Deepwater is the largest and most complex procurement project in the Coast Guard’s history. The acquisition is scheduled to occur over a 30-year period at a projected cost of $17 billion. It includes the modernization and replacement of an aging fleet of over 90 cutters and 200 aircraft used for missions that generally occur beyond 50 miles from shore. Deepwater currently accounts for almost one-third of the Coast Guard’s acquisition staff and one-third of support personnel funding. 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 aging deepwater assets with a single, integrated package of new or modernized assets. The primary objectives of the Deepwater program are to maximize operational effectiveness and to minimize TOC while satisfying the needs of the customer—the operational commanders, aircraft pilots, cutter crews, maintenance personnel, and others who will use the assets. The Deepwater program has been in development for a number of years. Between 1998 and 2001, three industry teams competed to identify and provide the assets—aircraft, helicopters, cutters, logistics, and C4ISR—needed to transform the Coast Guard. In June 2002, the Coast Guard awarded a contract to ICGS as the system integrator for Deepwater. Under a 5-year base contract with five additional 5-year options, ICGS is responsible for designing, constructing, deploying, supporting, and integrating the Deepwater assets to meet Coast Guard requirements. ICGS, a business entity comprised of a nine-member Board of Directors, is jointly owned by Northrop Grumman and Lockheed Martin. Northrop Grumman and Lockheed Martin are the two first-tier subcontractors for the Deepwater program. They, in turn, provide Deepwater assets themselves or award second-tier subcontracts for the assets. In our 2001 report, 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. 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, as well as the Office of Management and Budget, 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 equipment. 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. Since fiscal year 2002, Congress has appropriated almost $1.5 billion for the Deepwater program (see table 1), and as of September 2003, the Coast Guard had obligated $596 million to ICGS and $120.4 million for government program management, legacy asset sustainment, and facilities design work. In response to congressional direction to assess the feasibility of accelerating the Deepwater program, the Coast Guard reported in March 2003 that it could accelerate the implementation schedule from 20 years to 10 years and that this acceleration would provide increased operational capability sooner to support maritime homeland security. On March 1, 2003, the Coast Guard became part of DHS. A December 22, 2003, acquisition decision memorandum from the DHS Investment Review Board’s (the Board) acting chairperson to the Coast Guard Commandant stated that the Deepwater program has been designated as a level 1 investment, meaning that it will be reviewed at the highest levels within the department. Further, because Deepwater interoperability within DHS and with the Department of Defense will be a major program challenge, the DHS Joint Requirements Council will be kept informed of Deepwater developments. While decisions as to specific assets or capabilities have been deferred to the Coast Guard acquisition executive, the Board will meet to discuss actual or projected changes to the program that affect cost, schedule, or performance. Noting that the Coast Guard has proposed accelerating the Deepwater program in fiscal year 2005, the Board directed the Coast Guard to ensure that risk management planning receives appropriate attention, that TOC is kept current, and that cost, schedule, and performance are monitored by measuring actual data against the baseline and projections to completion. Complex, performance-based contracts such as Deepwater require effective government oversight to ensure that the intended results are achieved and that taxpayer dollars are not wasted. Both Coast Guard and ICGS officials have acknowledged that an unusually large degree of collaboration and partnership between the government and the system integrator must be in place for the Deepwater acquisition to be successful. However, a year and a half into the program, the key management and oversight components needed to make the program effective have not been effectively implemented. Integrated product teams (IPT) are the Coast Guard’s primary tool for managing the program and overseeing the contractor, but these teams have struggled to collaborate effectively and accomplish their missions. While the Coast Guard has a Deepwater human capital plan in place to guide strategic planning for turnover among Deepwater personnel, the plan is not being followed and vacancies exist in key positions. Further, while it is still early in the program, the transition from existing Coast Guard assets to the new Deepwater assets has not been effectively communicated, a particular concern in light of schedule delays for some of the first assets to be delivered. Finally, a number of plans integral to the organization and management of the Deepwater program were finalized much later than anticipated. Appendix II contains additional information on these plans. IPTs are the Coast Guard’s primary tool for managing the Deepwater program and overseeing the system integrator. More than 30 of these teams, comprised of Coast Guard, ICGS, and subcontractor employees from Lockheed Martin and Northrop Grumman, are responsible for overall program planning and management, asset integration, and overseeing the delivery of specific Deepwater assets. However, the teams have struggled to effectively carry out their missions. Our prior work at the Department of Defense has shown that effective IPTs have (1) expertise to master different facets of product development, (2) responsibility for day-to-day decisions and product delivery, (3) key members who are either physically collocated or connected through virtual means to facilitate team cohesion and the ability to share information, and (4) control over their membership, with membership changes driven by each team’s need for different knowledge. The Deepwater program manager reported IPT performance shortcomings as an issue in 14 of the 16 monthly program assessment reports provided to us. The following comments, made in Deepwater management reports by Coast Guard officials involved on a number of different IPTs, convey the difficulties faced by the teams in the first year and a half of the program. Though the comments in table 2 are not exhaustive, they demonstrate that the Deepwater IPTs have not been effective. Based on our review of program reports, we identified four major issues that have impeded the effective performance of the IPTs. Lack of timely charters to vest IPTs with authority for decision making. Authority for day-to-day decisions—required for program success in meeting cost, schedule, and performance objectives—is vested in IPTs through charters; yet charters for most of the Deepwater IPTs were not developed in a timely manner. In fact, 27 of the 31 IPT charters were not approved until after the first year of the contract. More than merely a paperwork exercise, sound IPT charters are critical because they detail each team’s purpose, membership, performance goals, authority, responsibility, accountability, and relationships with other groups, resources, and schedules. Between June 2002 and June 2003, 20 delivery task orders, authorized for issuance by the contracting officer, were executed by IPTs that did not have charters in place. Similarly, we found that some sub-IPTs, which address specific issues at a subasset or component level, were operating on an ad hoc basis without charters. For example, a November 2002 management report states that sub-IPTs addressed numerous issues concerning requirements for the national security cutter, even though their charters were not approved until a year later. In addition, two other sub-IPTs were not chartered. Inadequate communication among members. The Coast Guard’s Deepwater program management plan has identified collocation of IPT members as a key program success factor, along with effective communications within and among teams. Face-to-face informal communication enhances information flow, cohesion, and understanding of other members’ roles—all of which help foster team unity and performance. Yet only 3 of the 31 operating IPTs are entirely collocated, meaning that every IPT member is in the same building. The IPTs responsible for assets frequently have members in multiple locations. For example, the logistics process and policy development IPT has members in 6 different locations. As noted in table 2, Coast Guard IPT members have raised geographic separation as an issue of concern. ICGS developed a Web-based system for government and contractor employees to regularly access and update technical information, training materials, and other program information, in part to mitigate the challenges of having team members in multiple locations. However, Coast Guard documents indicate that the system is not being updated or used effectively by IPTs. In fact, the Deepwater program executive officer reported that, while the system has great potential, it is a long way from becoming the virtual enterprise and collaborative environment required by the contractor’s statement of work. High turnover of IPT membership and understaffing. Most of the Deepwater IPTs have experienced membership turnover and staffing difficulties, resulting in a loss of team knowledge, overbooked schedules, and crisis management. In a few instances, such as the national security cutter and maritime patrol aircraft, even the IPT leadership has changed.