technical authorities to ensure that the Coast Guard’s technical standards are incorporated during the requirements development process. Further, the acquisition directorate’s program and project managers are to be held accountable for ensuring that the assets it procures fulfill operational requirements and the technical authority standards. The relationships between Coast Guard directorates in executing their systems integrator roles are represented graphically in figure 1. When it contracted with ICGS, the Coast Guard had limited insight into how the contractor’s proposed solution would meet overall mission needs, limiting its ability to justify the proposed solution and make informed decisions about possible trade-offs. To improve its insight, the capabilities directorate has initiated a fundamental reassessment of the capabilities and mix of assets the Coast Guard needs to fulfill its Deepwater missions. The goals of this fleet mix analysis include validating mission performance requirements and revisiting the number and mix of all assets that are part of the Deepwater Program. A specific part of the study will be to analyze alternatives and quantities for the Offshore Patrol Cutter, an asset which accounts for a projected $8 billion of the total Deepwater costs. According to an official, the results of this analysis are expected in the summer of 2009. Coast Guard leadership plans to assess the results and make future procurement decisions based on the analysis. In conjunction with its assuming the role of systems integrator, the Coast Guard has significantly reduced the scope of work on contract with ICGS. In March 2009, the Coast Guard issued a task order to ICGS limited to tasks such as data management and quality assurance for assets currently under contract with ICGS including C4ISR, the Maritime Patrol Aircraft (MPA), and the National Security Cutter (NSC). The Coast Guard is currently developing plans to transition these functions from ICGS to the Coast Guard or an independent third party by February 2011 when this task order expires. For assets procured or planned to be procured outside of the ICGS contract such as the Offshore Patrol Cutter, systems engineering and program management functions are expected to be carried out by the Coast Guard with support from third parties and contractors. According to officials, the Coast Guard has no plans to award additional orders to ICGS for systems integrator functions within the current award term or for any work after the award term expires in January 2011. Since our June 2008 report on the Deepwater Program, and taking into account our recommendation, the Coast Guard has improved its MSAM process. For example, the process now dictates that the acquisition project and program managers work collaboratively with the technical authorities as described above. The MSAM process was revised to require acquisition planning and an analysis of alternatives for procurement to start at an earlier stage, which is intended to help inform the budget and planning processes. Other improvements include the adoption of our recommendation for a formal design review, Milestone 2A, before authorizing low-rate initial production. The MSAM phases and milestones are shown in figure 2. Because the Coast Guard previously exempted Deepwater from the MSAM process, assets were procured without following a disciplined program management approach. Recognizing the importance of ensuring that each acquisition project is managed through sustainable and repeatable processes and wanting to adhere to proven acquisition procedures, in July 2008, the Coast Guard set a goal of completing the MSAM acquisition management activities for all Deepwater assets by the second quarter of fiscal year 2009. However, of the 12 Deepwater assets in the concept and technology development phase or later, 9 are behind plan in terms of MSAM compliance. In the meantime, the Coast Guard has proceeded with production and awarded new contracts without all of the knowledge it needs to ensure that the capabilities it is buying will meet Coast Guard needs within cost and schedule constraints. For assets already in production, such as the MPA and the NSC, the Coast Guard has made some progress in the past year in retroactively developing acquisition documentation with the intent of providing the traceability from mission needs to operational performance that was previously lacking. For example, the Coast Guard approved an operational requirements document for the MPA in October 2008 to establish a formal performance baseline and identify attributes for testing. Through this process, the Coast Guard discovered that ICGS’s requirement for operational availability (the amount of time that an aircraft is available to perform missions) was excessive compared to the Coast Guard’s own standards. According to a Coast Guard official, the ICGS requirement would have needlessly increased costs to maintain and operate the aircraft. Even as the Coast Guard gains this additional knowledge about MPA requirements, it is continuing with this procurement despite not having completed operational testing. According to the MSAM, testing in an operational environment should be completed with the initial production variants of an asset to demonstrate that capabilities meet requirements before committing to larger purchases. An approved test plan helps ensure that the tests conducted are clearly linked to requirements and mission needs. While the MPA began an operational assessment in July 2008, the Coast Guard still lacked, as of March 2009, a test plan approved by DHS and endorsed by its independent test authority, the Navy’s Commander Operational Testing and Evaluation Force. With 11 of 36 MPAs already on contract, the Coast Guard has completed the operational assessment but does not plan to complete operational testing until the fiscal year 2011 time frame. Similarly, according to Coast Guard officials, operational testing of the NSC, also conducted by the Coast Guard’s independent test authority, has begun in the absence of an approved test plan, which is now expected in July 2009. By the time testing is scheduled to be completed in 2011, the Coast Guard plans to have six of eight NSCs either built or on contract. According to the MSAM process, operational requirements must be approved before procuring an asset. However, since committing to the MSAM process, the Coast Guard has awarded new contracts for assets without having all required acquisition documentation in place, due to its determination that the need for these capabilities is pressing.